You've Got Questions. The Motley Fool's "Rule Breaker Investing" Has Answers.

In this podcast, Motley Fool co-founder David Gardner and fellow Fools answer questions from listeners.

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

 

This video was recorded on March 29, 2023. 

David Gardner: What do you get after a month of Great Quotes and Blasts From the Radio Past and The Science of Questioning and a Quarterly Game Show? Well, you get a Mailbag with 18 pages of notes, all of which I love to read only some of which will fit on any given Mailbag episode, which is what this is, this month's Mailbag episode, joined by David Kretzmann, Andy Cross, and Tim Beyers. All four of us ready to give our best A's to you're awesome Q's. It's the March 2023 Mailbag only on this week's Rule Breaker Investing.

Welcome back to Rule Breaker Investing. It's one of those months with five Wednesdays, which always makes us replete with lots to talk about in the Mailbag episode, we had four preceding episodes in the month of March 2023 here on Rule Breaker Investing. We started with Great Quotes Volume 16. While I didn't get any particular notes about Great Quotes Volumes 16 this month, I do just want to reiterate one of those five Great Quotes, of course, I love them all, I still enjoy doing that series over the years. Of course, that was Volume 16. How about the fifth and final one from the movie gladiator Proximo saying, "Win the crowd and you will win your freedom", that's advice in particular to entrepreneurs. If you missed that, if you feel inspired by that quote, if you love that movie or if you're an aspiring entrepreneur, I would highly recommend the first episode of this month. Great Quotes, Volumes 16.

From there we moved on to blast from the radio past, got a lot of great mail about that. One of course, joined by my brother Tom Gardner and our longtime producer, Mac Greer. We went back over some of the hilarious quotes, at least in my mind, they get funnier as time goes by 20 years later from The Motley Fool radio show back in the day, a cavalcade of wonderful guests, Roger Ebert appearing on that episode, also, Loretta Lynn, the dearly departed. A delightful ramp back through the past, but looking at the pass-through present day lens, seeing what we can learn here in 2023 from what we were hearing in 2003, that was Blasts From the Radio Past Volume 4. A couple of weeks ago, The Science of Questionology, by 2023 revisit with Warren Berger, the author of the wonderful book, A More Beautiful Question, also The Book of Beautiful Questions and other books about innovation and business.

A More Beautiful Question, Warren let us know, will be reissued in a new edition early next year. But what a wonderful opportunity to start to try to ask some of the best questions we can about our society or our businesses or ourselves to help change happen, to help new thoughts take root. Warren has been doing that for more than 20 years now as an author, helping businesses and people innovate. The Science of Questionology, two weeks ago, and then of course last week, the Market Cap Game Show, always fun. I think it was Andy seven Jim, three point one, I think that was the final score. But more importantly, how did you do? I hope you had a lot of fun on last week's Market Cap Game Show. Well, traditionally we start Mailbags with hot takes from Twitter, that's what I'm about to do.

First one up, this one from my friend Mahan Tavakoli at Mahan Y, M-A-H-A-N-Y on Twitter, "Love Warren burgers work, had him on the Partnering Leadership podcasts, would love nothing more than to hear the always well-prepared, genuinely curious and deeply insightful DavidGFool asked him more beautiful questions". Well Mahan, thank you for those kind words. Warren is at Glimmer Guy on Twitter. But I'm flagging this because of my enjoyment of Mahan's podcast, so if you've not previously listened to Partnering Leadership, which he does twice a week, twice the frequency of this podcast, I highly recommend the wonderful work that Mahan does interviewing so many business authors and thinkers worldwide. Partnering Leadership, a favorite listen of mine, and if you haven't gotten a chance to listen to Mahan, who's obviously a fan of this podcast, well I think you should.

Also, there was another plug, not on Twitter, but in the Mailbag which I'm going to include because I, as well as many others have enjoyed and listening in the past to Patrick O'Shaughnessy's podcast, which is entitled Invest Like the Best. I've had the privilege of being with Patrick on his podcast one time before, but apparently I didn't get to hear this one yet, but PT Lathrop, you wrote in mentioning your enjoyment of his podcast this past week. He had Tim Urban on. Tim, the author of the recent book, What's Our Problem?: A Self-Help Book for Societies, and that sounds like the book I'd enjoy. I think I'd like to listen to that podcast and maybe have Tim on this podcast as well. But I'm going to flag it for everybody who enjoys podcasts, especially ones that look at our culture, our society, especially ones that are business-minded, like certainly Patrick's wonderful investing podcast, Invest Like the Best is.

Plugs for a couple of other podcasts inspired by some Twitter hot takes this week. Really appreciated this one from Harley Carol, at Harley M, Carol. Harley you wrote, "I very often learn as much about life as investing when listening to the Rule Breaker Investing Podcast, DavidGFool marinating on this concept from the other day you wrote just pondering the positive externality", Harley writes in one of the more impressively worded tweets that probably happened on Twitter this past month or so. "Just pondering the positive externality". Harley writes of civility, and is reacting I think, to Warren Berger and one of the points Warren made on our Beautiful Questions podcasts this month. Here's that line, Harley, that you are pondering on, " Question from a place of curiosity rather than from a place of animosity". I do think that is worth thinking a lot about and civility, one of my ongoing frequently referenced themes and topics of great interest, I think it's so important for our society.

I don't just mean the United States, although I do, I certainly mean the world. Treating each other with civility, is something that has been lacking in recent years and is so important, and is so much happier. People actually being civil to one another lead to lower blood pressures and bigger smiles on both sides of every table. It doesn't make sense to me not to treat others with civility. Thank you for referencing that Harley. Then in the last one I'll mention just at Skins Fan Mike, Mike Gee wrote, "Rule Breaker Investing podcast listening to the review of palooza, I wonder how much time you would have to spend on picking five stocks now that you've stopped stock-picking", and I appreciate you mentioning that, Mike. Yes, I am no longer regularly formally picking stocks and a lot of the scaffolding that I had set up in place to enable me to do that on a regular basis multiple times every month for 20 years, I no longer have that scaffolding setup.

I still feel like I've got the touch and I certainly think about it from time-to-time, but I really am focusing my attention these days on investing and business and life, and certainly the work at The Motley Fool Foundation would be one example. But I continued to care just as much about the stock market and my stocks and yours as ever I did, and that's why investing remains such an important part of this podcast, Rule Breaker Investing. Anyway thanks for that brief note Mike. Onto Rule Breaker Mailbag Item number 1, this is one of seven this particular month. Number 1 coming in from Sydney Steel who rocks in addition to a CPA designation. Sydney, you're also clearly a gamer, thanks for this note. "Hi David, I've written in before my husband's gaming podcast. But he loved your talk with CT Nguyen so much that he dedicated almost an entire episode to your conversation.

