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Dec. 1, 2020

Rule breaking to achieve success as an entrepreneur and leader with David Gardner | Greater Washington DC DMV Changemaker

Rule breaking to achieve success as an entrepreneur and leader with David Gardner | Greater Washington DC DMV Changemaker
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In this episode of Partnering Leadership, David Gardner, co-founder and chief Rule Breaker at The Motley Fool, talks about the origins of the company, the importance of purpose and culture in their organization, and David’s belief in Conscious Capitalism. 

Some highlights:

What made David Gardner a rule breaker

The story behind The Motley Fool's founding and the Jester cap

David Gardner’s perspective on how to build a strong purpose-driven culture of engagement

David Gardner's explanation of Conscious Capitalism and its importance 

Also mentioned in this episode:

Dan Simons, Founder Farmers Restaurant Group

Ted Leonsis, Founder and CEO Monumental Sports & Entertainment

John Mackey, Founder and CEO of Whole Foods Market & Conscious Capitalism INC.

Conscious Capitalism DC

Mars Incorporated


Completing Capitalism: Heal Business to Heal the World by Bruno Roche and Jay Jakub

Conscious Leadership: Elevating Humanity Through Business by John Mackey, Carter Phipps, and Steve McIntosh

Connect with David Gardner:

The Motley Fool Official Website

Rule Breaker Investing podcast



Connect with Mahan Tavakoli:


More information and resources available at the Partnering Leadership Podcast website: 



Mahan Tavakoli:Welcome to Partnering Leadership. 

This week, I had the absolute pleasure of speaking with David Gardner. He's the co-founder and chief Rule Breaker at The Motley Fool, which is a financial services company he started in 1993, along with his brother, Tom. They're a purpose driven company, wanting to make the world smarter, happier and richer. 

They've been tremendously successful as a business, also nurturing a wonderful organizational culture. And David has been impactful in the community. In addition to that, championing conscious capitalism, and helping found conscious capitalism here in DC. 

He is brilliant. He is kind, he is loving, he is giving. I hope you enjoy this conversation as much as I did. And I look forward to many more conversations with David. As I mentioned at the beginning of the podcast, we could have spent hours just talking about his investment philosophy. 

But definitely listen to his own Rule Breaker Investing podcast if you're interested in that. David shares his insights on investing, and also every once in a while on organizational culture. Additionally, please make sure to recommend this podcast to at least one colleague or friend, partnering leadership.com, and I welcome your comments and suggestions. When you go to partnering leadership.com, you can either email me, or there is an icon for a microphone, record a voice message, happy to listen to those. And every once in a while I will play some of those voice messages on the podcast. 

For now. Here's my conversation with David Gardner. 

Mahan Tavakoli: David Gardner, my friend. Welcome to the Partnering Leadership podcast.

David Gardner:Thank you very much Mahan. It's a delight to be with you.

Mahan Tavakoli:David, I have to tell you, there are so many things that I've learned from you and so many different conversations they can have with you. Whether it is on your brilliant investment strategy, on the role you've played in the community with respect to conscious capital, or the fabulous job you guys at Motley Fool do with your own organizational culture. So while we're going to touch on every one of those a tiny bit today, I look forward to more conversations with you specifically on those areas in the future.

David Gardner:Well, thank you. Those are areas of passion for me, certainly. But I am ready for anything as always Mahan, and I've always enjoyed you since first meeting you at the start of my Leadership Greater Washington journey, about two years ago, this fall now that I think back on it. And I remember the energy that you brought, and the hard blue glow of intent and purpose that I see just emanating from you. So, that's a John Updike, phrase by the way, but, thank you very much behind. This is great. Let's go.

Mahan Tavakoli: Fantastic. So David, I know you grew up in DC, and your dad was a lawyer and an investor. So how did that upbringing influence who you have become?

David Gardner: Well, there's no question that from early days, our father was teaching us about the stock market and we didn't know it at the time Mahan, but at age zero, for each of us, each of his kids, respectively, he was investing for us. He started an account and then he said it so that at the age of 18, we would take that over.

And he said at the age of 18, here you go. This is all you're ever getting from me. Anything else that I have left when I die will go to your kids. Don't screw up. He didn't actually say don't screw up. Cause he wasn't that kind of a dad, he's a very loving, warm dad. And what he was doing from an early age for us was teaching us that the products and services that we appreciated as kids. You could be a part owner of the company that makes that chocolate pudding. So let's go get more chocolate pudding. And so from early days, we were kind of investors. We were also gamers. That's a big part of our youth. Our dad grew up playing board games with us in some ways the stock market  in a good, serious way is a great game.

