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Rule Breaker Investing: A Very Special Episode

By Motley Fool Staff - May 21, 2021 at 12:16PM

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News from David Gardner.

Imagine: You've just stopped doing something that you've been doing for a very long time. Something great. Something that in many ways has defined you. But now you've stopped. What would you do? What would David Gardner do?

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 May 11, 2021.

David Gardner: What do you do when you've done something for so long that without it, you might not know what to do? What do you do when you stop doing something and have no immediate plans to do anything else? What do you do? What would you do? What will I do? What am I doing? Only on this week's Rule Breaker Investing. 

[...]

Welcome back to Rule Breaker Investing. One of my favorite podcasts I did last year was on March 11th, just as America started locking down. I called it Thoughts on Our World in 10 and a half Chapters. Now, I haven't listened to it since and given, A, that I've done another 60 podcasts since, and B, well, B my memory, you should then know that C, I don't actually remember what I said, I just remember enjoying having said it. If and when I go back to listen to it, I'll feel some pride that I was saying those things, whatever they were, staring with each of you into the dark maws of an oncoming global pandemic about which none of us could really know what to think.

Speaking of oncoming things about which I don't really know what to think, 10 and a half chapters felt right this week once again. Here I am and thank you for joining with me this week.

I made a prediction at the end of last week's podcast and sure enough, it has come to pass. And I quote: "Well, the winds of May continue to blow over this month and change is coming. I will have a special podcast next week." End quote. I said, which is what has happened.

Spoiler alert. I knew it was going to happen with the wag and with Alan Kay who first said this line reflecting on his time working at the Xerox PARC think tank back in the day, "The best way to predict the future is to invent it." If you had a chance to watch my five-minute video explaining this to members, my news, you'll know that I actually shared this with our board of directors months ago, on February 1 actually. Heck, I might as well re-present the statement here for old-time sake on this podcast, since it only takes five minutes to read and many may be hearing this for the first time. Let me say it one more time, and I'm calling this Chapter 1 of this podcast.

Where you place your focus in life matters. The attention you give to your spouse or partner, to your hobby, to your kids, to stock picking, is powerful and intentional. On February 1st of this year, I conveyed to my brother Tom and our board of directors that with intention, I wish to change my focus, which I don't do very often. Because I've been picking stocks for my fellow Fools since July of 1993, when The Motley Fool paper newsletter kicked off, going to AOL back in the day. Remember AOL? A year later and the World Wide Web two years after that. One pick after another, one year after another. The Fool Port back in the day for those who remember. Motley Fool Stock Advisor for 19 years, Motley Fool Rule Breakers for 16 years. For more years than I would have ever expected, three picks a month, along with 10 Best Buys Now a month, starters stocks each year, two, five-stock samplers on podcasts month after month, year after year. 

Well, I'm happy to say that on February 1st, our board of directors respected my wish to move on from stock picking. I've loved doing it and loved the companies I recommended, even more, loved the people and their stories. You, who've taken a risk, been a Fool with me, been Rule Breakers, loved you. I hope your life has been enriched by mine. I hope I've made you smarter, happier, and richer. And though the next 27 years of my life won't contain nearly as much focus on the stock market for me and for you, the many gains that we have made together are real and will endure. The only constant, the winds of change are blowing over me and you and The Motley Fool, and I welcome that, and I hope you will too.

What's changing is that I'm handing off and transitioning my stock picking responsibilities. Handing those off to incredibly talented people and teams who've worked alongside me for years and years. People you already know because they've served as longtime analysts for services like Motley Fool Rule Breakers. People who've become friends to you via their faces and voices appearing daily in your home on this podcast or on Motley Fool Live. People who know my approach at least as well as I do. People who are not just my respected peers but my good friends. The hand pressing the mouse button to send the internal email with the newest stock pick each month will be different, but the philosophy and the frameworks and the thinking in place will not be different, and it will continue to win for you. That's what's changing, and by my choice. 

In a way it's a big change, so let me also convey then what remains. I remain co-chairman of the Motley Fool and Chief Rule Breaker. For life, I expect I will continue to speak to you our members, and the public, continue this weekly podcast, my passion project over the six years since it's been running, Rule Breaker Investing. I also remain chairman of The Motley Fool Foundation, our public charity that is beginning to work with you to unlock financial freedom for so many more. Tom and I want to bring smarter, happier, richer not just to you who can afford a Motley Fool membership today but to all. All May long, I'm here, here on this podcast on Motley Fool Live. I'll try to ensure every good question gets answered about what this means for you.

But now one final minute about The Motley Fool. Another reason I'm inspired to put my focus toward some new places is the growth of our company. Thanks to you, our listeners, our members to the prosperity that we are co-creating. 

Our company is not only the strongest it's ever been in its history by far, but also it's actually turning into one of the stronger companies in all of global finance. We're a private company; we're private by intention, with a still largely untold story. But thanks to my brother Tom and our leadership team, we are better positioned than ever to lead individual investors and Fools everywhere lead you into and through this amazing new world of possibilities.

To close for now on behalf of me personally, I want to thank you for suffering this Fool gladly for so many years. Though I'm intentionally changing my focus, I'm still here, and I'm deeply in love with our Fool community everywhere. And on behalf of our company, I just want to say, hello world.

