I asked Chat GBT this week what it knew about the Rule Breaker Investing podcast. You know, ChatGPT as we've gotten to know each other over the past year. What do you know about this podcast? It gave a pretty good answer. And so then I thought to ask this.
For this week's podcast, I'd like to experiment by having you, JatgyBT, come up with five of the most beautiful, challenging, inventive, valuable, provocative, and or capital f foolish questions about Rule Breaker Investing, and I will endeavor then to answer these in this week's podcast. Well, in a groundbreaking collaboration between cutting edge technology and timeless investing wisdom, Rule Breaker Investing proudly presents the debut of Chat GPT Asks.
David Answers volume one only on this week's Rule Breaker Investing. It's the Rule Breaker Investing podcast with Motley Fool cofounder David Gardner. Welcome back to Rule Breaker Investing. It's June. Welcome to June. The first week of June. June, you know, every year, this time of year, I start thinking about the market cap game show because we do that four times a year as you know. This time we did a little bit more.
March was March market cap madness, but we haven't done any market cap game show since March. And in a couple of weeks, the market cap game show comes back, and I'm looking forward to that. But as I thought about what I wanted to do this week, I thought, well, you know, we first started talking about chat GBT on this podcast when Dan Pink, the New York Times best selling author somewhere near the end of twenty twenty two said, I think this is gonna be big.
I remember Dan saying on this podcast that when he first heard about email, this is somewhere in the nineteen nineties, a friend of his had just clicked his mouse on his computer and he said, hi, I just sent that. And Dan said, what was that? His friend said, yeah, I just sent an electronic mail. And Dan said, what was that? And his friend said, well, what I can do is I can write mail now, and then I can press a button on my computer, and it instantly goes to another person as mail.
It's called email. And Dan said from that day forward, he realized email was gonna be big. And at the end of twenty twenty two, he said, I think chat g p t is that same moment for many of us now. And so ever since ChatGPT was first rocked in this podcast and certainly spending time with Mahan Tavakoli, my AI friend last summer. It's come up a number of times I've had a lot of fun learning about and with ChatGPT.
So I thought let's have ChatGPT ask me its most provocative questions about Rule Breaker Investing. The first thing that I did and for for a lot of people who use chat g b t, you already know this. In any thread with chat g b t, you can ask, what do you know about me? What do you remember from this thread? Please summarize what you know about me.
And since one of my threads on my chat GBT and by the way, I'm using the most recent version, chat GBT four o. I said to it, what do you know about the Rule Breaker Investing podcast as we've gotten to know each other over the months? And I wanna share back exactly the six things that Chat GPT summarized about this podcast in brief because I wanted to have confidence that it kind of knew what we're doing on this podcast and how we think.
And the six things it had in order from what Chatt GPT has learned about this podcast is, one, our investment philosophy, and I quote, the podcast emphasizes unconventional investing strategies that aim to make people smarter, happier, and richer. It encourages investing in top performing companies with strong growth potential. That was number one. Number two, educational focus.
David provides valuable lessons on investing habits, traits to look for in stocks, principles for building a portfolio. Number three, engagement with listeners. Monthly mailbag episodes address listener questions, enhancing engagement, and providing personalized advice. Number four, ChatGPD said guest features. The podcast frequently features authors, experts, and thought leaders offering diverse perspectives and insights. Five and six go like this. Number five, humor and storytelling.
David incorporates humor, historical references, and storytelling, making complex financial concepts more accessible and enjoyable. And finally, number six, conscious capitalism. There's a strong focus on conscious capitalism, advocating for businesses that positively impact society and operate with a long term perspective. And I said back to Chad, GBD, thank you very much. That is a very good summary indeed of what this podcast is about and stands for and aims to deliver every week.
So with the confidence that my interviewer knew what I was about, I asked this, the question I mentioned at the top, and I'm gonna restate it now because I carefully thought about this prompt and how we prompt AI is such an important garbage in garbage out quality in quality out mechanics. So here again is what I said.
I said for this week's podcast, I'd like to experiment by having you chat g b t come up with five of the most beautiful, challenging, inventive, valuable, provocative, and or capital f foolish questions about Rule Breaker Investing. And indeed within the proverbial three seconds or so, that's exactly what ChatGPT delivered. And for each of the questions, I only looked at it. I didn't look below it at the next question, and I just sort of formed my answer, and I thought about it.
