In this episode of Rule Breaker Investing, we talk about the things we’ve learned from each other.
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This video was recorded on May 11, 2022.
David Gardner: Once a year, well, it happens to you, too, you have a birthday, and that time of the year, every year for me is mid-May. For the last several years, we’ve had a new tradition with this podcast going which is that you give me a gift, which you did once again this month. You give me a gift in the form of notes, emails, tweets, sharing what you’ve learned from this podcast. Then I’ve always tried with this episodic series that recurs once a year in mid-May, I’ve always tried to organize those thoughts and then share them back out in the form of a gift especially to new listeners, especially during rough stock market times. I’ve tried to share that out in a way that welcomes newcomers and gives you some of the cardinal points of Rule Breaker Investing and Foolish thinking. This series is entitled, “What you’ve learned from David Gardner.” And here in 2022, that’s volume 3. What you’ve learned from me? Thanks for the birthday present. Only on this week’s Rule Breaker Investing. [MUSIC]
FEMALE_1: It’s the Rule Breaker Investing podcast with Motley Fool Co-Founder, David Gardner.
David Gardner: No big lead in necessary to this week’s episode. If you listened to me about 30 seconds ago, I think you know where we’re headed and what I’ve done is, I’ve basically taken in all of your notes and arranged them into a few themes. In fact, I have four themes that you’ve learned from me and from this podcast and I’d say without further ado we get started with theme No. 1. Mike McMahon aka ProShopGuy on the Motley Fool Live channel and our broadcasts. Mike, longtime Fool. Great to have you writing in. As I think about theme No. 1, I think you articulated it pretty well in your note, Mike. You wrote the market can make you feel like a genius when your five-stock sampler is up big and then make you feel like an idiot when the same five-stock sampler plummets the next year. See for example, David’s May 4 podcast for more details with a smiley emoji. Neither outcome is who we are. David, your consistent messages around staying in and investing in the market regardless of current conditions is your hallmark trade that I strive to emulate. Fool on, Mike McMahon. Thank you, Mike, and I’ve decided this in a few other notes I’m about to share, I’m aligning under the theme, what you’ve learned from me number 1 this week, just keep swimming. It’s a phrase I’ve used quite a lot in 2022, and that’s what I heard you saying in so many words. Mike, thank you for sharing. It reminds me of the different perspectives. Now, some people listening to me right now have been invested with the Fool for a couple of decades. Others have been investing with the Fool for a couple of years or less under this same theme, a different perspective making the same point. Right again from Berlin, Germany. Thank you, Vim Mickelson. Happy birthday, David. What have I learned from you? Well, I started investing in individual stocks with the guidance of The Motley Fool in December 2020. As it turns out, Vim writes, probably the worst time to get started.
I invested quite a lot in those first months and since then, every month and I love this theme, 20 to 25% of my salary goes into my stock account, whatever happens with the stock market and I keep on investing in my favorite stocks. Lesson 1 from his note, Vim writes is, just keep swimming. He continues, after November last year, things went really downhill with my stocks. I was going over my list of stocks to see if I needed to sell something using your guidance that the stocks I own should reflect my idea of how the world should look. After going over my list, I believed in all of those stocks except one, and that one I sold, he writes with, no loss. But all the rest of my stocks that I really do believe in, their stock price performance has been horrible. I won’t list all the stocks, but Vim basically lists bunch of stocks all down somewhere between 25% and 60%, and he writes, this is not down from their highs, this is my actual loss, and his lesson No. 2 is that the stocks you own should reflect your best vision for the future, and thank you for sharing that, Vim. Yes, that’s also a very important lesson that I’ve tried to teach and embody, not just for the seven years of this podcast, but for the 29 years of The Motley Fool.
