Rule Breaker Investing: 300 Weeks and Counting

Hmmmm, how to celebrate our 300th consecutive weekly show... Maybe a big party with cameos from past guests and free punch and balloons for all? Nope, not this time. Instead, in this episode of Rule Breaker Investing, David Gardner's audio-essay looks backward and forward at how we make our money, how we treat each other, and what we stand for.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on March 17, 2021.

David Gardner: I had initially thought, hey, it'd be great to have a blowout show, this is a big, round number for us, bring back all the greatest hits, authors, CEOs, entertainers, thinkers, stock pickers, bring them all back and do quick takes with them, slightly but not too self-congratulatory, motley, fun. Then it started to feel exhausting lining up a bunch of busy people on Zoom and/or asking them to do 60-second videos perhaps, but that would be for another day. For this week, our 300th consecutive weekly show, I then thought, let's do the exact opposite. Let's keep it tight, maybe short and sweet. Let's go above ourselves, or further beneath, or zoomed out, or extra zoomed in, I wasn't sure. I'm still not quite sure. But then I thought, 300 shows, 300, so maybe just three points this week. If you've heard all 300 podcasts especially, this one's for you, only on Rule Breaker Investing.

Point No. 1 has a silly title. I'm going to call it simply "this." You know how people on social media have abbreviated their own more elaborate responses by simply replying to someone else's posting, "this." It's been reduced these days even further to simple emojis, an arrow pointing up or a finger pointing down at what you're plus one-ing. That emoji, "This." My point No. 1 is "this" by which I'm wanting to underline its importance. I remember as a younger man hearing a line from someone older in my life. I can't even remember who it was. Was it a friend? It wasn't a family member because we didn't speak this way, but maybe it was a friend or an acquaintance, or maybe it was a television character or someone in the movie. The line's been delivered any number of times, and I didn't like it. It seemed judgmental or deflating, crotchety maybe. Here's the line; "Yeah. But how did he make his money?" I've thought about that more over the years and I don't think it's crotchety or judgmental or supposed to be deflating per se. I think it's an essential question. I think it goes to the heart of humanity for you and me at an intimate personal level, but also for the companies we invest in, for the world we live in. "Yeah. But how did he make his money?" I think the first time I heard it was probably from someone cynically observing about someone else, someone rich or wealthier. The implication was that while that person is quite rich, the way in which he or she got rich, how did he make his money? How do you make your money? 

As investors, through 300 weeks of this podcast and for many years before that, I've encouraged you to make your portfolio reflect your best vision for our future. If you were living your best investment life by these words, which I made the first principle of building a Rule Breaker portfolio as you build your portfolio, get started investing, which so many have over the past 12 months, a great blessing during this hard time, if you are making your portfolio reflect your best vision for our future, then two things are going to come from that. First, I predict you're going to do better. Your investment results flat out will exceed your own expectations, will exceed the market averages, will exceed most of the so-called pros. That on its own is pretty great. That's been my own experience. Though I can't see you right now because this is just a podcast and I'm sitting in my study as usual talking to my desk microphone, for many of you who are driving right now or jogging or sharing this with your 10-year old daughter, you nodding your literal or figurative head knowingly knowing this is true and is part of your experience, your "lived experiences," that fashionable, somewhat redundant phrase goes today. You know this because you have done it. When you make your portfolio reflect your best vision for our future, you get outperformance. But here's the second. 

The second is that old crotchety line, "Yeah. But how did she make her money?" For you, the answer is one-to-one authentic to who you are and what you believe. No spin, no smoke and mirrors, no greenwashing, no impostor syndrome, no making excuses to your kids or grandkids. No. How did she make her money? She put her money exactly where her mouth is, where her actions are, and she won. Outperformance and the rewards of direct alignment between what you espouse and want and what you did, that's the wonderful one-two punch that you've saved up for anyone who wants to butt into your business or ask aloud at a cocktail party, "Yeah. But how did he make his money?" This is why point No. 1 is entitled, "this," because how you make your money isn't just a caballing comment or snitty observation from someone else. How you make your money is in part the story of your life. It's sacred in its own way. It's between you and God, if you believe in a God which I sure do. How you make your money both as an investor and as a person earning a wage, whatever the number, to me says so much about you. 