And I I was curious what would be the next question after that. Well, thus, Chat TPT asks, David answers is born. I'm calling this volume one of maybe a recurring episodic series. I'm gonna have a lot of fun. This is a shorter podcast this week, but it really hits on some of the essentials. Let's get started. Alright. Question number one from Chad g b t, and here it is.
How do you see the evolving role of technology shaping Rule Breaker Investing strategies in the next decade, particularly in sectors like AI, biotech, and renewable energy. How do I see the evolving role of technology shaping our strategies? Well, I want us first of all say in response, things will continue to evolve technology and get smarter.
I'm pretty persuaded about that and, you know, I very much hope that we will through this period, especially of the growth of AI, that we will maintain what I'll call a human centered approach to AI. I think AI is here to benefit us, not vice versa. This was articulated really well in a tweet I saw on Twitter x in the past week. This was articulated in an article by Joanna Machieszka. In a recent article, Joanna listed as an author and video game enthusiast herself. Here's what she said.
I love this line, don't you? Quote, I want AI to do my laundry and dishes so that I can do art and writing. Not for AI to do my art and writing so that I can do my laundry and dishes, end quote. I think a lot of us are head nodding at that one as we go. It reminds me of a similar viewpoint. This one from the futurist, Garrett Leonard, who emphasizes you can check and follow him on Twitter if you like at g leonard.
Garrett emphasizes the importance of ensuring that technological advancements are here to serve humanity's best interests rather than replacing human values and capabilities. So I think AI in particular is gonna show its comparative advantage in whatever ways it can and in whatever ways are most valuable. I remember comparative advantage, perhaps you studied this in school as well. I didn't major in economics, but I remember it from my economics course in college.
Comparative advantage is basically what countries end up doing with their industries. Yes. The United States could be the world's best producer of skateboards. We could be the greatest skateboard nation of all time, but it turns out we have a higher calling. We have more of a comparative advantage in other fields and so we leave it to another country to rise up and be the skateboard manufacturer I'm making up this example.
But comparative advantage basically reminds us that if the economic system is working well, each of us will rise to provide the best thing that we can that we're most advantage to do at the level at which we operate. So comparative advantage and so I think that AI in particular will inevitably show up where it's most valuable, where we value it most. So that means if replacing a lot of human effort, and I would even say some of our creative efforts is what AI can do more effectively.
I would say more beautifully, more cheaply. These are big ifs. If that's possible, then I think in time, it inevitably will. But I hope and I I wanna say I do believe that our developing wisdom, because we're all getting smarter about AI at the same time AI gets smarter, our developing wisdom, which ironically is itself aided by AI, is gonna help us steer technology toward, I think, ways that elevate, not denigrate humanity.
So it's with that cautious optimism that I will be fully invested in the next decade as I have been throughout my life. So the traits that I use, the six traits of the rule breaker stock and the stocks that we choose, that I choose, that you choose, if you use these traits, I think are actually very unlikely to change and chat, TPT, the fields you mentioned, AI, biotech, renewable energy are all fields where I have plucked fine companies that I've recommended for us to buy stock in.
Some of which have risen, some of which have declined. Those are just a few examples of bleeding edge fields. There are many others and I constantly suggest to each of us that if we wanna practice rule breaker investing, we are in a way pioneers. We should be looking at the next frontier and asking ourselves where are things headed and getting our money there as quickly and as well as we can. So again, I don't think rule breaker investing is gonna start choosing different companies.
We're gonna continue to be technology focused and asking ourselves where is the world headed. I also wanna say as I think about closing my answer to this first question, the time frames that we use are gonna continue, I think, to be the only ones that matter and that is the long term because the long term is the only term that matters to me at least to my investing and that's also the most rewarding term of all where you're gonna make the most money.
I don't think our time frames are gonna change. I realize there's a perception that everything's speeding up and we're not gonna be able to keep up with all this new technology. And I think that's true in some ways. But in other ways, rule number one, let your winners run high, which is the first habit of rule breaker investing. It's all about time frames and letting winners run. I don't think that's gonna change.
So overall, in conclusion, I would say, I don't see our investing strategy changing. After all, my rule breaker approach has now lived through the birth of the Internet back in the nineteen nineties through smartphones, through social media, cloud computing. Now we have AI. There will be more technology frontiers in our future, and I would say that Rule Breaker Investing has worked wonderfully through all of these.