I especially appreciate that you are articulating that in the face of what is really hard to look at, losses where you’ve been cut in half. Those who have been with us for a couple of decades. It hurts to watch our capital gains in many cases dry up, I’ll say a little bit more about that later. It hurts to watch your gains go, but especially for newer Fools, people doing it right, doing the right thing, just with bad timing initially. It hurts a lot to see loss after loss. Vim continues and concludes, until November of last year, my portfolio was up. It wasn’t beating the S&P 500 yet, but at least it was going up. I spent every evening after work or during breaks, quite a lot of time actually checking my portfolio and on fool.com. Since November, it’s not been so much fun anymore seeing all the red figures. Then you mentioned in your podcast that you took time to live during such a market downturn, and I’ll pause for a second.
Written in the past, in bull markets, I get busy checking how I’m doing. In bear markets, I get busy living. It works, and it really does and that’s what Vim is recognizing when he says that you mentioned in your podcast you took time to live during such a market downturn. He concludes, I found this very good advice. Since then I also don’t check my portfolio so often and I feel better about it. Lesson No. 3, spend time living instead of checking your portfolio daily. An addendum here Vim writes, normally, I would also add here a fourth lesson, add to your winners. But since all are going down, it’s difficult to do that. Instead, I’m continuing to add to my favorite stocks. All the best for your birthday and may better investing times be ahead of us. Vim Mickelson.
I think it’s easy to group that under just keep swimming because not only was that Vim’s first point, but I think Vim, you are not just expressing an important sentiment. You are truly embodying it. My heart goes out to you because it’s so hard to start something and get negative feedback constantly and abruptly and with the volume that we’re seeing as the stock market has sold off in so many great companies have been cut in half. Again, that’s been the story of 2022, but it didn’t start 2022. There were some hard market times in 2021 and really the world is not been kind to many Rule Breaker stocks now for about 15 months. By the way, the average bear market lasts about 18 months. My heart goes out to not just to Vim but just so many who can share some of the sentiments that I’ve just shared back, and that’s why again, theme No. 1, what you’ve learned from this podcast and I hope you’re embodied in your own life is just keep swimming.
Adam Nelson, hero to many. Adam Nelson, longtime correspondent also wrote in to contribute to this podcast and Adam, you wrote, and I quote, “In this market, I’m confidently buying shares of businesses that have been reporting solid results and have had positive stock-price reactions even if those prices haven’t been able to hold up for very long in what I, Adam writes, consider to be a bear market. I will continue to throw more money at management teams that I considered to be winners and I’m confident I’ll be happier and richer for doing so years from now.” We here yet again from another Fool in so many words, but not just words, actions, just keep swimming.
David Gardner: Before we move on to theme No. 2 of what you’ve learned from this podcast, I got a note from a good friend last night expressing some of the anxiety and disappointment of watching so many wonderful gains greatly reduced, in some cases, evaporating altogether. I decided to write him a note back. I thought, as long as I’m going to write a little bit of a longer form note after midnight, might as well share it out here on the podcast. This again speaks to just keep swimming. I wrote my friend last night, “Thanks for the note. It feels like each week on my podcast, sometimes as well on Twitter, I’m trying to speak to the times. This once-in-a-decade bad market we’re living through. I hope these messages, if helpful, are reaching you. I think often of you. I’m sad and worried that if you’re like me, a lot of what you’ve made over recent years is gone. Of course, this happens. Of course, I console myself with two thoughts. First, this is about as bad as it gets. Look ahead.
Things will likely be higher in December than they are now. This is really crazy bad. Second, hopefully you’re still sitting on some nice capital gains here or there and leaving those in place because the big mistake people make is to sell out at or near bottoms because they decide what they’ve done before ‘isn’t working,’ and so they bail.” I wrote my friend as well, Again, last week in point No. 1. This is last week’s podcast of the mailbag, provide about 10 more minutes of additional clarity and encouragement. I continued to my friend. “This week, I do my annual, What You Have Learned from David Gardner, podcast, which is where listeners write in nice things as a birthday present to me. I get some really lovely notes, but here again I’m simply going to turn those into opportunities to encourage and console. It’s what I have to do during rare times like these. It’s much more fun talking about Netflix up 100 times.