My favorite economies in the world, let's take the United States as an example, but there are more spectacular examples, look at Japan, look at Singapore, can be mathematically expressed in this simple ratio which I'm making up. I'm sure someone's studying this out there but I haven't looked into it. The ratio goes like this; the numerator is the country's GDP, its gross domestic product or its related ilk, one of those flavors, GDP. The productivity of an economy is the numerator. The denominator is the natural resources of that nation, the natural assets that each country has within its borders, so basically the output of your economy as a multiple of the natural blessings you were given, the hand you were dealt. My favorite economies in the world score big numbers here in the same way that most of my favorite Rule Breaker stocks traded elevated multiples, many times price per sales, many times price per earnings. What that tells me is that that country has worked hard over time to do great things with its very unique hand of cards. Might have been a bountiful draw, and I think the United States got dealt a great hand and it's turned it into the world's greatest economy, or it might have been a scanty draw. Singapore is a nation of six million people that was destitute as it gained its independence from Malaysia in 1965. 

My good friend, Wikipedia, puts it this way, and I quote, "70% of Singapore's households lived in badly overcrowded conditions and a third of its people squatted in slums on the city fringes. Unemployment averaged 14%, GDP per capita was $516 US, and half of the population was illiterate." Today, Singapore is the 38th ranked GDP in the world achieved last year by less than six million people. Flipping the coin over and looking briefly at the other side, my least favorite economies in the world, and by extension, my least favorite world cultures, are those that have the lowest ratios. They bountifully sit on enviable resources and that's most of what they do. They sit on them. These nations are often ruled by a tiny elite, the people fortunate enough to be born into families that sit on, sometimes exploit, those resources and often jealously guard them. Most of the rest of their countrymen are excluded. These countries produce little more than they inherited. Their contributions to the rest of us in the world are minimal. Side note, often, they are the same countries least well represented in the Olympics every four years. Large populations but few athletes, often few to no female athletes. How does Singapore make its money? How does your favorite company make its money? How did your favorite leader make his or her money? How are you making your money? "This."

One of my points of highest pride and fulfillment is that the very nature of the business model of our company, The Motley Fool, is that we butter our bread. We make money when you make money. This is fundamentally different from most financial services. We offer our advice freely here once a week for pay every day of the year and you buy it from us if you feel it's of use, if you're doing better with us than without. We're not a bank trying to figure out how to raise our fees on you. We're not an insurance company incentivized to find fault with your claim so we can hold onto what you've previously paid us. We have literally co-created prosperity with our membership base worldwide for 27 years and counting. Some of you have grown up with us. You've grown rich with us. You believed in Fools. You invested when most of Wall Street traded. You took personal risks. You took personal responsibility. You were attracted to a message that breaking the rules might just be the way to win the game. But not just a message; a demonstration. Stock Advisor since 2002, 28 five stock samplers, over 300 podcasts. You believed and we made money together. 

We found stocks, we bought them together, we lost together, we've won together. The Motley Fool business model is a beacon and an inspiration, and it's been so successful that you've enabled us to reach people now for free. This podcast is just one example 300 weeks later. "This." To that old figure, that possible figment of my imagination, that figure in my mind who said, yeah, well, how did she make her money, I say along with you, this is how. Children, spouse, fellow employees, cousins and critics and companions in the present, people looking back from the future, how you make your money as an investor, as a professional, as a company, as a nation, as humanity writ large in this age of seven billion of us and growing, though not growing so fast anymore as people once thought by the way, how we make our money is exactly the question we should be asking ourselves and others. If you're not satisfied by the answers you're getting, change it up. It will make your life better and my life better and our world better. "This."

Now, on to my second point on this, our 300th consecutive weekly podcast, which by the way I started recording at exactly 3:00 PM as we record Tuesday, March 16th. My second point has another silly title, but maybe I can inject it with meaning. This one is truly Foolish, in the sense that it very much runs contrary to a lot of the conventional wisdom in our world today. If it rubs some, and perhaps you dear listener, the wrong way, my apologies. But part of what I think entrepreneurs are put on this earth to do is to break the rules and to challenge conventional wisdom, Fools, certainly, and I think inherently, many entrepreneurs are people who are willing to take risks more so than your average bear, and I take that seriously as a responsibility. It's what Fools do. It's what Fools have always done, challenging conventional wisdom, saying what we think needs to be said. Here it goes. My second point is entitled, "is," as in reality, what is, not what we wish were, not what we hope might be. I like wishes and hopes and dreams as much as anyone I know, and I believe in the mantra, dream it, build it, which my friend, Roy Spence, has uttered at any number of Conscious Capitalism keynotes, and indeed, on this podcast a few years back. It was Rule Breaker Investing podcast No. 123 in fact, for those keeping score at home. I think I may be the only one actually keeping score at home. Of course, no one else would or should have known this was even No. 300, but it was No. 123 when Roy said dream it, build it. To me, that's the story of enterprise, and enterprise is what I believe to be one of America's five core values. I love dreams and I admire hopes, but this point No. 2 is about what is. Let me sidle in on to making this point. 