That was the statement. It's still up there on fool.com this week, which I hope says about all most of us need to hear about. About a move like that, a move by me. Heck, last week, Bill and Melinda, this was sad, ended their own 27-year run with a tweet. If you didn't already know my news and that's all that you personally need to hear from me this week, what I just read to you, then I'm happy to be your favorite classroom teacher around this time of year who cuts class. Do you remember this? Who says, "Go enjoy the flowers; take our regular time off this week, leave the classroom; spring is sprung." That's me right now. I'll be back next week teaching risk ratings and breaking down two stocks for your consideration and if this is you, see you then.

But if you're still listening after that pregnant pause, then you're a Rule Breaker Investing podcast listener of some vintage or more avid than average.

For you, dear Fool, I give you some more chapters beyond Chapter 1. This week you get more than a five-minute video or a tweet. Settle in, and let me share with you the other nine-and-a-half chapters.

Chapter 2 is entitled, All Pull, No Push. The line I was giving privately to family and friends for the months leading up to last week's announcement was, there's not one reason, I was saying, there are 23 reasons. How many actual reasons I couldn't say as I haven't counted them, but it conveyed more my own mentality that this was well considered. It was time, and it's not about anything pushing me, but about many potential things pulling me. All pull, no push. As I conveyed in my written statement which I personally wrote out. — By the way, we have an excellent corporate communications team here at the Fool, but I wanted to ensure you heard directly from me, not corporate. — All pull, no push. 

The day after I'd communicated to our board of directors my wish to transition my responsibilities, it was February 2nd. The big business news headline that day was Jeff Bezos stepping down as Amazon CEO later this year. It was a big news headline, certainly, because of the prominence, the size, and the relevance of Amazon.com, but also I think because most of us perceive Jeff as having so much life ahead of him. How and why would Jeff Bezos, of all people, no longer want to be CEO of his own company? Given that the very day before, I had communicated what I did to the board I felt like I got it. I was grateful to Jeff for helping basically run cover for me, providing an easy exemplar I could point to just 24 hours later for anyone else who might think "Dave is going crazy" and thinking, he wouldn't keep picking stocks for the next 27 years. By the way, maybe I am crazy or going crazy. I always allow for the possibility even as I've picked every new stock. We might be crazy here, behind this Rule-Breaking company today. A subtext of every one of my picks, you have to allow for it. If you don't, how else will you ever begin to recognize and seek help if you are, in fact, going crazy? 

One of the best antidotes is to call yourself a Fool, increase your self-awareness, be ready for the possibility you are crazy or just simply wrong, and then go, act, do your thing. Which is what I had done on February 1st. There, the very next day, Bezos goes off and says, "I'm stepping down as CEO." In the prime of his career, or perhaps the most consequential global corporation of our time, that net-net does incredible work in this world and has so much more potential going forward. I got you, Jeff.

Now maybe it's kismet or mere coincidence, but I certainly took a sign that the universe may be conspiring to tell me something when not only did Bezos do what he did the day after, my February 1st, but exactly two months later, which your calendar will show you is April 1st, which I hope you recognize as April Fool's Day, another prominent person tied to me said he was retiring from his responsibilities. History shows that Roy Williams stepped down as the hall of fame coach for the University of North Carolina basketball team on April 1, two months to the day that I had said the same. Now, not maybe, by the way, the ideal day to announce you're retiring if you're Roy Williams, April Fool's Day. But old Roy wasn't fooling, and nor was Jeff, and nor was I. 

Anyway, I just wanted to share with you what I was seeing as things unfolded for me over the past four months, which by the way is what I wanted to give our company, in order for the Fool to best plan for you, our members, during a transition which would always be hard for us no matter which year touched off in the past, present, or future. By the way, a lot of effort is being put into creating what I call it from the start on February 1st, an intended win-win-win for all. That's the spirit, which you will also recognize, of course, implicit in conscious leadership, one of the four foundation stones of conscious capitalism.

Pretty sure in conclusion here, that Jeff wasn't pushed but pulled. That Roy wasn't pushed but pulled. For me, it's the very same.

Chapter 3 is entitled, Two Fools. I want to share with you a story I haven't told publicly yet, because it only just happened a few weeks ago. But it again further confirmed for me that this is right and it's going to work. It's mid-March. We get a call into Fool HQ to our receptionist, from a longtime member and fan, who left a message saying he was going to be visiting Washington, DC, and hoped during his brief trip he might have an opportunity to meet Tom and/or Dave and say thanks.

Well, the message got flagged, especially, as he was a person of prominence, and knowing that Tom was out of town and couldn't join, I was going to be happy to make sure this fan got a high five from me regardless. But not only that, I was excited, because as a longtime American football fan, I was going to get to spend my Friday morning over coffee with an NFL head coach.