Just wanted to thank you for a wonderfully thoughtful episode about games and the deeper side of gaming, plus the fantastic companion episode, we love role-player games too", wrote Sydney Steel. Thank you, Sydney. Well, I guess this is my month of plugging other podcasts. I haven't yet listened to this, but I'm certainly going to mention my appreciation that you leaned in and listened and cared. In fact CT Nguyen after appearing on my podcast, said to me offline, let me know if I get any feedback. I know you guys are investing podcasts, so you may not get many notes about my appearance, but I'd be interested in hearing them. Sydney, please know I've forwarded on that podcast, your husband's podcast to Thi as well. Tabletop Game Talk is the name of your podcast, your husband's podcast, Sydney, and specifically the episode Tabletop Game Talk number 325, and it's entitled, is Gamifying Life Bad, and I'm really going to enjoy listen to that podcast.

Thank you for that. Slightly more broadly, I wanted to say two things before moving on to Rule Breaker, Mailbag Item number 2. The first is that very often I'm noticing with our Mailbags, I do them at the end of the month under the assumption that you're going to write me about this month's podcast. But so often my notes come in from the previous month. Of course, CT Nguyen and Gamifying Life and talking about games and investing was in February and well worth the listen and yes, we did secondarily do companion episode of bonus where we talked about which Tabletop board games we would each put on our respective Mount Rushmores. I had so much fun with Thi, I do look forward to having him back, I hope again this year or in future. From some listeners standpoint, I'm sure we talk about games, maybe too much on this podcasts and for some, others of us, we may not talk about games quite enough.

I try to strike that middle ground is a lifetime gamer who believes that Gamifying investing is very valuable and leads to beating the market. I believe that Gamifying business is a lot more fun to be in business and makes it a lot more numerical about winning and yes, sometimes losing. I like to Gamify business and I Gamify life too in lots of different ways. Which we talked about some of that in podcasts and which I may talk more about in future. Because I think there are lots of ways to score life or think about rescoring life, or add fun and value to life by thinking about life as more of a game than many people seem to, so Sydney Steel and the purveyors of the Tabletop Game Talk podcasts, thanks for writing in Fool on. Rule Breaker Mailbag Item number 2, this one from Vince Granary. Thanks for writing in, Vince. But oh my gosh, wait, before I start reading this, David Kretzmann, welcome back to the Rule Breaker Investing podcast.

David Kretzmann: Thanks for having me, David. Always great to be back.

David Gardner: Well, the core progenitor without ever even meaning to of an important investment framework that we're going to talk about again this month, David, in addition to your job responsibilities, you are the co-founder of the Gardner-Kretzmann Continuum. But before we talk about that, David, would you just remind us what you're doing at the Fool these days?

David Kretzmann: Sure thing. Right now I'm helping lead our product team, so anything and everything within product investing, everything that we deliver to our members.

David Gardner: Excellent. Well, there's probably a good argument for me to have you on every month because a lot of the mailbag that I get are from Motley Fool members who have this or that thought about investing or sometimes our services directly, and indeed, you're always chipper, you're always present and you're back again this month. We're not going to talk I don't think as much about Motley Fool services that might come up, but let's start with Vince's node here. Because David, anytime you and I start talking GKC, it triggers even more mailbag items about the Gardner-Kretzmann Continuum. Here we go. Hi, D&D. By the way, that reminds me that the Dungeons & Dragons movie, which has gotten pretty good reviews is coming out this week. I, as a longtime D&D fan, will be headed to theaters for the rare direct ticket purchase Day 1 because it's gotten good reviews, it looks funny. David, have you ever played Dungeons & Dragons?

David Kretzmann: I never had. My group of friends grown up did, but I never got into it. I'm sure I missed out on some fun times.

David Gardner: Well, one D&D you're not missing out on is this D&D because that's what Vince is calling us, hi D and D. I'm not sure which David to take to task, he said Gardner or Kretzmann. Regarding David Kretzmann's statement that he had never seen "obscenely high GKC score." David, for the benefit of new listeners, what are we talking about before I go forward?

David Kretzmann: The GKC is really a diversification measure that we conjured up almost a decade ago, you and I David on this podcast. Really it's a simple number. It's taking the number of stocks you own, divide it by your age, and that's your GKC score. Over the years it's essentially become a litmus test where I think we've generally agreed that everyone should have a GKC score of one or higher, just as a baseline diversification measurement.

David Gardner: Well said. David, you are approximately how many years of age today?

David Kretzmann: Thirty.

David Gardner: If you're a fellow 30-year-old, congratulations by the way, listening to this podcast, we think you should have about 30 stocks in your portfolio. Now maybe you've just gotten started and you're like, wait guys, I'm at eight or 12, well, we think through the magic David of no commissions these days and a fractional share purchases through a lot of brokerages, you can get to 30. In general, why do we care about this kind of diversification? Why does it lead more often than not we think to success?

David Kretzmann: I think there are a few different factors that go into it. The first one that's top of mind for me is just, from a behavioral perspective I think in general the more stocks you own, the better you'll sleep at night because you have less of your portfolio riding just a handful a few companies. Maybe it lowers the anxiety, at least for some.

David Gardner: Which by the way is very important in life, right David, because it's not just about your stock market portfolio, it's often about your blood pressure, your longevity. How about any intimate family relationships you may have a spouse or partner. How you manifest yourself every day to the world freely does matter outside completely of your stock portfolio, but you and I know how many people, how many members have we talked to over the years, David, where our stock portfolios do affect how we think, how we act, and how we appear to others around us.

David Kretzmann: Absolutely. I think there's behavioral lowering the anxiety or stress level of your portfolio, how you think about your portfolio day-to-day, year-to-year. There's another factor where research will show that generally speaking, the more stocks you hold and the longer you hold them, the better your odds of generating a positive return or having a successful outcome. Just from a math perspective, more stocks held for longer generally results in higher likelihood of positive outcomes. That's another factor. I think the third one for me is, it's fun. It's fun to hold more companies in your portfolio. If you have dollars at stake invested in a company, you're going to pay more attention to that company that the services and products that it's innovating and delivering on, a company's cultural impact, if it's trending the right direction, if it's becoming more relevant. For me it's behavioral, there's just the dollars and cents math, and then it's fun.

David Gardner: That is a very succinct and elegant way of summarizing why we like to diversify. Not overdiversified necessarily, and that's where we're headed now with Vince's note, because he said that you said that you'd never seen an obscenely high GKC score, that would be somebody who owns way, maybe too many stocks relative to whatever their number of years on this planet is as a human being. Let's keep going with Vince's note. Now I love discussions about the GKC, Vince writes, as I have always considered myself a world record holder, or close to it. In fact, way back in 2018, I emailed you to explain that I had gone off the GKC score deep end. I was using what Vince calls the Noah Methuselah continuum score to express what others might have considered my over-diversification.

I had well over 600 positions and I was 61 years old at the time, so my GKC score was greater than 10. By the way, Vince continues, I was beating the market, so my extreme GKC score did not turn my portfolio into a market index fund as some suggested it would. My logic was simple, I paid the Fool to make recommendations and who was I to decide which of them were better than others. I won't go into details about my allocation strategies, but my GKC mantra was, it's not how large you make it, it's how you make it large. I'm going to pause right there, there's a little bit more. Your reactions to his GKC mantra, David.

David Kretzmann: This is so good. I aspire to be like Vince by the time I hit 60 or higher. This is a good goal, I think. GKC, 10 or higher, let's go. I still have ways to go. Setting setting the bar high, Vince, I love it.

