In this episode of Rule Breaker Investing, listeners of the podcast share what they have learned from The Motley Fool co-founder David Gardner.
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This video was recorded on May 19, 2020.
David Gardner: Last week I asked you, what have you learned from me? What have you learned from this podcast? And what, for some of you, have you learned following The Motley Fool for 27 days, or 27 months, or 27 years for those who were there at the very start? What have you learned?
Because when you tell me back what you've learned, you're setting me up for one awesome podcast. All I have to do, as long as I don't screw it up, is mirror back to all my listeners what my most experienced listeners are saying, and you have right there a short course in Rule Breaker Investing. One of those occasional greatest hits podcasts to welcome the new and remind the old. And that's what I have for you. What have you learned from David Gardner? On this week's Rule Breaker Investing.
Welcome back to Rule Breaker Investing. Great to have you with me this week. Yep, last week was my birthday, it was also our Campfire Stories Volume IV podcast. I really enjoyed the feedback from that. Some of that influenced, no doubt, what you're going to hear this week, and probably I hope also next week, because, of course, next week is our May Mailbag, May 2020, a month few will forget anytime soon. And it's our mailbag for this month, so anything that you were inspired by over the course of this month. And yep, we kicked off with the Old, New, Borrowed and Blue Volume IV, the first week of May. And then it was campfire stories, and then it's this week's What Have You Learned from David Gardner Volume II, we did this once last year, I had a lot of fun with it, that's why we're doing it again this year.
But a reminder, it is Mailbag next week. So, [email protected] is the email address. Of course, you could tweet us @RBIPodcast, as many of you did. Thank you for really contributing so much content for this week's podcast.
So I looked at your tweets and your emails and I thought about what you've learned from this podcast. And what I started to do, and you can't really see it at home, because we're just an audio podcast, this isn't a video, but I started to get out my scissor -- we're going back to first grade here -- my scissors, little paste, post-it notes, and I start to bucket up, because I started seeing some recurring lessons. And certain ones that a lot of you have said back to me you learned from our podcast. And so, I began to bucket them up.
And what I've done here is I've created 10 little buckets. And I say "little," because each of them I'm going to just spend about one minute on. I'm going to go down the top 10, maybe, greatest hits that you feel like you've learned from me and our podcast. And that's going to be just the next section of this week's podcast. I'm going to go fairly rapid-fire through these points; I hope you'll appreciate it. Since a lot of you have learned them from me here, I don't have to illustrate them very much, I'm just kind of saying back to you what you're saying you already know. But it's worth going over each of these 10 about a minute each.
And then the rest of this podcast this week, it's just going to be some longer form stories from those of you who wrote in. And anybody who pays much attention to the next 10 minutes will see some of these lessons recur in the beautiful and inspirational notes that will form the back-half of this week's podcast.
So, I say, without further ado, let's get started.
Alright. What have you learned from me? No. 1, winners win.
Yep, this one came through loud and clear. I think I had more people saying this back to me than any other single lesson. So, I thought I should lead off with it. Buy winners, winners keep on winning, said @Hdgs_ @benstubbens. "Happy Birthday! Winners win." You even said it twice in your three lessons you've learned from me. @RazorRockJoe. "Key lessons that should not be taken lightly, winners win." When Mark Mariotti, "Add to your winners, winners win."
The list goes on of those who feel the same way I do. And it's not to say, by the way, that every winner always wins, or that every loser never becomes a winner, or that every winner never becomes a loser. Certainly, the world is dynamic. But betting on the lead jockeys, finding the real winners in our society, who do, in my experience, whether it's in sports or investing in business or in life, they tend to just keep on winning. One of the best places you and I can put our money is on the winners.
Lesson No. 2, I guess, we could broadly call this something like, don't sell, hold on, never sell. @paul_essen, you wrote, "Let your winners run high," and you point out Shopify as a recent example. And yeah, that reminds me. Trait No. 1 of the Rule Breaker investor, rule No. 1, let your winners run high.
"Happy birthday from Sydney Australia!" said Andrew Wyles, and he said, "Stay with your winners." @RazorRockJoe added, "Be focused on the long-term, that's the greatest secret of all; tend not to sell." Even if you can't manage never to sell, tend not to sell, let your winners run.
Alright. Lesson No. 3, and let's call this one something like "market cap divided by possible." I put a lot of emphasis on market cap in Rule Breaker Investing, not just in this podcast for five years, but certainly for the 20 years or so that preceded it through my writings and stock picking on Fool.com. I want you to know the market cap, I think you know that, we created a game show around it, I'm looking forward to playing that in June once again. So, market cap is important, but it's also important to think, whatever the value or market cap of a company is today, let's say it's a $4 billion stock, again, you take all the shares of that company, multiply it by the share price that gives you the market cap. And let's just pretend it goes to $4 billion. Ask yourself, how large could you see that growing in 10 or 20 years?
Now, if it's a very small, niche company, you might not see it grow too much more than $6 to $8 billion over the next 10 years. In other words, you might only see 50% to a 100% upside. But what about the $4 billion companies that could go up 100X in value? Could you see that market cap of $4 billion one day, go to $400 billion? I've seen that happen, if you're a longtime investor then you have too. And so, yes, Burt Buffett @OracleOfEncino, market cap size in relation to future expected returns fluctuates, don't worry about entry price. Yeah, don't over focus on that. And Mark Mariotti, you said, "Don't pay too much attention to valuation, most of the time, cheap is cheap for a reason." So, yes, we're looking for usually more expensive stocks but at early stages of growth where we can see great stuff ahead.