Here's what is; let's start with your genes. Start right there. You have a unique fingerprint. It's estimated that as of 2020, 107 billion humans ever existed, ever walked this earth. So call yourself No. 107 billion. You, as our 107 billionth human, have the only fingerprint that ever was that is yours. Even identical twins don't have the same fingerprints. You are you with every beautiful strength you have and every beautiful weakness, the sage that you are as our friend, [...] has said, as well as your saboteurs. You are unique. Question for you; do you believe you are equal? Equal to what? While I believe we're all given the inalienable human rights to pursue life, liberty, and happiness equally, but for me, "is" means that we will never be equal in terms of outcomes. We should never try to make our outcomes equal. In fact, in doing so, we would make "a hell of heaven" to pull a line from John Milton. 

Let me tell you something I will never be, an "is" for me; I will never be 6'. In fact, I'll never be 5'11''. I'm 5'10 3/4''. I could stand on my tiptoes for a bit, maybe be 6' for a bit. I could wear high heels, although at this cultural place in history, that's reserved for the fairer sex. Here's a problem for me with not being 6' or not being 6'6'' or 7' like some of my favorite athletes that I'll once again be cheering on this week in my favorite week of every year, which is like Christmas except that it lasts five days and it's called March Madness. The problem is that a study in the Journal of Applied Psychology confirms that an extra inch of height can equate to roughly an extra $800 of income a year. The study controlled for education and for experience. Here's an "is;" taller people get paid more. Here's another "is;" our height comes from our genes. You did nothing for your height. Here's another "is;" there are better-looking people than me on earth, well, for most of us. There are some remarkable Sophia Loren types out there. But every year, as we age past a certain point, we get a little less good-looking, and here's the problem with this. It turns out better-looking people make more money. As Sean Salter, a finance professor at Middle Tennessee State University explained in his 2012 paper on real estate brokers, the more attractive the broker, the higher wage. 

A Business Insider article on the study gives this key line, and I quote, ''It has to do with a bias toward beauty that we all unconsciously have.'' Now, I realize we are living in an age of making more conscious our unconscious biases, and at its best, this makes us wiser, more empathetic, more sensitive, and fairer-minded. At its worst, this same age sometimes threatens to envy or penalize or demean what is beautiful, to suggest that the beautiful things are exploiting the rest of us, and are dirtying the world. The phrase "the beautiful people" is almost routinely cast with the most negative of connotations. Back to "is" and "are," so there are better-looking people than me and you on earth, and there are taller people than you and me on earth, and I also suspect there are smarter people than you and me on earth. There are people of higher, to say nothing of lower, character than you and me on earth. While intelligence and character in many ways are complex, can be augmented and no doubt improved over time, I think we are fooling ourselves if we disconnect the idea of taller, better looking, smarter, or wiser from our genes. My own Yankee horse sense tells me something like 50% of us is pre-determined. 50% of us "is" and the other 50 is what it's all about in whatever circumstance; the choices you make, the lessons you learned, the learnings you've made a part of your life. As Emerson memorably once wrote, "Sow a thought, reap an act. Sow an act, reap a habit. Sow a habit, reap a character. Sow a character, reap a destiny." 50% of you "is" the hand that you were dealt and you had no control over that, until, and if, gene therapy becomes a thing. The other 50%, how you played those cards, how'd you make your money, who'd you love, who loved you, and will you one day leave this campfire better than you found it. 

Quoting again, "It has to do with a bias toward beauty that we all unconsciously have," which is always going to be true and always should. Beauty of course is in the eyes of the beholder. It can be very culturally based. One culture today may view beauty very differently than another culture today and very, very differently from another culture 100 years ago or 1,000 years ago and 1,000 years from now. So like most studies, these studies about height and beauty, we hardly need in the sense that we already know they are intuitively true. They are "is" is. Does ice cream make you fat, says the headline on livestrong.com. I'll save you a few minutes. No need to read that one either. The answer is yes. That too is an "is." Why am I taking time out and perhaps a risk or two here on podcast No. 300 in order to challenge the present-day obsession with equality in all forms, that always sees, hunts for, always will see and decry gaps, and that in so doing, brushes past or sometimes blows off "is" and usually fails to celebrate success the "is" that you have created or that your portfolio may be exhibiting, the effort made, and the win that resulted? I just want to make sure that you, my fellow Fools, will not forget, will indeed remember that we do have some important equal rights. We have no right to equal outcomes. It makes no human sense, if we're talking about humans anyway, which are faulty, beautiful mixed bags of DNA and actions, of beliefs inherited or earned, of people who come from unequal and tragically unfair places, and of people who can play a poor hand masterfully and a beautiful hand into a dud. One of the people of privilege I know who came from a lauded family and was one of my best friends growing up took his own life in college. He may or may not have been taller than you. He may or may not have been better looking. He was handsome for sure. His family had money, it had history, it had political power. But one card that was missing from his hand, the love of his father. 