In fact, I think we have an approach that is not just future proofed, but I would say future interested and future ready. So thank you for question number one. I don't wanna come across as too strong. I don't wanna come across as too confident and assertive. I don't wanna have my head in the sand if in fact technology is changing in a way I don't anticipate.
But because I've always tried to be as open minded and generally positive as I can about technology, I think that approach will continue to stead us well. Again, open minded, ready to be wrong, but interested and invested and positive about the future. Those are outstanding attributes of rule breaker investing, and evolving technology ain't gonna change that anytime soon, at least for me. Let's move on to question number two.
Question number two from Chad GPT, and I quote, with the increasing focus on sustainable and socially responsible investing, how can Rule Breaker Investing principles be aligned with conscious capitalism and environmental, social, and governance, ESG criteria? Well, I appreciate the question. Let me just say first off, I think it's a it's a really good thing to be thinking about, but I also think it's not a great question.
Because here, I think, Chad GPD, you've shown a little bit of a lack of knowledge of who I am and what we stand for because we're not gonna have to worry about aligning our principles with conscious capitalism when remember the tenants of conscious capitalism is habit number four of rule breaker investing. In fact, for years now, I've said and I'll say it again, make your portfolio reflect your best vision for our future.
That's one of my watch words and it's the quote I pin up on my Twitter feed at the start of every year. I say, here's something to think about in twenty twenty, twenty twenty one, two, three, four. Make your portfolio reflect your best vision of the future. Now I wanna emphasize this is not prescriptive in that I'm not telling you what should be in your portfolio. What I'm telling you is that what is in your portfolio should reflect your best vision of the future.
I've gotten to know a lot of my fellow fools, a lot of listeners over the years, and yet I don't know everything about everyone, and there are many people hearing me right now that I will never meet. But I want you to know even though I don't know what your best vision of the future is, I think your money should be demonstrating that if you were to show your portfolio.
I think your money should be demonstrating that if you were to show your portfolio statement to a spouse or partner, to your grandkids, to your broker. I think that's how we all should be invested, and I've thought that all the way through. We first wrote a chapter about socially responsible investing in our first book, The Motley Fool Investment Guide. The brothers, Tom and Dave wrote that book, and we split chapters, and I wrote that chapter.
And I basically said, I think each of us should be showing through our money what we believe is socially responsible. And I went on to say, to press the point a little bit, I question how socially responsible this is irony. I question how socially responsible socially responsible mutual funds are because do you know the manager of that fund? Do you know all of their criteria? Do you know that? Does that person know you?
Does that person understand you and what you think leads to our best most socially responsible future? I don't think so. It's kind of impersonal. If you're really being responsible about this, shouldn't you be investing your own money yourself toward your best vision of the future? I appreciate our mutual fund friends. I'm sure there are some very good socially responsible mutual funds, but I question whether it's socially responsible to invest in them.
At least if you care, if you wanna put in the time, if we're gonna be this painstaking around our money, and I think it's a great thing to be. You know, let's talk a little bit more about consciousness, conscious capitalism.
I do believe there is rising human consciousness in the same way that I agreed with Jeremy Rifkin, the dearly departed Jeremy Rifkin, and his book, The Empathic Civilization, which had a very optimistic and I think very true central thesis, which is that Homo sapiens is far more empathetic today that at any point in history and indeed, it's a rising graph. How we treat animals today, even though there's a lot of maltreatment of animals today.
How we treat people from other cultures today, even though there's a lot of maltreatment of people from other cultures. Nevertheless, it is far better than how things were two hundred years ago or one thousand years ago. Rifkin goes on to show a graph of human empathy over time. He has much more of an academic bent than I do.
He's able to cite lots more sources than I can, but I can save you reading his book, although I'd recommend it, by telling you the graph goes from the lower left at the dawn of time to the upper right. You may agree and be nodding your head already. You may disagree. That's up to you, but I believe it. In the same way, when Bill Burke came on this podcast a few months ago and said, you know, if you read the news headlines today, you watch cable TV, you'd conclude things have never been worse.
And yet, Bill went on, he's quoting Kevin Kelly, another great rule breaker guest of the past, quoting Kevin Kelly by saying, and yet if you read history and history books today, you'll conclude things have never been better. So I think it's really important to understand both the short term noise and the long term view that we all need to maintain because we're all living in the very short term.