Alright. Lesson No. 4, this one's pretty much straight, chapter and verse, I've said it a lot in the past, I'll say it a lot in the future, "Stocks always go down faster than they go up, but they always go up more than they go down." That's true of the market overall, the stock market, and that's also true of individual companies. You'll find that the market itself, as we saw earlier this year, can sell off quite fast. In fact, that was, by many accounts, the fastest, biggest sell-off in history. And you tend not to see days or weeks where the market goes up by that much, but it's really important to remember that over the long-term, the only term that counts, the market goes up. And it goes up way more than it ever goes down. That's why in the lower-left, for any market history graph you're looking at, in the lower-left you'll see that starting date, maybe it's 30 years ago or a 100 years ago, and then look where the line goes from the lower-left to the upper-right, and that's because stocks always go up more than they go down.
Alright. Lesson No. 5, "Add to your winners." Add to your winners over and over again as they keep winning, pull the weeds and water the flowers, get rid of the laggards and feed the growers. Add to your winners. And sure enough, that's also one of the traits of the Rule Breaker Investor, in fact, it's trait No. 2, I hope many of you know this byheart already, but trait No. 2 of the Rule Breaker investor is add up, don't double down.
So much money, so much good money has been thrown after bad by people who buy a stock. And they might have had good reasoning in the first place, and maybe they were right temporarily, but for whatever reason, maybe they got it wrong or maybe the world got it wrong or the company blew up, the stock started going down. And they think, well, if I liked it at $12, I'm sure I'll buy some more stock here at $8. Or if the stock goes from $12 to $6, they'll think, OK, time to double down. I could double up my money the same initial investment I made at $12, I get twice as many shares at $6. And you know how the sad story can end, as they disconsolately look at their massive losses as they were adding on the way down.
I don't have enough confidence in myself or any investment thesis or the world at large, I don't have that fixed confidence to believe in most cases that as a stock starts dropping, especially if it's a very large drop that I have it right that the world has it wrong, and that that company will come back. It's beautiful when it happens. And certainly, companies with balance sheets, right, companies with cash that have some strength and resilience because they don't have much debt and they have a lot of cash, so they have time to recreate themselves. But many companies don't, and many investors have made huge mistakes throwing good money after bad. That's why we add up, add to our winners, as you well know, because this is lesson No. 5, not double down.
Okay, I'm getting distracted by many sermons and many rants around these points, when I said I was just going to say them back to you quickly, so let's move quickly through six to 10.
No. 6, I would summarize under a book title, it was the second book that my brother Tom and I wrote. It was called You Have More Than You Think. We'd written The Motley Fool Investment Guide, which was published early in 1996. And Simon & Schuster, our publisher, said, hey, guys, what about another book from you? And this time let's make it about personal finance. So, the first one is about stocks and the stock market, that speaks to some people, what about speaking to money that speaks to more people than that. So, we wrote the book, You Have More Than You Think.
And Lisa Wharton you wrote well here, you said, "What I've learned from David, buy and hold quality companies and miracles will happen. Thank you so much for changing my life. I used to think one of the few ways to go up on the economic ladder was to get a Harvard MBA, now investing with The Motley Fool is another." That's very kind of you to say, Lisa, but what you're speaking to there is that you and I don't need an MBA and we don't need a Harvard degree. Those are beautiful things, I certainly won't gainsay anybody's Harvard degree or their business masters, but I will say a lot of the investment world, it seems to me, predicates itself on the idea that they need to do it, because they're the experts, you and I could not figure it out, we need to give our money over to them, often overpaying them for their management, because it's too complicated for you and for me. And I disagree, I know my brother Tom disagrees. I think everybody who works at our company and so many among our hundreds of thousands of members worldwide know, in their own hearts, that you can do this if you want to. Why? Because you have more than you think.
And I thought Mark Woodburn spoke to this really well in a note he wrote me, he said, "David, have a wonderful birthday. I've been a Stock Advisor and Rule Breakers member for several years. I'm so grateful for your insight. Given my lack of financial education growing up, you and The Motley Fool team have been one of my main financial mentors. I had the pleasure of buying lunch for a very successful growth-oriented financial advisor in our area who said about you, "If you've been listening and reading David Gardner's philosophy and strategy on investing and growth, and tech companies that are changing the world, then you understand way more than most financial advisors in our area." Mark closes, "Thanks for opening my eyes to the incredible opportunity we have to invest in great leaders and great companies and to become financially independent doing so. It feels like I've been given one of the best gifts on Earth."
Well that's really a lovely note from you, Mark, but in both Mark's note and in Lisa's note, you hear people saying, "You can do this." And we believe that firmly, your hobbies, your own profession, your life lessons are leading you, and can lead you to some of your best stock market selections. A stock that you might recognize as great before I ever do, almost any good stock I've ever picked, somebody has bought well before I did and they were probably a Motley Fool member. So, there are constant lessons all around me seeing people act on their hunches based on their wisdom, their experience and when they show resilience and know how to invest, when they practice those six traits of a Rule Breaker investor, I've already covered a couple of them, you sure enough can and may well grow rich. I certainly trust it will happen over time.
The purpose of The Motley Fool is to make the world smarter, happier and richer, all three, never one without the other two. But it's really important for me to convey to each of you, my listeners, that you have more than you think. And make sure you're making the best use of your gifts and your power.
