It's the last Wednesday of May. We've had, wow, five Wednesdays in May. It always makes for a full month. I mean, May is thirty one days every year. Anyway, but for this podcast, this is our fifth Rule Breaker Investing podcast because there were five Wednesdays in May. A few special ones, especially my birthday podcast a couple of weeks ago, and I wanna thank each of you who took the time to write in and share what you've learned from this podcast.
That really in in its own way was a fantastic May mailbag. But as has been the case for one hundred plus Wednesdays going back years now, it is the final Wednesday of May twenty twenty four. And therefore, it is once again your mailbag 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. A delight to have you join me. Let's get started with this month's mailbag.
And as I often do, I like to start with tweets from Twitter x. And let's go with tweet number one from Jason Moore at Jiminy Jellickers on Twitter. Jason, you wrote, between the perfect storm of NVIDIA's looming stock split, Rule Breaker Investing podcast's newest episodic series, I Fought the Law and the Law Won, and Wikipedia's triumphant success. Jason, you wrote, I'd be remiss not to bring up Moore's Law.
And because this was a month of laws on this podcast, I just wanted to remind listeners, of course, Moore's Law coming from Gordon Moore, the cofounder of Fairchild Semiconductor and later Intel where he was CEO for many years. I know a lot of techno files will recognize Moore's Law as stated by an English major in this case. I would say, computers roughly double in speed and have in price every eighteen months.
That's a shorthand way of saying that the number of transistors in an integrated circuit doubles about every two years. That's what Gordon Moore hypothesized. We're gonna be talking a little bit later about whether there are actually any laws at all or maybe they're all just rules, but Moore's Law certainly one that I could have included on last week's episode might show up in some future series. But I'm glad, Jason, that you included Moore's Law.
And given that, Jason, your own last name is Moore, that seems even more apropos. That was tweet number one. A second tweet, thank you, Martin Triggs. Right again, at Triggs one Martin. Martin said, wow. Incredible lessons and thoughts to ponder. This is again reacting to last week's podcast, I fought the law and the law one, volume two. We'll listen again, Martin wrote, the less you trade, the less you have to follow the markets.
He's quoting me from last week's podcast, and I do wanna say, yeah, I really do think that's true. I'm not gonna say that's Gardner's law because, a, I'm questioning whether there are any laws as you'll hear shortly, and, b, if there were a gardener's law, I probably wouldn't make it that one. But the less you trade, the less you have to follow the markets. I do think that's a truism. Thanks for calling that one back out.
Martin, you close by saying, rather use your time to study and understand laws like these, enlightenment. You also went on to say, Martin, and I appreciate this. It's worth reminding everyone that the United States is a nation of laws, especially in this election year. May the laws uphold a strong democracy and election and that the people accept the legal transparent results. And I do fully expect that to be the case once again. I appreciate that sentiment, Martin Triggs. Thank you.
And now a third tweet. Thank you, Alberto Echevarria. Alberto writing in, I said on Twitter which law was your favorite from last week. Alberto, you said has to be Newton's first law, winners keep winning. And I thought a little bit more about that myself, and I think my favorite law from last week was Cunningham's law. And to quote it verbatim once again, and I quote, the best way to get the right answer on the Internet is not to ask a question, it's to post the wrong answer.
And the reason that I keep going back to that one is, a, it makes me smile, and when you share that with a friend, there's usually a chuckle you can share together. But b, when you think more about it and you remember that Ward Cunningham is credited as the computer programmer who created the first ever Wiki, we talked about this last week, and Wikipedia is essentially built on Cunningham's law. People post stuff to the Internet, incorrect, incorrect, citation, citation.
All of a sudden, you can build an entire encyclopedia of all of human history based on people posting and correcting other people's postings. So the best way to get the right answer on the Internet is not to ask a question. The human tendency to correct each other comes fairly naturally as my friend, Shurzad Shamin, has pointed out. We each have a judge in our minds. We're constantly judging. You don't have to be judgy.
When you're constantly judging, we're constantly estimating what's going on around us and what we think of it. And it's a lot easier to shoot down the things that we know to be wrong than to clearly articulate or know the things that are right. So, indeed, the most productive way to build Wikipedia is off the posting of wrong answers, and, that's Cunningham's law. Anyway, Alberto, I'm also a big fan of Newton's first law of motion. I'm glad you called that out. Alright. Five mailbag items.
A little bit lighter mailbag this May, and I think in part, that's because we really already had an amazing mailbag two weeks ago. But there's always more to talk about. And, Vince Granieri, thanks for taking the time to write in. Hi, David. I'm hoping that this year's authors in August series will include one book about curing procrastination because I am obviously afflicted, Vince writes, as I listen to your April third podcast with Bill Burke, the subject was optimism.
