Stock Market Review: 2022 So Far

In this podcast, Motley Fool senior analysts Ron Gross and Jason Moser discuss:

• Investing headlines from the first half of 2022.
• Early front-runners for "CEO of the Year."
• Three stocks poised to rise.

And we're dipping into the vault for one of our favorite conversations, recorded in 2019 in front of a live audience, with best-selling author David Epstein who discusses Tiger Woods, predictors of success in the business world, and other takeaways from his book Range: Why Generalists Triumph in a Specialized World.

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 July 1, 2022. 

Chris Hill: We've got some early voting on CEO of the year and a few stocks that are poised for upside, Motley Fool money starts now.

It's a Motley Fool Money radio show. I'm Chris Hill and joining me this week, senior analysts, Jason Moser and Ron Gross. Good to see as always, gentlemen.

Jason Moser: Hey.

Ron Gross: How you doing, Chris?

Chris Hill: It is our mid-year review special. We're recording this a little earlier than usual, a little before the start of the holiday weekend. I just wanted to time stamp that Ron, in case there's any late-breaking news. [laughs] With that Jason Moser, let me start with you. What is your business/investing headline for the first half of 2022?

Jason Moser: Well, Chris, I'm going to take you back to our 2022 Preview Show. When I offered up a, I think, somewhat unpopular, I wouldn't be surprised if and I said I wouldn't be surprised if next year we have a down year in the market. I said I do think we're going to see some level of inflation impacting our economy stimulus. I think is going to become a thing of the past. We're going to see interest rates continuing to go up. Chris, we are in the throes of a bear market now. I don't mean to serve as a bee in anyone's bonnet, but unfortunately, the market is down, I think that that released the headline here. It's the bear market. What's going on and when are we going to get ourselves out of this? Now I also said, that doesn't mean you should stop investing. You should and I still stand by that. If you look at the data, you go back to 1929 on average since 1929 bear markets, the S&P has lost 36 percent. Now we're at around 22 percent on the S&P now. Granted, the Nasdaq has lost around 30 percent. We could be in for some additional downside. Who really knows? There is a lot going on in the world impacting our economy that's simply out of our control. But I will encourage investors to stay on the course and try to stay optimistic. If you look back to 2008, when the market lost 36.5 percent just in that year alone, it then went on to return 25.9 percent and 14.8 percent in 2009 and 2010 respectively. My point there if you remember the mood in 2008, it was dour, to say the least. Remember what Shelby Davis said, I always go back to this, you make most of your money in a bear market, you just don't realize it at the time. As bad as things feel right now, remember they will get better but the bear market that feels top of the list for me here so far this year.

Chris Hill: Ron, so Jason admitting that he caused this bear market by speaking into existence on our preview show, what's your headline for the first half of the year?

Ron Gross: Well, since Jason's bear market headline basically covered everything, I will still drill down for the listening audience on inflation and recession, 8.6 percent inflation reading in May, highest increase since December 1981. What a good year that was? Consumers definitely feeling the pinch, fuel oil up more than 100 percent, average price of gas per gallon around 4.92, which is actually down a bit. Maybe we have a trend of somewhat lower prices for fuel. But the price of everyday foods like cereal and eggs are up double-digit percentages as well, wages not coming close to keeping up with inflation. The Fed is raising interest rates aggressively to slow the economy and bring down that inflation. They're trying to engineer a soft lending. Investors are concerned there it's going to throw us into a recession. JPMorgan's Jamie Dimon said we should brace for an economic hurricane just recently Fed Chairman Powell acknowledged that recession is "Certainly a possibility." We're going to have to wait and see what they engineer here. Hold on tight though, and everything that Jason said I would agree with about investing in good times and bad, as long as you have a long-term horizon.

Chris Hill: Ron, let me stick with you. Long-time listeners know at the end of the year we do our full-year in review show. We hand out the award for CEO of the year. Who is your early front-runner at this point?

Ron Gross: This could be controversial because it's Big Pharma. But I like Albert Bourla from Pfizer. Last year, obviously his company's vaccines basically helped save the world. That's pretty special I think. Pfizer vaccines continue to get FDA approval, additional boosters for younger children. He's using a lot of the cash generated during COVID to aggressively make acquisitions to position the company in a good place for the future? I would expect to see him buy back a bunch of stock. Stock is trading only at seven times earnings. In May, the company said it will make 23 of its medicines, many of them are patented, available to 45 low-income countries at a what they call not-for-profit price. They're not going to make any money on those medicines. Great to see, especially in the age where big pharma certainly gets criticized on the pricing side. Bourla said he would want to reduce by 50 percent the number of people on the planet who cannot afford our medicines. I like that mission as well.