Alright, investment lesson No. 7, thing that you've learned from this podcast No. 7. Make your portfolio reflect your best vision for our future. And I heard that loud and clear from a few of you who remember that it's not just a ticker symbol or a balance sheet that you're investing in, it's actually a real living, breathing entity, it's having life breathed into it every day by humans, that's the employees that are powering most of the great companies in the world. Yes, increasingly there can be some AI and robots as well. And I certainly welcome our AI and robot overseers; I hope that they will add further value to the investment that you and I make.
But really, investment into the stock market is investment into real companies, and thinking about what are the companies that you hope will thrive, that you believe will thrive as the future gets better. And putting your money there is critical.
Lesson No. 8, articulated pretty well by JP @carforsp on Twitter. JP you said, "One of your winners can make up for all of your losers put together." And sure enough that is true. Now, it's not going to be true in every scenario, in every person's portfolio, but if you look at my stock advisor or Rule Breakers scorecards and you look at the single best pick on those long-term scorecards, you're going to see that the amount of money made 40X or 100X in value and then you compare that to all the worst losers on that scorecard and you'll see it pretty much wipes just about all of them, if not, all of them out. And that's just one big winner.
Now, I know any longtime listener of this podcast already knows, we're not just shooting for one lucky big winner. Every stock that we pick, we're picking thinking we'll beat the market, hoping it will beat the market, very aware that we could be completely wrong about that stock. And part of being diversified is we can be wrong and be OK. That's very important to investing successfully as well. But it's also important to know that rebalancing your portfolio toward the losers, not letting your winners run, not allowing your big winners to cancel out all of your mistakes. A lot of people don't give themselves the benefit of a big win, because they keep chopping it off or rebalancing to their losers.
So, yes, I love my winners and in part I love them, because they truly, if you're doing investing right, if you know how to do this right, your big winners should wipe out all of your mistakes and leave profit on the table. And isn't that a great thing, I wish that were true of other aspects of my life for years. Wouldn't it be great if just one great act cancelled out every sin you've ever committed? I sure wish that were true in other areas of your life, but certainly it is true if you're investing Foolishly.
Alright. What you've learned from me thing No. 9. "There's a difference between buying into companies that are going up and buying into quality businesses that are going up," Ben Stubbens says. And @JosephAParker on Twitter simply quotes me, "I try to find excellence, buy excellence and add to excellence over time. I sell mediocrity, that's how I invest."
And thank you for quoting me Joseph A. Parker. Yeah, excellence, always be asking yourself, what is the excellent and get your money there. I don't spend a lot of time looking for bargains or flipping over stones hoping to find a piece of gold. More often than not, when I flip over stones [laughs] in the real world, I find potato bugs or worms, and I'm not that interested in those, [laughs] those don't feel excellent to me. Nope. I would much rather aim my gaze not at my feet, casting over rocks and pebbles, hoping to find a piece of gold. I'd rather cast my eyes up at the skies and ask what is great. Excelsior -- ever higher. What are the excellent things in our world and in our society and can we spend more time with those, can we, when possible, through the stock market, invest in those things? I try to find excellence, buy excellence and add to excellence over time. I sell mediocrity. That's how I invest.
And finally, thing you've learned for me No. 10, lead a more interesting life. It's an occasional mini-sermon, [laughs] I deliver on the podcast. I think I did this again recently. Warren Kiesel @wkiesel on Twitter, you're reminding me of it. "To become a better investor, live a more interesting life."
Lead a more interesting life. A lot of people think that to become a better investor involves technical stuff, like, reading deeper into the footnotes of a 10-K or understanding better some technologies, you study a new industry. And those things are important, and I certainly love learning and I hope that you're getting to learn through this podcast how better to think about a balance sheet or the risk of a company or a new technology. But really in my experience, the best gains, not just for your portfolio, but indeed for your life, are going to be based on your own personal efforts toward self-improvement, toward betterment. And in my experience, a lot of that is getting out there in this world and trying some new things, meeting new people and seeing the great riches that those things have in store for you and your portfolio.
Now, as we close this section of the podcast, I'll say, I'm very aware that during this COVID-19 era, it's not quite as easy as it maybe was before to get out there in the world and try new things and meet new people, but darn it! It still is. And even if you're having to do it virtually with your web browser, more so than you did six months ago, this too shall pass and it'll be easier to get back out and learn from the world at large soon enough.
But really this lesson is about for all-time, right? In any context you can always learn something new, you can always, I think, lead a more interesting life if that's your focus, and I think it should be.
Alright. So, there they are, at least ten things that [laughs] many of you learned from me and from this podcast. They were a lot more, but I just tried to bucket up the ones that were most obvious. Again, for longtime listeners, you may already be saying, yeah, I know a lot of these. But you know what's interesting to me? A lot of people don't know a lot of these.
And I think that might be because I'm focused on breaking the rules, that's the focus of my investing and a lot of my work is I love to find conventional wisdom when it's wrong, if I can find conventional wisdom; if a lot of people are going through the motions and it turns out that that's not the right way to think about something or there's a better way to do something, well, for you and for me as Rule Breakers, we can break those rules. And that's where so much of the real value can be created in life.
So, for the rest of the podcast now, I'm just going to share with you some longer form notes, letters of inspiration from my fellow Fools and you're going to see some of the themes that we just covered recur.