Now in deference to him and any privacy he might wish, I'll keep his name to myself. But as we talk through some of his financial history, how he had been ill-served here, misled there, sometimes by people with ill intent, sometimes by financial professionals who were just not very good. I recognized not just his story, though it was so well told, but the story of many of us wanting to do well with our money, feeling uncertain as to how to go about that. Wanting to trust the system, discovering that large parts of the system are not exactly run by conscious capitalists, feeling in some cases screwed, hosed, feeling shame, knowing you want and could do better if you could only find the right guidance, happy to do it yourself. It's for this person, in particular, that Tom and Eric and I initially created The Motley Fool. It's what drives Tom, as much as any other motivation today as CEO of our company, to do it better, to do it well, to make it about you and your results, your learnings, to make it about Main Street, not Wall Street, to be a "for" person. Fools for you. 

We never know who's on the other side, taking our advice. I will never know who's actually listening to this podcast, who's listened to any given episode from five years ago, unless you raise your hand, which no one has to. But in this man's case, he did and just wanted to say thanks. After quietly, diligently, and rather brilliantly following the Fool for 10 years. Now taking one morning off, not long before the NFL draft, to just hang out for a couple of hours talking money, sports, talking life, with a Fool. Two Fools, as I said, closing out the morning with a selfie.

I couldn't tell him at the time, as it was under a cone silence, of my news. I couldn't tell him that I was never trying to be Buffett or Munger. I love the game of the stock market, and I always will. I love as much or more of the game of being an entrepreneur. The great game of business too, but the game of life, which I love most of all. I simply didn't and don't want to spend so much personal time in this third 27-year chapter coming up with 13 more stock picks every month. One new Stock Advisor stock, two new Rule Breakers, five Stock Advisor Best Buys Now, which as I've mentioned before, are even more popular than our new picks each month, five Rule Breaker Best Buys Now, -1+2+5+5 equals 13. 13 times 12 is 156, 156 times about 20 years ...well, that's a lot of picking.

As I said earlier, I loved it. As a lifelong gamer who is far more used to losing games than winning, losing to win, as I've said, I can fairly reflect that the stock-picking game might be the game I am best at. In some senses, like a professional athlete, I wanted to say that morning, my desire was to end my playing days in my prime. I could see in my new friend's life how a great player can become a great coach.After 27 years of being on the field every day, I would rather coach in my next 27 and use the additional time to see how the world might want me to try to add more new value.

There it is. Chapter 3, my Two Fools story. For you here, it relates to a very specific, and deeply inspiring, and memorable meeting, at a random Pain Quotidien in Maryland one day, late in March. Me a Fool, he is a winning NFL head coach. It's so fun for me to be able to share with you that story now. Perhaps we'll get more opportunity for him down the line to tell that story, someday later on.

But more generally, Two Fools. Isn't that what we do together, every week? You and I, Two Fools. Just as my new pal and I were coaching each other back and forth over a coffee table, isn't that what we continue to do together, week in and week out, with this podcast? A lot of members expect that I've coached my analysts and advisors some over the years, which I surely have. That's one of the reasons I feel so great about transitioning my responsibilities to them. They're ready for it; they've earned more playing time. But let's be clear that I'm coaching a lot more than just a few dozen talented and dedicated Motley Fool analysts and advisors, tens of thousands, more than that because I'm coaching you, directly or indirectly, as you like. I've been doing it for years. It's one of the things I love so much about my 27 years so far at the Fool that I'm insisting on continuing it indefinitely, right here. Coaching you. 

I hope you know back that it's a two-way street, friend. You know it, you get to do it at least once a month on this podcast, it's been happening for years. I'm coached back by your stories, challenges, encouragement, questions, poems. I'm coached back. Part of what I do is I just shared that back out, all the questions and the answers into an increasingly deep cycle of sharing out, growing, resharing, deepening, sharing. So ends Chapter 3, Two Fools.

Chapter 4 is entitled To All the Fools I've Loved Before. Now here I want to say something in particular to my longest-time, most frequent, most avid, and most faithful listeners. First of all, as Roy Spence, the entrepreneur, the conscious capitalist, my friend, and yours, past guest on this podcast, Roy Spence has been wont to say, I've heard him do this over the years, "I like people who like me." But for this special podcast and this special opportunity this week, I want to make sure I nudge it up one notch. I love people who love me, thank you very much. Scott Peck showed through his classic, The Road Less Traveled, that love isn't a feeling so much as it is an act. It's what you do that shows love or not far more than what you say. "Love is work," Peck said. In the context of this podcast, the work of love is to have listened and those who have listened the most have loved the most and are loved back the most.

Thank you so much for being with me and Rick in the past many, many years some of you. Hey, look at you, you know who you are because if you're listening right now you are with me, in the present thank you for that. And the future. If no one's listening I'm probably not doing this podcast. If you are listening, I'll keep doing this podcast and if you are listening and sharing it out, I'm loving doing this podcast. Many of the things that I say are nuanced. Think about it whenever I use the word "Fool" or "Foolish," such simple, common, useful widely used words, I'm immediately qualifying that especially for new listeners. I can't just say "Foolish" without ensuring that you are aware of the nuance of either capital-F Foolish which is really good, or lowercase-f foolish, which is often really not so good. Many of the things that I'd say are nuanced. Here's a ready example that all the Fools I've loved before will recognize.

I think the market is going up this year. 