Chris Hill: Jason, who's your early front runner for CEO of the year.

Jason Moser: I'm going to give a hat tip to The Trade Desk, Jeff Green. I think stock performance aside, all stocks out there they got pummeled these days. Honestly, we need to take a little bit of a longer view here. I think what he's done setting this business up for success. But if you look at the tailwinds that are forming an ad-based video on demand he's really been building this business to capitalize on that opportunity and as inflation persists, consumers show they're more than willing to use the AVOD, that ad-based video on demand. Virtually everyone out there now is developing an ad-based offering with programmatic advertising playing a much larger role in programmatic advertising plays right into The Trade Desk's specialty there. Like I said, he's been studying this business up over the past several years to capitalize on this, he's developed partnerships with Peacock, Paramount Plus, Discovery Plus Sky just announced a partnership with HBO Max. There'd be some questions as to a potential relationship there with Netflix as they assess the landscape on how they're going to roll out their ad-supported model. You've got Disney coming out with an ad-supported model as well here very soon. You see the tailwinds growing there and ad-supported video-connected TV in general, becoming a bigger part of The Trade Desk's business. Now, accounting for better than 40 percent overtaking mobile this most recent quarter. The company just has a track record of really doing right by their customers. The customer retention is still over 95 percent and that is the eighth consecutive years now they've maintained that metric. For me, separate what you saw from the stock price, you look at what Jeff Green has done for this business to get to this point, it really feels like they are in a good position going forward.

Chris Hill: Ron, I don't think any of us are surprised that inflation continued through the first half of the year, but we did have some surprises so far. What would you say is the most surprising company news?

Ron Gross: One thing that shocked me a bit was in April, Starbucks announced that Kevin Johnson was out and Howard Schultz was back in as Interim CEO. The announcement seemed very abrupt to me, especially because the new CEO search hadn't even begun yet. It felt like something was going on that we weren't really privy to behind the scenes. It was surprising to me, that Starbucks had hit an all-time high in July of 2021, Johnson executed several strategies that were successful. He expanded in China, he expanded the rewards program. He navigated the pandemic pretty well, he improved the technology at the company. Yes, he was criticized for its handling of the potential unionization of some of the stores whose compensation package had been scrutinized quite a bit. I was overall pretty surprised Schultz immediately suspended the company's stock buyback program, choosing to refocus on investing in people and stores. Obviously, Schultz knows this company very well. I'm sure it's in good hands, but that announcement seemed rather abrupt and surprising to me.

Chris Hill: Jason, anything surprised you so far this year?

Jason Moser: A lot of things, but I think one thing that really stands out so far is Elon Musk announcing he wants to buy Twitter. That really was like a whee. But it's turned into quite the soap opera. I think we all initially were somewhat sceptical that this would actually work out or play out the way it has. I think actually though, it looks like it may work and it feels like he could give Twitter its best shot. He says he has no interest in being the CEO but he wants half of the world on Twitter. That's a big goal. But that's also his style, and he's a proponent of free speech. But by the same token, he notes that he didn't mean Twitter needs to promote that bad stuff, it's just the enforcement of the policies that they have at least seem extremely arbitrary. Just tightening that up, getting rid of the bots, it seems like there's a lot there that he could clean up to make it a better experience.

The board has unanimously approved it and you look at Jack Dorsey, one of the founders of the business speaking of Twitter, he said, "It has been owned by Wall Street and the ad model, taking it back from Wall Street is the correct first step." I feel like there's something to this, I think before anything happens to make Twitter a better platform for all, it really feels like it will function better out of that public company's spotlight, so to speak. It's a polarizing subject I'm sure. I actually wouldn't mind seeing this deal play out because I do feel like he has the opportunity to make Twitter a much better platform because it certainly seems like a very resilient and useful one.

Chris Hill: Up next we're going to have some predictions about the second half of 2022. Stay right here. You're listening to Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about and The Motley Fool Money have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. It is our midyear review special. All right, Ron. We're going to play around the fill-in-the-blank. For this first one, you can go with a company as CEO or something else altogether. Blank, really needs a strong second half of the year.