And I want to lead off with this one from Ryan Hasty because he makes an important point that I want to double-underline after I finish reading it. Thank you for this note, Ryan. You said, "Happy Birthday to David Gardner! I'm a member of Stock Advisor and Rule Breakers and I'm writing from Albury, New South Wales, Australia. I've got two things I'd love to share from my time gleaming gold nuggets from David Gardner. Personally, I feel the best advice from David is the advice that makes you think differently to all of the advice, suggesting you need to turn over rocks to find $0.70 dollars."
And then Ryan goes on, "Two points here. Point No. 1, top dog and first mover. This is a good indicator for a buy. Those who win, will keep winning. Those that are first to innovate often keep innovating over long periods in ways that are unseen at the time of purchase. While this isn't always a sure thing ... " Ryan writes, " ... it's a good indicator of future success."
And then the second point he wants to make is that a high valuation is a good indicator for a buy sign, this is the market telling you that many believe in the future success of this group. Interestingly, it will also scare many investors away because it may be sitting higher than people feel comfortable buying into, even though there's agreement on the company's quality. Fool on! Regards, Ryan Hasty."
Well, I wanted to underline one particular point that runs through Ryan's not right there, and that is, to go back to rule breaking again, where our thinking differs from the rest of the world. I recently had an opportunity to retake the Myers-Briggs personality test. This is the step two version which goes on a little longer and asks you questions to go a little deeper. And then the analysis about your personality comes back with some more metrics.
So, I discovered that while I generally fit the ENTJ, that is probably me, and some of you will instantly recognize these letters and understand what that means, and others will be wondering what I'm talking about, and I'm certainly not going to summarize Myers-Briggs right now. But while I fairly closely conform to the standard profile of someone who is an ENTJ, there are a few outliers for me, and the biggest one where my line zigged when others like me zag, was under the concept of communality, I discovered.
And commonality basically means, do you tend to agree and conform to those who have your same mindset. And as it turns out, I don't. I have this odd movement in my graph line that has me going strongly away from those who otherwise would think like me; anti-communality, if you will. And I think this is what I've been trying to convey to you about Rule Breakers and what Ryan says. "Personally ... " he said " ... I feel the best advice from David is the advice that makes you think differently to all the other advice out there." And you think about Steve Jobs' "Think Different," and you think about Apple and its branding around that. And, well, a lot of that might just be marketing. I also think [laughs] it's great advice for a lot of us, especially those of us who are going to call ourselves Rule Breakers in life.
So, I'm here to celebrate "think different." Not for its own sake, but specifically when it adds tremendous value to the world. Almost any great business was generally started when somebody had an Aha! moment and pursued a dream. Dream it, build it. And the best of them end up becoming public market companies that you and I can buy shares in, and then the best of those are the ones that multiply in value over the years. And I submit to you, in most cases, they were doing something different, they were businesses that broke the rules, they looked at how Goliath had the world set up so that Goliath is always going to win, and the Davids out there came in and said, you know what, let's do it differently or let's use a new technology, let's solve an old problem in new ways, let's create a new possibility. Thinking differently is really where so much innovation starts. And when it flourishes, well, darn it! Those are some of the best investments you and I can make. So, thank you for that point, Ryan, and for celebrating the anti-communal spirit.
Alright. The next story I wanted to share was from Rich Smith. Rich you said, "Dear David, Happy Foolish Birthday! As a devoted listener for over five years now, I can easily attest that you've succeeded in making me smarter, happier and richer." Well, Rich, that makes me really happy. Thank you very much for sharing that. "Well, I can relate to the cover letter you read last week." And Rich is referring to the wonderful campfire story No. 3 from last week's podcast. "A moving note about the concept of being raised to be poor." Certainly something, if you didn't get to hear that, I would suggest you go back and listen to campfire story No. 3, you can skip the other three; No. 1, No. 2 and No. 4, those are mine, but the No. 3 one from a listener, I think, really, clearly moved a number of you. And it moved me as well, which is why I wanted to share it.
But Rich is alluding to that, when he says, "I too was raised in such a way where I was unable to reach my full financial potential. My parents are debt averse, which was a great way to start my adult life, but it left me lacking in the area of growing and employing my capital wisely. I appreciated the work ethic and personal responsibility I learned up in a small farm in Ohio, but that's not a life I aspire to." Rich writes. "It was about six years ago, I came across Million Dollar Portfolio ... " That's our book by that title, " ... and ever since then it's reset my trajectory. The books, audiobooks, podcasts and two Berkshire Hathaway shareholder meetings I've attended have truly enriched my life and contributed to making me smarter, happier and richer."
And then Rich closes with, "Additionally, my eyes have been opened to the fact that business can have a conscience. And I strive to bring some consciousness and foolishness to my office every day, not only have you improved my life, but also my family's life. The impact you and The Motley Fool have had on me and my family will literally be felt for generations. It's my goal to continually pay it forward and to do the same for others. Happy Birthday once again, David, and Fool on?"
Well thank you so much for that Rich. that is really inspiring.
And the next note I wanted to share is from my biggest fan. Yep, Joan, you're back, and thank you very much for taking the time to write in. And I thought you hit on a really good point. So, I want to share this from you. You said, "Hi, David, Happy Birthday! I hope you have a wonderful birthday, get to enjoy and relax with your family. I've learned a lot from you over the years, but I'm going to share with you one important thing I learned. And that is, it's OK to be wrong and we need to own up to our mistakes. It's evident in everything that you do ... " Joan writes, " ... for example, your stock reviews were not only talking about the ones that have done well or you're always sharing your past mistakes in your stories. The most important lesson I got out of this is that you own up to the mistakes that you made and you learn from them moving forward."