Much less fun, but perhaps of even more value talking about continuing to hold Netflix in the face of 70% losses sustained in just half a year. Netflix is my biggest holding. Also, the more one goes through such times, the easier it is to see past them. I’d written above in this note, once in a decade, which is about what this stock market performance is right now. It’s certainly not, by the way, once-in-a-lifetime bad, but over a lifetime of say nine decades. This means that you see this thing about nine times. Now, the first several times, you’re a child or a young adult. You hear it from your parents or the nightly news. You’re not really connected to it. Indeed, you’re maybe not even an investor until several of these have already happened in your lifetime, and so you find yourself at 40 or 50 or 60 years of age, maybe seeing this at most a couple of times, so it still seems scary and frustrating.
Frustrating, no matter how many times you’ve seen this because it’s still real. You still find yourself cut in half. Thinking either you should have sold, or thinking how much it will take now just to get back to those old highs. But as you and I, friend, traded notes some months ago, you were at the peak of your earnings power. So while it’s easier to recover from this thing when you’re 20 rather than 55 or 60, nevertheless, when you’re 55 or 60, you’re earning a lot more than when you were 20. Every dollar earned and saved for the rest of this year and then in 2023 and 2024, etc., can and should go, well, it is for me anyway, right back into those same great companies that simply are getting whacked by macro effects and market cycles. All of a sudden, a few years from now, you see what a great decision that was.
As the winners go back to winning, they come back, and with new, fresh capital injected into them. So this too shall pass. The up days always outnumber the down days. This I’ve said many times, the market always goes down faster than it goes up, but it goes up over time, more than it goes down.” I concluded that note, “Yours in pain, Foolishly, David.” I think what I was saying, in so many words, I hope that was helpful for anybody listening was exactly toward theme No. 1. Just keep swimming.
Theme No. 2. As the notes come in and as I read them, I can’t help but notice certain themes recurring from one note to the next. This next one is probably not a surprise to any regular listener of Rule Breaker Investing. Anybody who’s followed our work at the Fool over many years. Theme No. 2, what you’ve learned from me and this podcast. Well, as Ben Caskal wrote in from Miami, Florida. “One word,” Ben wrote, “optimism.” Thanks so much for the positive outlook.
Optimism and positivity, theme No. 2. Vince Guniari at Guniari V. “So many lessons from you, David. The most important being to be on, to bet on, to work on, to invest on the optimistic side, and make those dreams become reality for you and others as you make the world smarter, happier, and richer.” Vince, that is exactly my wish for you and for everybody hearing me right now. While it’s very hard to feel as if we’ve made much headway in that direction the last 15 months, I know for you and for many listening, that has been your experience of investing, and Foolish Investing and Rule Breaker Investing because you can see past a bad year or two. I love how you talk about making one’s dreams become reality for others. To the same theme, my biggest fan, Jam Jam, thank you for this note, wrote, “I feel that the world rewards negativity too much.”
She writes, “A video of a homeless man attacking a person who tried to help him got a million views on social media, but a woman who organized a cleanup of her community won’t even make news. I’m afraid that if more bad news gets attention, it will become a self-fulfilling prophecy.” So Jam continues, “I think one of your most admirable qualities that makes me your big fan is your unwavering optimistic view of the world. I remember you use the term optimistic realist to describe yourself in one of the podcasts made me look it up, the definition. I quote this from the internet, “An optimistic realist is a person who accepts a situation, is hopeful and confident about the future and success, and is prepared to deal with it all accordingly.” Another one, “They accept the present, envision a positive future, and take action to make their vision a reality.” Jam writes, “That resonates with me. That gives me the permission to stay optimistic. I’m told sometimes that I’m too optimistic, that I’m naive, if I don’t indulge enough in negative viewpoints. It’s not that I don’t take those concerns seriously.” She concludes, “I just don’t like to dwell on them for too long. Negativity begets negativity. In order to move forward, this requires the act of optimism.”