I also think business is an incredible game. I think life for me is a game. And in the best sense of the term, there are rules. Sometimes it pays to break those rules, but more often than not, you're trying to win, you're trying to succeed and figure out what that means as a leader and the good news and a secret to a lot of people, I think, is it's a cooperative game.

It's really a case of ,through business what I love so much, trading with each other. You're really good at this Mahan, so I'm going to buy from you and you buy back from me. And that's the way we leveled up our species over thousands of years and businesses like the best example I can think of as a global force for good. 

And that touches the conscious capitalism piece. But so our dad, Mahan, was just a wonderful, loving person who himself was not an investment professional. He was a lawyer, as you mentioned. And, but he gave us an awareness of the ownership culture that you and I grew up in.

Mahan Tavakoli: David, that same ownership culture, married with the fact that you seem to have been a rule breaker from the very beginning, which by the way, is the name of your fabulous podcast that I've been listening to and learning a lot from.

David Gardner:Thank you.

Mahan Tavakoli:So how did you become a rule breaker? Were you born that way? Or was it something that you got from your dad? What made you a rule breaker?

David Gardner: I think there's something in me and I bet it's in you too. It's in a lot of leaders, that when everybody takes, goes strong to the hoop one direction, I want to kind of go the other way. So there's a little bit of a contrarian streak. It might be there in my Irish blood. The Irish were always that way a little bit so maybe there's some kind of ancestral aspect or maybe it's genetic, but, for whatever reason, Mahan, I always loved the people who would take the other side of things, and show us insights. 

One of my favorite preachers, one of the memorable sermons that I heard the Reverend Morris Boyd give at Fifth Avenue Presbyterian church in New York city when I was at an important forming age was this idea that, well, the title of the sermon was in praise of hypocrisy, which seems crazy coming from a Christian pulpit. But the point that Boyd was making in this sermon was, “Hey, at least hypocrites know the right thing to do.

It's just that they're faking it, but at least they know the right thing to do.”

 So anytime somebody comes with a contract point or angle, that's always been attractive to me. It's how David beat Goliath. Taking a totally different approach. Malcolm Gladwell wrote an entire book about that.

I think that the investment approach that I take uses that. In particular, for me baseball and watching the history of the understanding of baseball statistics. Bill James and what he figured out about how to score, measure baseball better, 30 years ago, totally shunned by the establishment.

And then all of a sudden the Oakland A's start to kind of do what he was saying. I loved James back in the day, pre moneyball because he was questioning authority, and then sharing the answers. And he was using science to do data-driven approaches.

And so I think those things can be instructive for us, both in investing and in business.

Mahan Tavakoli: So I know you mentioned Moneyball, you mentioned baseball, I know that's one of the big loves of your life. And I found out that actually your grandfather was an investor in Washington Senators.

David Gardner: Yeah. And that's something that was a part of my youth. Now the Washington Senators in 1961 were moved by the Griffith family to Minnesota. So they became the Minnesota twins. I was born in 1966, so I never knew them as the senators, but my grandfather on my mother's side, here in Washington DC, coming out of Georgetown university as a graduate in the 1920s, stayed in the city, built his own business, and eventually borrowed some money in order to buy a good portion of the Washington senators in the 1950s. 

Our ownership started with the number four, not five though. The Griffith family had the five, so they were the majority owners and they made the decision to move the senators to Minnesota, which my grandfather was highly displeased by. But anyway, I grew up as a Minnesota twins fan and I got to be a bat boy, of course they were in Minnesota.

I was here in Washington DC so the Gardner kids never really got to enjoy the fruits of owning a local team. Obviously it's a very special thing and precious few people in this world, including my kids, ever have that opportunity. 

But it was a wonderful experience where I could kind of touch the magic of the great possibilities life has for us.

And have a relationship with some of those players that I idolized at the time. And so there was a magic to my youth that was in a lot of ways embodied in being a Minnesota twins bat boy.

Mahan Tavakoli: I imagine along with that magic, you also had a lot of drive, David. Because you ended up getting a scholarship, a Morehead-Cain scholarship to go to UNC Chapel Hill. How did that come about?

