“Rule Breaker Investing” November Mailbag: Gratitude and Paying It Forward

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This video was recorded on Nov. 30, 2022.

David Gardner: Here we are, Fools. It’s the fifth and final Wednesday of November 2022. Seventy-three, that’s the number I have for you today. If you’re looking for a lucky number today, this week, this month, you now have it: Seventy-three, it’s a prime number; mathematicians know how beautiful those are. And I do too, because this week’s mailbag marks the 73rd consecutive monthly mailbag in Rule Breaker Investing history. Seventy-three with your Twitter hot takes, questions on Rule Breakers, thoughts aplenty, only on this week’s Rule Breaker Investing.

Welcome back to Rule Breaker Investing. Let me be perhaps the last person to wish you happy November; the month is running out quickly. This is Nov. 30. The Rule Breaker Investing podcast comes out on or about 4 p.m. Eastern all year long, every week, and that particular day is right now.

It’s been a fun month for this podcast. Looking back over our four previous episodes, we led off with Mental Tips, Tricks, and Life Hacks, vol. 7; that started it on Nov. 2. One week later, Company Culture Tips, Kara Chambers, Lee Burbage, back with me for vol. 10, intentionally picking the greatest hits from the previous nine episodes in that series. All of us can make our workplaces better; there are many different ways to do it. Ten of them were featured on Nov. 9. We then did a Reviewapalooza! episode; Emily Flippen joined me to review two five-stock samplers last week, the week of Thanksgiving here in the United States. It was gratitude 2022, celebrating the torchbearers, and the part of me that is only with you.

Well, here we are. It’s Nov. 30. Here’s some hot takes from Twitter reacting to the month that has been. Gaurav Kumar, @GauravKInvestor, it is so good to put a face to the voices. Gaurav, you’re talking about having Kara Chambers and Lee Burbage, I think we just snapped a photo of ourselves, since we were all in Fool HQ together with our producer Rick Engdahl. There we were like old times, physically present in the same studio during the podcast, and we just put that out over social media, and you’ve got to see Lee and Kara. It’s a delight for me to have seen them both for something like 17 and 25 years respectively, and counting. It was funny to think back to our first episode of Company Culture Tips together when Kara was celebrating her 10th Fooliversary and Lee his 17th. Then all of a sudden, fast-forward seven years later, and Kara has celebrated her 17th Fooliversary at The Motley Fool. Thank you for listening in, Gaurav.

Reacting to the same podcast, Jason Moore, @JimminyJilickrz, the most frequently (probably) quoted Twitter hot-taker following this podcast: Jason, thank you again. You wrote, “‘compelling, not compulsory,’ has been such a gem from the first time I heard it. I try and look for ways to bring this to many parts of daily life.” Yes, Jason, you were rocking one of Lee’s dictums, one of his prescriptions to himself and really to any HR department, if you will — which is if you’re having to make things compulsory, you probably should work harder to make them compelling, so that your fellow adults want to do the things that you’re asking, as opposed to feeling like they’re being compelled to fill out that form, show up for that meeting, do that thing you want them to do. “Compelling, not compulsory.” A good way of thinking about planning family life sometimes, as well. Jason, thank you for that.

Two more. Carlos F-S, @cfs76: “Thank you, David! I started investing in 2021 and your [voice/advice] is always present. It has kept me calm during this period of sustained losses and it keeps me ‘swimming’,” writes Carlos. “Your @RBIPodcast has been a huge positive influence. I just wanted to say, Thank you, sincerely.” Well, thank you back, Carlos. It takes two to tango. That’s true in dancing; it’s also true in podcasting. The reason I do this is because you listen in, and presumably the reason you listen in is because I do this and it’s our pleasure to share with each other from week to week, in good times and bad.

One thing I did mention this month, reminding all of my fellow Fools this: Two years out of every three, the market rises, and that’s why it goes from the lower left to the upper right over time. If two years in every three the market dropped, you can bet that stock market line wouldn’t look so great over the long term. But the truth is, things go up more than they go down, and that’s important to remember, especially in the dark times. Thank you, Carlos.