David Gardner: John, I’ve often said quoting Henry Ford this line, at least attributed to him, “Whether you think you can or whether you think you cannot, you’re right” The reason I love that line is because it speaks to optimism, not just as a state of mind, but as a creative force. A lot of times people think of optimism as a mindset and it’s a word that has its critics because you can sound like you’re out to lunch or you’re not seeing things appropriately if you’re not appreciating the bad in the world. If you’re not willing to sit through bear markets and acknowledge what’s happening that can look like Pollyanna, that can look like wet behind the ears optimism. But rational optimism thinking of Matt Ridley and his wonderful book, The Rational Optimist, it reminds me again, it is not just a mindset, with Henry Ford, it is a creative force.
That’s why I love your phrase, John, in order to move forward, this requires the act of optimism and finishing out this theme Number 2 this week. This note speaks both the theme No. 2 and transitions us to theme No. 3. Thank you Brandon Gerrick for this. Dear David, I distinctly remember a podcast where you discussed the type of people you spend most of your time with. The general consensus in your mind was, that people with negative mindsets and energy-draining world views weren’t really within your inner circles. Your inner circle like you is generally optimistic about the world and takes a glass half-full approach to life. Brandon and goes on, this struck me quite hard at the time because I recognize that my behavior and mindset at that time would in many ways exclude me from having meaningful relationships with people like you whom I greatly admire.
It was very telling to me and a bit of a wake-up call and this helped lead me, Brandon writes, to a new approach to my mindset and attitude that goes something like this, “Be the type of person that David Gardner would like to hang out with” Brandon concludes, this has made a significant difference in the way I interact with others. I’ve focused on being optimistic and solving problems rather than pulling people into the drudgery of negativity and hopelessness. A bit of foolish F humor goes along way as well. Thank you David for inspiring a new mindset that will attract people to me rather than push them away, Brandon Gerrick. Well, Brandon, thank you, and thank you again for leaning in and being such a wonderful Fool. You’ve already made some nice contributions to the Motley Fool Foundation. That’s a great sign of your positivity and your desire to be solving problems rather than as you wrote, pulling people into the drudgery of negativity. That sir is not you and that concludes theme No. 2, optimism and positivity.
I’m going to underscore it again, a rational optimism. But Brandon in his note, foreshadows theme No. 3 and in fact, I want to show that the four themes that you’ve learned from this podcast actually fit together into a narrative, they are sequence, they build on each other. Again, to go back briefly to theme No. 1. Just keep swimming to me. That’s about resilience. That’s about being in the game, in the good times and the bad times and so you just keep swimming and what enables you to do so. What is behind that resilience? Which by the way, for me anyway, is one of the United States of America’s five core values. Although clearly, it’s not merely an American phenomenon because them writing in from Berlin, Germany, so well articulated.
That I think what keeps us swimming is that positivity, that optimism, that belief that we can get there and getting there will be well worth it. I think the sweetest victories I’ve had in life occurred after one or more defeats. There’s no better way to experience victory than after suffering, suffering toward that and so I think what allows us to just keep swimming is you’re confident you will be smarter, happier, and richer for doing so years from now. What does that lead to theme No. 3? What did Brandon in his note articulate was the result of a change in his mindset and I suspect an improvement in his investing returns as well? Well, it’s theme No. 3, which I heard loud and clearly from a number of you and that is one of my favorite lines. My advice to you to lead a more interesting life. Brandon, I hear you saying loud and clear to me that’s what you’re doing as a result and I heard from a number of you how important that sentiment, that encouragement has been for you.
Jason Trice in a longer letter that I won’t share, but thank you so much for taking the time to write it, Jason. You led off with, lead a more interesting life. You wrote I think this is the most important thing you tell your listeners. Investors are always trying to find the next big thing and the reality Jason writes is that “It’s probably right in front of us, but we’re too distracted to notice. Your advice to lead a more interesting life has led me to be more curious. It has resulted in new friendships, new hobbies, and new opportunities. Most importantly, it has made me a better father and husband. I was stuck in a COVID funk but now I’m meeting new people, learning new skills, and discovering innovative world changing businesses more interesting” Jason concludes, “equals more fun” Along a similar dynamic, beautifully illustrated Lisa Wharton.