I was moved to contact you, but sadly procrastinated in so doing. I guess that's why you're now writing me in May about this, but that's fine, Vince. He goes on, as you predicted, I find myself going back to this one podcast even though it's relatively new. In fact, one of my life's goals is to write a book about the top ten quotes in my life. And Bill Burke, quoting Kevin Kelly, has made it to my list of worthy candidates for that book.
He said, and I quote, if you only read the news, you will think that it's never been worse. But if you read history, you'll realize that things have never been better. Wow, Vince writes. Switching gears, the recently announced stock splits of Nvidia, Chipotle, and others led you to tweet that these are nonevents, which certainly is conventional wisdom and passes the logic test.
Insert the well worn pizza analogy about a pizza cut into eight slices or four slices matters not as it doesn't change the size of the pizza. Then the joke about the customer who is asked whether he wants his pizza cut into six or eight slices, and he responds, six because I couldn't possibly eat eight.
Therein lies the secret to my feeling, Vince, goes on that maybe stock splits, especially those that turn a share of stock with a price over one thousand dollars into maybe ten worth one hundred dollars each are more than a nonevent. Notwithstanding the research that shows at least a short term performance bump for high dollar stocks that split, there is something that matters to me as I near retirement and I'm looking for ways to boost the income part of my portfolio.
Say there are some winners. Let's call them Mercado Libre, Chipotle, and Nvidia. Some I own less than one hundred shares, so I am unable to utilize a covered call strategy with them. Others, I have over one hundred shares but could not stomach risking that larger share of my position being called away. Finally, others where, thanks to following The Motley Fool's recommendation years ago, I have hundreds of shares, but still would not like to deal in one hundred share lots.
Once the split is enacted, I will be much more comfortable with this strategy. Additionally, despite some brokerages offering fractional shares, the split will allow more folks to start positions in these stalwarts. Take care, David, and full on, Vince Granieri. Vince on the Motley Fool discussion boards. You are a full four z tribe. Shared your work through these mailbags before. I know you are a Cleveland Guardians fan. Your baseball team is awfully good this year, Vince.
Well, just a few reactions back. First of all, really appreciate you going back and listening to the Bill Burke Optimism Podcast. Yes. That one is worth listening to and relistening to in the years that come. And that quote about the news, reading the news versus reading history is so apt.
As regards stock splits, especially when I'm on social media writing just short lines without long opportunity like this podcast to explain myself, I typically will say that stock splits are a nonevent as indeed I did. And most people need to hear that because most people think I know a lot of people who think stock splits are very exciting because in their mind, value has been created and or they like low price, sometimes penny stocks. So they like low price stocks.
And so stock splits for that set are exciting, and I don't think that they should be exciting in that way. But as a fellow fool, I do wanna say in years past, I've sometimes said and written that it's not always true that stock splits are a nonevent. Now, Vince, you were highlighting that round lots help a covered call strategy. Covered call strategy, I'm not gonna speak to in this particular podcast.
It's It's not something I use, but I know many people who do, and it's a way of gaining income off of our long held positions. I know many of you are very familiar with the covered call strategy. Vince is pointing out stock splits could help in this regard. I wanted to stir something else into the pot here, something I've said in the past about stock splits and why they are kind of beneficial if you wanna click down a few clicks.
When companies reduce their share price, when they say, let's go from one hundred dollars a share down to twenty dollars a share in a five for one stock split. When companies do that, they're now precariously low relative to where they once were with their share price. And there is, I think, a little bit of a bias against very low price stocks. If you're trying to be a big well known legit company like Mercado Libre or Chipotle or Nvidia, you probably don't want your stock down there.
Let's let's just go with one dollar and thirty seven cents a share. That's not a great look to many stock market observers. So we have to point out that companies don't really want their shares going too low. Right? So when a company does its five for one split from one hundred down to twenty, it's playing chicken a little bit with market expectations and market observations about that coming. It's kind of saying, we really I don't think we wanna be below ten dollars a share.
I'm gonna call that out as a round number. I think most big companies don't want their stocks below ten dollars a share. Therefore, one could argue that when companies intentionally decide to reprice their stock much lower, they're actually subtly exhibiting a little bit more confidence that they will continue to go up because they don't wanna go below ten dollars a share. So I think that there is some reason to be a little bit bullish when company stocks are split. I don't cheer them on.
As I mentioned, most people are misled about this. And so I think the the key point is to is to make the pizza joke that you made, Vince. But if we wanna go a little deeper as fools together, assuming a base level of understanding, I think stock splits are actually a little bit bullish. So thank you for sharing that. Let's move on to mailbag item number two. This one is a doozy, and I mean in the best way. Earlier, I was mentioning, are there any laws?
And it was Bart Hubbard's note to Rule Breaker Investing this week that have me questioning just that. DG, this note starts. Bart writes, I'm a man of no particular wealth, and the jury's definitely out about my taste, so I'm told. But, hopefully, in my favor on taste, I do thoroughly enjoy your podcasts. Your latest is no exception. I'll accept your challenge to serve up a law or three.