David Gardner: It's not how large you make it, although we're all trying to make our portfolios probably presumably as large as we can, not everybody, but most of us probably are. But it's how you make it large. There's a little bit of process here, David, trust the process.

David Kretzmann: Yeah. What I like about this is very few portfolios will be set it and forget it. I think a lot of capital F, Foolish investors recognize like you and Tom with the Fool over the past three decades, it's a lifelong endeavor where you're continually looking at new companies, turning over new stones and portfolios. Our dynamic and companies come and go over time and some companies really thrive and others contracts. It's kind of a never-ending exercise and learning and investing in the world and companies that are becoming more relevant in the world. Investing isn't something that needs to just be draw a line in the sand set at one time, it's something that's really never-endingly ongoing.

David Gardner: Very well said. We will finish Vince's note now with this because he goes fast forward to today. Vince says I'm 66 years old. I've spent the last few years consolidating and concentrating my portfolio with the knowledge gained from being a Fool for now 20-ish years. I took the opportunity presented by this roller-coaster market to reshape my portfolio, to better reflect my vision for the future, to quote a famous Fool Smiley. I have left the NMC world, that would be the Noah Methuselah continuum world of Vince's own making and returned to the GKC.

My position's number about 250, so my GKC score is now under four. My goal is to wind up somewhere around two, so I still have some work to do. Thanks again for helping us to become smarter, happier, and richer. In this case, Vince closes less diversified. Well, it's a pleasure always to read such well-written notes. Vince, you've written in to this mailbag before and you're a fine thinker and writer. After all, language is the garment of thoughts, so I can see underneath your words, Vince, a very bright and Foolish fellow, David, any closing thoughts before we move on to number 3 here about his shift from the NMC to the GKC.

David Kretzmann: Back to the GKC. All roads lead back to GKC. A score of two or four for the GKC, I think that's still a large amount of companies. I think most people responding to this note would probably think, man, whether it's 125 stocks or 250 stocks, that's still a lot of stocks. It's probably more stocks than most listeners right now holding their portfolios. But I think it goes to show that every person will approach investing in a different way. I think David where you and I have centered the conversation around is a GKC of one or higher, like that's the barometer for most people. Some will go as high as 10 or maybe even higher. There's some people out there who are looking at top Vince already. But I think we will generally agree that it's probably a minority of investors who should have a GKC below one, where it's a highly concentrated portfolio, spending a lot more time just hyper-focusing on 10 or 15 companies. Some people do that and they do it well, but that's going to be a minority of investors. So GKC, one or higher continues to be an applicable message.

David Gardner: Onto Rule Breaker Mailbag Item number 3. Kind of a related note. David, I hope you'll stay with me. In fact, I've got one more for you. We're going to be joined by another special guest shortly. But let's go a little bit more GKC here because I think this is an important point made by our new friend, Hex. Hex writes, "Hi, David. I've been a member of the Fool US services since November 2019. I've been a listener of Rule Breaker Investing since then. I was previously a member of The Motley Fool's Singapore office." He writes, "Thank you for all that you do and the wisdom you share.

I've seen my portfolio go as high as plus 40%, but the roller coaster ride also brought me to minus 10%." Welcome to the crowd, Hex. I think a lot of us listening this past year can relate to that whipsaw volatility. Hex goes on, "David, listening to the Fools and believing in the value of investing over the long-term and the just keeps swimming idea you share has kept me going. The February mailbag brought up the GKC and the sleep number. I would like to add my perspective to the perennial question, how many stocks should I own?" Now before I go forward, David, is this a question that were sometimes asked when people call into Motley Fool Member Services? How many stock should I own?

David Kretzmann: Absolutely. How many stocks should I own? How do I know if I'm properly diversified? Right in the sweet spot I think of what is top of mind for a lot of investors, particularly after going through such a bumpy period in the markets over the past 12, 18 months. Definitely, a question that's top of mind and we hear it quite a bit.

David Gardner: We do. It's the mailbag question I could probably answer just about every month because there's some version of it. We're not going to always touch base there, but it is good to return to some of the eternal verities time and time again. Let's go forward with, I think Hex is not just asking question though, but making an important contribution that we'll speak to in a sec. Hex goes on, the guidance from the GKC, or the commonly used numbers like 25 stocks or 30 or 40 stocks, does not address the concentration of one's holdings. I think when deciding how many stocks to own, an additional question should be, how many of your stocks make up 80% of your portfolio's value?

Continuing on, Hex says, personally about 38 of Hex's stocks make up 80% of Hex's portfolio, another 76 stocks make up the remaining 20%. Quick math here, David, I'm seeing 114 stocks, again, a very highly diversified fellow Fool. But the important point is that about a third of those make up 80% of the portfolio, two-thirds of them, is there a Pareto principle emerging here? A little bit, maybe, 76 stocks making up the remaining 20%. "In total, I have 114 stocks," writes Hex. "My GKC is 2.7, but my attention could be focused on the 38 that make up 80% of my portfolio." Do you agree with that by the way, David, before we continue? Should Hex's attention be focused on the key ones that make up the bulk?

David Kretzmann: I think that's a good way to approach it, focusing the bulk of your attention on the companies that make up the largest percentage of your portfolio. I think that's a good starting point. Again, depending on how much time or how fun it is for you to spend more time looking at companies, that'll certainly differ by investor. But I think as a starting point, that makes sense to me.

David Gardner: Hex continues, "The other stocks are really small positions, thanks to the monthly recommendations from the Fool services I subscribed to. There are also tiny positions, I can relate to this as well, that are down 80-98% which just stay in my portfolio to remind me of the lessons I learned. I feel that this additional question helps to tease out more accurately if one's holdings are too concentrated or too diversified. Hope you find this additional question useful. I must admit, I'm surprised I've not heard anyone talk about this before.

Foolishly yours, with a capital F, Hex." Well, let me start by saying, this is indeed something that we've talked about before. We don't talk about it all the time but then again, it's not even every month that we talk about the GKC, David, but certainly within Motley Fool services, so many of our members, many of whom listen this podcast, but we have a lot of listeners who are not members of the Fool. We hope that you are, dear listener, one day a member of The Motley Fool, like a couple of our correspondence this month, but many are just starting or they enjoy the free resources that The Motley Fool offers. They might not be aware that we think a lot about how you are allocated across the context of your personal portfolio.

David Kretzmann: Absolutely. This is really the additional layer of diversification and allocation. GKC is just looking at number of stocks, but obviously there's a lot of different ways, as Hex's getting at, to slice and dice those stocks from an allocation perspective. Again, I think this is the type of thing where there's not a one-size-fits-all answer. There are certainly some general principles that we'll approach and many of our premium services when it comes to allocation. But when you're looking at stocks that make up 80% of your portfolio, there are a couple of different ways that you can get there. One is just through share price appreciation. Maybe you bought Amazon in 2003 or 2012 and you've held it for a decade or two and naturally it's grown to become a larger position in your portfolio just through the share price appreciating over time.

Another way to get there, which maybe entails a little bit more risk because if you're putting more capital to work in a given stock from the beginning, so maybe you're allocating five times the usual amount to a stock that you feel really excited about compared to what you would typically allocate to a stock in your portfolio. That means right out of the gate, you have more of your original capital at stake in a given stock, so maybe a little bit more risk in that scenario versus where a given stock naturally appreciates to a bigger portion of your portfolio.

