“9 Foolish Truths That I Hold to Be Self-Evident”

If you’re a longtime listener to this podcast, these truths may seem self-evident. But to much of the investing world, they’re still wildly contrarian. So please feel free to share this Motley Fool Rule Breaker Investing episode with someone who doesn’t get it yet.

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This video was recorded on Oct. 6, 2021.

David Gardner: What are the eternal verities? The things that have the state or quality of being true. Do you know the phrase eternal verities? Well, then maybe you know some of them; truth, right and wrong, good and evil, hope, love, compassion. You might have your own, though, to live up to the phrase, they need to be eternal and they need to be true. But what are the eternal verities in the world of money, in investing specifically, but also in business. Well, every two years on this podcast, I bring you nine Foolish truths that I hold to be self evident. Things that I believe, that I hope you believe, things that I believe you should believe. Truths that I want to make sure I don’t forget to state and restate, reemphasize, at least every two years. Indeed it was four years ago, and two years ago this very week on this podcast that I’ve last spoken to these, which means, checking my Apple watch here, yeah, it’s about that time, once again. Time for really one of my most important podcasts that I ever do for you. It’s time for nine Foolish truths that I hold to be self evident, this week only on Rule Breaker Investing.

Welcome back to Rule Breaker Investing. What are we doing this week? Well, I want to go back as I mention and restate some of the classic Rule Breaker points, stories, basics. Especially for those of you who may be new, who’ve never heard all of these laid out on the table for you, displayed in full so that you can dine at this table surrounded elbow to elbow with Rule Breakers and know how we think and what we do. Well, long time listeners have definitely heard me say this before, after you do a few hundred podcasts, and this by my reckoning is number 330. That’s 330 consecutive new weekly podcasts without a single skip or repeat as I’m trying to become the Cal Ripken of financial podcasting, except a lot of people cared about that hall of fame baseball player’s streaking, I don’t think really anybody cares about Cal Ripken’s podcast. But anyway, as I say, once you’ve done 330 consecutive new Rule Breaker Investing weekly podcasts, the older ones, they start to drop below the fold on iTunes. They fall away from our minds. I mean, I might remember how much fun I had here with Seth Godin or inventing the first Market Cap Game Show, or five good stocks, but those are all ancient history now and I cannot expect that you dear listener, that you have ever heard them or know of them, or even so remember them. I make assumptions sometimes that I said a year ago, so I’m sure everyone remembers that thing I said, whatever it was, and I can’t assume that.

A lot of podcasts you could just start in the middle. I mean, especially the newsy ones, you could just join in anytime you like, but for Rule Breaker Investing, this is a strategy, this is an approach. It’s a thought framework which is very helpful for any new listener to have in place as he or she begins listening to podcast number 331, number 332. That’s why every two years I like to reset with this podcast, nine Foolish truths that I hold to be self evident. Nine things that I take for granted. I think you should, but I don’t want to take for granted that you do take them for granted or know them for yourself to be self evident. Here we are, we find ourselves at this place once again, in our end road, T S Elliot is our beginning, my nine Foolish truths that I hold to be self evident. Let’s get started. Foolish self evident truth number 1 is about business. In fact, the first two are about business. We’re not even talking about investing yet. Truth number 1 is about how to do business right, and finding businesses that do business right as an investor. There are a lot of them and they’re growing, good news. I would say that we’re living in an increasingly enlightened capitalistic environment. That’s not ever to say that things are perfect or can’t be improved, but in fact, one of the things that I love about the time in which we’re living is that things are pretty persistently improving, a lot of them.