So, yeah, I did mention Bart. Would love to hear in the mailbag this week anybody who wants to add additional laws to my I fought the law and the law one list from last week. And, Bart, you are providing three in this fantastic mailbag item, and I'm really looking forward to digging into them and sharing them out. So let's let's do it together. Bart, you said here's my first, which might be called Godel's law, but maybe that's a stretch. Law number one. Here it is.
There are no laws except this one. He goes on, as I understand your distinction between laws and rules, Laws are at least true most of the time regardless of circumstances in a way that rules are not, and the consequences of breaking laws are thus likely to be harmful almost inevitably, whereas the consequences of breaking rules offer potential rewards and progress if done well. And I wanna say, Bart, I would say you beautifully summarize what I was trying to convey.
It took me an extra minute or two relative to the succinctness of your explanation there. But, yes, you've done a very nice job summarizing my viewpoint as asserted earlier this month. Bart goes on, I do appreciate the distinction, but alas, as with anything in this world, nothing can be proven universally true So that there really is no hard line between laws and rules. The sun moves and the world's flat were laws surely for thousands of years.
More basically, even in Newton's age, his understanding was the time was absolute and not relative. So that, quotes, velocity was measured by a concept of, quotes, time that was absolute. That again in quotes, law remained essentially unquestioned, Barth goes on, until Einstein's special relativity blew it away. So even Newton's first law of motion is no longer a law as it depends on time being an absolute. But physics is physics, which may change as our understanding of the universe changes.
And I'm gonna say that again because I think that's such a great point, Bart. Physics is physics which may change as our understanding of the universe changes, and you've already pointed out that's been happening constantly throughout human history so far. He goes on, it's hardly surprising that seemingly immutable laws relating to physics will change over time. Nothing really new or particularly interesting in that. Right?
I think that's sarcasm, but Bartz, since sarcasm is the wit of fools, it is very welcome on this show. He goes on, but what about mathematics? Surely mathematics has laws that are indisputably true. The purity of mathematics as true goes back thousands of years. Well, Kurt Godel's Indefiniteness Theorems brilliantly blew that idea away.
And I wanna pause for a sec because I mentioned last week and again, if this is already striking the listener as heady, stay here in this heady space with me for a few minutes. It's worth it. But I wanna point out, I'm kind of a fish out of water in this heady space to mix metaphors because I've never read even though I quoted Hofstadter's law last week, I've never read Godel, Escher, Bach, an eternal golden Braid or Hofstadter's other work.
I just liked his law that I shared last week, but here we have, I think, in Bart Hubbard. And Bart, your email address includes the word professor. So I'm thinking I'm guessing you're maybe a professor of mathematics out there, and I just wanna mention that I stopped math at the end of high school. Calculus was enough for me, and a lot of rule breaker investing is built on what I've always called fifth grade mathematics.
I don't think we need to get really deep into the math, but I admire those who do. I hope you enjoyed my conversation in last year's authors in August with Jordan Ellenberg, the brightest mathematician yet to appear on this podcast. Anyway, I wanna now return to what professor Hubbard is saying here, Kurt Godel's Indefiniteness Theorems, which brilliantly blew the idea away that mathematics has laws. Now again, I'm not familiar with this work, but let's keep going.
The first theorem showed that one can use a mathematical system to construct a statement that can neither be proved or disproved within that system. The second theorem arrived at by proving the first is that no consistent system can be used to prove its own consistency. Bart Hubbard goes on, a shout out for me goes to Douglas Hofstadter, not only for his book, Gertel, Esher, Bach, and Eternal Golden Braid, which, by the way, won a Pulitzer prize decades ago.
But his later book, I Am a Strange Loop, you may have already read both. I've read neither. But even better than he does in his first book in strange loop, Hofstadter does a wonderful job of thoroughly explaining and exploring Godel's theorems among other great stuff. It's by far the best thing I've ever read, says Bart Hubbard on Godel's Indefiniteness Theorems. Alright.
We're gonna start settling back down from this heady place where Bart had us, and we're gonna get back to the bottom line here and share two more fun laws which apply to investing. Bart writes bottom line, unfortunately, from an investment standpoint, there are no laws, just rules, but there are rules and then there are rules. He writes, some rules are better than others, but none are infallible and all may fail.
So that was the first law that Bart wanted to share with the listeners of this week's podcast. It was again, there are no laws except this one, and he he attributes that to Godel's law, but we can call that Hubbard's law for the purpose of this week's podcast. Let's move on to your second contribution. My second law, you write, is from legendary investor and attorney Charlie Munger, who captures the essence of a behavioral investment perspective that I have found useful.
Here's Munger's Law. Bart explains, most investment decisions are transactional. For every asset buy, there's a corresponding sale. So if I'm making a directional investment choice, someone else, the person I'm transacting with, is making the opposite choice. Munger's investment philosophy is largely driven by his understanding and application of human behavioral psychology. For Munger, avoiding being stupid is paramount to investment success.