Ron Gross: I'm got to go with Target or Tar-Jay as it's called in my family. [laughs] Stocks down 46 percent from its 52-week high. Couple of weeks ago, Target explained that it had a merchandise problem. It over ordered big, bulky home goods like patio, furniture, TVs, kitchen appliances. Those items are costly to ship, they're costly to store in warehouses. Basically, from a merchandising perspective, they thought the COVID purchase patterns would continue. They were wrong. Inventory was up 43 percent. They issued weak guidance, stock-out whacked. A week later, they said it was even worse than expected. Brian Cornell, the CEO said, "We have to be decisive. Get out in front of this, make sure this doesn't linger through the back half of the year." They were ripping off the band-aid. There's severely cutting prices. They're getting rid of excess inventory in the hopes that they can put this behind them. That at the same time, they raised their dividend 20 percent as to say, we're OK here folks, that yield is now 3.1 percent. Shares are trading at only 15 times forward earnings. Don't sleep on Target.

Chris Hill: As a shareholder, I hope you're right and they have a strong second half of the year. Jason, what about you?

Jason Moser: It feels like Bob Chapek, CEO at Disney, he needs a strong finish to the year. All stocks are down, as we've noted, but Disney being down 40 percent seems excessive, giving the company's assets and diverse revenue streams. The fact that people are back out traveling and life is more or less back to normal. You've looked at the numbers trailing 12-month revenue was up 10 percent from 2019. Greater profitability is still recovering, but domestic per capita spending was up by more than 40 percent versus 2019, which is also very encouraging. They believe they are still on track to reach that milestone of 230, 260 million Disney Plus subscribers by fiscal 2024. As I mentioned, they are going to be rolling out an ad-supported version of that service. But of course, he got into hot water earlier in the year with the way he handled the parental rights and Education Bill in Florida. He put himself in the company square in the politicians crosshairs.

Then he got this big back and forth with the whole special tax status and whatnot. It's going to be interesting to see how he handles these types of situations in the future. Because you look at the company itself, there is 165,000 employees there at Disney. You have to be careful jumping into these hot button political issues when a company actually takes a firm stance on what is honestly debatable issue in many cases, that only creates division and it puts the business in an untenable position. Bob Iger, he is not, but he's going to have to figure out his identity as a CEO going forward because Disney is going to be in the spotlight for sure.

Chris Hill: Ron, we've already seen some M&A activity in the first half of the year in terms of the second-half fill-in-the-blank. Don't be surprised if blank gets acquired.

Ron Gross: Netflix, Chris. They've stumbled. Things are not great at the moment. Subscriber growth is going the wrong way. The stock is down from 700-180, but they still have over 220 million subscribers, making it the biggest subscription video-on-demand service in the world. That alone could make Netflix an attractive takeover candidate. For some folks in this arena, I'm thinking Amazon, I'm thinking Apple, the gaming angle could also potentially be interesting. I'm thinking Microsoft or Sony, even at current prices, still would be an $80 billion acquisition. Not for the faint of heart, but trading it only 16 times forward earnings, so it's not expensive.

Chris Hill: That a big one. Jason, what about you?

Jason Moser: Yeah, it is a big one. One that I think is a lot of people have had fun kicking this around recently, DocuSign. Don't be surprised if DocuSign gets acquired. There will be a number of reasons why Dan Springer, the former CEO recently stepped down. It may not be related to potentially shocking the company around at all. But I can certainly see, given where the stock is today in relation to the fundamentals of the business, a suitor really taking a close look. True, it is still working its way to profitability, but it is cash flow positive. It's got a massive user base and a very user-friendly interface. What kinds of suitors might exist? You look at a competitor like Adobe, they could easily digest this, but with their own offering, I'm not sure they really need something like a DocuSign.

You look at Microsoft, that would be a candidate, were it not for this Activision Blizzard deal that they are trying to push through. The one thing that comes back to mind, Chris, it's Zoom. I think Zoom could just be the total wildcard here, but Zoom wanted to make a deal earlier, they tried to buy Five9 for around $15 billion, so they have the wherewithal to get this done. It is something that they don't have currently. A DocuSign could be very complementary to their overall offering in the new way that we're doing business in many cases. DocuSign management sees the opportunity to be a five billion dollar revenue business over the course of the next several years if they execute, which is essentially where Zoom is today. I'm not saying it will happen, Chris, but I wouldn't be surprised if it does.