A lot of different ways to slice and dice it but generally, I would say most of our investors would agree that you probably don't want to put more than 5% of your initial capital to work in a company from the beginning, maybe up to eight or 10% if you're a little bit more aggressive. But for the most part, probably start with 5% or less position in a company that you're adding to your portfolio. Follow that company over time. If you get more conviction in the company, maybe you add another slug of cash to that company, or ideally that company is performing well, the stock price goes up and it becomes a natural winner in your portfolio over time, so a few different ways to approach it.

David Gardner: Very well said. You're keying in a couple of things, and then we'll move on to number 4 here. But you're keying in a couple of things that I've talked about in the past on this podcast in The Motley Fool services. That max 5% allocation does indeed accord exactly with what I've been saying for years now, which is I think that's the largest a starting position should be in your portfolio. In fact, there are six habits of the Rule Breaker Investor in number 5, and it's a mnemonic because it has the number 5 in it, is max 5% allocation. This I think is an important concept. I'm guessing a lot of our listeners know that but really, if you were to survey, David, the world at large, I think a lot of people wouldn't know what the right number is there or wouldn't have a developed viewpoint. Often I think the mistake made is?

David Kretzmann: Investing too much too soon in one given company.

David Gardner: Exactly. How often do we see that? Rarely is the mistake made not to put enough into a good company. That can happen too, although if it's a great stock, as it sometimes been pointed out, it doesn't really almost matter how much you put in because if it's a really great stock, you're going to do really well. I do want to point out that 5% allocation, I totally agree with that. Then one other is, this is in a past podcast I've done for Rule Breaker Investing, it's just how much time should you spend focusing on how many stocks? If you have 114 stocks like Hex, I certainly would be the first to say, spend most of your research time focused on ones that represent 5% or more allocation, if indeed any are in your portfolio.

But you should be spending a lot more time with the three and five percenters than the 0.3%-0.5%-ers in your portfolio. That's an easy way of saying just focus on the ones that you have significant stakes in, and that's really where your research time should go. I guess, David, the one exception would be if you're starting a new position in something that looks interesting, it might be a tiny initial position. It sounds like that's the way Hex is using Motley Fool services, he's taking smaller initial positions. But you might want to spend more research time there if things look particularly interesting or promising.

David Kretzmann: Absolutely. Again, different ways to approach it depending on how much time and interest you have in crafting your own portfolio. But I think there could be an argument to be made if the top of your portfolio, the heavily concentrated part of your portfolio is a little bit more boring and steady. Maybe you do spend a little bit more time on the research positions and maybe some of the companies that might be a little bit riskier, smaller, newer, and potentially build those into larger positions if they prove themselves out.

David Gardner: Onto Rule Breaker Mailbag, Item number 4, for anybody who doesn't like the GKC, we're done with that. But David, will you hang on for another one?

David Kretzmann: Always.

David Gardner: Excellent. Thank you. We're also joined by The Motley Fool's Chief Investment Officer, Andy Cross, great to have you back.

Andy Cross: Thanks, David. Hi David, two Davids, it's double David. I love that. That's special for me when I have two Davids.

David Gardner: Thank you. It's good to have an Andy in here and Andy, great to have you back on this podcast. You were here winning the Market Cap Game Show last week. Was it emotional?

Andy Cross: David, it was emotional considering that I think like many, my final four was completely obliterated. I was looking for a little bit of wins and I felt Jim was a contestant and a great friend, and that was a lot of fun and I was very happy with my performance. But what's most important is that it was just a lot of fun and it gives a lot of context to investing.

David Gardner: Thank you. It was a lot of fun to do together and let's talk about this next note together, guys. This one comes from Justin Harrison. Justin, thank you for writing and hey, David, I've thoroughly enjoyed listening to Rule Breakers since I stumbled on it over two years ago. You're positivity and insight with investing business and life have been a staple for my weekend runs ever since that time and that's why I do this like that is so much fun. I would do it just for your runs, Justin. I mean, you know, you're loving what you're doing in life, if you would pay to do the job that you're doing and I don't tell anybody at the Fool, I would pay to do this podcast each week, even if it was just us running together.

By the way, I need to get more steps, and OK, let's continue. I've been in public education for 14 years now, both in the classroom and as a school counselor. Saw your discussion with Warren Berger struck a more personal cord for me this week. Growing up, both of my parents were teachers. This has allowed me to see firsthand how that dynamic has shifted over the last four decades. Our education and questioning no longer synonymous, but instead two terms of conflation.

Well, as an educator and a parent of two young boys, Justin writes, the thought of that is a concerning one to say the least, questioning and exploration of thought is imperative for learning to reach its full potential. Your discussion mentioned teaching to the test and that, in my opinion, has led to a number of issues in education that need to be corrected. By the way, guys, I don't know if this ever happened to you going through high school or college but some teachers feel a need to so-called teach to the test because often that standardized test that SAT or that API, whatever it is, or even just our school district or state test exam.

They know the questions that are coming generally the teachers do and they need to teach students how to answer those questions and so, so much of teaching in some contexts. I see you both nodding your heads here as we do this over Zencastr, which is our video platform, although this is an audio-only podcast. But I see both of you nodding, that some teachers feel pressure to teach the test. They don't get time for exploration or questioning they need to get what's inside their heads, into their students' heads as efficiently as possible so students can regurgitate to get an A on the test. Andy, did you ever face this or feel this at any point in your own education?

Andy Cross: Well, I think David, many people feel this. I will say, I've never been a teacher in education per se. I think I hope I help teach some investing.

David Gardner: You're doing it right now.

Andy Cross: Thank you. I hope I can have some appreciation, I certainly have appreciation of testing. What teachers have to deal with and what is the pressure they're under, from their administration, from their parents, from their performance is something I've never dealt with. However, I have thought often David, that healthy Socratic method, the ability to see different parts to different problems, the ability to understand how to ask the right questions, think for yourself that is really important in education and it's actually very important in investing because so many people on investing use one simple tool to try to value a company or value an industry or have one style of investing, instead of really broadening out their horizons. I think that broadening part allows you to find those winning stocks that we've identified at The Motley Fool over the years.

David Gardner: Well said, thank you, and yeah, asking questions often leads to most of the gains we make in life. I think asking new questions, obviously, that's a major part of Warren Berger's work. Justin continuing as note, Andy would agree with you because he writes teachers do have their hands tied in all of this, when both federal and state funding gets tied to standardized test scores. There are opportunities to have meaningful time to build relationships with students and enrich the content are limited by that reality, leaving them with a watered down version of what could be.

I'm sure that legislative policies like no child left behind and other various initiatives began with the best of intentions, but have instead, and again, this is from somebody on the front lines. I don't see this, my kids are now out of school. I'm glad that they're adults. That's why we raise them hoping one day there'll be responsible independent adults, which I'm happy to say we have in our family at this point. Anyway, instead perpetuated Justin writes, these shortcomings in our current system, unfortunately, we also know what destination that roads so ominously paves, although this all may sound bleak. I am hopeful that things can turn around in a positive and meaningful way.