His basic premise is that investors who avoid big mistakes have time on their side so that the general growth of economies and markets up and to the right will work to their advantage at least when the investment is tied to the economy. To prevent stupidity, he counsels that a key part in making an investment decision is to engage in seriously considering the very opposite of your investment thesis. You invert always invert. You invert your premise.
For example, if you believe that a particular business model is likely to be successful and that the businesses stock price will be able to benefit from that model, seriously consider the opposite premise that the business model will fail and that the stock price will fall in response? What factors and conditions would cause your investment thesis to fail and for the opposite thesis to succeed?
Bart says bottom line here considering all pros and cons to an investment thesis and its opposite are great habits of mind. This avoids getting mentally and emotionally stuck, but at the same time, makes it easier to stay the course. Always invert. Couple reactions back before we go to your third law, Bart. The first is, I agree with you. And in fact, that's something we've always done at The Motley Fool.
We always have encouraged our listeners, our members, our fellow fools to consider both the bull and the bear hypothesis for any stock. I'm bullish most of the time, and the stock market's tendency to go over time from lower left to upper right, I think, justifies my bullishness. I think there are very rational reasons why it goes that direction over time. So I'm bullish most of the time. Not in every company though. We're choiceful with the stocks that we pick.
And part of our process is to ask, what's the downside? What might I be missing? Do I have blind spots? Forget about the company itself. Where is my mind and my mindset? That's always been such an important part of our work here at The Motley Fool. You're probably familiar with this concept. It's used in business a lot as well. People talk about not postmortems, which is what we do to bodies after we try to figure out, oh, that that one died. What happened? We do a post mortem.
I bet you've heard this phrase before. What about pre mortems? And sometimes, a process of discussing ahead of time before the next project or product or services launch, before the next initiative is taken by groups of us in our lives. We can convene with each other and say, let's do a pre mortem here. How did it fail? And, of course, you hope it didn't fail. But ahead of time, you imagine what are reasons that this might fail. Always invert as you're quoting
Munger. So I wanna say double underline. I completely agree with what you're sharing, and you even use the phrase habits of mind, and I wanna reference Deborah Myers' five habits of mind. I did a podcast on this. Anybody can Google this and find it again. I see it's March fifteenth of two thousand seventeen. So seven years ago, I shared Deborah Myers' five habits of mind. And just to summarize them very briefly, they are in order evidence. How do you know what's true or false?
The second one is viewpoint. How might this look if you stepped into other shoes? The third habit of mine, she suggests we all cultivate and teach in our kids is connection. Is there a pattern here? Have you, whoever you are seen something like this before connection? The fourth, conjecture. After evidence and viewpoint and connection, those were the first three. Number four is conjecture. What if it were different?
Whatever this thing is that we're thinking about or studying or exploring, what if it were were different? Can you play things forward? Imagine how things might play out differently from here. Conjecture. And the fifth and final habit of mind, relevance. That might be my favorite of all personally. Relevance. Why does this thing whatever it is we're talking about, why does this why does this matter? Why is it relevant?
So again, five habits of mind, evidence, viewpoint, connection, conjecture, and relevance. Of Course, I'm summarizing what was a twenty eight minute podcast seven years ago. So anybody who'd like a little bit more can listen in once again for Deborah Myers five habits of mind. But habits of mind matter greatly to me as a person, certainly as an investor, and especially as a giver of advice or perspective through this podcast and many other channels about the investing that we do.
And, of course, I deeply respect Munger. I like always invert. Let's go to Bart's third and final law. He says, I'd like to switch it up and just have some fun. The originator is reputed to be we Willie Keeler, an early baseball star who often led the major leagues with the highest batting average. Here's Keeler's law. I've heard this one before. Haven't heard a phrase as a law, but we're having fun with laws this week.
Bart, you wrote, quoting, we Willie Keeler, quote, hit them where they ain't gonna be, end quote. We Willie Keeler reputedly was asked the secret of his success in leading Major League Baseball in hitting in the years he did or it says he said simply he hit them where they ain't. Willie Sutton, you're referencing Sutton's law last week, a bank robber, Willie Sutton, a Willie of a different flavor.
You write Willie Sutton may have been wildly more successful in his life had he been more guided by we, Willie Keeler's law than his own. Of course, Sutton's law, go where the money is. He robbed banks. Yes. Willie Sutton's right. Barth continues that banks are where the money is, but banks are also where law enforcement knows the money is. Banks ain't where the law ain't. Combining the two Willie's laws together is much more likely to be successful.
As your podcast noted, investing in winners is likely to work partly because winners are winners for reasons that are long term and structural. A seven foot basketball player is likely to get more rebounds than a five foot basketball player. Most investors really distrust just cloning a successful strategy. Instead, they tend to think that the current situation is destined to fundamentally change and reverse course. It's just a matter of time.