Chris Hill: Got just a couple of minutes left. This is going to count as a stand-in for radar stocks, Ron. I think blank is poised for upside the rest of this year.

Ron Gross: I like the hospitality sector right here. Consumers continue to move away from buying things like outdoor patio furniture and televisions just ask Target, and they're moving on to experiences such as travel, we're getting back out there. Yes, inflation will push back against this. We don't know if another COVID variant is around the corner, but I like companies like Marriott, Airbnb here at their current prices for the next several years.

Chris Hill: Jason.

Jason Moser: I think a little bit in line with Ron's hospitality angle there. Uber to me is a business that stands to benefit from a recovering economy as these things get better. People are traveling again, the world is opened back up. The neat thing about Uber is they benefit from three key drivers in mobility, delivery, and freight. The cross platform nature of the business leads to lower customer acquisition costs and ultimately higher retention over time, which is encouraging as well. You've got management there that continues to roll out new initiatives with things like high-capacity vehicles, partnering with Avis to offer Uber valet and person-to-person car rentals. It goes on and they're even building out a little advertising driver of the business as well. With a renewed focus now on cash flow and profitability in whittling down those costs to maximize efficiency, it feels like there's a pretty attractive risk-reward scenario set up for Uber long term.

Chris Hill: Drop us an email, [email protected]. That's [email protected]. We want to hear from you, what do you think is poised for upside in the rest of 2022? Jason Moser, Ron Gross, guys, thanks so much for being here.

Jason Moser: Thank you

Ron Gross: Thank you, Chris.

Chris Hill: Coming up after the break, we're dipping into The Motley Fool Money Audio Vault for a conversation with best-selling author, David Epstein. We talk about Tiger Woods, predictors of success in the business world, Epstein's memorable encounter with fellow best-selling author Malcolm Gladwell and why it might be time to dramatically scale back travel, and soccer here in America. I really think you're going to enjoy. Stay right here. You're listening to Motley Fool Money. [MUSIC] Welcome back to Motley Fool Money. I'm Chris Hill. I hope you're enjoying the start of the Independence Day holiday weekend. Now, our interview. In 2019, I got the chance to talk with best-selling author David Epstein.

He joined me on stage in front of a live audience at our annual FoolFest Investing conference. Epstein has masters degrees in journalism and environmental science, he's been a senior rider for sports illustrator and is the author of The New York Times Best Seller, The Sports Gene: Inside the Science of Extraordinary Athletic Performance. On stage, we talked about his latest book, Range: Why Generalists Triumph in a Specialized World. During our time, we discussed a wide range of topics including Tiger Woods, Roger Federer, and how to predict success in a business setting. But my first question for David was, where he got the idea for his new book.

David Epstein: The idea still did grow out of the first books. The first book was about the balance of nature and nurture in athleticism. I was invited to the MIT Sloan Sports Analytics Conference co-founded by the General Manager of the Houston Rockets to debate Malcolm Gladwell. So 10,000 hours versus the Sports Gene, it's up on YouTube, I never met him before. He's very clever. I didn't want to get embarrassed. I tried to anticipate some of his arguments I knew he'd have to argue; this was specifically about the development of athletes. I knew he'd have to argue for early specializations in sports and highly technical deliberate practice. I said, "Okay, I'm the science writer Sports Illustrated. Let's go look at what the science has to say." We actually found, in almost all sports, in most places in the world, athletes who would want to become a lead actually have these so-called sampling periods where they play a variety of sports.

The gain is broad general skills that scaffold later learning. They learn about their interest and abilities and they systematically delay specializing until later than their peers. We all know the Tiger Woods story of early specialization, that's like the most famous developmental model, but it's actually completely the exception. Golf is an unusual sports skill compared to other ones. Whereas like with this, we all know when Mark Zuckerberg at 22 says, "Young people are just smarter," we all hear that story. Meanwhile, the research shows that the typical age, on the day of founding, not when it becomes a blockbuster, is 45.5. But it's like we don't hear the stories of the science they're really telling, we just hear the Tiger Woods, Mark Zuckerberg's stuff. These much more, it's very like Daniel Kahneman's availability heuristic; the dramatic stories that we base our models of the world on, not what the actual science finds.