My state, Justin continues not identifying his state, but this is true of a bunch of the US states today. My state, along with numerous others across the country, have added financial literacy as a graduation requirement, whether furthering their education in college and listing the military or going straight to the workforce, students will now have that critical knowledge-base as they venture out into their post-secondary journey. That critical knowledge-based Justin's referring to is financial literacy. We're blessed to live in a country where despite our imperfections, we can create change through our electoral process. I myself want to do my part on the ground floor by being a catalyst for optimism and growth with all of the students that I encounter. Going to pause that right there, David Kretzmann, what jumps out to you in what I just shared?

David Kretzmann: A strong plus one to everything and I'm glad we brought Andy on because he's saying things far more eloquently than I would be able to. But no, I think similar to Andy, I haven't been in the teacher shoes. But having been a student from my perspective I can understand where tests can be an effective tool just to capture that snapshot in time, did we get enough students over this knowledge threshold of a given topic? From my own perspective, though, whether in high school or college, as a student cramming for a test, I feel like I forget 90% of that within a week.

And now looking back a decade plus, I don't really remember anything that I studied for in those tests. The things I do remember from high school and college, it's the experiences, the principles, some of those things that are certainly valuable. I think it comes down to the balance of book knowledge versus just some of the more foundational principles of how to live life effectively, how to navigate friendships and relationships and the world effectively, all those things. There's obviously nuance there, you don't want to go probably too far to either extreme. But I think looking at our system, I can certainly see where the pendulum is swung very heavily to the book knowledge snapshot in time, which I think is missing a lot of those qualitative aspects that make life so rich.

David Gardner: Really well said. You were using the metaphor of walking in someone's shoes. That's so important today, especially because we have more awareness of more different people within our own culture to say nothing of the global culture, we're so much more connected with the outside world, even if we're in our dens, still some of us choosing to work at home, you're still so much more aware than humans were a century ago of people are very different from you. Walking and others shoes is such a helpful thing and I wouldn't be the truly Foolish person I try to be if I didn't make a joke about this as well because it reminds me of another great quote from a past podcast. This is about walking in someone else's shoes. It's from the actor now, dearly departed James Con, I don't know if you guys were listening to the episode, but if you weren't, you miss this amazingly great quote that you're now going to get to hear.

Before you criticize someone, James Con tweeted once this is about two years ago, using Twitter to do this before you criticize someone, walk a mile in their shoes. That way when you do criticize them, you're a mile away and you have their shoes so worth considering. But let's move on to the close of Justin's and I want to end this message. He writes by going back to where I started it, I've been listening to you in following The Motley Fool for just over two years now, as we all know, the market has not been particularly kind to most investors over that time period. I fall into that category and have seen more losses than gains during this stretch. Even so, I firmly believe that the market will go up over time and this can be a wonderful opportunity for capital F, Foolish investors with a long-term horizon. I love the term spiffy-pop, Justin says, thank you Justin, and look forward to the day that I might achieve that return.

Until then, I'm pleased to say that the information that you countless others at The Motley Fool the good folks over the investors podcast, and countless other financial writings have helped me Justin Harrison writes, achieve a mental spiffy-pop from where I began back in late 2020. With that learning compounded over time, I like my chances of making the type of investments that will lead to a prosperous and financially sound future. Fool on Justin Harrison. Well, Fool on yourself, Justin, what a great note. What proper sentiments guys, it hasn't been easy to find spiffy-pops, a term that if our listeners don't know, you just have to Google at this point because we can't go back over our language every time, every podcast, darn it, fellow fool, you should know what a spiffy-pop is. But if you do, you'll appreciate Justin's concept of the mental spiffy-pop, which anybody can achieve despite market conditions. I'm going to ask Andy to hang around for another mailbag item or two, but before you go, David, any final thoughts as you exit stage?

David Kretzmann: I think the only thing that comes to mind, and there's probably some pitfalls to this idea, but a standardized test, I think, would be interesting in the context of high school college tests. Financial literacy would be a financial literacy tests that you need to take and pass before you can take on a student loan for college. I think that's an example we see. Often, an 18-year-old brain isn't even fully formed and you're taking on probably the biggest chunk of debt you'll take on in your life unless maybe you buy a house down the road. That's a huge commitment that most people I think have very little idea the ramifications of that literally often for decades for your life. If we're talking about standardized testing, I might be in favor of that one. Give it a shot.

David Gardner: Thank you, David. I was going to let that be a mic drop and you're walking away in slow motion while everything blows up behind you because I thought that's such a great point. But without letting that happen, Andy wanted to jump in and add something. Andy, what?

Andy Cross: Just David Kretzmann, such a great point, I would see that almost as valuable as four people taking on a credit card for the first time as well too and we're seeing the risk. Very similar to the college loan credit card as well too. But I think your point, David, was excellent. Thank you so much for making it.

David Gardner: Well, to educate, to amuse, and to enrich. That's the phrase we rocked on the front of our AOL site back in the mid-1990s when The Motley Fool first launched and we're doing it just as much here 30 years later, guys, really good points. David Kretzmann, thank you for joining us again on Rule Breaker Investing.

David Kretzmann: Thanks so much fool on.

David Gardner: Onto Rule Breaker Mailbag Item number 5. And really I saw this Andy Cross in two different notes. I'll share Eric lounge note, first-year David, hello again from Hong Kong. Eric writes in last month's Mailbag episode, I appreciate you sharing item 2 about the dismal recent performance of a fellow Fools portfolios. Through being a Motley Fool member, I've come to learn the benefits of investing for the long-term, Eric writes, diversification, I think these are themes we've hit hard this month. How a few big winners can make up for a handful of losers. As a result, Eric writes, I am not rattled by last year's bear market and my conviction is as strong as ever.

Having said that I do empathize with what some of the reader Greg shared in terms of the performance of the rule-breakers portfolio when promoting the Rule Breakers and Stock Advisor services, you referenced the performance versus the market since the inception of the service. That includes your most legendary stock-picks like Amazon and Netflix, to name a few. However, Eric ends for the sake of transparency, would you also be able to share the relative performance of these services for the most recent 5-year and 10-year periods. This information it's quite common to find and the promotional materials most ETFs and mutual funds, it would be helpful if such information Andy was also available for the various Motley Fool services.

I know you have something to say to this, but I'm just going to add in one other note, short time reading a rather redundant notice to say is to show that it's on the minds of not just one person, but maybe many. It's worth thinking about together Andy. Cliff Cater writes, I'm reacting to Greg's note complaining about the dismal rule-breakers performance over two years and that it's laughable, he wrote, to keep referring to Amazon. I suggest you published 5, 10, and 15-year performance of all the services where appropriate. That'll help highlight their success over meaningful periods, but also encourage new members who may feel they miss the boat on those early picks. Andy Cross, I was going to say a penny for your thoughts, but I'm going to give you a dime.

Andy Cross: Thanks, David. I hope is worth a dime. This is something we've discussed. Tom and I have discussed it, I've discussed from other investors and certainly discuss it with other Fools and other members and David, maybe even you as well too. We're very proud and we focus on the long-term here at The Motley Fool and so reflecting all of this success and all of the failures since the time we've started the services in Rule Breakers and Stock Advisor our two longest running services. Those are monthly recommendations services and we report those generally as an average return. Not generally we do as an average return on our scorecards. That is most meaningful reflected since inception.