I believe this is partly out of our inherent desire to challenge ourselves. We get restless with success and root for the underdog. It just seems too easy to just sit on our hands. Bottom line, in closing, Bart Hubbard writes, hitting him where they ain't means that we shouldn't expect superior investment results just by following what everybody else does. But hitting them where they ain't doesn't mean avoiding investment strategies that are current winners. It's actually quite the opposite.
When Willie Keeler was at bat awaiting the pitch, he had to anticipate not only where the fielders were positioned before the pitch, but where they would likely move when he made contact with the ball. He had to hit them where they ain't gonna be. Investment decisions are a continuous process, not just one time buy and sell points. Time horizons are a key to applying the hidden where they ain't law. Thanks. Bart Hubbard. Well, Bart, again, I said at the start, this one's a doozy.
I think this one mailbag item might almost be the majority of this week's podcast, and yet it was completely deserving of that. I so enjoyed your look through your three laws. The first one in particular was an eye opener for me. The the idea that maybe the only law is that there are no laws, and you went on to explain why in mathematical terms. Then you rocked Munger, and especially for fools, I hope we get it.
We're calling ourselves fools after all, not the wise, Always invert and then hit him where they ain't gonna be. I do wanna say in closing that part of the reason I think rule breaker investing works is because even though many of our members have mimicked it and we get wonderful notes from people years later saying, this has worked for me. Thank you. And what they were doing is they were following what we were telling them to do. Nevertheless, most people don't listen to this podcast.
Most people don't subscribe to Motley Fool services. The vast majority of the world is not at all listening to these things or behaving in the contrary ways that we behave. A quick example for me, I think I mentioned this last week, but the idea that the third trait of Rule Breaker stocks is that they exhibit outstanding past price appreciation. That on its own is so counterintuitive for most people that we would specifically be looking for stocks that have already gone up.
Not only does it make much sense to most of the world today, I don't think it ever will make sense to the majority. I think we're always going to be in the minority with that, and that's why in a lot of ways, I think we hit them where they ain't gonna be with our approach to investing. And I speak specifically of rule breaker investing, but I would say so much of what we do across The Motley Fool. Anyway, one fool to another, Bart Hubbard. Thank you so much for writing in.
You know, I was saying offline to my producer, Des, earlier. I was saying, what I'm really after in life is the good opinion of good people. It's steadied me pretty well through life. I'm not saying that's the only way to behave or the only thing that should drive you in this world, but it's not a bad way to go throughout one's adult life. And therefore, I count it especially worthy when I get wonderful thoughts and notes from people who are clearly very bright and very fun to be around.
And Bart, despite being in your own words, a man of no particular wealth, and the jury's definitely out about your taste. You fit in very well in this podcast and among fools. Alright. Rule breaker, mailbag item number three. David, I've just listened to your I Fought the Law episode. I think the law that you attributed to Amara or one very similar to it was coined a lot earlier about one hundred eighty years ago by Ada Lovelace. Now this note, by the way, is from George Rowe.
George, a long time Motley Fool contributor and employee, and now he writes at the end, long retired. So first of all, it's great to hear again from you, George Roe, and let me continue with your note. Ada Lovelace is generally acknowledges the world's first computer programmer. She worked alongside Charles Babbage contriving programs for his mechanical computation machines, the difference engine and the analytical engine.
And sometime in the eighteen forties, she said, and I quote, in considering any new subject, there is frequently a tendency first to overrate what we find to be already interesting or remarkable, and secondly, by a sort of natural reaction to undervalue the true state of the case when we do discover that our notions have surpassed those that were really tenable, end quote.
Alright. And just to review, Amara's Law, one of those shared last week, we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. And, George, you're pointing out a very similar sentiment from Ada Lovelace a century or so before. She said that about the public reaction to the mechanical computers of her era, you write.
I used to cite her rule when I was lecturing in the nineteen eighties in the introductory lectures to a course I taught on AI when I was reviewing the history of artificial intelligence. AI is a subject that is topical at present, George asserts. I agree with that.
Many talk about AI as the overnight success of the last year or two as the place where the money is at the moment, but the expectations of AI have ebbed and flowed since the first conference on the subject in the summer of nineteen fifty six. There have been many so called AI winters when it's been dismissed as overhyped whimsy, and many metaphorical AI summers when it has been seen as about to deliver human level intelligence and flexibility.
It has repeatedly been subjected to what I think is, George says in conclusion, Lovelace's law. All the best, George Roe. T m f Grow, g Roe. Well, thank you again, George, for writing in. It's great to hear from you again, and I'll just say that I think you've hit upon truth for the most part. As best as I can tell, that is a direct quote from Ada Lovelace as you mentioned in the eighteen forties.
The only difference I can really see between what she's saying and what Amara said more recently, I guess I would say there are two differences. The first is that Amara is focused more on technology, whereas Ada Lovelace is speaking to, I think, is more general. She's talking about an overall tendency, a human tendency to overrate what we find to be already interesting or remarkable. So I think Amara in a sense focused our attention on just that within the realm of technology.