Chris Hill: You've opened the book with a great sports example because as you said, everybody, I'm not even a big golf fan and I know the Tiger Woods story of just basically from the time he couldn't walk, his father is drilling him on all these different things and he's Tiger Woods, he's the dominant golfer of his time and maybe of all time. But the comparison you draw with Roger Federer, who is also the dominant tennis player of his age, and probably on the shortlist of the greatest of all time, it's a completely different path.

David Epstein: Roger was exposed to tennis early, but he was also doing swimming, skiing, wrestling, handball, basketball, badminton, rugby, tennis, of course, table tennis. I'm probably forgetting, oh soccer. That was his other biggest one, soccer. His mother actually was a tennis coach, but she refused to coach him because he wouldn't return balls normally like she couldn't get him to do the normal drills, so she declined. When he got good enough to be pushed up a level with older players he declined because he just like talking pro wrestling with his friends after practice. We finally got good enough to warrant an interview from a local paper. The reporter asked him if he ever became a pro, what will he buy with his hypothetical first paycheck and he says a Mercedes. His mother was totally appalled and asks the reporter if she can hear the interview tape and the reporter obliges.

It turns out Roger actually said, "mehr CDs" in Swiss German, he just wanted more CDs, not a Mercedes. Then his mother was fine. One of my colleagues who was the senior tennis writer at Sports Illustrated described Roger's parents as pulley not pushy. Eventually, he did specialize but it was after what we now know is the very typical developmental trajectory for most elite athletes. In golf, the people who study skill acquisition in sports view golf as different, it's non-dynamic domain where you don't need anticipatory skills like to judge things that are happening quickly. Early specialization may well work in golf, I don't know, there's a dearth of science. I can believe that it does. But the problem is that we've extrapolated from that to all these other skills.

Chris Hill: We'll get into some of the business stuff from the book in a second. But I want to stick with sports because I expose these ties into business as well. Because if you think about the youth sports in America, the business of it has almost gotten too big. It's pretty amazing that Roger Federer's parents were not only actively pulling him away from specialization, but also his mother was a tennis coach herself. In the United States, the flip of that is she's the tennis coach and as soon as he can walk, she's got him out there, drilling and not to pick on soccer, but it really does seem like soccer more than any sport in the United States. The youth sports business machine of that is almost too big to overcome.

David Epstein: No, do pick on soccer, you should pick on soccer. I don't live in Brooklyn anymore, but when I did, there was a youth seven travel soccer team that met near where I lived. I don't think anybody thinks that six-year-olds have to travel to find good enough competition in a city of nine million people. [laughs] Really. I don't think that has anything to do with optimal development for those kids because we know the way to make the best 10-year-old soccer player is not the same as the way to develop best 20-year-old soccer player. But those kids are our customers. Someone else has an interest in keeping them away from those other sports. When you talk to lead athletes, they are the ones who know and they're like the most against because they know what they did, against specialization. But that's a whole other industry.

But some places like France, which just won the World Cup, started decades ago reforming its pipeline, where they get kids exposed early and they get them in the pipeline early. Because I think multiple sports is really just a proxy for diversity of movement and training, because there's this classic research finding, breadth of training predicts breadth of transfer. It means the broader your training scenarios, the more likely you will be able to apply your skill to situations you've never seen before. They get the kids exposed early. But then they put them in these games where they're playing like on sand one day and cobblestones another day, this game called Futsal whether in small spaces and the coaches aren't even allowed to talk most of the time, they're just saying there's no remote control, meaning the coaches shouldn't try to micro-manage the players. They get them exposed early, but they put them in this very free-form development that we know is the best. I think there's hope because there are models for making this better.

Chris Hill: Business is one of the thrill lines of this book because we just talked about youth sports. But one of the things that comes up is the business implications on scientific research. Before we started, one of the more jarring things to me in the book is how scientific funding has increased over the last say 30 years or so. But discovery has actually dropped. Because it seems like the pressure for economic outcomes immediately in the short-term are taking precedence over just discovery.

David Epstein: I think everyone knows we want those outcomes, that the end goal is applications. The question is how best to get there? To that point, I was reading a lot of Nobel acceptance speeches when I was doing the research and the funny thing in the more recent years, you start to notice that almost every year someone giving their speech says, "Well, I wouldn't be able to do my work today because I didn't really know what I was going to find." I just had this interesting question, now in your grant applications, you have to say, "Here will be my application." That's OK. But we have VC community for that. They can be more focused on that. Why squash the diversity of the research endeavor? Because so many of the biggest breakthroughs have come from questions that someone was interested in, that we didn't know where it was leading, like Vannevar Bush who led the scientific research efforts during World War II, wrote a report for the president about a successful research culture. You see these phrases that are like the free play of free intellects working on questions of their own design. That led to like 30 years of wildly successful progress that led to microwaves and MRIs and the Internet and all these other things. We have to keep in mind that we know the process is inefficient when we don't exactly know what we're looking for. It's a problem that we're having a purifying selection where we're forcing people to say the applications before they really know what they're going to find.