Listen to this podcast right in a very short term, but we're thinking about our money in the future over a long arc of our lives and the narrative of the human race. And I think human consciousness is rising. Therefore, I think it makes a great deal, Chad TPT, of sense to be aligned with conscious capitalism.
And I would also say with some of the ESG criteria, although I wanna say in closing on this one, I'm not a big fan of when movements become So I like some of the environmental thinking, some of the social thinking and governance thinking. I wouldn't agree with all of it. I'm sure each of us has sort of different things they might like or dislike when we hear ESG, but the very fact we're using ESG has me questioning things a little bit.
I admit I also feel the same about other acronyms that pop up at different points in our society or history. DEI is another example. I understand generally the goodness of these things, but once they start becoming acronyms, I start wondering and people have business cards that say their ESG or their ESG fund. I start questioning the social responsibility of simply mailing it in with established, acronomized criteria.
I would much rather get underneath things and understand what's really going on. So, yes, I think rule breaker investing principles are aligned with conscious capitalism and encouraging each of us as investors to think hard about what is sustainable, about what is socially responsible. And we're gonna come up with different answers, and I think our money should show that. So to complete the answer, move on to number three, chat GBD.
I don't think this is a very good question in that the answers, I think, have already been very evident on this podcast in my writing, both the recent writing and writing from long ago. So I'd say a little bit of constructive criticism back for you on this one, chat, GBT. Do better. Alright. Let's move on to question number three. And I quote, given the current market landscape and trends, what are the key attributes or indicators that you look for in identifying potential rule breaker stocks?
And how do you differentiate between short term market noise and long term growth potential, end quote. I like this question. I think it's because it's focusing and it's honing in on what are the key attributes or indicators that one should look for when looking at potential rule breaker stocks. So it it lets me cast my gaze over the last decade or so and think about what's worked and what hasn't. What's been overrated? What's been underrated?
First of all, I wanna say of the six traits we look for in rule breaker stocks, the first one always has been the most important and is the most important. That's why I made it the first trait of rule breaker stocks, and it is looking for top dogs and first movers in important emerging industries. Full stop. That phrase has guided me toward every great stock that I picked and a lot of stocks that didn't work out as well.
But the timeless lesson we've learned together is the winners far outweigh your losers, and so don't be afraid to lose. In fact, if you're listening to this week's podcast, if you're following Rule Breaker Investing, maybe you're a long time Motley Fool member who's seen this work, or maybe a friend told you to listen in this week, or you're just a chat GPT fan and somehow through search engine optimization, we found you randomly as a listener this week.
I want you to know that finding the top dogs in important emerging industries, the ones that have started industries around them. I mean, you could argue Facebook wasn't the first social media company. Certainly, some people will point out that Myspace preceded face book in a lot of ways. I think it did in terms of its timing, but not really in terms of its heft, its scale, its speed.
It really did start in that Harvard dorm room with Mark Zuckerberg and his early friends, and it became the top dog and first mover. It came public in two thousand twelve, you might remember. That is a great example of a top dog and first mover and a great winning stock. It it was a failed IPO. It did very poorly in its first year or so. It was I'm not gonna say left for dead, but it was certainly cast aside by Wall Street, and the stock was well down from its IPO date.
But here we are having recommended it, more than a decade ago. Stock is up twelve times in value from when it came public in two thousand twelve. The market over the same time up four times in value, so it's more than tripled the market's performance. It's been a great stock. Today, Meta Platforms, the former Facebook, is a one point two trillion dollar company. So when I think about the current market landscape, one of the things that I think about is the television show
Silicon Valley. Have you seen it? It came out. It's comedy. Two thousand fourteen on HBO. I didn't watch all shows in all seasons, but I enjoyed what I saw. But it was right around that date. I mean, this is post the Facebook IPO where Silicon Valley venture capital. Even though the show is there ostensibly to make jokes about it, it was also glorifying venture capital and the area that area of the world both geographically Silicon Valley, but also psychographically.
The idea of startups, startup culture, the idea that you could make it huge in just a few years. And indeed, what we saw over the last decade is companies that I would say in earlier eras would have come public younger and earlier. Companies like Airbnb, companies like Uber. Instead of coming public as younger companies, they really blew up in the sense of their size. They became gigantic companies. I'll give a quick example. Airbnb came public twenty twenty. Do you remember? It was an IPO.