David Gardner: Well, that was in my senior year. I was going to  St. Mark's school in Southborough Massachusetts. Locally, we'd gone to St. Albans and we kind of grew up at the cathedral club. We went to Beauvoir, then St. Albans, all of our friends, all of our youth were spent in that group of people.

And our dad just got in his head, for really good reasons as it turns out, that we should go away for high school. And so both my brother, Tom and I, and our younger sister were all shipped off to New England around that time. And it was against my will. But it was a great call. I learned a lot more independence.

St. Albans is a very competitive local school. St. Mark's coed, just a little bit of a different environment. And I really thrived in that environment. And so I had a wonderful several years at St Mark's and I just found out that I was nominated by my school senior year as a potential Morehead scholar to get a full free ride to the University of North Carolina chapel Hill with summer's paid for and amazing experiences that I definitely, as a slacker would never have made for my program for my own summers. And I was fortunate enough to win that scholarship. It is given for leadership. 

For me, that was kind of the culmination of the 18 years of life that I'd had up to that point. It was incredible, it was also a little bit of a risk. Because I was setting up to go to Yale. And, I had this prospect of instead taking a totally different path. 

Our dad had gone to Harvard. My dad's smarter than I am though. So, he definitely deserved to get in back in the fifties, but I was probably setting up to do something like that. And then to go to a large public university down South, was a new adventure. But that contrarian of me, that ‘Let's try the other side of the road. Let's take the road less traveled’, that orientation probably causes me to go, “Yeah, I'm going to do that.” And I'm so glad I did.

Mahan Tavakoli: I know among many other benefits of it, you met the love of your life at UNC that you've been married to for more than 30 years.

David Gardner: That's right, Mahan. It was a sophomore year creative writing class where Margaret and I first spent some time together and began dating that fall. So that would be the fall of, I think, 1985. We got married younger than most of our peers. We were married at the age of 24. So we dated for five years.

And then began having kids in our late twenties. And these days, fast forward in the clock, 30 years or so, those three little kids are now all adults. Our youngest is having his senior year of college right now. 

We've been through so much together in life. Starting as undergrad kids, dreaming big, and it's been the most meaningful relationship in my life, of course. And I'm so deeply grateful cause the Morehead foundation basically brought us together. Margaret was also a Morehead scholar in my same class. And we're not the only couple that meets each other at Morehead and gets married.

That's still an odd thing, but it seems to recur once or twice with every class over the years and years of that wonderful scholarship and foundation. But of course the Morehead was so meaningful to me and created a lifelong association that I have with a university. Otherwise I would not have attended.

Mahan Tavakoli: And you come out of that and fast forward a little bit. You have your first child Catherine, and being the true contrarian that you are after having your first child you decide to start a business called The Motley Fool.

David Gardner: Well, you know, you're making it sound as if it was a contrarian or an if then or a causative, but Mahan, I didn't even really probably associate those two things. I will say, looking back on it, you're right. The Motley fool began, technically in July of 1993 as a print newsletter we launched on AOL one year later. 

Catherine was born in between those. She was born in May of 1994. I guess I'll mention that this home brew newsletter that I pulled the name for from Shakespeare, The Motley Fool, that I started with my brother, Tom and our co founder, Eric Rydholm.

Six or eight months in all of a sudden it's April, it's near April fool's day. And so we decided to plan April fools prank, and we decided to do it online. This is a pre world wide web. This is online and services, private services, prodigy. Do you remember prodigy? And so we decided to mimic what was happening that we did not like online, which is people, hyping penny stocks.

And then presumably dumping them on the people that are buying the hype, right? That's the whole pump and dump scheme that has been enforced well. Well, before the internet ever showed up, but we didn't like that. So we satirize it. We created a fake account hyping a fake stock that didn't exist on a made up Canadian exchange for a few days.

It actually ended in a death threat which was on my home answering machine. But that story, it was written up in the Wall Street journal a few weeks later and then Forbes mentioned that. But really it was the spirit of the joke and what we were kind of showing about this new media, both, it was powerful. It could be powerfully good for investors. It could also be used for ill. I think that was the big thing and that caught AOL his attention. And so, somewhere between April Fool's day and the birth of our daughter, Kate, in May of 1994, we started to meet with AOL.

They were, of course, a local company that was itself coincidence. We could have been anywhere. They could have been anywhere, but we happen to be Washington DC natives, but it'd be a growing force in Northern Virginia. And so we launched The Motley Fool keyword fool on AOL in August of 1994, August 4th.