As Kevin Kelly, the author of the book, The Inevitable said on this podcast, “We’re living not in a utopia and certainly not in a dystopia, but rather in a protopia.” That’s a world that gets a little bit better almost every day, but almost invisibly. It’s not evident until you step away and look back a year, or 10 years or how about 500 years, and you see the amazing amounts of human progress that get rolled up over time. So yeah, one of the things I love about the time in which we’re living is that things are pretty persistently improving. Sometimes in fits and starts, sometimes we take a big step backwards. It’s not true in all areas of the world, and I especially want to make it abundantly clear, over these past two years, that for many, the world seems to have gotten worse, gone to a bad place. In some instances I will agree, although most of all, I think about vaccines, rather than just COVID. I think Zoom, it saved our economies. I think our heartbreaking acts of goodness and sacrifice and love that I hear about or see every day. Am I not reading the same headlines you are? While that’s very likely true since news media headlines are very intentionally tilted toward trolling you with negativity so it gets the clicks. If you dear fellow Fooler, reading it, you’re probably seeing that, in which case the difference between us, it’s just that I’m not. My head isn’t buried in the sand, at least I sure hope not. I think we’ve all become aware of much systemic injustice and yet, that’s a great step, because it may not look like such a big deal right now, but that’s invisibly the world getting a little bit better every day. Many of us have become aware of systemic injustice and are now working to do good things about it.

Next week, I’m excited to be speaking at the Black Wealth Summit with my friend Cedric Nash. Speaking of Zoom, you dear Fool can attend, and if you or a friend of yours, might be interested, please do buy a ticket. You can register today, it’s blackwealthsummit.com. See you next week, but to get back to my subject, the way that capitalism is practiced and talked today is far superior to what I inherited anyway, when I came on this Earth 55 years ago, maybe you too. I was reminded of my Foolish truth, which I hold to be self evident number 1 here, as I made by annual trip last week to Austin, Texas for the Conscious Capitalism CEO Summit, because number 1 is chapter and verse conscious capitalism. In fact, remember the four tenets of conscious capitalism is also one of the six habits of the Rule Breaker Investor, which I’ve presented before. My God, was it three years ago now in this show? Let’s restate. There are four principles that underline what I consider to be effective capitalism, and these are not my ideas, these were originally settled on by Whole Foods co-founder John Mackey and his friend academic and coauthor Raj Sisodia. Both of them I’ve seen speak so beautifully and eloquently about how to do business right. They settled on these four principles. You could read their book Conscious Capitalism, learn more about them, but quickly the first is that you are a purpose driven organization. This works for profit and not for profit. I think a lot of us recognize that not for profits often do this very well. They have a strong sense of purpose.

One thing we tried to do here at The Motley Fool that I think our employees appreciate, is that we’ve tried to bring the heart of purpose from the not for profit world right into the entrepreneurial platform that is Motley Fool Inc. Anyway, strong sense of purpose. By the way, I’m not saying we even do it that well here at the Fool, but we’re trying. I think you know our purpose is to make the world smarter, happier, and richer. I hope that you’re working for an organization for profit or not for profit. If you’re working, that is also trying and that is purposeful. By the way, if the great resignation is for real, I think what will most compel people eventually to on resign will be they find real purpose in their future work. Purpose driven is a key part of Conscious Capitalism. The second one is my favorite of the four, and it’s multi stakeholder orientation. I’m going to park that for a sec, because the third and fourth, quickly, are just conscious leadership and conscious culture.

Basically in so many words, there are servant leaders, people who give the better parking spaces to, let’s say, the employees who get to the garage first. These conscious leaders don’t have their own pre demarcated best parking spots in the garage or all the corner offices for all the leaders in the building, or if they do, nevertheless, you’d say, “That person is a servant here. She is here to serve me as a leader in my organization, to serve the organizations purpose. ” That’s servant leadership, that’s number 3. Then of course, conscious culture is just having a strong sense of a good corporate culture, which I’ve talked a lot about on this podcast in the past, but now, let me go back quickly to multi stakeholder orientation. The way that capitalism started, I think to veer away from its better pure form, probably happened around 100 years ago, when CEOs of Fortune 500 companies began saying that the purpose of this corporation is to “maximize shareholder value. “Milton Friedman, the very famous and rightly, so academic, the Nobel Prize winner who ruled the roost for a good portion of the 20th century. Friedman, made a big point of saying the purpose of a corporation is to maximize shareholder value. But we at The Motley Fool both in our own culture for our organization, but also when we’re looking at others and stocks that we might pick, we love to find the corporate cultures that don’t just take one stakeholder and try to maximize its value. At the heart of conscious capitalism, you’re not trying to maximize the value of your enterprise for any single group, like shareholders, no.