And thank you very much for that. I hope I'm worthy of that. I aspire to that, I'll say that. But even if I can't always nail it 100% myself, I want my listeners to hear that. And certainly, as I shared earlier this month in my Old, New, Borrowed and Blue episode talking about Warren Bennis' four lessons of self-knowledge. One of them very simply stated, "Accept responsibility, blame no one." Those are great words to live by and I hear you saying that back to me here, Joan.
It's the ability to rise above our ego, accept and review our mistakes, that's what sets us apart, can make you a great person and a leader. Now, she goes on to say, "I have another response to that latest campfire stories episode. I too was raised to be poor, and I'm grateful that my parents did, because now I understand the value of money and wealth. I have a friend whom I've finally convinced to start investing several years back. He too grew up and was raised to be poor. We talked a lot about the reasons behind why he resisted investing for so long. His perspectives were coming from mistrust of capitalism in the financial world due to bad feelings around money."
And by the way, I think a lot of people have some sense of that or feelings in that way. In my experience, I encounter a lot of people who do -- and we would all say, this is not reading from her note now, but me just speaking to you, we would all say, rightly so, there certainly have been egregious examples of greed, selfishness, abuse, all kinds of bad stuff in the name of capitalism. But to think that that is what capitalism is or that that's all the capitalism is, I think, misses the vast majority of the picture. I do think, if it bleeds, it leads.
I think, even the financial media tends to lead with the Enrons and forget about great stores like Old Dominion Freight Line, which is a wonderful, multigenerational trucking company, doesn't really have unionized workers, because people feel so well-treated by Old Dominion that they don't feel a need to rise up against their employer. I love businesses that treat their employees well in a way that people would say why would we want to unionize. We all understand reasons why unionization can make sense. But anyway, these are just talking to what capitalism is and it's a many splendored thing with some faults too.
Anyway, to continue on with your note, Joan. "A lot of people associate money with greed." She says, "I've been trying to convince some of my co-workers to invest and change their attitude around money by putting out that while money isn't everything, financial independence will allow us to give back to the world more, the hardest discussion for me so far was trying to convince someone to invest when he or she thinks that capitalism is evil. It's hard to defend against giant companies who often make headlines, their top executives earn a lot of money while lower-level workers aren't treated fairly as well. If the company doesn't pay taxes because it's getting such a tax break from a government."
She goes on to say, "I've not known any CEO or Co-Founder of any company, but maybe you could speak a little bit from your perspective." Well, I think I already did. She concludes, "I tried however to refocus my friend on what kind of impact such companies have contributed to improve our way of life. I also encouraged them to look into the concept of conscious capitalism. I hope every company operates with that concept in mind. As more and more of these companies grow and the concept becomes more widely practiced, it'll help eliminate the bad connotation around the word "capitalism," people will then open up more to investing, to create long-lasting wealth for themselves. I'm sorry for ranting ... " she concludes, " ... the subject has been [laughs] on my mind. The subject of discussion for a long time. In conclusion, thank you for being who you are, consistently staying positive. I too believe in the positive force that moves the world forward. Please continue to do what you do, wish you the best birthday, etc., sincerely, Joan." My biggest fan.
Well, thank you. And I'm resisting the urge to say too much further, because I don't really need to editorialize around these notes, and I really wanted them to speak for themselves. So, thank you for those sentiments so far, Ryan, Rich and Joan.
Alright. The next story, the fourth one that I'm reading out. This one's from Edward Ruger, love this note, I got a few others like it. This kind of continues talking about positivity, but I especially appreciate it because it comes from a Senior in college. So, thank you for writing in, Edward.
"Hi, David, first of all Happy Birthday! Thank you for all you've done to continue to make me and countless others smarter, happier and richer." And thank you for that, Ed. "My name is Ed. I'm a senior in college. I'm studying geology. Soon I will be entering the real world, yikes! I've been an investment nut since I was 12-years-old when my mom told me to take advantage of the many free resources at The Motley Fool for ways to save my $2 a week allowance. At a young age, I learned financial discipline from The Fool and I opened a custodial brokerage account where I could save my allowance, put it into stocks. And this is where Rule Breaker Investing comes in. Despite having taken full advantage of all the information you all provide for over half of my life now, I only first started listening to this podcast and, I believe, the whole allotment of Motley Fool podcasts last summer. Since then, Rule Breaker Investing has become my Wednesday afternoon tradition."
"In the past few weeks, I've found sanctuary from the barrage of breaking news in the massive backlog of episodes of this podcast. Despite being about something as ephemeral as the stock market, there are many truths in each episode that allow them to be timeless. Not only have I learned to become a better businessman through investing and Rule Breaker Investing, but a better scientist and an optimist. I've learned traits of positive company culture, how to succeed on Kickstarter and that some people "own the water." And I think longtime listeners will know who Ed is referring to there. And if not, just google it, "Motley Fool, I own the water"."
Anyway, Ed concludes, RBI has pushed me to take the occasional leap of faith and view the world around me with a lens of optimism, I finally bit the bullet on Twilio this past Summer, and again this Fall, and again in February, in thirds, of course," Ed notes. Boy! This is chapter and verse foolishness, Ed. I love it. Some of my favorite employees here at The Fool were people who are much younger than I am, but they grew up with The Motley Fool, people like David Kretzmann, who came out of this podcast and co-created the Gardner-Kretzmann Continuum with me spontaneously one podcast. But similarly, David, to my recollection, got started investing at the age of 12 with The Motley Fool, with his dad.