And so that's kinda how all the timing worked out. And yeah, there was a lot to be balancing right there with a first child and the birth of something else really important.

Mahan Tavakoli:Now, obviously, with the success you were having, you also ended up on the cover of Fortune magazine.

David Gardner: Yeah, that was actually just two years later, which I would never have known or been able to predict or have expected. And sometimes when I go back and I, for example, last year I was speaking at UNC Chapel Hills, a business school, Kenan Flagler, a very esteemed institution here in the East. 

I just think briefly out loud with my audience. If I, as an undergrad, an English major at UNC, could see myself right now giving a lecture to the business school, wearing a court jester cap. If you'd shown me a still image of that, of myself as an undergrad, I would have been like, What? I would have had no idea why, what, how, where. 

I try to get back into my early days of the fool mentality. Once again, to think about that fortune magazine cover. Just less than three years from starting it as a home brew newsletter for our parents' friends, since they were the only ones who pay us $48 a year. Our friends certainly wouldn't back then and it was truly remarkable.

It's not really, much of a sign of our greatness. We're really just fools. I think it was more a sign of the times in terms of the rush of interest in the internet, of which The Motley Fool was an early player, and recognizable with our jester caps player. But it was really the fascination that worlds started to develop in the 1990s about the possibilities of the internet.

Mahan Tavakoli:David, you actually were able to also marry your brilliance on investments. With brilliant marketing, you mentioned the jester caps. And I have a great friend of mine, from all the way back in high school. We used to run cross country together style, and he asked me to ask you how many jester caps you have. By the way, before you answer that, he says he has made lots of money, thanks to your advice buying Netflix early, and Tesla early. So he's a big fan of The Motley Fool. But he said you have to ask David about those Jester caps.

David Gardner:Well, first of all, thank you Sal, for your support over the years. Anybody who's ever subscribed or followed any of our advice has been part of our foolish initiative and I'm excited to hear that. And those are some great companies. 

And I have about six, about six. I'm wearing one now for our interview, just because it's more fun to wear a jester cap than not, right? And I think it's a little bit catchier if somebody's flipping through YouTube and finding our video to see some guy with a jester cap than not, but that was certainly also true back when we were on CNBC, or on the cover of a magazine or whatever. People always said, guys, could you please make sure you wear your caps and we did so with joy. 

We love the position of the jester. The jester is the one who can tell the King or Queen the truth. That was the license that they enjoyed in Elizabethan courts. They were the only members typically of the court who could tell the emperor he had no clothes, if he didn't. And of course, they use humor to do so. So we've always been inspired by that. We try to do that ourselves. 

I was also conscious though that in the 1990s, on the one hand it was great marketing brand building, brand awareness. Ted Leonsis, a lot of us know him as one of the most generous people in Washington DC and the owners of some of our local sports teams. But Ted was a champion of The Motley Fool. And he was saying, "You know, guys, it takes 500 Million dollars typically to build a brand. And you guys are doing it through our services and your jester caps, and that's a lot cheaper." So we were conscious that it probably worked really well.

It also can backfire, right? Because we could also be painted as the young guys on the crazy Gogo days of the internet that are convincing America it should buy stocks and all these stocks are about to go down, which they did in 2001. And by the way, 2001, in our 27 years of the Motley fool, we've had 26 good to great ones. I had one really bad year. It was 2001. 

We were conscious at the time, it also can make us look like the wet behind the ears newbies, with their internet business that they had picking stocks, which a lot of people doubt anyway. They think the stock market is a gambling machine. And so it could cut both ways for us. But we hope through continuing to apply the trade that we have as fools for 27 years that we've tried to convince as many people that we are very much for real. And we love the position of the fool and we love the stock market in good times and bad because we're always playing the only game that counts, Mahan, and it's the long game.

Mahan Tavakoli: And David, jester cap without substance would be a fool with a small letter f. Jester cap with substance can be a fool as you described it as capital letter F. And just for example, you bought Amazon back in 1997 at $3 and 21 cents.

David Gardner: And it's been a spectacular investment. The best one of our lives, and the key there is not that we bought it, but that we've held it and recommended it over the course of time. And the same is true of Tesla. And the same is true of Netflix, and a number of others, I would say some of the great companies of our time. 