Chris Hill: One other things I like about your book is we just meet all these people. Put aside Tiger Woods and Roger Federer in your research, all of these people. You just touched on something from one of my favorite people in the book, Arturo Casadevall, who speaks to that and talks about the very nature of pushing boundaries is that you're out there, you're probing, you're not really sure what you're going to find and by definition, it's an inefficient process.

David Epstein: Yeah, Arturo is one of the most prominent immunologists in the world. If specialization continues, he wins no matter what happens basically. He sees no problem getting funding, but he decided to leave a cushy post in New York to go to Johns Hopkins School of Public Health because they were allowing him to start a new education program, where he is essentially trying to despecialize the training of future scientists. He arrived and he showed this graph where he said the rate of retractions of science, the acceleration is now outpacing the rate of new publications, so if we continue this trend, we will have retracted all of science in a couple of years. [laughs] Science gallows humor, but there is this retraction problem now. We're recognizing there's been a lot of bad work.

By the way, I contributed to that bad work. I have a Master's Degree in Science and only as an investigative reporter writing about how science works did I realize that I too committed statistical malpractice of the variety he's talking about. Because not purposely, I was rushed into very didactic specialized material about arctic plant physiology before I knew how my statistical tools worked. You can get these big databases, hit a button to run this incredibly complicated statistically significant master's degree, [laughs] and this research is still published. It's crazy that only later did I learn how scientific thinking is supposed to work. We're having these problems, so he's trying to despecialize the research and get people to think more broadly.

He describes science as becoming a system of parallel trenches where everyone's in their own trench and not standing up to look over the next trench, even though that's often where their solution is. There's always perverse effects like women are much more likely to write grants for interdisciplinary proposals, but interdisciplinary proposals that are systematically marched down because they always go to one discipline or the other, and so they are about less likely to get funded. But the world's interdisciplinary, disciplines are a necessary evil for breaking down how we study. We're docking people who are asking questions about how the world really is.

Chris Hill: One of those things you get at is Arturo does it with science. We've seen it in the military where basically leaders are trying to figure out what's the best way to mentor people, what's the best way to educate people. Along the way, they find out, we've been doing it wrong. Not only have we achieved short-term success in education, we've deluded ourselves in thinking, we'll pat ourselves on the back, everything's fine and in fact, we've set those people back.

David Epstein: Yeah. That gets to some themes in the book so they can jump into that one in a couple of places. But one of the themes to me was that there are things you can do to cause the most rapid immediate progress that systematically undermine long-term development. I'm going to use that queue to get into one of the studies that was most surprising to me in the book which was done in the US Air Force Academy that you could never set up. They had this amazing scenario where they bring in their freshman class, thousand students or whatever it is and they have to all take a sequence of three math courses. Start calculus 1, calculus 2, and then a follow-on course. They are randomized to professors for calculus 1, and then they're randomized to the next course, and then rerandomized again to the next course. You can really see the impact of teaching, and that's what these researchers wanted to see. What they found was that the teachers were the best at promoting contemporaneous overachievement compared to the characteristics of the students came in with in calculus 1.

Those students then systematically underperformed in the follow-on courses. The teachers and students performed sixth best out of 100 in his calculus 1, got the seventh best ratings because the kids feel like they're learning, they rate them higher, was dead last in how his students then did the follow-on courses. It turned out that professors whose students did the best contemporaneously were teaching a very narrow curriculum and their students were learning so-called using procedures knowledge that they could execute when the test came, but when you get into a different class and you're facing different stuff, breadth of training for next breadth of transfer, you don't have those broader conceptual models, and so you don't have what's called making connections knowledge, which is the broader frames where you learn how to match a strategy to a type of problem instead of just executing procedures. It's really deceptive because the learners rate their learning as faster, they rate the professors as better, they do better, and then in the long run, they're undermined, which is deeply counterintuitive to me.