In some of our real, incidentally David, and some of our real money services though, the higher-end services that where we have Motley Fool capital invested in a portfolio that can be followed by our members. Those we actually track and we do report those since inception as well as rolling five-year periods. Stock Advisor Rule Breakers, we don't do it. I'm not opposed to doing it, we just want to make sure we reflect the right numbers because of the way that they are on an average performance. But we're so focused in trying to really teach members about the long-term and really stretching out that term that we're so passionate and so determined to make sure we highlight the since-inception returns because all of the recommendations are tracked on that scorecard. Any given time, anybody or any of us can see the individual performance of any stock and any month on those scorecards. The transparency is there and then that matches up with the since-inception returns.

David Gardner: I think that's true and it's certainly I'm not going to say we take pride in this, I just think this is how every investment service should be focused. You can see every pick we've ever made when you join Rule Breakers or Stock Advisor, not just the last three years, or five years, or ten years. You can see every pick we've ever made, all the good ones and all the bad ones. You can also see exactly what we were saying all the way through from our initial buy report to our ongoing coverage, any Best Buys now, reports where we added that stock to a list of what we consider timely buys. Even when we sell stocks, you can find that they're too. We have a huge amount of content for people when they start a Motley Fool service, especially one of long vintage Andy.

I think that that's really important to us. I think a lot of people do too tightly focus on the last one year or the last three years of their portfolio, or their fund, or services that they're looking at. At the same time, I would say I think the reason that Eric and Cliff have written in about this and presumably discussions in our Motley Fool discussion boards and other aspects of our services is because I think it is a benchmark that people use, hey, how has a given service done over the last ten years or five years. I don't see any real problem with showing all of the above. I think the inception returns are most important to me. I think what's the greatest value that The Motley Fool offers to the world in some ways is that long-term track records. So much of the world is caught up in five-year returns and what has it been, and doesn't realize that it's about five decades of holding stocks.

I think we're so highlighting that under your leadership, Andy, returns since inception say so much, I think, to a lifetime investor and spending a lifetime we hope with our services through good times and bad where a lot of people jump off the train if they just see a bad returned over three years or Andy, the last five-years, if it looks spectacular, maybe they go into strong are too high because like these guys can't lose, look at the last five years. It's hard to solve the equation for everybody and every context, Andy and what everybody might want from our services. But I think the points here are well-made. I'm sure you're hearing them, you think about them, and I know also a bunch of our services do that. The ones that use real money to manage a portfolio in front of our members.

Andy Cross: Exactly David. With Stock Advisor and Rule Breakers because we list every single recommendation we've made over 20 plus years for Stock Advisor and 18 years for Rule Breakers, David, 17 years for Rule Breakers. The transparency is right there that matches up that since inception returns. The matching of that I think is really important and then transparency of that. Perhaps we should have more conversations about highlighting some of those shorter-term periods. But I think your points are certainly correct in a way that I know Tom feels and I feel, which is the continued focus on expanding on our time horizon beyond just one, three, five years that is so touted in the invest in media and really thinking about decades of performance because over that time period, you can't say it's luck, it really is truly representative of your invest in talent. I think that's what we want to showcase in a style with what we've done at Stock Advisor and Rule Breakers.

David Gardner: Well, let's move on to Rule Breaker Mailbag Item number 6, I will just say in passing and you can imagine if you're a marketer and you work at The Motley Fool, you probably just like if you're marketing, Chobani yogurt, or let's go with latest Chipotle has some new meat, or something. The new chicken from Chipotle that you're always going to want to put your best foot forward. It doesn't make sense to say, hey, we've had really bad returns over the last three years in Rule Breakers, because by the way, the market and Rule Breakers stocks have had really bad returns. David Gardner, the progenitor in some ways of that service, hasn't had great returns over the last three years.

They're going to want to show you how we've done over the longer-term than that, where we're well beating the market for members who've been with us for a long period of time, which is to us the only period of time that matters. But anyway, I can certainly appreciate that if you're a marketer at any company, you want to put your best foot forward and lead with that. I think since we have such an incredible long-term inception starting to tell. That's why we tend to do that, but I won't speak for that group. Hey, I'm not even in operations. I'm just a co-founder that does a podcast in a weekly basis. Andy Cross, thank you for speaking to that. Let's let's go to Rule Breaker Mailbag Item number 6, Andy hanging around for this one. But when you and I were battling this around before we came on the air, you said you'd shift Tim on for this one. Tim Beyers, welcome back to Rule Breaker Investing.

Tim Beyers: Thanks for having me back, David, good to be here.

David Gardner: I feel a little silly saying welcome back to Rule Breaker Investing since every day you're working in for Rule Breakers and anybody who's a member of our services would know that about you. But I guess I'm just talking about this podcast. It's a delight to have you back. You've made many past appearances for good reasons and this is just the latest. Are you ready to talk to this Mailbag item from Phil?

Tim Beyers: Absolutely. Let's hear what Phil has to say.

David Gardner: Let's do it. David, after having one of a few conversations surrounding GAAP, generally accepted accounting principles, GAAP. That GAAP, G-A-A-P, and non-GAAP comments related from the discussion board on The Motley Fool that discusses Cloudflare, which is ticker symbol NET. This is another member guys. This is a guy who's dropping notes in our community on our discussion boards about GAAP and non-GAAP investing. Field continuous. I began to question some of the advice I was getting from that discussion board.

By the way, that advice would be coming from fellow members usually. There are staffers, Tim, you might've been posting on the Cloudflare board, or Andy, but often it's member-to-member communications going on there. Anyway, he began to question some of the advice he was getting from the board and made the decision to move on and explore other ideas. I guess he, he moved on from that discussion. They didn't like, or agree with what I was saying, says Phil. He even uses this verb guys and canceled my humble opinions. Now, pause for a sec there. That feels a little sad to me, Andy.

Andy Cross: For sure, David, we are a forum where we welcome contrary opinions, learning, discussions as how we all get smarter. Especially in this day and age cancel is have very strong word so I hope Phil is not canceled.

David Gardner: We don't cancel people at The Motley Fool, but I'm sorry if you felt that way, but you're getting your moment Phil because here we are. Rule Breaker Mailbag Item number 6. Now Tim, let me keep reading here. My question is this, does The Motley Fool Rule Breakers have a blind spot when it comes to GAAP and non-GAAP accounting practices? In a recent podcast, David, you highlighted a new investor who is disgruntled with your service, you apologized and gave a reasonable answer as to how the market works. Having been around a long time and journaling my investments, I am way further ahead by following the Rule Breaker recommendations than I would've been without the investment advice even with all the recent losses and Phil, you know that warms my heart. Thank you, sir. Thank you. He writes for the record, I do cherry pick. I look for companies that adhere to GAAP accounting principles. Tim, we're about to get into this, but let me just add a little bit more. Here's what I believe is a Rule Breakers blind spot. Upon The Motley Fool's recommendation, investors decided to invest in the companies say Cloudflare, or the Trade Desk and enter through the front door. The front door here means is GAAP and GAAP accounting. Now, a lot of listeners know what we're talking about, but a lot of other listeners don't know exactly what we're talking about at this point.