Finally @LibertyCentric, prepping me to hype up next week’s podcast: @LibertyCentric writes, “My family thought they’d escaped 2022 without an abundance of board games under the [C]hristmas tree. Bwahahahahaha!! #boardgamesrule.” @LibertyCentric, you’re enabling me to preview next week’s Games, Games, Games; I believe that one is going to be vol. 4. I’ve gotten into the habit once each year, the first week of December, so you still have time to order before the holidays — my favorite board games, tabletop games, card games of the year that has been. I’ll try to pick five that are typically lighter games, casual fare for families, and then five for harder-core gamers. I’m getting my lists together this week. I look forward to doing Games, Games, Games vol. 4 with you all next week

Enough then with Twitter, and I hope everyone’s still using Twitter. I’m still using Twitter. I once applied for the blue checkmark, and I got it because I’m me, and it was just an authentication process. These days, the checkmarks they keep a-changing, and apparently, you might need to pay some money to use Twitter. No one yet has made me do that. I probably would pay Twitter $8 a month to post and continue to use it myself, but I realize that can be off-putting to some. Anyway, I think some form of social media connection is helpful. I intend to maintain that unless somebody has a much better idea for us. @RBIPodcast is this podcast’s social media handle on Twitter. I am @DavidGFool on Twitter.

Rule Breaker mailbag, item No. 1 of six this week: Thank you, Rich Smith, for this note. “David, I want to send a heartfelt thank you and appreciation of the Motley Fool and all the podcasting content. I shared this with Motley Fool Money earlier, but this year, I won’t be able to spend Thanksgiving with my family. I’ve mentioned it before in some of my previous messages, I’m a military Fool. I’m currently overseas for some extended duty, and wanted to offer my appreciation for what you all do. The podcast provided a much-needed reprieve from the day-to-day tempo. The market news, insights, and humor are something that I look forward to daily. Again, thank you to all the Fools this Thanksgiving season, and for helping me to pass the time while I’m away.” Fool On, Rich. Well, “Fool On” has been the way I’ve signed off many a note since we started this company — yeah, I think I was sending AOL emails from [email protected] back in the day in 1993-4.

Thank you for Fooling On Rich, and thank you for your service. I know so many of us here in the United States, and really all of us in every country in the world, are grateful for those who keep us safe. Thank you for the sacrifices that you make, small and large. There are many small sacrifices made by people serving the public every day. Larger ones like not getting to be with your family for Thanksgiving I particularly appreciate, so Fool On to you, Rich. I can see that you are a regular listener to Motley Fool Money.

Of course, this podcast comes out just once a week, but Motley Fool Money comes out every single day. If every listener of Rule Breaker Investing is not already also listening to Motley Fool Money, just search your podcast aggregator for Motley Fool Money, hosted by longtime Motley Fool personality and good friend Chris Hill, and a cast of thousands. Thank you, Rich, for being a daily listener to Motley Fool Money and a weekly listener to Rule Breaker Investing. Fool On to you, sir. Happy Thanksgiving to you in this season of gratitude.

On to Rule Breaker mailbag item No. 2. Welcome, Rick Munarriz, how’re you doing?

Rick Munarriz: I’m doing great. Thanks, David.

David Gardner: I’m delighted to have you join with me for this mailbag point No. 2, Rick — long-time analyst for Motley Fool Rule Breakers, writer for The Motley Fool. Man about town, is it fair to say that at this point, Rick?

Rick Munarriz: I don’t know what man about town — I’ve heard it used. I’m not even sure if it’s a good thing or bad. I think it’s a good thing. I’m a man about town, man about city, man about questioning things, I guess, so yes. Thank you, I will take it.

David Gardner: Excellent. Man about questioning things, and in this case, man about answering some questions. We’ve got a nice one in here from Max Karr. Rick, he writes, “Greetings, Fools. I’m a 22-year-old investor currently in my senior year of college. Love what you guys do. Very thankful I was able to find The Motley Fool at a young age. I’ve been learning so much with you all. I would like to ask about and discuss Robinhood [Markets]. I’ve used Robinhood since high school,” Max writes, “I’m very thankful for it. Robinhood allowed me to begin investing small portions of money, getting some skin in the game, pushing me to further learn about and love the stock market. Although Robinhood definitely has competition, I’ve thought of them to be a bit of a Rule Breaker.”