Now, when I say that to you, beloved Fool, you know exactly the context and the background for those words. I will specify what I mean when I say that to everybody else very shortly, but you can only immediately appreciate the context and the background of what I mean by that silly line once you've heard me use it before, explain it before, and so you get to the point where you don't need me to explain it again. You already know what I mean and why. All the Fools who've loved me before, to whom Chapter 4 is dedicated, do not need me to reexplain this, but here quickly I go.

I think the market is going up this year. Now, even as I say that dear newcomer, you should know that I don't think anyone knows what the market is going to do any year, let alone quarter, month or day. The news headlines explaining why the market did what it today are always reductionistic and a bit silly. There are 1,000 reasons why the market does what it does on any given day. To these articles' credit, at least they're doing so in retrospect. Imagine instead if these were all written at the start of the day, before the markets had traded. What an incredible waste of time they'd only ever be right maybe half the time, and even then their reasoning would be wildly off.

So when I tell you, new friends, that I think the market is going up this year, part of the nuance is pure tongue in cheek for me, I think it's really silly to spend time predicting the market. Yes, I will still be asked by people who don't yet get this and still even some who do, what do I think the market is going to do this year or the summer, or is it going to crash in the fall? I think the market is going up this year. Nuances. You got one already. I'm basically having fun with the whole notion that this is worth having an opinion about spending time on with some of the precious focus that is yours to spend as you see fit in life. Do you really want to spend some of your focus on that?

That's one nuance, but a second nuance is that I know and you do too if you followed me over the years that historically the market rises 2 years in 3 and falls 1 year in 3 and when you take it, all in all, you want to be an investor. You want to be invested in the market because you're getting two years of up for every one year of down. It all averages out wildly in our favor, leading us to approximately double-digit-percentage returns annualized, which is completely amazing. 

Einstein is sometimes recognized to have said that the biggest miracle he encountered on earth was the power of compounding returns. I would only modify this in my own case to say the power of compounding returns of the U.S. stock market. Because compounding at 10% or 12% or more than 20%, which is what my Stock Advisor picks have done since 2002, is a darn side better than compounding at 7% or 3%, or, in a much worse place, paying someone else double digits so they can compound with your money on your interest, which you got into because you overspend in the first place. Anyway, compounding the U.S. stock market.

Now that you know the math, new listener, now you will appreciate and perhaps agree with me. I think the market's going up this year and you can just go around saying that every time with your tongue in cheek but also with the knowledge that the math is on your side, and so it makes sense. It makes even more sense when you see studies that show that market timing doesn't work, market timers are fooling themselves and or their customers. Market timers rarely get better than a coin flip, which is 50-50. 

Meantime, you and I are getting it right more than they do. Getting it right two-thirds of the time without spending time on it and getting our money on the right side of history, positioned to profit and to compound those profits, and I think the market's going up this year. And by the way, it has. My stocks are sucked in the wind in 2021, my portfolio is dead flat at 0% this year as I speak. How's yours? Yet the market, by golly, is up once again this year 10.4% for the S&P 500. Even if I'm not participating in 2021 market gains right now — which I'm fine with, thank you very much based on many other years of gratitude and joy — even if I'm not participating and maybe you are not either in this environment, dear Fool, the market has gone up this year.

Let me close Chapter 4 like this; All the Fools who've loved this podcast before, loved in the sense of worked, already know exactly what I just said. With you, I can simply say, I think the market is going up this year and trigger all of these associations and awareness. Many of my own Fool employees probably cannot, especially a new hire, even somebody working on my investment team wouldn't understand any nuance where I'd say, I think the market is going up this year. Because not everybody listens to my podcast or needs to or should want to. Even my fellow Fool employees, and this isn't about them anyway, it's about you.

Love is being able to be economical in word or action. Some of the best forms of love require not a word at all, just a look or an act, a gesture. Nuance is packed deep into this podcast, so to all the Fools I've loved before, to whom I can say "Etsy" and you think of the market cap game show, to whom I can say, "Oh the places you'll go," and it's a little ironic, who can recite the Six Habits of the Rule Breaker Investor because they first came out on this show in 2018, September 19th, actually complete with mnemonics, please know that your every bit as Foolish and every bit as coached as any Motley Fool full-timer, and maybe even more so in many cases, and thank you for that. I love that about you.

Chapter 5: entitled, I Love Doing This Podcast and I'm Keeping It Up. Chapter 5 is a short one. In fact, that's pretty much it. The title, I Love Doing This Podcast and I'm Keeping It Up. Anyone who felt a bit bereft, put out to sea, put it out, anyone who felt at all sad that I'm not picking the June stocks for Rule Breakers or Stock Advisor, please know that I hope you have something of value nonetheless, me, here. This podcast may change by the way, or it may not at all. In light of my own changing focus, I'm oriented toward believing the only constant is change. Of course things will change. 

I hope that I bring solutions and relevance and fun to you every week with my continuing parade of Motley variety, dozens of episodic series awaiting their next entry, solutions, relevance, fun. I hope every bit over the coming weeks as I did over the past ones. That's Chapter 5. You can tell I love doing this podcast. You already knew it was coming in, I hope. I'm keeping it up.