Thank you for your note, “Dear Rule Breakers, David and the Motley Fools have done so much for me since I joined Stock Advisor in 2008 and Rule Breakers a few years later. I became an avid and knowledgeable, long-term investor. Now one of my lifelong hobbies. The Motley Fool and David Gardner have helped me obtain life-changing gains that I had never dreamt of. I’ve learned so much from David, but wish to summarize these two main points. One, the market goes down faster than it goes up, but it goes up more than it goes down” During the last market downturn, Lisa writes in March of 2020, “I went from being able to retire happily to retiring with a tightening belt” Then at the end of 2020, my portfolio went up 100 percent and 40 percent more in 2021. Now with a 40 percent haircut, Lisa writes here in 2022, “I can still retire nicely. The stock market goes up over time. If you are patient, you will be rewarded handsomely” Her second main point is “Lead a more interesting life.
This advice from David is particularly resonant with me. Leading a more interesting life has always been my goal beginning with a very unusual early life spent in China. Being a buy-to-hold, long-term, foolish investor frees up so much time for me. I think the more hobbies that you have” Lisa writes, “The better your returns are. Besides working as a software engineer, I’m also a published fiction writer, a poet, and a Foolish investor. My family has taken more than 30 family vacations worldwide since 2008, wow, and more than 50 trips, five-o in the last 30 years. We’ve been to Europe half a dozen times, China, Central America. This is a more interesting life that I’m living many national parks in the United States, New York City, LA, San Francisco a dozen times. Lisa concludes I can retire anytime. My purchase of a condo on Lake Superior has further enabled my husband and me to do more hiking and skiing on the beautiful North Shore of Lake Superior. I owe the Motley Fool for this life changing wealth. Happy birthday David. Fool on, Lisa Wharton” Well, thank you for that note. Lisa, you are clearly leading a more interesting life.
David Gardner: You just keep swimming, because you’re driven by an optimistic, positive view of life, and the possibilities for you, which helps you lead a more interesting life, which takes us to the final fourth theme, and I’ll maybe let you guess, as I share this note this week to conclude, from Jason Moore. Frequent correspondent to this podcast @JimminyJilickrz on Twitter. Jason you wrote, “You asked last week, what have I learned from David Gardner? Well, simple yet complex. I credit David for helping spark back up my candle of curiosity, and kindness. Truly almost everything I’ve learned this past year is tied to those things, yet I will try to answer in a fitting way with a montage.”
Here, Jason writes, “Where five of my favorite episodes of Rule Breaker Investing the podcast, from the past year. Chronologically and stemming from one of the great episodes of the podcasts, a Road Less Traveled in 10.5 Chapters,” which yeah, I did a year ago this month, “The first one Jason mentions, is lead a more interesting life, sometimes it’s easier slip into routines, that become a creature of habit, you close off to new friendships, new experiences, and new ideas. David taught me to get out of my shell, and meet new people, and have new experiences.” That was number one. “The second of his favorite five podcasts over the past year, no man becomes suddenly different from his habits, and cherished thoughts.”
Now, that comes from my interview with Indianapolis Colts Head Coach Frank Reich last summer, and, “That was Frank quoting Joshua Lawrence Chamberlain, I’m just checking Wikipedia again to update my own memory of American history. Joshua Chamberlain was an American college professor from Maine, talk about leading a more interesting life here, who volunteered during the American Civil War, to join the Union Army. He went on to become a highly respected, and decorated union Officer, best known for his gallantry at the battle of Gettysburg, for which he was awarded this American college professor from Maine, with the medal of honor. No man becomes suddenly different from his habits and cherished thoughts,” Jason reflects, “Living a life of purpose, means thinking ahead of each decision. Through that thoughtful interview with Frank Reich, David taught me, tough decisions become easy, when you develop good habits for life,” and I can’t think of good habits without also wanting to plug a wonderful conversation I had a couple of years ago.