We recommended it in Motley Fool Rule Breakers. It's been an underperformer. It hasn't been a disaster, but check it this week. Airbnb from its IPO date is up five percent. That's right. It's up five percent. The stock market's up forty five percent over the same four year period. So it's been a underperformer. It hasn't lost money, but it hasn't made any real money for investors. Although, it's done better over the last couple of years. It it declined, initially. I would like to point out this.
It's five percent bigger than when it came public, and its market cap today is ninety three billion dollars. That means the company waited until it became worth in private markets tens of billions of dollars. The equivalent of like eighty billion dollars as it comes public that was its valuation on its first day of trading and that is absolutely massive relative to almost every other company that's ever come public in history, but it's not the only one.
Uber similarly two thousand nineteen came public. It's up fifty five percent since it came public. By the way, the market's up eighty two percent. So Uber itself has underperformed another stock I recommended. It hasn't been a bad performer up fifty five percent. Perhaps in time, we shall beat the market, but it also hasn't been great. I will mention the last two years, it's been pretty on fire. Uber got off to a bad start of the public markets.
Last two years, if you've invested it, you're up a hundred seventy percent. Markets up just thirty five percent over the last two years. So Uber has actually been a fantastic stock in just the last couple of years. But here it is, fifty five percent bigger than the day it came public, and it's worth one hundred thirty four billion dollars. So it too came public around a ninety billion dollar valuation, not a nine billion dollar valuation.
Like most of the IPOs that preceded it, like most of the companies that I've enjoyed picking in their early stages when they're much smaller.
I'm not trying to blame HBO or Silicon Valley, the two thousand fourteen debuting TV show, but I think that something changed in the last decade where companies decide they did not wanna come public, where the venture capital markets swole with funding and all of a sudden you could parlay something small and acorn and you could become an oak and you didn't ever have to go public. But when you eventually did go public, you were selling yourself to you and me, the mom and pop investors.
I'm a pop investor right along with you. You were selling yourselves to us at a gigantic valuation. It might even be a legitimate valuation. Right? Airbnb and Uber are a little bit up from their IPOs from years ago. But did we make any real money from these stocks? Not so much. In fact, I would say Meta Platform's Facebook might be the last big time IPO that has risen ten times or more in market value over the last decade plus or so.
So when we talk again, Chad GBT, with your question about the current market landscape, I think we have to notice that. And I don't think that's a permanent state, by the way. Venture capital is not as cheap and easy to come by these days, and I've seen companies in recent years be more willing to come public at smaller valuations. Think about something like Warby Parker or Kava or Sweetgreen. These happen to be restaurants. Well, that and a Internet eyewear brand.
But Toast, Olo, these are companies that are payment platforms helping restaurants run themselves, tech companies themselves. These companies are much smaller and and they're much smaller IPOs, but they're a mixed bag. For example, Warby Parker is down two thirds in value from the day it IPO'd. Although it is up fifty percent in recent months, it's worth about two billion dollars today. Kava has more than doubled. It's been a good performer. Sweetgreen, the others kinda mixed bag.
So I would say about the current market landscape that I was never that interested in IPOs anyway, and I'm even slightly less interested in IPOs these days unless you're bringing me more of a mid cap company. So don't wait till an eighty billion dollar valuation to get me excited about your stock because I probably won't be that excited. But if you're coming public at one or two billion, that's gonna be the dodgy experience investors have always had.
Statistics point out that if you don't buy an IPO on average, you wait six months, you'll get a better price than the IPO offered you on day one. So investors have generally been rewarded for waiting and staying out of IPO's. I guess I find myself talking about IPOs because of the market landscape and how these big brands have weighed over the last ten years. But let me conclude my answer to question number three. What are the key attributes to look for?
I continue to look for top dogs and first movers. But when I think about what has really made money over the last decade, I see two big buckets of beautiful stocks. Many of which we recommended and own. The first bucket, I'm gonna call the obviously great companies. These are not companies that were IPO ing at massive valuations in recent years like Uber or Airbnb. These were Netflix, Tesla, Nvidia, and their ilk. What we once called in another book of ours, the obvious greats.