You’re not trying to maximize it for customers either, you’re not trying to maximize it just for your employees. You may love the environment, but you’re not doing it just for the environment or other stakeholders that might be around you in your community, nope. What you’re trying to do is you’re trying to create a win for all of them. You start creating non-sustainable, sometimes ugly enterprises, if you tip everything in favor of one of those groups, and you say, hey, that’s what we’re all trying to do here. We’re simply here to max it all out just for that group of people in the corner over there. That’s why we, and certainly John Mackey and Raj Sisodia call it multi-stakeholder orientation. It’s a critical principal really. It’s the foundation for building a sound organization with a great structural integrity underneath it that’s going to support its long-term prosperity. If you remember two years ago, the much ballyhooed announcement from the Business Roundtable, which is basically a lobbying group for big business, you saw them change their definition of what businesses were for to something very similar, very confirming of what I have just shared with you. What started as an edgy thought 20 years ago, conscious capitalism, is today increasingly mainstream. I want to make sure you get it, and that’s why its Foolish Truth number 1. It’s a little bit of a mouthful, but I want to make sure you understand that I hold this truth to be self-evident that conscious capitalism is a great way to do business, and many of the best businesses of our time do this every day.

Nobody is perfect. But as an investor, I tend to sit up, I hope you do too, in my seat and take a harder look when I see companies operating in this manner. Foolish Self-Evident Truth number 1. Let’s go onto number 2, which I’m just going to call by the watchword that we often use which is, optionality. This truth is value optionality. Consider it, look for it because it’s underrated, and underappreciated, and it runs deep. Truth number 2 is basically that the best businesses are able to evolve. Why does that matter? Well, just like in biological evolution, changes in external circumstances happen, and your organization needs to both be aware of those things, and be adjusting itself to be relevant and/or successful and/or just survive into the next era by evolving. One of the best ways that innovative companies manage to do this is often that they have a second or third trick. We call that again, optionality. It means you have multiple possible futures, and think about the change in external circumstances that has occurred from two years ago this week when I last did this podcast, and this week. That would be COVID-19, and ask yourself what kind of external shock did that create? Which businesses, which species survived, which went extinct, and which in some cases thrived? Most of us though, have been muddling through and trying to make the best of it, and the best of us had optionality and we’re able to transform.

One of the strongest businesses of our time is Alphabet. Look across all of Alphabet’s different businesses, starting of course with Google, but then looking across the globe and seeing all the different places that it’s doing its googly things and that’s incredibly strong. The optionality there is enviable. It started, of course, with its Google search engine. Alphabet still carries the artifact ticker symbol GOOG, but Alphabet is YouTube, it’s GV, that’s short for Google Ventures start-up financing, it’s DeepMind AI, and it’s Fitbit. Remember that? Alphabet bought one of my poor performing Rule Breaker stock-picks of all time earlier this year. Alphabet is Fitbit, and the Android operating system too, Waymo, that’s all Alphabet optionality. Now, very few organizations are, of course, anything like that. Very few stocks that you and I will pick have that kind of resilience. But all companies to a greater or lesser extent should aspire to optionality. The ability to transform or morph into something new, something bigger and better, one hopes into some kind of crazy better butterfly. Just like in biology, business has cycles and they are often driven by a change in external circumstances. The ice age hits, and it’s going to be important for companies to recognize that it’s getting cold. Let us say, and they need to stop doing this and then start doing this other thing. The ones that actually do that, that have the leadership, that have the vision, that have the strength to actually be able to implement real changes, and by the way, permission from the markets, and customers, and partners to evolve, those are the companies that you and I want to start, to work for, and through the miracle of the stock market, to own. Again Truths 1 and 2, mostly about businesses themselves; conscious capitalism, optionality. Next, we’re going to move onto the markets. Foolish Self-Evident Truth number 3. Well, I hold it’s self-evident, anyway I hope you do too because it’s straight data. It’s basically one year out of every three the stock market drops on average. Sometimes those happen years in a row. But often the average bear market when it hits is about 12-18 months.