And Mahan, I think the key there is, we try to be in tomorrow's stocks a day early, today, and we're going to try to hold those stocks way past how long most people hold them. The average wall street mutual fund today holds its stocks inside of a year. That is, if you see what's in that fund, like which stocks does it own on January 1st. A minority of them, it will still own the average fund today by December 31st of that same year. 

And that, those are the professionals. So that's the way the world works. The industry. Some people are trying to make money inside of a second with high frequency trading. We’re doing the extreme opposite and what we're doing, and this is important, can be done by anybody. Because I can't think faster than a second and I doubt I'm going to be getting all the inside information that you would need to trade in or out as a trader. And I just don't think that way anyway, just like for our business, 27 years, that's the same way we think about your investment portfolio in mind. That you should be making a lifetime investment to save and then to invest it, we think directly into stocks. We realized some people like funds and we like index funds, but I really, I love stocks and you and I should be finding the best company because of our time. And we should be holding them for long periods of time. If you hold more than a year, you're holding longer than wall street in a lot of ways Mahan, we're wearing a jester cap to contrast with wall street, right? The pumpin circumstance, the pretention, the arrogance. 

There's some really wonderful people working on wall street. So I'm not going to broad brush the entire thing. But from day one at The Motley Fool, we were trying to democratize wall street, trying to go with things that disarm people like jester caps. But with the help, a friendly, in some ways, Warren Buffet down-home talk that anybody can relate to what to do with your money.

Mahan Tavakoli: And the track record supports it, David, October 2008, you celebrated your 200th consecutive monthly stock pick for the Motley Fool Stock Advisor and those 200 picks return an average annualized return of 20.7%, while S&P 500 in that same time period had gone up only 7.5%.

David Gardner:Thank you. And yes, that was October 2018. That's right. Mahan. And that was Motley Fool stock advisor, which is our kind of service that most people get started with. So maybe Sal, that's where he would have found Netflix where we first recommended it in 2004. And by the way, we still hold it today. I think we've made 250 times our money. With people like Sal finding, it's not going to happen every time, not nearly, but with the few great companies of your era, measured over time. 

As you mentioned, Mahan, 200 consecutive monthly stock picks. That's kind of what I do at the fool by the way, is I pick stocks every month and that means every month in good times and bad. And sometimes we look back and say, "Boy, did I not want to be picking stocks in 2008 and nine." That felt horrible. It was a minefield and everything was blowing up around me. 

And now I look back and say, "That was like the best time that I could have been recommending new stocks." Because the stock market, of course, recovered as it always does. Even when people start to think bleakly that it won't. Every single time the market comes back and returns to new highs and you can look at any graph for decades or centuries for the American stock market and you see it happen over and over again.

I don't think we'd be worth listening to that long as court jesters, beyond the jokes that we make, if we weren't also helping you beat the market. Outperform index funds, ultimately that you're better with us than you were without us. That's kind of what we're trying to do. By the way, I should mention that the purpose of the Motley fool is to make the world smarter, happier, and richer.

We're a purpose-driven company. It's a really important phrase. We have about 475 employees. Most of them are located right across the river in old town, Alexandria today. And if you ask virtually any Motley Fool employee, what is the purpose of the company? They would be able to tell you right away, it's to make the world smarter, happier, and richer. 

That was part of our journey too, Mahan. I know we probably won't talk about that today, but just declaring purpose. We didn't do that on day one at the fool, we start to learn those things culturally over the course of time, but these days that's such an aligning thing. And by the way, side note, I wish people asked what's the purpose of the United States of America.

Because when you have that conversation, instead of pitting one party against another and you and I are Washington DC people, but we're outside the establishment, at least the political intelligence.But boy, do I think it is important just like we have our core values at our company and yours, to think about, what are America's core values? And what's the purpose of America? And that's really a unifying, uniting conversation that I want to have, that I want to hear from our leaders at a national level today. I think it would be, it would add so much value.

Mahan Tavakoli: That is beautifully put, David. Couldn't agree with you more. And tying it back to your organization. One of the things I absolutely adore about the way you and your brother Tom approach organizational culture at The Motley Fool is that it is a very purpose driven organization. And you do a lot to build a strong culture of engagement with your team.

David Gardner: Yeah. And it's something that we started from day one, Mahan, intuitively without really knowing what we were doing, and certainly not intentionally, but here's how it started.  

Tom and I, and Eric are casting about, we've just launched with AOL. This is the business model, by the way, it was a great business model. I wish it still exists today.