Like, if you think about what are the obviously great companies with great services, great employees, great stocks, Netflix, Tesla, Nvidia, this category of company, we've watched them. They were already big ten or twenty years ago. We've watched them become gigantic. And those of us who've owned the stocks, these are our favorite stocks. They usually are the ten poles of our portfolio. So of the two buckets that have made money, big money for investors in the last ten years.
One of them is these obviously great companies that were already public. And the second, I would describe as the lesser known leaders of their categories. So what comes to mind when I think about these? Think about Mercado Libre. Mercado Libre has been a fantastic one hundred plus bagger for me in Motley Fool rule breakers and for rule breaker members. And Mercado Libre is basically the Amazon of Latin America. They're the ecommerce giant. They're doing the deliveries.
They're doing the payment systems. This has been a great category leader. But is this a household name like Amazon or Tesla or Nvidia? No, it's not. And nor is Axon Enterprise, the former taser. Now with Axon Police body cameras, basically, supporting the law enforcement industry with better technology to give our police friends cameras that they now are required to wear in many cases filming them and what they do.
And that's just one of the things that Axon Enterprise has has done to improve the world of law enforcement. Again, not a household name. Most people don't recognize the name of that company, but we see they're the category leader. In another example, this one is a little bit better known, Chipotle. Chipotle Mexican group technically their company name CMG. Their ticker symbol, not nearly as big as Netflix, Tesla, or Nvidia. A well known brand though, but definitely, again, a category leader.
And all of those stocks I just mentioned, Mercado Libre, Axon Enterprise, Chipotle, phenomenal winners over the last ten plus years rewarding rule breaker investing and rule breaker investing as a strategy. I said I was gonna conclude this a few minutes ago. I think I actually will now conclude this answer, but let me just say, I'm not sure you ever heard me say a decade or so ago, there will be an Airbnb IPO.
It will have blown up before it ever IPOed, and the stock will rise only five percent in value over its first four years in the public markets. I wasn't saying or predicting that, and so I'm not gonna aim to predict now what I think is gonna happen next. And I would say that's why Rule Breaker Investing emphasizes having a portfolio of twenty five or more stocks and a fair starting line allocation generally for each, which is my way of saying four percent in each of those twenty five stocks.
Don't load up on one with forty percent of your money and then just invest one percent in another fair starting line across your portfolio. Those are our strategies. And, again, I think they work in every environment. So, Chad, GBD, you ended that question with how do you differentiate between short term market noise and long term growth potential? I would say that's what helps you avoid short term market noise and long term growth potential.
Focusing on the top dogs and first movers, not trying to be predictive what what you think is gonna happen next. That isn't gonna be what makes you money. What's gonna make you money is a diversified portfolio of the companies that reflect your best vision for our future and the emergent ones especially in twenty five or more stocks. Alright. On to question number four, Chad GPT asked and I quote, Rule Breaker Investing emphasizes letting winners run.
But how do you handle situations where a stock experiences a significant downturn? What strategies do you employ to mitigate risk while staying true to the rule breaker philosophy, end quote? Stocks decline for us all the time, and sometimes they never come back. So the first thing I think about when I think about mitigating risk while staying true to the rule breaker philosophy is habit number two of the rule breaker investor, which is to recall, add up, don't double down.
In so many words, what I'm saying is when you have new money because you took the time to save it from your salary because you're being smart about your money and your future. You are living below your means. You are not subsisting on double digit credit card debt. You are not you've gotten out of student debt. And if you did, God bless you. It's not easy for a lot of people to do, but you're at the point where you're saving.
You're at a point in your career where maybe you could save up to ten percent of your salary. That's a great goal for a lot of people. And maybe maybe your employer matches your savings. So you're that person at that stage of life. And I wanna say, when you have that new money that you've just made and you're investing, put it in the things that are rising, put it in the ones that are doing well. Much of the world hears buy low, sell high, and they think, oh, so I got some new money.
I should put it in the ones that are making new lows, not the companies making new highs. But gut check here, anytime we talk about a great stock and we just threw down a bunch of company names like Netflix, Tesla, Nvidia, Mercado Libre, Axon, Chipotle, Mexican Group, Look at their stock graphs in your head over time, lower left to upper right. Those companies consistently just kept making new highs one year after another. Now there were years where they lost half their value in one year.