Chris Hill: Coming up, David Epstein talks birds, frogs, and LinkedIn. Stay right here. You're listening to Motley Fool Money. [MUSIC] Welcome back to Motley Fool Money. I'm Chris Hill. This week we're revisiting my conversation in front of a live audience with best-selling author David Epstein about his latest book, Range: Why Generalists Triumph in a Specialized World. In terms of business and leadership and one of the things I think you touched on in the book was how to deal with maybe using LinkedIn to figure out how do people get promoted. It really does seem like the people who have the widest breadth of experience, they're the ones most likely to move on.

David Epstein: Yeah. I should say we absolutely need specialists, I don't want to denigrate specialists. I like Freeman Dyson, the mathematician and physicist, and writers framing of it where you said we need frogs and birds. The frogs are down in the mud looking all the little details. The birds are up above, they don't see those details, but they can integrate the work of the frogs. He said we need both for a healthy ecosystem, the problem is we're telling everyone to be frogs and we're not telling anyone to be birds. The LinkedIn researcher referring to, they looked at about a half-million members because they have this amazing database. What are the best predictors of someone who goes on to become an executive? One of the best predictors was the number of different job functions that an individual has worked across in their industry, and their chief economist thinks that's because they get this month more holistic view of the industry, each additional job function saved them about three years of experience in moving toward the C-suite. That resonated with me because I saw that as I was visiting different companies.

Chris Hill: I know it's only been out for a week or so, but I'm curious what's been the reaction that you've gotten, not necessarily from readers who I'm sure are enjoying the book, but to the extent that you've heard from communities or leaders and whether it's an industry or used sports or something else.

David Epstein: More positive than I expected and maybe that's because the blowback part takes a little longer. [laughs] But this book got out again faster than my last one did. The last one, there was a lot of pushback about 10,000 hours rules stuff. Helpfully this time, Malcolm Gladwell and I were recently conference in March, the same one when we first did the debate. This is on YouTube and at minute 54, he says, I now believe I conflated to ideas. The idea that it takes a lot of practice to get good at something with the idea that in order to become good at X, you should do only X, X and only X starting early as possible. I thought that was a very astute thing for him to say. I think that might have softened some of the blow a little bit for me. But it really has been interesting to hear people identify with it. I started getting invited to some business things and the executives would tell me this really resonates.

I just met a woman who was the head of executive search for a really big company, and this really resonated with her. She was telling me, I think in the age of LinkedIn for all its good things, we're getting too narrow in describing our job functions, because if you look at research on serial innovators, for example. This women, Abby Griffin, whose research is in range, she says to HR people, you have to keep it broad because the serial innovators, they often zigzag, they've had other domain experience, they have wide range of interest, they tend to have hobbies, they read a lot, they need to communicate with people outside their domain. When you define the job too narrowly, you accidentally screen them out. Some of the people who do executive search, apparently that's resonated with them because they've reached out to me and said, we are increasingly making this square hole and we have the square peg we want to fit it, but those aren't necessarily actually the people who are set up to make the biggest contributions.

Chris Hill: I've actually experienced that on LinkedIn because I host a radio show and a podcast and that's what I list on LinkedIn. Once a month I got an email from LinkedIn, and it's here are some jobs you might be interested in and all of them are host jobs, but it's at a restaurant. [laughs] I'm like maybe I need to do a better job of getting across what I actually do.

David Epstein: Well, that would be a transfer of skill.

Chris Hill: It would be if it does. You know what? I'm too specialized, I should branch out into that sort of thing. The book is Range: Why Generalists Triumph in a Specialized World. You can find it wherever you find books. Unlike when I interviewed David Epstein in 2019, now it's available in paperback, you get to save a couple of bucks. If you're just starting out or you know someone who's just looking to get started investing, we have a free investing starter kit that covers everything from saving money to 401k plans to how to buy your first stock. It comes with a built-in watchlist of 15 stocks and five ETFs that were selected by our investing team and it's free. Just go to fool.com/starterkit. That's fool.com/starterkit. Check it out when you get a chance.

On behalf of everyone at The Motley Fool, I hope you have a safe and fun Independence Day weekend. Please be safe with the fireworks. Don't be one of those people who ends up trending on social media because it did something really stupid with fireworks and ended up in the emergency room. Look out for your friends too, you know who I'm talking about, that one friend, yeah, that guy, keep an eye on him. That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Chris Hill, thanks for listening. We'll see you next time.