Significant bear markets where we would actually use that phrase as opposed to just a down year, might sometimes bringing those down years into a pair, as I mentioned, even maybe three in a row, although very rarely anything like that. In fact, even that long markets have some up years here in there. The good news though, is that two years out of every three the stock market goes up. As I’ve been wanting to say in the past, the only market timing I ever do, I’m somebody who will never predict the stock market, I don’t think I’d be good at it, I don’t think anybody else is, I don’t think it’s worth your time or much thought frankly, because it’s never going to be much more than a coin flip. That’s why whenever anybody asks me where the market is headed over the next year, I always say, it’s headed up. I think it’s headed up. I’ll be the first to say it might drop one year in three, it does. But by simply saying, I think it’s headed up, I get it right two-thirds of the time, which if you look at so-called professional market timers who rarely get it right more often than a coin flip, well, you’ll see I have an enviable track record with my market predictions and you can too, just feel free to copy me. Let’s look briefly at the downside of market drops because markets drop. One year in three, it doesn’t feel good to be an investor, you have to be ready for that. We haven’t had any big down years over the past decade, and yet by no means am I predicting now that the market will go down. In fact, you know what? I think the market is going up in the next 12 months. You already know this. I don’t know about you but I can tell you at some point in the next few years the market will drop, and you need to be ready for that. You need to understand that’s how it works.

It could be nasty, it could be rather mild. It might happen quickly, it might take a while. No matter what always expect that the market can and will drop. You need to have as part of your own resilience as an investor, which is going to be Truth number 5 by the way, but we’ll get there in a sec, you need to be able to recognize that market drops are going to happen and not be freaked out about it. Which leads me to Foolish Self-Evident Truth number 4. Now, this brings us to the lovely phrase, the rowboat syndrome, which I swipe from the late, truly great Jack Bogle. As I’ve swiped many other lines and stories from the Vanguard founder, the investing master, great friend of the Fool, Jack Bogle and his rowboat syndrome. Now, I always say don’t do this if you’re driving a car or a bike right now please, but raise your hand, in fact, raise both hands if you know what the rowboat syndrome is. I’m looking around right now, I see a minority of us have both hands up, so let’s make sure that we can all get our hands up about three minutes from now when I asked the same question, except the drivers of course. Let me paraphrase Jack a little bit. As we’re paddling down the river of life as investors, which direction should we be looking? Do you want to be in a rowboat? Because most of the rest of the world is, I think, because when you paddle a rowboat you’re looking backwards.

Many market commentators, our fellow human beings, forget about the stock market, we’re fixated on the rearview mirrors, we’re looking backward as we paddle forward through time down the river of life. I’ve always said, toss away your rowboat. Take a canoe at least because when you take a canoe, you’re facing forward, and you recognize that all that really matters is what comes next around that bend in the river as you paddle forward looking the correct way. Now as an investor paddling your canoe, you’re not going to spend too much time looking backward. You’re asking where things are headed, good on you, and you’re getting your money aligned right there. But I’ve also said to close Truth number 4, toss away your paddle and kick away that canoe because there’s a much more efficient way for you to navigate bodies of water. That’s what the sail boat. The beauty of the stock market is anybody who studied it knows, is that it tends to rise 8-11 percent annualized over long periods of time. That my fellow Fools is the wind at our backs. What an absolutely awesome trip it is that you and I get to be on as investors, what a delightful trip to think that we can just sit there in the boat and left the wind push us forward, occasionally attack when needed, enjoy the sites, have fun getting rich together as the winds push us forward. In fact, when I think about those paddlers in their canoes, it feels exhausting to me. That feels, well, a lot like trading. That feel a lot like day trading for some people.