Every one of the stocks I mentioned that's happened to at least once. And if you're a long term holder of Nvidia, for example, as we have been, you saw that multiple times. You see thirty three percent drops every several years for these winning these greatest stocks of our generation. So you need to be ready to lose. But when it comes to the real story of what wins in the markets, it's the ones that, yeah, they have some short term setbacks, but they just keep going up.
They just keep coming back and going like Amazon dot com as a stock over its nearly thirty years in the public markets at this point. And so those are the saddles, the bucking broncos that go up. That's where you wanna put your money. Don't put your money. Don't double down in things. So the number one risk mitigation strategy, Chatt GPT, when we talk about the rule breaker philosophy is to add up, don't double down. Another way of saying it, don't throw good money, your new savings after bad.
That would be bad investments you've already made. Add up, Don't double down. There's one more thing I wanna say. This is a quicker answer for me, but one more thing I'd like to point out and that is for years, when I worked for the Motley Fool Rule Breakers team, a team I dearly esteemed, a service that I loved creating from the ground up in October two thousand four, still going twenty almost at its twenty year anniversary.
Now when I think about our team and our teammates, what we would do is we would look at stocks that were down, and we would ask a series of questions about those stocks that were down. I'm just gonna give you a few of them right now because when Chad GPD in the first part of your question you're asking about, how do we handle situations when a stock experiences a significant downturn? The first thing you already know is we're not gonna add new money to them.
They're gonna need to prove themselves to us by reversing course before we're gonna add new money. But if you're a stock analyst or you're just interested in following the market, you're wondering what are the stocks that maybe come back from those points, and then what are the ones that don't? There are a bunch of factors that typify. Anyway, my pattern recognition as to what comes back and I'm gonna share three of them right now very quickly.
One of the things we did in my services over the years is we would say, we're looking for some green flags and we don't want red flags to show up. And when we would publish a new recommendation, we'd say, here are five green flags that by our definition are five things in the future that we're looking for. We're kind of expecting or hoping. And when they happen, we're gonna go check green flag, wave that green flag. We got it right. And we also did the same with red flags.
In fact, we called it our five and three. We always publish five green flags and three red flags. A brief explanation as to why it was five and three. If you're gonna buy a stock and you're an optimist about that company and our economy, you should be looking for more green flags and be able to number them more than red flags. And so the concept of five and three is always tilted toward the good because that's what the market does. It rises over time. We wanna align our flags in line with that.
So if you, dear listener, have taken the time to think about a stock before you buy it, you can list it, bullet it out to yourself somewhere in your digital library, somewhere where you keep your notes or you can write it down an index paper and drop it in a file folder. Just write down what you're looking for, what your expectations are. And then when stuff happens, especially if the stock doesn't do very well, you now have an excellent list to refer to to ask yourself what's really going on.
So for example, if none of the green flags have been hit and it's all red flags, guess what? I don't think that's probably a great investment going forward. That's especially one you don't wanna stay invested in or add new money to. So if you put in a little bit of sweat equity upfront and thought about the future and what you're expecting to see, that is a great guide to yourself to remind you whether you wanna still believe.
Keep that candlelight vigil for that company coming back or snuff out the candle. So I said there are three things I look for that I'm gonna toss out in this interview with Chad TBT. That's one. A second one is just the balance sheet. Of course, the company's balance sheet where it shows its debt and the amount of cash it has just like you and I have a bank account. We can see how much cash we have and how much debt we have. Companies have to publish those publicly.
So when you can see that the balance sheet is strong, it has a lot of cash, maybe no debt versus the opposite. Not much cash, a lot of debt. That's another great thing to look at when you decide my stock has experienced a significant downturn. Will it come back? And then a third thing I'll point out, we're gonna get away from green and red flags here and financial statements, and we're gonna go right to the heart of human beings. Somebody's running that company, the CEO.
You can also think about the board members maybe or the big investors in that company or sometimes star employees. In fact, one of the best signs of a great company is when the CEO can attract great talent. Just like if Lin Manuel Miranda comes out with a new musical, everybody wants to be in that musical or movie because he attracts great talent. The exact same thing happens in business. Johnny Ive works for Apple, not its competitors.
So I would say, look at the CEO that's in place of that company now. Do we find ourselves increasingly knowledgeable about that person or the management team? Start with their names. Do you know the name of the CEO? Has the CEOs changed? Is that part of the reason the stocks down? Do we know anything about the new CEO? These are really important questions. You wanna be admiring of the people that you're putting your money behind. You should be inspired by them.