Lovelace spoke much more generally. I think they both speak truthfully. I I really appreciate you pointing that out. The the other thing I'd say that distinguishes Amara's Law from Lovelace's Law is it's a little easier to say we tend to overestimate the effect of the technology in the short run and underestimate the effect in the long run. It's a little bit longer to say what Lovelace said, and it's a little bit ponderous language from almost two hundred years ago.
But with all that said, hashtag truth. And I really appreciate you writing in, George Rowe. Great to hear from you. I also wanna say some of my favorite fools are the ones who list themselves as long retired. You know, that's what we're trying to do for so many people worldwide. That's what we've been trying to do for thirty years. We're trying to accelerate financial freedom, and the word retired itself can mean many things.
Often, I've said I don't ever wanna retire if retirement means stepping away from the world or not being relevant, one of my favorite habits of mind. I think we should stay in the game, whatever the game is, our whole lives long. Keep trying to add value to the lives of others, and I think that's the kind of retirement you're speaking to. And, George, you're demonstrating that by taking the time to write in even though you're retired and help us learn a little bit more about thought and history.
So thank you again, long retired fool. If retirement simply means financial freedom, I want everyone to be retired. It's not easy. We're doing our best to help, but it's the decisions and choices often discipline that come from each of our listeners and members that will get you there far more than any other factor. Alright. Two more mailbag items. Let's go on to mailbag item number four. This one from my big fan, John. John writing in about dividends.
Hello, David, and the Rule Breaker Investing family. I just finished listening to a fun episode of dividend investing. This is weeks back. Leave it to the Rule Breaker Investing podcast to break its own rule and talk about dividends. I love the dividends. John writes, who doesn't? I have a portfolio dedicated to dividend paying stocks and REITs, real estate investment trusts. I really enjoyed the history of dividends and stock buybacks that Matt Argosinger provided.
Also really appreciate the distinction between stock buybacks and dividend paying companies. Of course, this was the first Wednesday of the month of May. We kicked it all off with dividend fools volume two with Buck Hartzell and Matt Argersinger. The episode, jump goes on, is full of coincidences. Coincidentally, the property REIT EPR that Matt referenced was the first stock I did some research on and picked on my own.
I've held this company since two thousand fifteen, enjoyed somewhat consistent monthly dividends. The company did withhold their dividend paying for a period of time during the pandemic, but eventually resumed their regular monthly dividends. So my hand was up in the air, John says, when Matt said, anybody raise your hand. No one's ever heard of this company. I have to say, John went on. I'm very surprised Matt didn't know what EPR stood for.
That's the snarky question I asked Matt on the podcast. What does that actually stand for? Jump says, after looking at its website today, I now understand why. If memory serves, back then, EPR stood for entertainment property REIT. I have a feeling they're trying to rebrand though, because now on their website, nowadays, they call themselves the diversified experiential REIT. Yep. I went to their website, EPR, and that sure enough, I think it's got a trademark next to it.
It's the diversified experiential REIT. That's maybe why Matt was saying he was saying experimental as his guess at the time. Let me pause for a sec there. You know, experiential read. What is indicated? What is meant by the choice of that word experiential are hotels, amusement parks, hospitality experiences, businesses that operate in and around giving humans, consumers experiences, on-site experiences.
So for those like me who were scratching their head at what the heck a diversified experiential REIT might be, TM, that's that's what we're talking about. Jump goes on to close. I looked into Buck's recommendation of Brookfield Infrastructure, BIPC, and I have a question about that. According to Schwab, the price to earnings ratio of BIPC is two thousand eight hundred forty eight. This number is really high if we use traditional math. Could you speak a bit about that?
I'm quite certain it must be using some different calculation. Could it be that p ratio doesn't really apply to this type of company's valuation? I've had the same question for another read, a commercial one. I don't really know the answer. All in all, I love the episode. I hope we won't have to wait another four years for dividend fools volume three. Well, thank you again for Reddy and Jim. Yeah. It was fun to talk dividends.
I think without looking deeply into Brookfield infrastructure myself, often companies that have staggeringly high PE ratios of triple or quadruple digits usually have faced a point in their history where they are investing a lot of their earnings or cash flow into growth. And so all of a sudden, what was a steady standard amount of income declines drastically. This can also happen for cyclical companies.
And so all of a sudden, if a company used to have regular annual earnings of eighty cents per share and all of a sudden, they just had two cents in that off year cyclically or where they were reinvesting. All of a sudden, that PE ratio will look sky high. The stock is not gonna lose forty times in value just because its earnings went from eighty cents to two cents.
There's a lot more going on with company valuations and balance sheets than just whatever the latest quarterly or annual earnings figure was, but it can throw those price to earnings ratios off. And so it's worth paying attention. I I guess I I would just say one of the habits of mind we can develop as investors is not being single factor investors where you're just looking at a single number.