I’m going to pause it right there. Rick, as you think through Rule Breakers, and you know this framework as well as I do — at this point top dog and first-mover, an important emerging industry, sustainable competitive advantage, strong past price appreciation — the list goes on. We won’t go through all six of the attributes we look for in Rule Breakers, but we’ve talked through them many times over the years, and we will many times again. Does Robinhood tend to grade out as a Rule Breaker for you, Rick Munarriz, or not as much a Rule Breaker?

Rick Munarriz: I think in some ways it’s definitely very Rule Breaker-ish. I think you have the case where Robinhood disrupted. Obviously, it wasn’t the first trading platform, the first way to trade stocks, equities, and crypto. But it did disrupt the market. The reason why so many brokers now have zero-fee commission trading is because Robinhood planted that flag and said, hey, free commission trading, and everyone said, well, we have to compete against that. It definitely disrupted the industry, and I think the founder-CEO Vlad Tenev has done a lot of things that are Rule Breaker-ish, like cutting his own path.

But on the other end of the time, the stock itself has been a disappointment since it hit the market. There had been some issues. Robinhood, like so many other trading platforms, [is] struggling lately. It’s had two restructurings so far this year. There are some ways that Robinhood is not a Rule Breaker. But it definitely entered with a bang with a way of just taking a market — the sleepiest markets are always the easiest ones to disrupt, and they clearly disrupted the brokerage market.

David Gardner: The stock has been really interesting to follow. It came public to a great deal of fanfare in the summer of 2021, when it seems like any stock that helped you in your home life, in your locked-down home life, enjoy yourself a little bit more was rocking and doing really well. The stock briefly, and I’m talking about for a week or two, touched over $80. Today, it’s just below $10, Rick. The market cap for this company’s still $8 billion, very substantial.

The next line I want to share from Max is known as “I understand the hate Robinhood has gotten now.” What does that trigger for you, Rick Munarriz?

Rick Munarriz: Again, Robinhood, they’ve done a lot of good things. Just as Max, he discovered Robinhood when he was in high school, and his [inaudible], Robinhood got a lot of young people in the market. You, David, you were in the market very young. I was in the market relatively youngish. I would have loved to have a Robinhood when I was growing up, and I didn’t have to go over to Morgan Stanley or any of the other major full-service brokers to get invested in the market.

Robinhood has leveled the playing field, so that is good. They have a cool little gimmick where if you open an account, you get a free share of stock; it’s usually a low-priced stock. Already right away, they are just easing your way into it without having to have a lot of money to get into investors. In that way, yes, Robinhood does well in that regard.

In another regards, it’s a platform that even now, even today, there’s not a lot of stock trading happening on Robinhood. You think Robinhood is stocks; more than half of it, 60% of its transaction-based revenue, comes from options trading — which is fine, but very speculative in the wrong hands, and 25% is in crypto. It was higher with crypto, but with the crypto market taking a hit. It’s not the stock options, it’s not like you and I that we grew up with a love for stocks and eventually said, hey, options are an interesting way to defuse some of that risk and largely sidestep crypto to a certain extent. But yeah, it is obviously catered to your young market. It gets a lot of young investors excited about trading and speculating. Obviously speculating isn’t as good as investing, but it’s a gateway drug to becoming a long-term investor, I hope.

David Gardner: This is not your granddaddy’s, your daddy’s [Charles] Schwab here — or maybe it is, maybe this is the new form of Schwab, but there’s a lot of trading. Every platform, Rick, has typically benefited from more activity, more volume, and more trading. Yeah, Max goes on, “Robinhood’s mission is to democratize finance for all. This feels like generally a good push.” He goes on and mentions the potential global markets expansion in the coming years. He also talks about a 3.75% interest rate on your uninvested cash, which is obviously a relatively new thing, reacting to higher interest rates. A lot higher than zero these days, which was they were about zero a year ago.