Oh Motley Fool Live too. Our Motley Fool Live producer Tim Sparks put up a graphic recently for members. It was a week or two ago. He had to apologize though for a minor, but I thought it was a perfect typo. In a communication sent out to members the graphic read, "Motley Fool Love." It was supposed to read "Motley Fool Live," of course, but any member, and if you are a member, you have access to Motley Fool Live. By the way, just go to live.fool.com, any of the workday and some weekends too and join in with what I call the television channel running on the Motley Fool website, it keeps getting bigger and better, and boy, if a lot of love is important do it every day. I love being on Motley Fool Live and I love the love that is, I think aptly called Motley Fool Love, and that's Chapter 5.

Chapter 6. Well, anyone who knows my predisposition toward the number six — Six Traits of Rule Breaker Stocks, six habits for you, the Rule Breaker investor, six principles on which Rule Breaker portfolios should be built — must know that this is a special chapter in my 10-and-a-half. Chapter 6 is entitled, I Made My Pencil. Henry David Thoreau, I believe this is fact or mostly fact, but I admit to having had a busy enough week that this isn't thoroughly — Thoreauly? — fact check, so if I don't have this right, think of it as the stuff of legend. It's a great story anyway to borrow for me to make a point. Henry David Thoreau, the 19th-century transcendentalist, author of Walden, lifelong abolitionist. I want to make sure you hear and know. Henry David Thoreau who among other inspiring passages wrote the very famous and I quote, "I went to the woods because I wished to live deliberately, to front only the essential facts of life and see if I could not learn what it had to teach and not when I came to die discover that I had not lived." Henry David Thoreau, who also wrote so many Foolish things, which I know as we are two Fools together this week you, my fellow Fool, can appreciate lines like, "If a man does not keep pace with his companions, perhaps it is because he hears a different drummer."

Henry David Thoreau was born to a pencil maker. That was the family business, something rarely referenced, not known to many. Did you know this? He put quite a lot of energy in the pencil making, especially as a young man. He rediscovered some old wisdom that could boost production and profit for the Thoreau pencil factory, which it did. The Thoreau pencil, in an age before mass production of the standard No. 2, we all take for granted today, but back in the mid 19th century, the Thoreau pencil was the most popular American-made pencil in its day. Yet despite his visionary efforts translating into profit and betterment for all, a true win-win-win.

Despite these efforts, in the flush of the success of the pencil factory, Thoreau basically disengaged and his friends were like, "Henry, what? You just invented the perfect pencil. You can make so much money leading this. You have so much more in you. Why, after creating what you just did, would you walk away from pencils? Now?" History will show that where Thoreau basically walked away was Walden, and the rest is history. Indeed, according to the New England Historical Society, and I quote, "Walden would probably never even have been published without the Thoreau pencil." For Thoreau, pencils were a means when others thought pencils should be his end. Now, you know why I feel like another David a bit here.

Henry David, although technically David was his given name David Henry. He reversed it as an adult but never formerly had his name so change. Anyway, I feel like my fellow Dave here. Wait, do I need to read the "too many Daves" poem once again? No, I will not do that, Sam, I am. I will not be distracted in middle of this key chapter by too many Dave's, but some few of you anyway, will know that this too is a part of Rule Breaker Investing.

Anyway, back on track again, I was just saying Rule Breaker Investing, and that's the right segue because Rule Breaker Investing in my mind is my pencil. I've made it. I pulled from some old wisdom, we humans always do, and standing on giant shoulders I added to it. I made it for Main Street, not Wall Street. I not only put together our Foolosophy, but I practiced it. No ivory tower here; I played the game. I used the same principles I once wrote with a pencil, perhaps, in draft form as a book 23 years ago, Rule Breakers, Rule Makers, I took that Foolosophy, and I didn't keep pace with my fellow travelers, Buffett or Bogle, and it was because I heard a different drummer. I made my pencil, Rule Breaker Investing, and I illustrated with that pencil for 27 years, and after 27 years with not a regret, no push, pure pull. I'm putting that pencil down and I'm allowing others to pick it up and use it how they want, use it perhaps like Harold used his purple crayon. 

Now, do you know the Harold and the Purple Crayon books? Well, I hope you do. I hope they haven't been canceled. They're older books, so perhaps there's some cultural gap between them and now that makes them less magical than I think they were for my kids, who got them for bedtime readings. I sure hope not anyway. I sure hope they're highly regarded. The first of those books, which is Crockett Johnson's best-known book, entitled simply Harold and the Purple Pencil, if you will, tell the story of a little boy who with his purple crayon has the power to create a world of his own simply by drawing it.

What a message for our kids, and what an analog for entrepreneurship, what an inspiration for the artist and liver of the creative life that each of us is. Each with your purple crayon, with your portfolio, reflecting your best vision for our future, with the money that you save, especially how you spend it, how you invest, like a purple crayon or purple pencil, with the choices you make, helping for better or worse, to create a world of your own simply by drawing it.