I know you're not, John, because you're looking at the price to earnings ratio of companies with dividend yields, which is another way of valuing stocks. And in the end, we should be looking at the top line and the bottom line and lots of other factors as we think about what stock we want to buy next, whether it's a rule breaker stock or a dividend full stock. They deserve us using that second habit of mine from Deborah Meyer Viewpoint.
How might this look if you look at different numbers or a different view of a company. You know, this is an investing podcast a lot of the time, and even though Deborah Meyer comes to the world of education and those five habits of mind are what she thinks our schools should be teaching our kids, I love taking frameworks like that and applying them directly to our topic, stock market investing. And I think, in this case, Viewpoint is a really helpful one to have.
Thanks for writing in, John. Good on you. Alright. And on to our final mailbag item for this May twenty twenty four mailbag from Steve Hostetter. Dear David, this is the fourth year I have written you. For reference, you read a letter I wrote in your February twenty twenty one mailbag titled Tinker Tailor Soldier Sailor, and I've been drafting an annual lessons learned portfolio update ever since, Steve writes.
Now for long time listeners, you might remember that Tigger Tailor Soldier Sailor podcast. And if you do, one of the the characters I introduced on that mailbag was a firefighter, and that's exactly who Steve Hostetter was and is. Although, he's now, like, I like my fools, he's now retired. Steve goes on in this month's note.
This year, I don't have any share worthy lessons regarding my investment decisions, but I read some books that have had a profound impact on the way I think and should I hope improve my investment decision making process? The books are as follows, and here comes a short reading list. I'm familiar with a few of these, Steve, in part.
I'm delighted to share this near the end of this May podcast because, yeah, I'm thinking about authors in August twenty twenty four and who I might wanna have on to talk about their book two months from now. But almost anytime we share reading lists on this podcast or through The Motley Fool, a lot of you appreciate this. And because I respect Steve Hostetter, I think for any who haven't read these books, you'll enjoy these as much as Steve has.
Here's his short list, Thinking Fast and Slow by Daniel Kahneman, Everybody Lies by Sepp Stevens Davidowitz, Thinking in Bets by Annie Duke, Mistakes Were Made, But Not by Me by Carol Tavris and Elliot Aronson, and Fooled by Randomness by Nassim Taleb. I'm a sixty one year old retiree, Steve Wright, and near the top of the long list of things I love to do with my time is read. This comes as a surprise to my parents, my brothers, sons, and, yeah, me.
As I wasn't a big reader outside of school required texts until I retired, but now I'm into it. There are so many interesting things to learn about. From the titles of the books just listed, it's not too difficult to figure out that I'm interested in understanding how people think, how I think, and why I think what I think, and how I came to think it as opposed to simply studying psychology as I did in my undergraduate days.
The books I've listed have practically helped me to be more self aware of my biases and recognize when I might be wrong about something. Each of these books articulates why this is so difficult from a unique perspective, but a common theme is that our biases are primarily subconscious, influencing what we believe and what we want to be true. This is often very different from what is factual. Admitting we might be wrong is hard. Being intellectually honest is hard.
Annie Duke states in her book Thinking and Bets that, quote, motivated reasoning and self serving bias are two habits of mind that are deeply rooted in how our brains work, end quote. We just aren't wired to be objective. Sometimes, our ego is the problem, but it's our subconscious biases that are difficult to recognize. Changing our biased behaviors, Steve goes on, and being aware of other people's biased behaviors requires us to be constantly conscious that they're lurking about.
But the benefits are worth it, in my opinion. It can give us an edge in life because we'll be open to information that we normally wouldn't be. This has the potential to make us smarter, wiser, more humble, and more empathetic. And when we communicate with people in a way that lets them know we are open to their ideas, It can only improve our relationships.
Related to investing, being constantly and intensely aware of our biases is our only hope of ever controlling emotions like the fear of missing out FOMO, in my opinion, and we can't be counterintuitive if we don't know what our intuitive looks like. Steve asserts intuitive going with one's first instinct and reaching decisions quickly based on automatic cognitive processes.
Okay. I could go down the rabbit hole writing about all the things I've learned from these books, but I'll leave it at that. They have already made me smarter and happier, and I think they'll make me richer. I hope they can do the same for others on team rule breaker. It's possible that I originally heard about one or more of these books from you or one of your guests. If so, I apologize for not giving credit where it's due. My best to you and all of the rule breakers tribe, Steve Hostetter.
Well, Steve, thank you very much. That was your reading list. I've not had those authors. We certainly had Nicholas and Nassim Taleb and probably each of those authors on podcasts or at member events over the years. And I think the reason that we do the reason of your avid interest here is and is it the theme for this whole mailbag? The habits of mind that we cultivate over the course of our lives affect everything that we do.
It starts with our own perception and often it's what we're telling ourselves in our head. Oh, of course, she said that because she's so this way or I think this will happen. And then when it doesn't, we sometimes forget that we were saying ahead of time, I think this will happen. There are lots of habits of mind that involve us tricking ourselves. Highly ironic.