And so, to think that you're steeped in just your early 20s in this kind of thinking in these kinds of stocks, I just love hearing that you've now fully bought your position in Twilio over time. It just makes me so happy, but you said, "Why? Because I believed in their mission. And much like how Twilio got its moment in the sun this earnings season, despite the uncertainty in the world," And if anybody didn't see ticker symbol TWLO, pop that into a browser and see how Twilio has been doing recently. A tremendous Rule Breaker stock.
Ed goes on, "I've been able to appreciate that while the end of my college career wasn't what I expected, I'm incredibly thankful for the health of those I love. On top of that, I can proudly say that despite a large exposure to aerospace ... " where he said "ouch" because those stocks haven't done so well, " ... I'm currently beating the market due to the performance of the true Rule Breakers in my portfolio. Thank you and Fool on! Ed Ruger."
Thank you, Ed.
I just loved receiving this note from Bob Cambridge. Bob, you're writing from British Columbia. Thank you so much for this note. "Happy Birthday, David! I myself have a birthday coming up on May 23rd." Well, Happy Birthday this week to you, Sir. "I recently discovered, I'm exactly one week younger than you are, [laughs] as I was also born in 1966. I've been a longtime fan and Fool. I have three of your books. I've been a Stock Advisor member since 2007, member of Supernova, Stock Advisor Canada, a couple of other services. It was a real pleasure to have met you, Tom, Jim Mueller, David Kretzmann and Morgan Housel at FoolFest 2015 in Alexandria, Virginia. I had planned to make the journey East again this year for FoolFest 2020, but alas, that will have to wait."
Yep, we recently announced, [laughs] it's going to be not in-person, just like every other conference this Spring and Summer, but instead virtual. But I hope it'll still be a pretty great FoolFest.
Anyway, Bob goes on, "I've been interested in investing from the first days I started earning money. I'm a Canadian, which, I believe, has made becoming a Fool even more important. Higher fees on retail investment products, limited industries to invest in here in Canada and a currency fluctuating dramatically versus the U.S. dollar create different investing challenges in our fine country. I wanted to thank you today for providing me with excellence, not just in investing but also in principles and perspectives for life. Through the help of The Motley Fool and Warren Buffett, I'm now living the life of financial freedom, some would say, "retirement" but that word does not seem fitting for me. I've long believed, the key to a successful life is to keep learning, and luckily my interest in investing and learning has led me to financial freedom where I can learn even more."
"I grew up on the beautiful West Coast of Canada on Vancouver Island. My employment took me to the Greater Toronto area for 19 years, and due to investing, I was able to move back to British Columbia and the Okanagan Valley a few years ago. As I kept learning from you and others in the investing world, I developed my own continuum instead of the Gardner-Kretzmann Continuum."
"Let me explain. As a lifelong investor, like you, I've lived through some big market adjustments. The dot-com market adjustment was painful, as I was invested in many of the building blocks for the internet that flamed out, like, Nortel or JDS Uniphase. After this period, I turned to Warren Buffett and Berkshire Hathaway as a safe spot to buy shares to keep investing. Eventually I turned my attention back to David Gardner recommended Motley Fool companies through Stock Advisor. Companies like Apple, Starbucks, Netflix, [Booking Holdings'] Priceline among the most successful. The GFC recession of 2008-2009 turned out to be great timing, of course, if you kept investing. A strong Canadian dollar helped me buy more shares of many great companies at great prices, which I still have today." And Bob cites Amazon and Netflix as two of his largest positions.
"My lifelong investing journey has led me to think of my portfolio with a "Buffett-Gardner Continuum." This continuum helps me think about portfolio risk and finding good companies. Investing with Buffett and Berkshire has been effective over the last 20 years. It's my biggest position. However, you've taught us Fools to invest in your best vision of the future. Living through market adjustments of the past has in effect using this continuum makes investing in the future more comfortable for me. Evolving down the "Buffett-Gardner Continuum" to companies of the future has really paid off with the pandemic taking over the world. At present, it also reminds me of a quote you've used from F. Scott Fitzgerald, "The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and retain the ability to function." Warren Buffett and Dave Gardner have two different styles of investing, tapping into both of them has been very effective."
"One of the great Warren Buffett quotes ... " Bob starts to conclude, "It's better to hang out with people better than you, pick associates whose behavior is better than yours, and you'll drift in that direction." And I didn't know that is a Buffett quote, that's a great one, it sounds a lot like James Clear and what he was saying a few weeks ago on this podcast as well.
Anyway, Bob says, "I've been listening to more of your rule breaking podcasts lately. I equate this to hanging out with the best, not only in the investing world, but as an individual." That's too kind, thank you, Bob. "I recently discovered the David Gardner quote "I like to invest in excellence." Yep, I think I pounded that one home earlier this hour. "This is my new mental framework, invest in excellence. I consider spending time with you, David, and your podcasts an excellent investment of my time. I not only learn fantastic investing behavior and insights but also great principles and perspective for life. Another one of your quotes resonates with me. "If you want to be a more interesting person, lead a more interesting life." Thank you, David, for providing excellence, making me a better investor with a better temperament, helping me to become a more interesting person overall. Warren Buffett has had a huge influence on the investing world, and in life, David Gardner is a fantastic complement to the investing legend. Happy Birthday! And thank you." Well, those words are a birthday present, and certainly too kind, Bob. Thank you.