You should be inspired to dig deeper. If you find yourself disconnected or you don't like the CEO of the company, that would be another great example of a question you could ask yourself to guide the decision as to whether you think the company is gonna come back or not. So chat g p t to close this one, I wanna say you have to be comfortable with losing. You need to be ready to lose to win. One of my big themes on this podcast. And if you use our approach, you're adding up not doubling down.
Alright. On to question number five. The final question for this first episodic series, Chat GPT asks, David answers. Chat GPT, here is your provocative question to close, and I quote, as Rule Breaker Investing encourages individual investors to think independently and embrace innovative ideas, How can listeners cultivate a mindset of continuous learning and adaptability to navigate the ever changing investment landscape successfully? That's a beautiful question.
And the funny thing about this question is it's not being asked of me. It's actually being asked of you. Dear listener, how can you cultivate a mindset of continuous learning and adaptability to navigate this ever changing landscape that we live in together? I would say first off, that's probably already you. These are the listeners that we attract to this podcast and to our strategy.
Regular listeners tuning in each week are very likely, I would say, way over index toward lives of continuous learning and adaptability. You know, I once did a twelve minute sermonette on this topic. You can still go back and listen to it. It's only twelve minutes long, shorter than this week's podcast. It was May fifteenth twenty twenty one. It's entitled lead a more interesting life.
And if you ever need a twelve minute pep talk from me and a reminder of the importance of that, it's there for you. You know, when you think about cultivating a mindset of continuous learning and adaptability, it's not just true of our investing landscape. Chat GPT, I know you were asking about our investment landscape, but remove the word investment there because that's what's happening not just in investing, but in business ever changing. What is AI doing to business and for your life?
And those are the three domains of this podcast, investing, business, and life. I urge you, dear listener, to be cultivating a mindset of continuous learning and adaptability. We have a lot of those types on staff at The Motley Fool. We have a lot of continuous learners. We have many, many more in our membership.
Our membership base is much bigger than our employee base, and there are so many fascinating people who are always asking questions and trying to make things better for those around them. In fact, I would say that it is its own reward. A life of continuous learning and adaptability, sure, it's gonna help your investing. And, yeah, it's gonna help your business, but it is its own reward to live that way through life.
So, Chad TBT, remove investment from that question, but you've asked the right question and it isn't even of me. It's of you, dear listener. And this is the future we're living into, by the way. If you think this future where you're going to need to continuously learn and adapt, if you think that's any different from the past, I wanna tell you I do not think that it is.
In this regard, pretty much since the start of the Industrial Revolution in the nineteenth century, there has been an ongoing continuous changing landscape in our business world, in our society, and sure enough, of course, for your investing as well. So it's always in fact, if you think about it, what is the story of human history except one of constant evolution and adaptation to ever changing circumstances? It can push us out of our comfort zone. Sometimes it doesn't sound fun to say.
We always hear people don't like change, but I actually think we love change when you really think about it. Can you imagine nothing changing from right now? That sounds like a small hell to me. I love and encourage betterment and change, and I think that's in a lot of ways what I hope I've enabled through this podcast this week. Chad Gbday, I wanna thank you for the questions that you asked, the beautiful, provocative, challenging questions.
One of them may be not as good as the others, and I know we all are expecting AI to get better. So these questions should improve if we wanna continue this series. And if you'd like to see this series continue, drop me a line. R b I at fool dot com is our email address. Of course, at the end of this June, we'll do a mailbag, and I'll read back your thoughts if you take the time to write me and share what you learned from this week's podcast. In fact, I invite you to do the same.
Just as I said to Chat GbT, come up with a beautiful, challenging, inventive, valuable, provocative, foolish question. I say the exact same thing to you, dear fellow fool, as you drop a note maybe for this month's mailbag, you can tweet us at r b I podcast. You know, as I say goodbye this week, I'm reminded of another past author on this podcast. How could I not mention Warren Burger and his book, A More Beautiful Question? That's really at the heart of this week's podcast. I love that book.
It just came out, I think, in its tenth anniversary edition, Warren dropped me a signed copy. Thank you, Warren. That was completely of your own volition. I appreciate that. But asking beautiful questions, even knowing what is a beautiful question is I think one of the great pleasures and value unlockers in life, yeah, in investing too, and business and life full on.
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 r b I dot fool dot com.