And so it's very helpful to gain self awareness as you're pointing out to have people point out to us through their books, through their talks, the biases often subconscious. The more that we can make the subconscious more a part of our conscious, I think the better off will be. It definitely works towards smarter. Pretty sure it works toward happier.
Steve, you pointed to the benefits in our relationships of not being judgy, of coming across authentically as someone who's open minded, who doesn't think they have everything licked, who's willing to take in new information even if it goes against what we want to be true. These are powerful reasons that we can be smarter and happier. And as you mentioned, of course, richer too, fitting the Motley Fool's purpose to make you smarter, happier, and richer. I appreciate you rocking that.
And as a final gift, as we close out May of twenty twenty four in this podcast, I wanna share again from what Steve Hostetter shared three years ago as a firefighter in Tinker, Taylor, Soldier, Sailor. Again, it was February twenty fourth of twenty twenty one. You can go back and listen to it, but I just wanna excerpt one paragraph from the transcript from what he shared as a final going away gift for all of us in our habits of mind as we close out May of twenty twenty four.
And I quote you, Steve, my hope for your listeners and the people in my circle is that they become true capital f fools as soon as possible and avoid the investing mistakes that I made for so many years. I've made many, but the three mistakes that have been most devastating to my net worth can be summed up easily, and they are simple to avoid. They are as follows.
Number one, buy several recommendations when you start investing in just a company or two increases the probability of hit and miss returns. It will deteriorate your confidence thus decreasing your interest and your commitment to investing. Conversely, investing in several companies will increase the probability of high returns and your confidence resulting in more investing and compounding into significant wealth. Here, Steve is just pointing to the importance of diversification.
One thing we've often said at The Motley Fool, don't just buy your first stock, buy your first fifteen stocks. In fact, it's easier than ever before to do that today because, yes, many brokerages do now have fractional shares where you can buy just parts of shares. You can take a hundred dollars these days and spread it into fifteen different stocks if you like. That's something that was completely impossible to do one generation ago. Anyway, back to Steve's number two mistake to avoid.
Number two, don't sell without a foolish capital f. Well thought out reason. This mistake has cost me dearly. I have a handful of companies on my list that weren't interesting for a while, so I sold a list that went on later to multi bag. I bought Tesla at thirty one. I sold it at ninety. Need I say more? Fortunately, I also have a longer list of multi bagging rule breaking companies that I didn't sell, and I plan on holding for a long, long time.
And before we go to his investing mistake number three, most of you will probably be familiar with the language of multibagging. But what we mean rocking Peter Lynch's ten bagger language, which is drawn from baseball, we're talking about a stock that doubles in value, we say, is a two bagger. A stock that goes up ten times in value is a ten bagger. So a multi bagger is a stock that has made you multiple times your initial investment. That's what Steve is speaking to.
And finally, he says, number three, get started. If you're listening to this podcast and you aren't a Motley Fool investor, just do it. Buy a subscription to Stock Advisor and or Rule Breakers. Open a brokerage account. Fund it. Invest in twenty or so companies. Start with a small portion of your portfolio if necessary until you get comfortable. If I'd been a true fool, capital f at the age of forty instead of fifty, I would be significantly more wealthy.
If I got on board even earlier than that, I can't imagine what fortune I would have amassed by now. Please, however old you are, get started the capital f foolish way now. In closing, I'd like to say thank you for the Motley Fool service. It's made investing about so much more than just which stock ticker to buy. I love learning about new innovations, business, and bigger world that I knew was out there.
It is most certainly made me and indirectly my family and friends smarter, happier, and richer. Take care and full on, Steve Hofstadter. And now returning to the present day again, that written three years ago. Steve, it's great to see you learning, learning, and then learning some more. I love that you send me an annual write up. This fourth one, this fourth year included some of your favorite books.
I know many people have just heard a title or two that they're going to read in the months and years ahead and benefit from you sharing out your wisdom. I really appreciate you sharing your investing mistakes as well. Cunningham reminds us, putting stuff that's mistaken out there is much more likely to provoke others to act than things that are perfect.
So the more we admit our vulnerabilities and our mistakes, one thing we've always done at The Motley Fool is talk about all our bad investments, something I've done a lot on this podcast, losing to win one of my big themes so in evidence in your note this year and your note years ago. Well, from a month that featured dividend fools and then some blast from the past points, what you've learned from me on my birthday week, and then last week, I fought the law and the law won.
Well, I think this was a most worthy mailbag to conclude and deepen our thinking of the past weeks. That's really in the end what I want from our mailbags. It's my opportunity to learn back from you whatever arose as you listened and learned and shared in this podcast. And as I said a couple of weeks ago, I think I've learned more than anyone because I have the great privilege and fortune of hearing back from you what you thought you taught me all the way through.
Alright. That's May. Looking forward to June. 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.