"I'm really glad of our past association that we met five years ago at FoolFest, I'm sorry that we can't spend time directly with each other at FoolFest this year. I'm thinking about you, though, in beautiful British Columbia and it puts a smile on my face, and I want to say again, Happy Birthday to you, Sir, this week."
You know, I try to always back load my stories so they get better and better. I try to backload my points so that they get better in many of my podcasts, I hope that's going to be true here as we close out with these last couple.
This great note from James Chen is next. James, you wrote, "Dear, David, Happy Birthday! What I learned from The Motley Fool and you, specifically, cannot possibly be summed up in just three points, but I'll do my best. To give you an idea of just how transformative The Motley Fool has been to me, I was exposed to The Motley Fool, and specifically, the Rule Breaker podcast, four years ago, and bought my first stock in April 2016. Fast forward to 2020, not only has my own portfolio thrived almost 30% annualized at time of writing, I've been able to help numerous people among my friends and families to do the same, started teaching personal finance and investing at my local church and even launched my own investment fund." Wow! That is quite four years, [laughs] James.
"Reflecting on these amazing four years, here are the top three things I learned from David Gardner? I'm intentionally referring to you now in the third person just in case this is read on air." Yes, you know that I'm a little bit sheepish about referring to myself in third person, I made quite a deal about that in last year's What have you learned from David Gardner show. If anybody wants to hear me make jokes about how professional athletes often refer to themselves in the third person and how I think that's funny and how I try not to do it myself, you can definitely listen one year ago to me with a mini-rant on that topic.
Anyway, James, you go on. "No. 1, winners win. Finding and holding on to excellence is a lot more important than finding bargains or minimizing mistakes. While David has demonstrated this principle over-and-over again in his recommendations, my own experience only reinforced this concept. When I first started in 2016, I established positions in Veeva Systems, Match Group and ServiceNow. A few months in, I became concerned about their valuations ... " Note he said, a few months in. " ... sold all three for a small gain to concentrate in another investment which I thought was trading at more of a "bargain," while that other investment ultimately did well, it does not even begin to approach the kind of returns that these three companies have generated since then, four- to five-baggers each." That means they're up 4X to 5X in value each, for those who are not rocking the bagger language that I regularly use on Rule Breaker Investing, swiped from Peter Lynch, one of my investing heroes when he first started characterizing a stock that goes up 10X in value as a ten-bagger, kind of, riffing on baseball a little bit there.
Anyway, that's amazing that you found Veeva, Match Group and ServiceNow that early, James. Great lesson to learn. And thank you for sharing this back.
"Moreover, MercadoLibre was already a ten-bagger ... " James writes, " ... by the time I first established a position. To this day, it remains one of the best performers in my portfolio. Of course, how can I not mention Shopify, which I was fortunate enough to own since 2016? Just when I think this company can't go any higher, it continues to defy even my most optimistic expectations. I'm now so fully convinced winners win that I even have my own paraphrase for this concept, "Find a bargain and it rewards you once, but find excellence and it will reward you for years, if not decades to come."" That's a signature phrase from James Chen.
Alright. "Point No. 2, humility and accountability. David Gardner's colleagues at The Motley Fool have demonstrated that nice guys don't finish last. [laughs] From keeping score of his past recommendations, to embracing the tenets of conscious capitalism, David embodies the kind of business leader that we as investors should look for when evaluating the management of companies we want to invest in. Without humility and accountability, we cannot learn and grow, nor can we truly inspire others to be at their best for a common mission. I don't think it's at all a coincidence that some of my best investments ... " James writes " ... are also run by leaders who exhibit such qualities, whether it's Tobi Lütke from Shopify or Eric Yuan from Zoom."
"Related to this, humility also means that we're willing to admit that we could be wrong. No matter how confident we may feel about a particular investment, by simply acknowledging that we could be wrong and always keeping a diversified portfolio, we can avoid devastating losses and ensure that we are victorious in the long-run."
Boy! Do I want to just keep underlining a lot of the things that you're saying? [laughs] That's a really important point that you just made. James, thank you for articulating it so well.
Your third and final point, "Live a fun life. I often joke [laughs] that David Gardner proves that a successful and responsible adult can and should play games. After all, nobody can deny that he's been very successful nor is he shy to disclose his late-night gaming endeavors. David often says that one of the most effective ways to become a better investor is to lead a more interesting life, and I couldn't agree more. By exposing myself to different experiences, and sometimes even forcing myself to go out of my comfort zone, my life and thinking have been greatly enriched. It's also allowed me to meet new people or deepen my existing relationships, many unsurprisingly are now involved in one way or another in my investment and business endeavors. In fact ... " James concludes, " ... it was exactly this willingness to expose myself to new experiences that four years ago, at the prompting of my brother, also called David ... " shout-out to David Chen, " ... that I started to learn about stock investing and listen to the Rule Breaker podcasts. Happy Birthday again! James Chen."
Thank you, James.