In fact it was April Fool’s Day of 2020, I was just checking the calendar again, with James Clear, the author of the wonderful book, Atomic Habits, which many of Fool, has enjoyed since. But if that’s a book you dear Fool have not yet read, Highly suggest Atomic Habits by James Clear, if you want to do with Jason Moore just spoke to which is develop good habits for your life, and then see where those lead you. Three other podcasts you’re calling out in conclusion, Jason, number three, the line that you’re calling out, I love this one too Jason, if you tell the truth, you don’t have to have a good memory. Well, that was from conscious politics, when you think about a world of Conscious Capitalism, which for me is a better world to live in for businesses, both for customers and employees, and shareholders.
We asked with that podcast with Matthew Dowd last year, what if some of that began to influence, and change our world of politics in the United States as well, and I remember Matthew talking about if you tell the truth, you don’t have to have a good memory. Jason, you reflected, “David showed how leading with integrity means walking the walk, and talking the talk, at every step of the way, also a great reminder as why not to burn bridges as you venture through life.” Jason, you have a better memory than I do, and I’m sure Matthew was reflecting on some point about how, every previous job he’d left, he always left on good terms with those for whom he worked, and I think that’s great advice for life. Favorite podcast number four, over the last year was the year the market skyrocketed, you wrote, “David taught me that the Motley Fool still knows how to have a good time.
Also, if I ever get wind of a company researching animal speech, I will just invest.” Another line I delivered in that podcast, which is important, even though it’s wrong this particular year, I think the market’s going up this year, which is my market prediction every year. In your fifth and final podcast you reflect on, is that let’s talk about death over dinner podcasts last month, and your reflection on that was to make sure we’re talking with the people we love. In conclusion, Jason, you wrote, “David taught me how to have one of the most important, and least talked about conversations in my life, and shows strong character, leading by example, showing compassion, and vulnerability for the benefit of us all. To wrap it up, thank you David, for another year helping me grow, smarter, happier, and richer.
Thank you for sharing your take on life, being so generous with your time, and knowledge, happy birthday, and Fool on.” Well, thank you Jason, and I’ve left it a little unclear, what theme number 4 is, but you just used the words right there, and they also recurred in other notes I received this week. That’s the Motley Fool’s purpose statement, to make the world smarter, happier, and richer. The happiest news I get from any longtime Fool, or any new listener, any Fool of any vintage frankly, is that our organization, this podcast, whatever we’re doing, has made you smarter, happier, and richer. Why does that matter so much to me, well theme number 4 is toward a greater purpose. It’s one thing to do really well in the stock market on its own.
That’s great, and that will happen over time, if you follow our dictates, and actually act on them, live them in your life. But it’s even better rather than merely making money on the stock market rather than merely achieving financial independence, if you have a greater purpose driving you for all of us. Across so many listeners hearing me right now, that means different things to different people. A lot of us might think about our families, or what we want for our next-generation, or our church, and what we want for our afterlife, a lot of us might think about the work that we do every day and certainly at the Motley Fool, we think all the time about trying to make the world smarter, happier, and richer. That is our purpose in this purpose driven life, and that is the fourth theme that has come across to some of you anyway, and I’m happy to see it loud and clear. To conclude, theme number 1, just keep swimming. Why? What enables that? Theme number 2, optimism, positivity, solving problems, creating better future possibilities.
Theme number 3, which will surely lead you toward a more interesting life, and finally, theme number 4, if you’re going to lead a more interesting life, to what purpose, and I say to a greater purpose, whatever you choose that purpose to be. I want to thank each of my correspondents who took the time over the last week, to share what you’ve learned from me, it means a lot on his birthday week for me. I also want to thank those whose notes I didn’t get to read, but I did see the bones, I saw the foundational structures that underlay them, and I hope I did a good job laying out all four legs of the chair, and I think how they interrelate. That’s what you’ve learned from David Gardner, at least in the 2022 bear market version. I look forward to doing the same podcast with you a year from now, and seeing how the lessons may have changed or may have endured. Now, some of you also have a birthday this week, and to you I say, together, happy birthday to you as well. To everybody else who doesn’t, hey, happy birthday to you on your birthday, this year. Funfetti thrown your way. I think we all need, to make sure we’re seeing the fun in 2022. [MUSIC] Thanks again. Talk to you next week, Fool on!
FEMALE_1: As always, people on this program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com.