A lot of effort, not nearly as much reward as just sitting there with maybe umbrella drinks in our hand, in our ship of Fools which is a sail boat. Foolish Truth number 4, the rowboat syndrome. Now raise your hand as long as you’re not driving any heavy equipment, raise both hands if you understand the rowboat syndrome. Great. Thanks. Foolish self-evident truth number 5 is simply a reminder, like most of these nine actually reminders, in this case, to remember what the word investor means. Remember what investing is and means. It’s really not that remarkable a point, but it does introduce what I’ve called in the past, my dead arm initiative. Let me briefly explain that once again, you have permission to give me a dead arm if you’re near me at an event or around full HQ. If we ever meet, and you ever hear me use this phrase, and please don’t dead arm me right now, because I’m actually just demonstrating this phrase, long-term investor or long-term investing. You are allowed to give me a dead arm if you ever hear me say that because investing is by its very nature, long-term. Whenever anyone uses that phrase that I won’t use now, it’s a tautology, it’s a redundant restatement. It even confuses some people, I think, because they think that there are other forms of investing besides the long-term, and there are not. The opposite of investing is, well, actually it’s not investing, which by the way is true of most of the world. Most of the world is not investing today, and for 1,000 reasons. A few of the more prominent ones are; people are in debt, they don’t have capital, or they don’t have an understanding of how to invest. For that I think by the way, the Motley Fool was in part put on this Earth. While the opposite of investing is not investing, the antithesis of investing, thank you, Eric Easen for this reminder once again, the antithesis of investing is trading.

Trading by its nature is done short-term. There are two players in the market for my viewpoint, there are investors and traders. You know whom this podcast is for obviously, I’m not here to denigrate trading, It can be, I guess, fun for some people, it’s a pass time for others. Somebody will do it very seriously full-time, they get paid a lot of money is traders on floors like bond traders or futures traders. But for you and me, anyway, if you’re like me, you have a lot more interesting ways to spend your time beyond staring at wiggles and waggles on charts, or looking at CNBC, or following the markets, or your crypto all day, every day. There are just too many more interesting things in life. The good news is that you fellow Fool can with me be and investor. The Latin root for the word invest is investire. That means to wear the clothes off, in my mental image, if you’re a sports fan, I hope to get this, I hope you invest too by the way, you put on the jersey of your hometown team, you go to the stadium, you cheer them on. You love your team. You should love the companies you’re invested in. The consciously capitalistic I hope enterprises that you’re invested in doing good things in this world, purpose-driven, managing for the long-term, resilient, maybe with optionality, but you keep that hometown jersey on. Now I’ve been watching a lot of football and playoff baseball in the last week or so. If you were too, you see with me just how many people are wearing the shirt. It’s not just true of football or baseball, it’s also true of soccer, hockey, the list goes on. People wear the jerseys. Why don’t we do that with our money? Well, good news, investors do. I hope you do. Rule Breaker Investing certainly does. We put on the jerseys, we buy our stocks, and we keep those jerseys on, we keep holding our stocks. Even if sometimes we have a bad game or even a bad year or two. Again, your team is not always going to win every year, nor will your stocks, but if you found a great team, stick with them. Now you know the Latin root, investire. Now you know what you’re doing.

Now you know the dead arm challenge, the dead arm initiative. You may dead arm me if you ever hear me say, well, you know what I’m not going to say. Those are the first five, two from business, three from the markets. Now let’s get away from just business and away from the general investing. Let’s go very specifically into our space now, Rule Breaker Investing. Let’s think about why it works. Why six years worth of five-stock samplers picked in broad daylight right here with you, while 27 years of Rule Breaker Investing for me have so badly beat in the markets, and why it’s so much fun, and what we’re all about here at Rule Breaker Investing. Foolish self-evident truth number 6, here it is. We’re Fools. Fools don’t like wisdom. I don’t like conventional wisdom. Well, I do like conventional wisdom when it works. By the way, sometimes conventional wisdom does work, that’s why it’s become a convention. But many other times, especially as humans, sometimes we like to play tricks in our minds. We think that there’s a certain way of thinking about something or maybe we’re taught how to think. Sometimes it’s just the stories that we tell ourselves in our heads, Shirzad Chamine, that start to set up that conventional wisdom that then sometimes becomes conventional because other people start thinking the same thing too. What I would think of as sub-optimal thoughts sometimes become shared. That’s what’s so great about foolishness, and that’s why it’s so much fun to break the rules. Now, I’m a board gamer, I think that’s become clear to anybody who’s listened to this podcast any length of time that exceeds maybe two months or so.