Tim, in a second I'm going to ask you to briefly break down the terms before answering Phil's question. But he's talking about that front door. They buy that stock through the front door, GAAP accounting. These are great companies with great models, Phil rates who generate a tremendous amount of revenue, but revenue minus expense and liabilities equals profits, or losses. The problem is that when you invest using non-GAAP accounting principles, which Phil terms the back door. The back door is wide-open. As often happens, stock options not being recognized as an expense, escape out the back door, leaving investors left holding an empty bugger. He uses that phrase, I'm going to pause right there. Tim, can you break down what's happening here?

Tim Beyers: Essentially what Phil is saying is that when a company gives out a lot of equity, so stock options are one way it can be done and other restricted stock things. They give stock, they give equity compensation to employees. That is equity that could be available to shareholders, but it gets diverted and it goes to the employees. Basically what Phil was saying is come on in the front door, I'm going to shuffle some money to employees out the side door. When you go out the back door, some of the maybe the equity gains I promised you have already gone to the employees and you're not getting the full share here. I think Phil is saying, look, I want a company that is going to expense everything properly, is going to abide by GAAP generally accepted accounting principles. Not give me a bunch of numbers that are non-GAAP to say, essentially it feels like a Jedi mind trick. I'm putting words in Phil's balance here, so I apologize.

David Gardner: I think doing it very well. I think Phil is nodding his head possibly vigorously.

Tim Beyers: I would say he's making the argument. This feels like a Jedi mind trick. These are the numbers you're looking for. If you're looking at GAAP over here, don't pay any attention to that stock-based compensation expense look at these better numbers over here. Phil, I think he's making the argument that those non-GAAP numbers are deceptive and they're hiding the fact that a lot of money that could go to shareholders instead goes to employees and he's not digging that very much, David.

David Gardner: At the heart of this Tim, you got stock options, or stock grants that are being given to employees and they're not being paid a salary. You're not actually seeing the full salary composition what you'd expect it would cost for a techie in this world, or a good digital marketer. Instead, you gave him some stock, or some stock options and that's not reflected in that front door accounting that a lot of people want to see. They want to know the full expense that it costs, but if you're just giving people stock, by the way, stockholders are being diluted. As you're pointing out, they're not getting the full effect of that pie that they got an initial slice of portions of that pie are disappearing because it's being given away by management. Cynically, we could say hiding expenses. This is a common practice, Tim Beyers, an Andy Cross for many innovative upstart companies, a lot of Silicon Valley fueled by this. It is best sense in some ways, Tim, right?

Tim Beyers: Yeah.

David Gardner: Maybe it's worse too?

Tim Beyers: Yes. We can absolutely get into that. I would say the problem with thinking about any equity compensation. Essentially what's happening is all of this stuff If you know your accounting rules, there's an income statement where we look at the profit and the loss and everything gets expensed, including some things that aren't cash expenses, like equity compensation and then we move from that to the balance sheet where we say, here's how much we got in the bank. Then to the cash flow statement where we say, here's the cash that's flowing through the business. On that cash flow statement, some of these companies you're talking about, David will get a really big fat credit. Said, hey, we actually didn't spend cash. That compensation that was expensed on the income statement, that's now credit back to us because no cash went out the door.

These companies will say hey look, we're cash flow positive. Except they got what I call the big fat artificial sweetener benefit of being able to defer a lot of expense they'd have to pay in cash. They instead paid it in equity and so Phil is pointing out, and I think rightly. When a company does that, you're like, hey man, you're taking money from me as a shareholder. What do I get for that? David, I want to give full credit and say that is exactly the right question to ask but don't let the question hang. You got to ask the question and then you got to do a little research because context matters and I'll hand it back to you, David, with this point that we can get into a little further. Sometimes when a company does that, it is absolutely to the benefit of shareholders. Sometimes when a company does that, it is absolutely not to the benefit of shareholders and so it is never, and when this happens, it's bad, it depends.

David Gardner: I hear you there. It depends. Andy Cross, you've watched this phenomenon for decades. You've been at The Motley Fool even longer than Tim Beyers has been with us for decades. Andy, this is something I remember in the early days of the Fool. I won't name this wonderful investor that we both know that we've worked with over the years. But this person was targeting Activision. Activision Blizzard is a company that was a serial pair of stock to its employees, hiding its expenses and didn't like this stock and I will just say I downplayed it. It's not to me, it can work out well. If you pay employees in stock, not salary cash and the stock goes up over time, that's actually a win-win really. I think it's a win for everybody so I recommended Activision anyway, Andy, and it's been a pretty great stock over the years. Not to say this is about a single-stock because I think Tim's point, Andy it's an either or. It can work both ways here.

Andy Cross: Well, and David, it's mostly acute and in information technology and the most innovative companies, and not mostly, but they reward a lot in stock. That is part of the currency of Silicon Valley and the way they recruit and the way they maintain the way they incentivize their employees. Years ago when we first started, the stock-based compensation wasn't even part of the income statement they didn't include it I forgot that. Now it's at least included and then companies will back out the stock-based compensation so Cloudflare, for example, had probably close to a billion more than a billion-dollar of expenses last year and about north of 200 million of that was in stock-based compensation, that is into the income statement.

Then when companies go to report their earnings and talk about their cash flows as Tim mentioned, they back out that stock-based compensation because they didn't shuffle a bunch of cash out the door in salary expensive. Instead, they prefer to give it out in equity grant but that is the real trick into Tim's point about the context and looking at a case by case and with your case Activision. I remember looking at this with Netflix many years ago two with stock-based compensation and people getting criticizing the company for stock-based compensation that overtime has worked out very well for those employees.

It's really as an analyst and investor, you have to recognize the expense and look at both the volumes and also the underlying business obviously to see if that stock is going to get rewarded not just for those employees and turn out to be a reward for the employees, but obviously for the shareholders and then how much, as you mentioned David, the dilution, which means as you issue more and more shares, those of us who own that stock get a little bit less and less of that company if you're doing that at a really obscene amount then the dilution is pretty insignificant over time.

David Gardner: Right. Fortunately, these numbers are more available and more transparent than ever before, which is why even mom and pop investors like me can roll up our sleeves if we want to go in there and the 10-K and have more awareness of this, which companies do this? The most or the least if there are any egregious players here, etc. Tim, I'm going to close by asking you whether you think this is a blind spot, that we have a Motley Fool, Rule Breakers. But before I ask you that, I'm going to let you cogitate on that as I read the end of Phil's note, Phil's ends his note with ''If you buy into companies who do not adhere to GAAP, as an investor, you will be paying hefty prices for stocks you purchase and we'll continue to see hard-earned money exit through the back door when stock options are granted to the tune of hundreds of millions or even billions of dollars.'' Something to think about. Now, Tim, I think you did a good job pointing out earlier, Phil can be right. Phil is right in some situations, but this is not an always right viewpoint. But Tim, do you feel like Motley Fool Rule Breakers has a blind spot here?