He closes, “I personally would like to live in a world where underprivileged people and investors are able to have the ability to save and put a portion of their wealth into a competitive risk-free rate. This reflects my best vision of the future.” He ends by saying, “Could the ‘hood be a Rule Breaker?” And Rick, to close, looking at this company, the first thing I see is that the stock, we talked about how it once was $80, it’s now $10. It really has been bouncing around $10 for most of 2022, the volatility is pretty low in this one. Up to $12, down to $9, back to $11, down to $9 again. One thing I’d like to see is strong past price appreciation before I could get excited about ticker symbol HOOD, that’s what I see. What do you see, in closing?

Rick Munarriz: Again, there’s a little more than 12 million active monthly users on Robinhood right now. That may not seem like a big number, but for a trading platform, that is substantial. That is a lot of people. They’re mostly very small accounts, so you have to keep that in mind. But again, 12 million was a lot less than where we were a year ago — more than 20 million active accounts on Robinhood. I’d like to see that improve.

Like you, I would like to see so many other things: metrics improved, the stock price would improve. I think that’s all reflective of the fact that the platform is going through a transition. I think Robinhood is promising, and it’s always been on my watch list; it’s always been there. It’s a stock that I’ve been hoping gets it right, because even through their missteps, their company is doing a lot of things that you should be excited about, getting young people to invest. I hope it’d be more passionate about the discipline as an investor, because zero-fee commission trading is basically opening you up to a golden corral of investing, where you can just keep eating and eating and eating and tossing your plates, used plates, and grabbing a new one. But I do think that Robinhood’s markets, their stock is in the right place, but I still think it has quite a bit a ways to go before it’s actually Rule-Breakers-worthy.

David Gardner: Well, thank you. I agree as well. Technically, the company name is Robinhood Markets, which Rick was reflecting in a couple of different points. Ticker symbol HOOD. Certainly, a fascinating company to follow, one that has enabled many to get started investing cheaply. The bad news is it wasn’t a great time to get started investing, as it turns out, from its IPO [initial public offering] in the summer of last year through a year and a half later to this year. But, yeah, in closing, I’ll just add, Max, that I like to think that if I’m investing in something it’s winning. We typically do better when we invest in stocks at their 52-week highs rather than their 52-week lows. Obviously, this rule has exceptions, but I would like to see Robinhood perk up and start to win before I committed significant capital at this point.

Rick Munarriz, Happy Thanksgiving. Good to be with you.

Rick Munarriz: Thanks.

David Gardner: On to Rule Breaker mailbag item No. 3.

“Hi, David, Rick, @RBIPodcast team, The Motley Fool Foundation, and everyone at The Motley Fool.” Wow, Jumm, thank you so much. You’ve addressed us all with your opening. “It’s a season of thanks, again,” writes our biggest fan, Jumm, sometimes a correspondent for Rule Breaker mailbags. Great to hear from you again, Jumm. “It’s a season of thanks, again,” you write. “I want to take this opportunity to express my gratitude for all the hard work and everything that you and your team are doing for our community. I truly enjoyed all of this year’s episodes. I will start my vote for 2022 Besties soon.” Well, thank you for that, Jumm.

“This year,” she goes on, “I would like to dedicate my special appreciation to a newly founded and growing Motley Fool Foundation. Although this year has been rough for many investors, myself included, due to the market’s downturn, I remain extremely grateful that I still have the capital to invest. However, many people are still in a constant struggle. The foundation has opened my eyes to the possibility that there are many smart, innovative, and caring people with a passion to help solve and help those who struggle toward financial freedom. There isn’t a lot of good news this year. But to me, the Motley Fool Foundation has been the light, joy, and hope that someone cares. Solving financial freedom is not easy; that’s an understatement,” Jumm writes. “But with the foundation, I’m very hopeful and will continue to be a strong ally in fighting and supporting in any way I can. I feel that my donation — and thank you again for donating. It’s FoolFoundation.org, my fellow Fools, it is the holiday time of year. We’d love to hear from you.” Jumm, thank you for this.

“I feel that my donation isn’t only deployed properly, but also multiplies to make a bigger impact through our fellowship. If I can have one small request, to hear an update from someone at the foundation periodically, either in future episodes of this podcast or other Motley Fool podcasts, I’m sure many members want to hear more…