As a board gamer, I recognized that often the best approach to take to a good strategy board game is to look around, see what others are doing, see how they’re all competing, maybe for the same resources or maybe in this area of the map or the game board, and by not doing what everybody else is doing, often, you put yourself in a better position to win the game. The same is true of the game of business. Where new businesses pop-up, trying things in different ways, breaking the rules of how things are done in their industries and sometimes, yeah, succeeding, well the best ones do. I also think it’s true of investing and investment strategy. Part of what I love about Rule Breaker Investing is we’re taking a highly contrary approach. None of it is taught in schools, other than maybe Fool school. A lot of it is self learned, it continues to evolve as an approach and as a strategy. It’s very contrary, as I’ll be mentioning shortly in another self-evident truth to come, but that’s part of the reason I think that it works. Truth number 6 is just about the beauty of fighting against conventional wisdom, something that the Motley Fool has done across many fronts and contexts in our first 28 years here on this planet. As a fellow Fool, a fellow Rule Breaker, my dear listener, maybe you’ve listened this podcast for a couple of months or a couple of years, maybe you’ve been a member of Motley Fool Stock Advisor and/or Motley Fool Rule Breakers, you know that we constantly challenge conventional wisdom. Most of our great stocks seemed outrageous when we first picked them, and that’s what makes investing even more fun. Do we need to get this product into Fool mark because it sounds like maybe a bumper sticker or a T-shirt or a mug?

Fools have more fun. Self-evident truth number 6, we’re Fools. I hope you’re one too. Foolish self-evident truth number 7, lucky seven, this is a brief restatement of the rule-breakers six traits, the six things that I’m looking for in my favorite stocks. Now, there will be a tendency or a temptation for me here to attempt to illustrate each of them, but no, that results in far too long of a podcast. Good news that material is regularly reviewed over and over from one month to the next right here at Rule Breaker Investing. Let me just briefly restate the six traits that I look for when picking stocks. Number 1, I’d like to find top dogs and first movers in important emerging industries. If you’re not the lead husky, the view never changes. I love to find the lead huskies, especially in emerging industries, technologies, and world changers.

Number 2, we’re looking for a sustainable competitive advantage. After all, when you’re investing, which you know now, is by definition, over the long term, you’d better find sustainable competitive advantages. Those can often be gained through, well, how about just your business momentum? Think about big players like Amazon and its industry or in a very different industry, Intuitive Surgical, business momentum. Another thing that can help us patent protection for some companies, certainly for some of the medical companies that we invest in. Another form of sustainable competitive advantage, well how about visionary leadership. That’s a great forum, we have Jeff Bezos, you don’t try to beat us. Or another form of sustainable competitive advantage would be inept competition. When you can find it, that’s an amazing advantage. When all of the players in your industry aren’t serving customers, for example, the cable industry at various points in the past, if you enter with a new model, you can start to win over not just customers, but shareholders too. If you are, for example, Reed Hastings at Netflix because you’ve got some inept competition that you are now streaming against. That’s sustainable advantage. Number 3, is strong past price appreciation. Yeah. Very contrarily, we’re looking for stocks that are doing very well. They may already well have doubled over the last six or 12 months. Now, most of the world in my experience is looking at the list of 52-week lows, asking which one they want to buy. We’re looking at 52-week highs. Rule Breaker trait number 4, good management and smart backing. The value of visionary leadership is always underestimated by the markets. Smart-backing, looking for which venture capitalists are funding these enterprises. Some VCs, just like some CEOs, are better than others. Keep an eye on that.