People, do you remember this? You and I were paying four bucks an hour to be online. Now, talk about a different world. I'm so glad that it's free today, but back then, Gee, if you were a content startup like ours, and you were partnered with AOL, you got 8% of that. So we got 32 cents for any hour, anybody spent a keyword fool on AOL, and we negotiated that up after a successful launch to 10%. Ted Leonsis gave us an extra two percentage points. So we were making 40 cents on the hour that anybody's spent. That made us cash flow positive from the beginning. 

And so we didn't have to do a lot of the hard work that entrepreneurs do.We didn't have to have a business plan to raise money. We just kind of started cash flow positive for better and for worse. The better part of it anyway, which is what I'm answering about now is that we could hire somebody. 

We could actually hire a fourth friend. And if you're going to hire back then, we couldn't have Washington DC classified ads through the post, which of course is how new postings were largely advertised back then in the 1990s through the newspaper. So we just kind of asked, who could we reach? The answer is our best, smartest, fun friends from college that didn't already have a job at that point. So we started to hire them. And if you start to hire them, you create a culture unintentionally, and it's a pretty beautiful culture. 

The two keys to that culture.

Number one, it starts with trust. And 27 years later, we default to trust. We always have it at The Fool. Sometimes, we will fail. Somebody will fail and not earn our trust or lose our trust. And sometimes I'll blow it and lose someone else's trust, but we default to trust and always have. We weren't doing things like, for our fun new friend from college, our first hire, we weren't saying, "Hey, you gotta be here at 9:00 AM. Gotta stay till 5:00 PM. You only have five vacation days your first year." That conversation would have, we would have sounded like knuckleheads if we were saying that to our friends. 

So from the beginning we create a culture of trust and one where we were just kind of, making it fun and making it that it's about getting the job done, not when, these days, not where, we're all living, not where in 2020. But I will say we were doing this a couple of decades ago not because it was intentional, but because that's the only thing that made sense as people with a little money left over that could hire one person and how they would treat that person. 

But we did go on to scale, thanks to that cash flow positive first few years. Of course AOL then later goes flat fee and then eventually, and it increasingly becomes free, which forced changes in our business that at different points hurt us or helped us.

That was how our culture started and I will mention one other. 

Quick anecdote Mahan, which is, this comes from one of my favorite people in business. Danny Meyer, who is the founder of union square hospitality group in New York city. Many of New York city's greatest restaurants. Many of them closed right now. And Danny has to have had his heart broken in some way in 2020, but having already interviewed him once I know that he's one of the people who can take it. A great entrepreneur understands truly, the meaning of hospitality. But I once saw him give a great talk as a leader about how he had intuition about how to do a restaurant right. How to make people feel welcome, how to kill it on the Zagat ratings. He realized then he had to open up a second restaurant and a third, and he couldn't be there at those restaurants cause you can only be on one place. And so he realized as an entrepreneur, he had to turn his intuition into intentionality.

He had to think what was going through his head and then he needed to actually externalize that and teach and coach and train. And it was at that point that all of us, at a certain point, when you scale, you start turning that intuition into intentionality. And that's kind of what we've done with our culture over time.

Mahan Tavakoli: You have done absolutely a fabulous job. I know some of the podcast episodes that you record are on organizational culture that you have at The Motley Fool, I would highly recommend for people to listen to those. A lot of brilliant advice on that. Now, all of this journey, you've had 26 great years, one really rough year post September 2001.

David Gardner: So, I mean, it really started pre September 2001 Mahan, because while 911 was the sucker blow at that point, we had already been beaten up pretty silly. We entered the year 2001 with a new business model that we'd been using for several years. And that was a free website. Free advice by Amazon, by Netflix. That was free advice that we were giving. We hoped that you would read the article that mentioned our new recommendation, and we hoped you click the ad next to that bit of advice. And that's how we made money. For a while it worked and made sense. It let you get out there for free and massively grow your audience.

Of course, Facebook has proven that that can be a powerful model, inside or outside of the 1990s. Facebook has grown hugely through free. But you know, when you are free and you're the customer, or you thought you were the reader or viewer. You have to realize that you're actually the product as the line goes, because you're being sold in effect to the advertisers that are paying the platform provider like Facebook or like the Motley Fool back then. 