Another, the lived experience of being resilient. Another, there may have been a screw loose. At the end, I can't really know. I never got to hear anything from him just before the end. The last image I remember was his beautiful smile coming back home on school break a weekend or two before that same smile, once said to be worn by Richard Cory in EA Robinson's poem, had both the fictional Cory and my factual friend both suffer the same fate. Before I hit my final short point, I want to make sure that you know that while I believe equality is an overrated concept and a will of the wisp highly purposed by many people from whom it is their life struggle or their power goals for our society, as a Fool, I'm calling out equality in this context. I want to make sure you know of the better world that I see and I believe we're living into, and that is a world of abundance. It is a world where the stock market goes up from the lower left to the upper right over the course of your lifetime, which it does and has and will continue. A world where you are more than you started with, where you have more than you started with, and will have more besides, more if you want it, which sometimes I don't think you should. A world where you're putting in little, and sometimes, big efforts every day to make my life better through your job and where I'm doing the same to make your life better through mine. A protopia, in the words of Kevin Kelly. A world that improves in invisible and infinitesimal ways that aren't noticeable in the day to day, especially when headlines will always be seeking out the bad; if it bleeds, it leads, but a world where ephemeral headlines are forgotten about as quickly as they're hatched and what matters is what endures. 

So I don't want to tax NBA players extra for every inch of their height which separates their net worth from yours or mine. I don't support a beauty tax. Has such a thing ever existed? Sometimes, I think that's where we might be headed. I don't want to tax beauty. I want to increase it. That's my "is." I hope it's your "is" too. I don't want to be the Russian in the old joke that goes like this; "Three men who died recently are brought before the throne of God and told that they may each have one wish. The Briton asks for an end to war. The American asks for an end to hunger. The Russian smiles slightly and says, in my village, I have a neighbor who has a cow. I do not have a cow. I wish that my neighbor's cow shall sicken and die." As a Fool, I wanted to share this with you because I see conventional wisdom out there that tries to make some hells of heavens, that tries to make successful businesses out to be greedy, successful people out to be criminals. Yes, there are criminal businesses and criminal people. We know them. The headlines are about them, but the headlines are often not about "is" though. I want to make sure you care about what is as we work harder to improve the world for everyone, to include everyone, have no one left behind, which I so desire because we are all connected, recognize that from the time and place and body in which we are born, we are not equal. We never will be. That is not a human world. 

From that unequal place of our origin, we will go on unequally to live lives of unequal value. Spend no time with the Russian, [laughs] this is not about Russia, by the way, from that joke, I'm having fun with it, spend no time with the Russian in the joke comparing yourself and trying to bring down others. That is a fool's game. That is a loser's game. That game played forward will create extreme dissatisfaction. It has in the past created many evils by those who cannot accept what is. Come over, dip your foot into this other pool, I'll call it here, the fools pool. The water's warm enough and win-win-wins are not only possible; they are the only goal that is laudable, and they will happen led by the people and forces in our society who know what is, who will always strive for an "is" that is better while recognizing that most human progress has been caused by people and cultures that are striving, trying to take your A to an A+ and not ding you for your C-, to have each of us using our comparative advantage, because each of us, very surely everyone on Earth, whoever looks like whatever, every one of us has numerous comparative advantages. Point No. 1, "this," and point No. 2, simply "is." Point No. 3 to close. I won't put a word on it yet but I will pick back up that old joke I was just mentioning, that like most cultural jokes, puts out a stereotype that is often unfair but sometimes contains insights. 

What I like about that joke is the American request. The American asks for an end to hunger. Boy, does that sound great to me. Does that make me proud of the American stereotype in that joke about envy? Yes. Go ahead and Google this phrase; when will world hunger end. You want another beacon-of-life message? In a dark time, the answer comes back in a simple four-number sequence that Google presents in a large font, you know that kind of large font when it thinks it knows right away the answer to your Googled question. That four number sequence reads, 2030, as in the year 2030, as in nine years from now. Now, I don't know what you think of that answer. Some of you are going to have a knowledge base much deeper in this material than I do, which by the way is always true of every stock I've ever picked. 