Trait Number 5, I love to find companies with strong consumer appeal that have a brand name, that know how to market well, speak well, truthfully, authentically to customers willingly, often with some humor, strong consumer appeal of great brands. Finally, number 6, the ultimate secret sauce of Rule Breaker Investing. Valued according to the financial medias. The more prominent the voice calling our stock overvalued, often, the better it will be for us as investors. When you have those first five principles in place, restating quickly, top dog and first-mover in an important emerging industry with a sustainable advantage, strong past price appreciation, good management and smart backing, strong consumer appeal, and somebody at Barron’s or Seeking Alpha or sometimes an anonymous short sellers start saying, it’s so overvalued. I’m pretty sure I know which way things are going to go over the only term that counts, which is by definition for investors the long term. Of course, I think and most of the time it acts this way, I’m thinking up.

Now it doesn’t always work, which transitions me to Foolish Self-Evident Truth number 8, it doesn’t always work, but when it does, it works wonderfully. Foolish Self-Evident Truth number 8, this might be my favorite. Get ready to lose. That’s right. You will lose and you will lose a lot as a Rule Breaker investor. Now, I did an entire podcast on this subsequent to the last time I threw down these nine Foolish Truths two years ago this week, and that podcast was called Losing to Win on November 18th of last year. Now the numbers will have changed somewhat inevitably, but they’ll read mostly the same, and the truth itself will never change. I said on that podcast that I have now picked in Motley Fool Rule Breaker’s history, 389 stocks, that’s right, two every month for years and years from October 2004 forward and fully, 63 of those 389 stocks had lost 50 percent or more. Now, I hate that. It’s shameful. I don’t like to think about it. People follow my advice. I’ve followed my advice and a lot of the time, not all the time, which we’re going to get to in a second, but a lot of the time we actually lose and we can lose dramatically, and you need to be ready for that if you’re a Rule Breaker. Otherwise, you’re not a Rule Breaker. You need to be willing to lose. Here’s why. Because even though I had 63 minus 50 percent losers in the 389 stocks that I’ve picked over the course of 16 years now, 63 minus 50 percent losers. Good news. The 63rd best stock that I picked for Rule Breaker is HubSpot. It was up 401.8 percent at that point, the 63rd best performer. By the way, it’s now up 883 percent. What a year it’s been for Hubs, up 11 percent just today as I record this podcast, which by the way is a spiffy pop, oh my gosh, wait. Did I just give a spoiler alert of my final 9th truth? Anyway, can you hold both these two key stats in your mind for a second. Remember the 63 minus 50 percent losers, that’s one. Then the other is that the 63rd best winner is up 402 percent. You got it? Exactly. You got it.

The value of winning far wipes out the cost of losing. This is such a critical psychological point. It’s probably the best way to figure out whether you’re truly a Rule Breaker investor and can have and own that mentality. By the way, maybe you shouldn’t and if you should not be the first to say, there are many other styles to adopt, but these are Rule Breaker Truths I’m throwing out this weekend. Psychologists tell us, “the pain of loss is three times the joy of gain.” Think about that. It hurts to lose far more than it feels good to win. That’s just true of human psychology, but look at that math that you and I just threw down together. Quick quiz. What’s the pain of loss at its maximum for an investor? Well the answer is losing 100 percent on a stock market recommendation or purchase, which I’ve still never done to any of our members in any of our services minus 100 percent. But what is the joy of gain by contrast, for investors? Well the answer is that joy is unlimited. My four 100 baggers in Motley Fool Stock Advisor history four stocks that have all gained 100 or more times for our members, any single one of those four amazing companies. Netflix up 338 times, Amazon up 212 times, NVIDIA up 126 times, and Bookings/Priceline up 104 times. Any one of those four amazing companies on its own wipes out all of the losses of all of my minus 50 percent losers and then leaves profit on top of that. In fact, the best stock in Rule Breaker’s history is Tesla. It’s up 125 times since we first picked it just about 10 years ago, in November 2011, still holding. Tesla on its own, those gains from that one stock exceed all of the losses of all of those 63 minus 50 percent plus stocks taken together. In fact, those gains from that one stock are more than three times all those losses combined.