Tim Beyers: I think we might have in the past, but I've spent a lot of time thinking about this and I think the way I would caveat Phil's comment is maybe like what he said at the end of that, it always goes out the door. You have to put in my opinion, Phil, you have to put a maybe on that so let me give you some context here. Remember I said the question you should ask is, what do I get for that? Because there is money going out the door. I'm going to give money to employees so what do I get for that? I get diluted as a shareholder so what do I get back? The way I think about this, David, is, I think of those equity grants as investments made in building something, particularly among any information technology company that neither you or I can't see. It's general software. We know value is created. If I could give you an example here, the net intangible assets, the gross forever of the Microsoft Corporation is $23.5 billion. Microsoft makes over $200 billion a year in revenue. Do we really believe that the assets that Microsoft has created is only worth $23 billion? That is nonsense. We know that's nonsense. We know that there are investments being made here and those investments invariably are being made in people.

David Gardner: That was really well put Tim, you remind me how well you break down complicated concepts. Sometimes you do it about technology. This time you're doing it about investing and GAAP principles. Did you say 23 billion, is that what you just said about Microsoft?

Tim Beyers: That's the forever number.

David Gardner: You think about the market cap of Microsoft is over two trillion. That's a small insignificant percentage really looking at the grand scheme and that's what we're doing right here, looking at the big picture of its forever grants, and it's today's market cap built-up over decades. That's just one example. I think in closing, you can pick your poison here. If you want to make a point scoring and feels calm, you can find companies that have been bad decisions in our cynically hiding expenses and hurting shareholders badly and they exist. You can also find companies that might not be so cynical.

They may think of this as a compensatory tool that's very effective and they've gone on to create huge wins for all their stakeholders, certainly shareholders included. I hope we've painted both sides of the fence. I know when I bring in Andy Cross and Tim Beyers, we're going to do that because we tend to be what we shoot for being as broad-minded and seeing all sides as possible. That's, I think part of The Motley Fool's special sauce part, and it was on evidenced today. Tim and Andy, I want to thank you both for leaning in with me this month on our Rule Breaker Investing Mailbag.

Andy Cross: Thanks, David.

Tim Beyers: Thanks, David.

David Gardner: Well, that was a lot of fun. I said just off the air to both Andy and Tim. I think for some of you fellow Fools, our listeners, you're like guys that was keep that topic short-shrift. You can go a lot deeper, and I bet that's true for some of you. I also think others listening maybe a majority or like maybe five minutes on GAAP is all I really need. Hyperlinked to stop on your website if you like, or we can go infinitely deep on an HTML page. I'm often trying to strike it with the golden mean of how much time should we talk about GAAP accounting or not with this large audience? Anyway, thank you for bearing with me. If you are a longtime listener, you know that I often tried to close many of my podcasts, especially my mailbags with the best for last. Let's see if we got it with Rule Breaker Mailbag Item number 7.

Before I read Jason Trice's note, I want to say that Jason has been a frequent correspondent to this podcast through this mailbag over the last few years. Jason Moore, who is also recognizing in this note, has also been just as equally engaged in. To both of the Jason's, I want to say thank you, you guys are not only a pleasure to, in some senses work with, even though it's purely informal and largely writing back-and-forth on the mailbag, but also on Twitter. Both of you are active and great follows on Twitter. Jason Trice, you are at Jason_Trice, and Jason Moore you are at JimminyJilickrz. That's Jilickrz J-I-L-l-C-K-R-Z for those who are spelling at Twitter handles as they do their weekend jog lists, podcasts. But at JimminyJilickrz and Jason_Trice have been wonderful Fools, and so this is a great tribute to close out this month's mailbag.

Rule Breaker Mailbag Item number 7. Hey, David, I hope you're doing well, it's Jason Trice. This was a fantastic month of podcasts for Rule Breaker Investing. I enjoyed each one. I'm writing to let you know about a friendship that has developed due to your weekly podcast. Here's the story. It's entitled a Rule Breaker Friendship. About once every other week, I do an hour-long FaceTime call with a friend of mine. Our friendship is unique for several reasons. One of which is we've never met in person. Jason lives in Canada and I live in North Carolina. We are about the same age. We have young children and aging parents and have similar interests. We discuss everything from books we're reading to complicated families situations.

Our conversation started on a surface level, but the more we talked, the more we connected and the deeper our talks became. Jason has helped me through some difficult times and I have also helped him through some, it's a friendship I value deeply. Why am I telling you this? Because you introduced us. Jason and I initially connected through a shared interests in the Rule Breaker Investing podcast. It started with comments on Twitter and eventually led to a Zoom chat where we discussed our favorite RBI episodes and speculated on which authors would make the cut for authors in August. Our conversations have evolved. We usually start with an episode of the podcast, which always leads us in an interesting direction.

The last time we spoke, I began to think about how unique and special our friendship is. When you started recording the podcast in 2015, I don't know what your goal was. I can guess it was probably centered on educating, amusing, and enriching. It has undoubtedly done each of those for me. But my friendship with Jason reminds me that when we put good things out in the world, the world rewards us with things we didn't know were possible. Why am I typing this long-winded message? I want to say, thank you. Each week I hear you're smiling voice. You know you're optimistic when listeners can tell you're smiling, and I'm thankful for the good you continue to put out into the world. It's created a wonderful community that connected two unlikely friends living thousands of miles apart. Without your podcast, we would've never met. It's what I call a Rule Breaker friendship.

I hope to meet Jason face-to-face one day perhaps at a FoolFest. But even if we never meet, I will continue to look forward to our chats and always be grateful to you for introducing us. I imagine there are several other stories like this out there. I didn't want another month to pass without sharing mine. Thanks, David and fool on. Well, to Jason Trice to Jason Moore too, I hope many others who have made or met a friend through not just this podcast though of course, that makes me smile, but through The Motley Fool, through the connections that we make at member meet-ups, through investing clubs we might have started online, or maybe bumping into a fellow shareholder at your Starbucks. As you both realized you own, SBUX shares, the connections that we make through the businesses we're invested in together.

But I think even more importantly, through this shared mindsets that we often have valuing the long-term, which Jason and Jason, I know you guys do and I hope so many others listening to me right now, realizing that's the only game that counts, the long game, working for the good of ourselves and others in this world often through how we spend our money and how we invest our money, and realizing that most of us are trying our best. No one is perfect, and yet, if you're Foolish enough with a capital F, to admit you're a Fool. If you can start there, that opens up any number of conversations gives you a beginner's mind humility to who you are and where you're coming from, which is appropriate for every human being on this planet.

Without being too grandiose, Jason, I so appreciate you taking the time to write that note, it accords to my own belief that the expression of gratitude is itself helpful. I wish both of you guys Foolish and long lives. I hope those Zoom chats continue, I know you'll meet in-person one day, and I so value my connection with you each and my connection with so many others listening to me right now, both the past connections that we may have had sometimes over decades, the present connection that we enjoy right now through the human voice on a podcast you can download this week. Of course, more importantly, really, all that really matters, the future, the future connections that we may share and enrich each other's lives. The Motley Fool exists to make this world smarter, happier, and richer. Gentlemen, you are great examples of Motley Fools. Fool on.