And the last correspondent that I'll share with you this week; and before I do this, I want to thank everybody for writing in, obviously, I couldn't share all the stories, all your notes, all the lessons, a lot of them though or consonance, so even if I didn't get to feature you this week, I hope you heard some of your own story or some of your own lessons in what I've shared over the course of this hour together. And Jason Pete-Myer I mentioned you a couple of weeks ago on Old, New, Borrowed and Blue because you liked the idea of more positive news. I was talking [laughs] some about my experience at the Columbia School of Journalism way back when. So, I mentioned you there and so your note here picks up by saying, you just listened to that episode. "Thank you so much for the shout-out. How cool to hear my name read aloud ... " Jason says, " ... on my favorite podcast of all time and perfect pronunciation of my last name, Pete-Myer, I shared the podcast with my fiancée Andrea immediately, and that made our day." Well, that makes my day; I'm so glad to hear that.
"Thank you so much for being a Tom Wolfe in your replies to your Foolish listeners ... " Jason writes. Another allusion that I won't cover but regular listeners may remember my Tom Wolfe story. " .... the replies and interactions with listeners make for such a fun and entertaining show." And I'll just add again, boy! Hasn't that been true of this week?
"What have you learned from David Gardner? Well, your request is both the easiest and the hardest question for Fools to answer. It's easy, since there are many great lessons that you've taught us Fools since the Rule Breaker Investing podcast began, but that's also what makes the question challenging, as there are many great lessons. So, how's a Fool to choose? Well, my thought ... " Jason says, " ... was to summarize what I believe is the essence of David Gardner's investment philosophy. It happens to be those same words mentioned in my previous email to you, and those words are, "the future." And so, to perhaps break the rules and provide my answer in a unique way, attached is an MP3 audio clip that I saved a few years back from one of your lessons. I have that audio clip saved to an Apple Note with some of your best investment ideas that I read on a regular basis."
Wow! That's awesome! Thank you so much, James. And well, an MP3 audio file, I'm flattered. Thank you very much, Jason. And you know what? I do want to tell one final story before we finish. So, I'm going to ask my talented producer, Rick Engdahl, to -- right as I conclude my final story -- to play the clip, it's just a 20-seconder, I see, that Jason has as his big takeaway from what you've learned from me in this podcast. So, that's what's actually going to end this week's podcast. Thank you for our dramatic ending, Jason.
But I did want to tell one final story in passing, you know, I was listening back to last year's What Have You Learned show, on my birthday week. And I had an experience that week that feels just as interesting and fresh to me today. I told the story on last year's show and I'm going to just tell you the story and the lesson once again to close. So, shall we?
My birthday was last week and I was driving from where I'd spent my day to supper that night. It was a gorgeous evening here in Washington DC, for those of you who know our climate, the Mid-Atlantic in general perhaps, but maybe especially Washington DC, there's a wonderful three weeks or so each year where Spring is sprung and yet the heat, the humidity and the gnats aren't out yet. The Washington Nationals may be out -- and keep in mind I was writing this last year when indeed baseball was happening and it ended up being quite a season for The Washington Nationals, as they won the World Championship, but anyway to go back to the story -- The Washington Nationals may be out, but I'm talking about the gnats, would start to swarm around us like clouds through most of the Summer. And it was one of those nights last week on my birthday. And I got in my Uber.
My driver had, I'm going to say, it was a Russian accent. I'm quietly on my own, I noticed he had the windows up, but it was about 5:30 PM and I wanted to drink in the evening air, so I put my window down, and we got started. And about four minutes in, he just reflexively rolled my window up.
So, I'm just sort of sitting there, I'm a generally pretty non-confrontational person, so in my mind, the driver wasn't comfortable or didn't want me to have my window up, he probably had air conditioning and maybe he was thinking economically. I'm not really sure what he was thinking other than he wasn't thinking what I was thinking and that made me sad as he put my window back up. So, I sat there for about five minutes and I stewed about it a little bit. I noticed that the air in the car was not particularly pleasant, it wasn't really air conditioning. I think he had the air going, but not the AC on. And I was just sitting there thinking, it looks so beautiful outside. Should I do it?
I decided I'm going to do it. I'm going to ask him if I can roll my window down. Now, I know many of you are like, of course, you can roll your window down, it's Uber, they're there to serve you. It's your window temporarily while you're in his car. And yet, that's just not how I roll, as I mentioned, I'm pretty non-confrontational, but I decided I'm going to ask him directly. So, I said, "Hey, do you mind if I roll my window down?" And he said back to me, in so many words. "Thank you so much for asking me to do that. In fact, I'm getting a little sick right now and the air in the car would not have been good for me."
And what I realized from that conversation was that we were both creating together a small dystopia. He misunderstood my intentions, I misunderstood his, we both found out the wicked witch was dead, all hail Dorothy, we both wanted the window down. And as I told my kids later that night, it's important in life not only to let others know what you like and not make assumptions about what they're thinking, but sometimes you may be surprised that the other person was thinking exactly the same thing that you were. And yet, if I had not reached out, if I just sat there and stewed for another 25 minutes, missing a gorgeous evening in the nation's capital, I would have been living in a dystopia of our own collective creation.
Now, I'm sure many of my seasoned, wise and knowledgeable listeners already knew that. That's maybe not something that you had to learn from David Gardner, but perhaps for a few of you, maybe I've given you a nudge.
Well, I look forward to being with you next week. Thank you all for the beautiful notes and thoughts that you graced me with and that I got to share back this week with you. I want to say in advance, Fool on!
And here's a final thought courtesy of Jason Pete Myer.
[...]
We're always on this podcast, and with my investment strategy and approach to The Motley Fool, the Rule Breaker approach, we're always looking, not backward, but forward at the future asking, what are the next leaders, who is innovating, and can we please get our money there as early as possible, holding for as long as possible, together?