For me, Rule Breaker Investing, the Foolosophy, I don't know the school of thought, the frameworks, Six Traits of a Rule Breaker Stock, Six Habits of a Rule Breaker Investor, Six Principles of a Rule Breaker Portfolio are my purple pencil, purple in Harold's way, pencil in Thoreau's way. It is my art and blessedly my art, because like a pencil or crayon, it can indeed be handed off to Fools, to you. Like an excellent pencil or a magic crayon it can, has, should, and will, I hope, enrich your life, make you smarter, happier, and richer.

Now for me, what I've been thinking in recent months and years with Chapters 6's title, I Have Made My Pencil. Thoreau transitioned to do more and differently. He is for me an admirable man. He died, by the way, when he was 44. I'm 54. You, Fool, you're probably a different number higher or lower. We're all living on borrowed time, and the best life for me, anyway, I think is the one that knows when to hand off the pencil to you and go to the woods. Because I wish to live deliberately to front only the essential facts of life and see if I can learn what it has to teach and not, when I come to die, discover that I have not lived. Thoreau died when he was 44. This is the only time I think I've ever cried, by the way, reading a Wikipedia entry. His friends were fascinated by his tranquil acceptance of death. He'd suffered sporadically from tuberculosis most of his life. His aunt Louisa asked him in his last weeks if he'd made his peace with God, he responded, "I did not know we had ever quarreled." His last full sentence: "Now comes good sailing."

Chapter 7 is wisdom for you, it's called Gravity. My friend Ollen Douglass, who's served for about 15 years as our chief financial officer, was one of the first friends with whom I shared my then-private news and here's what Ollen said a few weeks ago, he said, "I took a sabbatical a while ago. You remember, David? You guys were paying me to do nothing. Think about that. Getting paid to do nothing." After a while of that Ollen said, "I started to notice what I was gravitating to."

Now in Ollen's case, he was gravitating to what for him was an exciting new frontier: venture capital. Many of you will recognize today that Ollen Douglass is the managing director of Motley Fool Ventures, our venture fund. I'm so glad what Ollen gravitated to was a win for him and for our company and for our members. Ollen's advice to me was therefore, take time, see how you gravitate. That's basically Chapter 7.

The first rule of Fight Club is that you do not talk about Fight Club, and that's now set in stone by the 1999 movie by the same name. Most similarly, if you want to know what my plan is and if you've listened this long this week, thank you. You'd be entitled to know my plan at this point. I want you then to know that there is no plan, there is intentionality, there is time. I'm giving myself up to 12 months to not do anything new. There is intentionality, there is time, God willing, there is gravity, and there is no plan. Gravity will determine the plan. 

I already know I'll gravitate toward the Motley Fool Foundation, which you can find at foolfoundation.org, I hope, and think it'll be amazing. The aim is over time, from acorn to oak, to reach all the world, not just the part that can today afford a Motley Fool membership but all the world and unlock financial freedom for all. That, for me, big gravity. But other things too, which I can't know right now. I'm fielding offers, that's said with a chuckle, not sure Thoreau knew what he'd find in the woods. It just took some courage for him to head there. Ollen's story and a lesson to me is one that I'm wanting now to share with you, because blocking yourself out some time, clearing away some space, it's not easy and will always be aspirational for each of us. Time and space allow gravity to show up. For you then, to show up once again, maybe looking different. Chapter 7, lucky seven, Gravity

Chapter 8 is entitled Succès Fou. It's always a phrase I've loved. My mother, who was very much a Francophile, used it a lot. At the time, I didn't know what a mot just it would end up becoming. My favorite pastime of the last week is reading comments from Fools everywhere that appear at the bottom of the article announcing my news this week. Almost any single one of those comments would have elicited elation in a younger me to think that something I would start or to which I would contribute my head and heart would do for you what you say we have done.

Here's one. "Dear David, since stumbling across the Motley Fool in 2014, I have loved the style, the boldness of scorecard reviews, and the clarity of your Rule Breaking investment — no, life — philosophies. You and Tom have changed my investment approach and my wealth for the good permanently. Thank you, Fool on."

Here's one more, "Dear David, I'm a Christian, a mother, a grandmother, great-grandmother African American. I'm a retired General Motors engineer, and my last name, so happens to be Motley. Over the years, I have followed your teachings. I wish you well, sir, and pray you always try to give back the knowledge that God has blessed you with."

Reading things like this is like watching my own personal Mr. Holland's Opus movie over and over, and they keep coming in, and thank you so much.

This month's mailbag may be particularly stuffed, but anyway, I never tire of reading them and being inspired by them. I am a pleaser, as my friend Shirzad Chamine has taught me. Maybe Shirzad taught you some things about you, too, and I can indeed even be sabotaged by that, but not this month. I am deeply inspired. [inaudible] in French means literally a Foolish success, like silly success as in silly, like in extraordinary or wild. I love that the French characterized wild, extraordinary success as succès fou. I can hear you say it again, Mom, and it's been a succès fou. You're not here anymore but I know we're both smiling, and Tom too.

Chapter 9 is entitled Bill James. No secret; I'm a big Bill James fan. When people say, who inspired you the most to break the rules? Take the Rule Breaker investing approach that you do and I think they are picturing some shelf of investment books, wondering which investment author I appreciate and there are a few, even though I've only read a few investment books. I give them the easy, obvious answer for me, but I think a surprising, nonintuitive one for them. I say, Bill James.