That’s to say nothing of the second-best performer, which by the way is MercadoLibre, up 103 times in value. Just recognize the math here. The math of investing directly reverses the psychology that all of us are bound to. The pain of loss maybe three times the drive gain for most contexts in life but for you and me, for Rule Breaker Investors, it’s quite the opposite. A lot of people just don’t realize that they live in fear of ever having a single stock that would lose 50 percent or more of its value. That was Foolish Self-Evident Truth number 8. Let’s close it out here with number 9. Now, this is the definition of a term that I’ve taken on as my own screen name. That’s right. If you ever joined us at fool.com, you can come to our discussion boards at Rule Breaker or Stock Advisor, you might see somebody posting onto the screen name TMF. That’s for the Motley Fool, abbreviated TMF spiffy-pop. I want to make sure everybody who is still listening to me this week knows that that’s me. Here’s what a spiffy-pop is. Let’s pretend that you paid $63.37 for a stock that you bought eight years ago. I don’t know how many shares you bought, but it was a good buy, good job because you bought at $63.37, and let’s pretend that tomorrow that stock goes up $65 in one day.

Maybe it’s $700 a share of these days and when it goes up $65, let’s see, after a good earnings report, that’s about 10 percent gain for you these days about what HubSpot did today in real life, which might, by the way, sound like a pop. Yeah. I would say most people would say the stock popped if it jumped around 10 percent. But you and I now know that something even more impressive happened. You just got a spiffy-pop because you made more in a single day than the cost basis you paid way back then. You made $65 a share in one day and you’d only paid $63.37 for that stock in the first place. That’s not just a pop, ladies, gentlemen, and Fools. That is a spiffy-pop. Well, I invented the concept for investors who by definition act long term. We don’t get a lot of rah, rah. We’re not often invited on CNBC for our short-term market viewpoint. I wanted to have some concept, a rallying cry, if you will, a thing that could be a goal for any new investor that we could do together. I’m really happy to say we’ve had hundreds and hundreds of spiffy-pops across our services over the years. We’ve had years in which we’ve had in just one year, more than 100 across our different Motley Fool services now, prominently Motley Fool Stock Advisor and Motley Fool Rule Breaker. But real results here for real people and without bragging anymore than I might already have done this week, I should mention that once the stock does its 13th spiffy-pop, that is it hits its baker’s dozen. Once it happens for a 13th time for let’s just say Netflix, we stopped counting. I’m not including in the stats that I just gave you spiffy-pops across Motley Fool services. The dozens and dozens that happened from Netflix or Tesla or Amazon, which when they make 1 percent moves these days, generate spiffy-pops that are no longer even that interesting, and that’s why we call that 13th and final spiffy-pop for any stock, the forget-me-pop. We just don’t pay attention anymore. It’s boring.

Well, I’ll have the last word to close, but before I mentioned that, let me just say what we’re doing next week on this podcast. I’m excited to have longtime journalist Matthew Dowd join me to talk about, not Conscious Capitalism. Well, we might do a little bit of that too. But about an article he wrote a couple of years ago, envisioning conscious campaigning, conscious politics. Matthew wrote an excellent article. We’re going to talk through it next week. It is election season and I think campaigning could be done a lot better than it is done these days. Matthew Dowd will open your eyes and mine when he joins me next week. Well, there you have it. Nine Self-evident Foolish Truths. You stuck with me all the way through this podcast, stuck with me through number 9 so now you know what a spiffy-pop is and what I think you should make allowable goal that you shortly will achieve if you purpose toward these Foolish Self-Evident Truths that I tried to lay down for you this week. That’s it. Talk to you in two years.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Netflix, and Tesla. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, HubSpot, Netflix, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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