There will always be a Motley Fool member on the discussion board or in social media who has spent his life selling their product or who just published their dissertation on the industry. Anyway, 193 countries have signed an agreement committing to end all forms of malnutrition by 2030. Now, will we get there? Well, in the last year or two, progress has been slow understandably, in some cases sadly, reverse. So we may or we may not, but it's an amazing thing to shoot for and something I hope happens in my and your lifetime. Of course, each of us has a small role to play in helping to make it happen or hurting its chances of happening. The reason I'm glad the American in that joke said what he did is because this is true of my experience of being an American. One of my favorite podcasts that I ever did was No. 70, there's another round number, which happened on October 26th, 2016. No. 70 was called "America's core values." Now, most of us who work in organizations know the importance of having core values that are articulated, living, breathing parts of those organizations, cultures, and boy, does our purpose, do our values drive us at The Motley Fool. 

Maybe you're blessed to be part of something similar, maybe a business, a church, a family, an institution that is purpose-driven, and you can relate. You know the value of alignment, of shared purpose and values uniting us, having us work together. You know the power of figures today like John Hope Bryant, my friend and Conscious Capitalism board member, who are forces here that unite us, not divide us. Value-driven people are the best people, purpose-driven businesses are the best businesses, and I was saying way back on podcast No. 70, value-driven nations are the best nations. Boy, is every nation imperfect just as is every human, and my own nation, the United States of America, has suffered a lot of division over the past decade or more. It's been much reported on, seen in TV images, in social media screens, the list goes on. That's why I thought to ask this question on podcast No. 69; what are America's core values, and then with podcast No. 70, do my full best at answering exactly what I think are our five core values, the things that are American, the opposite of which would be un-American, in the very same way that around Fool HQ, we say that thing or person or act was so Foolish, that's a good thing for us, just as of the opposite, we would say that is un-Foolish. 

Well, here at the end of No. 300, I'm not here to reiterate what I think are the core values. In fact, I'm not even going to say I have them right. Part of the point all along is not to assert what I or you think but rather just to sometimes ask, just to hear it out from your white friend or brown friend or gay friend or old friend or beautiful friend, from every friend what do they think are our core values. There's such value just in the question itself. But my favorite TV show of the last year is itself an incredibly American show. To me in particular, it highlights front and center in such a non-in-your-face way what I believe to be one of America's five core values, not often acknowledged or celebrated but what I believe is at our heart and in our hearts, and that core value, fifth by my accounting, is kindness. If you want to experience what it means to be American both at home and abroad, American in the best and most aspirational way, I've got a streaming TV plug for you. You might have already heard it. You might have already binged it. You might be American or you might not. 

A third of my Foolish listenership this week, shout out to you around the world, is non-American, but if you don't already have Apple-Plus and you're wondering what kindness looks like and maybe want or need to be reminded of the power of kindness, then I hope you'll enjoy along with me and my family the show, Ted Lasso. People sometimes tweet at me on Twitter. I always appreciate it. I can never read them all, but my favorite of the last week leading up to this, the 300th podcast for Rule Breaker Investing, came from someone who may or may not be American. His given name is clearly Asian. Part of why I appreciate it is that Aninda [...] hope I'm pronouncing that right, Aninda is not a name that comes trippingly to the tongue for many U.S. citizens today. Aninda, I hope that you are American because our country is stronger with you in it, but if you are not, that's in a way even greater. You simply said this, and I quote, "If I had to list the most memorable podcast episode that I have ever listened to, it has to be @DavidGFool @RBIPodcast U.S.A. core values. Listening to it again after a couple of years, so refreshing. Then among several hashtags, he threw this one in; #kindness. I want to thank each of you for listening to anywhere from one to 300 podcasts with me. 

A special shout out to my 300 club, those who have binged all the way through suffering a Fool gladly. An even more special shout-out to Richard Kevin Engdahl who from podcast No. 1 has amiably and tirelessly and expertly produced pretty much all 300. Point No. 1 was this, I hope you'll remember how you make your money. Point No. 2 was "is," an "is" that recognizes the real world in which we live, that so often and I think always will do best when we work for the win-win-win of all people, that says you're great at this, let's make you greater, and I'm great at this so let's make me greater. That is what our best "is." Point No. 1, "this." Point No. 2, "is." Point No. 3, thinking of what binds us, our beliefs, our faults, our aspirations, our common causes, working toward the best we can be communally, corporately, not proposing our neighbor's cow to sicken and die but building each other up and with kindness, thinking of memorable nations, those back in the day, those we are building toward. I'm having fun with this. I doubt I'll ever see the movie, and certainly it isn't a celebrated culture, but it is a memorable culture like America in this way, so let's call point No. 3, Sparta. 300 is complete. This is Sparta!