If you know baseball, or if you read Moneyball and/or saw the movie, I hope you know Bill James. Though in the movie, he got about 15 seconds of recognition. Bill James came from outside the industry of baseball. As a writer and thinker, he brought his own ideas that would challenge baseball and its so-called Book. Book as in, "Hey, we do things here by the Book." Book says tie game, eighth-inning run around first, you bunt, move into second score that go ahead run." Book says, well, a lot of things like that and no one, most especially perhaps no one working in the industry of baseball spend a lot of time questioning that book. Most sports journalists themselves would use the book as an authority so that in postgame interviews, if you, the coach, took a risk, did something crazy, didn't follow the book, and it didn't work out. Well, the first question you could probably expect from the media was why you didn't follow the book. 

Bill James didn't work in baseball. He had no degree there or right to throw stones at anyone's house, glass or otherwise. But through a combination of scientific thinking, wit, constant challenges of conventional wisdom, intellectual curiosity, and a strong authorial voice, he began questioning the book. He said, "We now live in the age of the computer. We can use the black box and question the book. Question the book, gather data, and form some new theories. Those new theories may get some general managers in this sport fired." Which they should because James averred their actively over and over making bad personnel decisions, underpaying some, overpaying others. "If you listen to me," James said, "I think you'll start winning because no one's listening to me at the start. Everyone's following the book."

James said in effect, "I'm just a fool, coming from outside the status quo, questioning the received truths." As James continued with one brilliant inside after another, a movement began. New ideas not only came through his writings, captured annually in the Bill James Baseball Abstract publications, but evaluations that he was making, predictions he put out there were surprisingly, nonintuitively, often amateurishly — as opposed to coming from the professionals — right. He was actually right. He used real-world empirical results to make his points.

All of a sudden, the Boston Red Sox were hiring him to provide advice after the previous two decades, where he'd largely been ignored and they'd largely been mediocre. He was wrong sometimes too, which as a scientist thinker, he acknowledged. Then by golly, for the first time a team hired a general manager, the one who makes all business decisions, all capital allocation, and that team was the Oakland Athletics, and Billy Beane rose to prominence as a fair and middling former player who became baseball's new genius. Beane, who has always humbly credited James, went on to take a small-market team to constant winning and outperformance for an extended period of time that continues to today in fact.

But even more important, here's what really happened. Now, as a casual fan watching any ballgame these days, Bill James's ideas have permanently changed the game. The coverage, the stats, the announcers, sideline reporters, the general managers running pretty much every team, all of them have tossed away the book we all grew up with. Some parts of it were true, of course, and those remain the things that had always helped you win. But so many of them have been replaced, and so much of that, but not even all of that, as Bill James would rightly and humbly tell you, but so much of that was from Bill James. His ideas have been fully adopted. 

A new conventional wisdom is now simply much more wise. It's not wrong in some of the ways the old wisdom, unguided by science or empiricism, relying on received truths, repeated for decades in sub-optimal practice. All of it is rewritten now in smarter code, creating a much smarter game. While I realize some fans don't like how players now position themselves in all kinds of crazy arrangements that we didn't grow up with, and that might even lessen the game, well, that's not the point here. The point is that my favorite thinker, my favorite breaker of the rules, my favorite author, who explains by far better than any other, how I have come to do what I do and have loved doing it, is Bill James. I hope you can see Chapter 9, Bill James.

I got to spend one hour on the phone once with Bill just as a fan. We talked about baseball, his main focus, and stocks, my main focus. But you know what we talked about more than anything during that hour? Self-driving cars. This was like eight years ago. In fact, January 31, 2013, we spent much of our time talking not about each other's expertise but the future. That is why intellectual curiosity is a fire that I hope will burn in all of us to learn and to discover. Thank you, Bill.

Here we are. The final full chapter, and it's entitled Permanence in Volatility, Chapter 10. Google the phrase, without patting myself too hard on the back and why would you, this isn't much of a Google achievement. If you Google that phrase, "permanence in volatility," the top hit worldwide today, 21 years later is my article by that title written on October 13th of the year 2000. Earlier that day, Tom and I had been on the CBS Morning Show and got blindsided after a book interview by the show's other regular financial commentators, who jumped in to say, in so many words, that we were insane for saying we liked stocks. Now to their credit, over the following two years, the markets got really whacked and our company, by the way along with it, but they were basically advocating for volatility, playing the short-term game. 

What we were advocating, whether in October 1995, 2000, 2005, 2010, or October 2015, 2020, we'll continue in October 2025 and onward, is for permanence. Is for the things that in and through volatility, the things that endure. Making a lifetime commitment to the stock market, not a trade on GameStop. When will the game stop? Starting a portfolio and knowing its purpose, naming it, if you like, fair starting line, adding to the winners because winners win. Knowing the market drops 1 year in 3 and sometimes, by the way, three years in a row, not often, but it can. Knowing your sleep number, another way of saying knowing yourself, building your foundations on rock, not slippery sands. The things that endure: permanence in volatility.

Most of all, I hope for my fellow individual investors, who've been the focal point of my work and my life service for these past 27 years, I hope I showed you a new world. Many came to the Fool without prior experience investing. They may not have had the money; they may not have had a parent who could explain the stock market or get them started; they may have come from a very bad experience with so-called financial professionals. Perhaps they read Peter Lynch's wonderful book One Up on Wall Street, the true classic and one of my favorites. They heard for the first time in his book of a 10-bagger, wow. Lynch told his readers they could think for themselves. They could use some good old-fashioned Yankee horse sense and savvy and score 10-baggers. In his parlance, which we love and have used ever since, make 10 times their money like 10 trips around the baseball bases; 10-baggers. 

Well, the Internet showed up at the end of Lynch's career and at the start of ours. It truly enabled us to create interactive services that could reach many more people than books, and indeed reach them on a daily basis and build a community on the network. What Tom and I have often called with pride and silly fun, Fooldom. A kingdom, but of Fools. Here's the beauty. For many, this is a world they didn't know existed or could exist. One designed with the purpose of helping you. Yes, actually, helping toward a purpose, a purpose not to churn your account or have you feel like you need to be glued to a financial cable channel all day. No. A purpose to make you smarter, happier, and richer.

To that purpose, I hope in my playing days that I've shown you that in this new world, there are not only 10-baggers. Over 27 years, I have shown you there are 100-baggers. A bunch of them are growing. Tesla with our cost basis of $6.29, held by Rule Breaker members since November of 2011, is only the most recent 100-bagger. One order of magnitude is higher than that, a 1,000-bagger. A little company that sold books on this dodgy, fledgling medium called, in Bryant Gumbel's words at the time, called the Internet. So especially for you.

If you didn't know, you could do it, if you didn't know it existed. If the idea of something called a what? A spiffy-pop? If you didn't know you could make more money in a single day than you put into stock in the first place, well darn it. I hope 27 years of transparent empirical on-field data not only has shown you that this bright new continent exists, but you have a place on it.

You have found the Elysian Fields, squatters' rights are yours, you've marked out your acre, and you're starting to build and it might end up being something amazing: an estate, a mansion.

The I announced my news on social media last week, my friend, Morgan Housel sent me a Twitter direct message. It was short and succinct, the mark of a great writer as you'd expect. "Congrats and God's speed," said Morgan, "you've made a permanent difference in the world."

Thank you very much, Morgan. That means a lot to me somewhere around now the word permanent in this context feels very encouraging, selfishly, I hope so. In questioning the received truths of stock market investing. Not just questioning, but then sharing the answers through picking 13 stocks a month for a long time. 

I hope my fellow Fools everywhere, both those of today and the ones yet to put on their jester caps, have experienced and will experience and enjoy changes in this world and in your thinking that may, I hope, to bear some signs of permanence. I sure am glad baseball has gotten a lot smarter and I think the investing world is too. I can now recognize the handwriting of many people that I appreciate in the world who have picked up my pencil and will go onto write masterpieces that I couldn't have dreamed of. That, I hope, will be a very fulfilling legacy.

I'm hoping to find more and new ways to break the rules.

Thank you. Thank you for suffering this fool gladly on this week's podcast through 10 chapters.

Well, I have half a chapter to close with, but first, I guess just to briefly use the table of contents to summarize the 10. I just shared with you. Chapter 1, my five-minute Personal Statement. Chapter 2, All Pull, No Push. Chapter 3, Two Fools. Chapter 4, To All the Fools I've Loved Before. Chapter 5, I Love Doing This Podcast and I'm Keeping It Up. Chapter 6, I Have Made My Pencil. Chapter 7, Gravity. Chapter 8, Succès Fou. Chapter 9, Bill James, and Chapter 10, Permanence in Volatility

I do have a half chapter to close with. It will be a Rule Breaker extra appearing on your feed if you're subscribed via iTunes, Spotify, wherever you find your podcasts, it's going to show up this Saturday morning for your weekend. I think, in contrast to this one, it's pretty short. It's only about 10 minutes long. Here's its story.

From the first year we started this podcast, the summer of 2015, I recorded one extra podcast. The ostensible purpose for it was, well, to have one in the hopper if I got hit by a bus or took ill one week or simply couldn't get behind the microphone for any given reason. It would be OK, because we have this extra podcast that Dave did that we could run. And we still have it. We've never used it. Thanks to my pal Rick, and it takes a village of other wonderful Fools too. By the way, we've done a new podcast every week since July of 2015 without a single week off. This week included, which I hope says something.

I've decided why sit on one of my favorite messages that has never been aired? Is there a better week than this very week following this week's podcast to air my exhortation to you to Chapter 10.5, Lead a More Interesting Life. It in part inspired my own move, announced this month. I hope you will enjoy it as well. I'm curious to hear if my voice has changed six years later.

Fool on!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon, GameStop, and Tesla. The Motley Fool owns shares of and recommends Amazon, Etsy, and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$931.77 (3.52%) $31.68
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$142.69 (-0.60%) $0.85
GameStop Corp. Stock Quote
GameStop Corp.
GME
$39.28 (-3.58%) $-1.46
Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$117.35 (-2.13%) $-2.56

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