And so in a sense we were serving up our readers to our advertisers, it wasn't unethical. In fact, it's how so much business happens. Anything that's free, you're the product, if you're getting something for free. And so, that was the orientation that we had. And you kind of had to have it because you couldn't charge on the web back then.

In fact, when we went to the web for the first time away from AOL, you would have thought that might've upset AOL, but Ted Leonsis was saying to his guys, "go for it. We don't know anybody making money on the web. We don't see how you make money on the web -" These are early days AOL"- go out on the web." And so we did, and as it turns out, we were able to scale so much. 

And yet, 2001 begins. The stock market begins dropping the dot bomb days are going to be coming to a temporary close. Amazon.com is about to go from $3 where I'd recommended it up to 95 in the year 2000 down to seven by the end of 2001, early 2002, right. It was a brutal time. The World Trade Center comes down. We all know it. Pentagon here in Washington, DC. Remember the sniper? That was an added thrill for us in Washington DC and also Anthrax. I'll never forget, that was the worst year of my life, and for many of us, for our lives. And that includes 2020, although it's going to be different per different people's experience. But anyway, Mahan, we did our first layoff.

We had 435 employees. So we'd scale from those couple of brothers and their college friend to that fourth college friend to 435 employees. And we realized as our first advertiser, and it was kind of an oligopoly. We did not have that many advertisers and they were big. It was like Ameritrade or Schwab.

They were big players. And all of a sudden, one of them said, "Guys, we're not reupping this quarter. Things are bad. People are not even opening up their 401k statements". 

And we were like, "Wait, what do you mean? We have, we actually have more readers than ever before. You've been a wonderful value partner for the last three years."

Like "Guys, sorry, the budgets just aren't there". 

All of a sudden we realized we have over hired, we're going to have to lay off a hundred people and that was brutal. And that was February. After that we're like, "Well, we won't have to do that again." And it came to be May and we realized we're going to have to do that again. And so we let a hundred more people go. And we thought, "Well, you know what? That was brutal. We're not going to have to do that again." And after 911 the stock market closes for a week. We reached November, we're going to need to let a hundred more people go. 

At this point, we are letting go, of course, many of our most employees were letting go, family members, people who just moved their family across the country a year before, to work with us. People who loved what we were doing. We went from 435 employees down to 85 employees in nine months. And, you can imagine how we felt at that time and how bereft, how sad we felt. 

There's a lot more, we're not going to have time for, there's a whole Rocky comeback story and we can touch on it lightly. Fortunately, the story of The Fool did not end there. But we had already lived through from 1993 founding to that dark moment in 2001. That's eight years of unbelievable learning as young people. The experiences that we had, who we'd met, how we'd surprised ourselves constantly, mostly positively. And then the brutal lessons we learned when our VCs, when we asked for one final round, mid to late 2001, we were like "Guys round four, this is going to be the one that we really need", and they all walked away and said, "Nope." And we didn't even begrudge it of them. 

They were saying SoftBank USA, for example, they were saying things like "We're leaving the US." And in fact, SoftBank USA, I don't think exists anymore. SoftBank is a big prominent venture capital fund in Japan. That whole wing closed down. That's how 2001 was for those of us who remember it.

So we had to really pull ourselves up by our bootstraps. Reassess, reorganize and start again.  We've done really well since then.

Mahan Tavakoli: You have done an incredible job with that, David. Most specifically, though, I want to talk about the fact that you had to make some hard decisions for the business to survive, but you did it with a lot of humanity and care. I would like you to talk a little bit about some of what you all did during those layoffs. Because a lot of leaders at this time, have to make hard decisions for their organizations to be able to survive and eventually thrive. But you did it back then, as you do now, with humanity and care for the people that even when they had been laid off, they were champions of the Motley Fool.

David Gardner: Which we would never take for granted and which still moves me today to think about it. And I'm very happy to say that a number of them were then rehired in 2002, three, four, five, six. And so we did retain 85 employees, which by the way, was 82 more than we probably ever would have thought we would have had when we started the Motley Fool, right? So we were still in a sense way ahead of our own expectations as far as things had fallen. 

But I think Mahan, you talked about it earlier, I mean, it was a culture, as I mentioned, of trust. We were the underdogs, Wall Street was the overdog. We retained that positioning and that kind of feisty, underdog spirit.

We love what we do. Tom and I, we want to be doing this forever. It's an infinite game we're playing. You're never going to win, the market is never going to reach up to the all time point. It's a happy ending for everybody. It'll go up and down over the course of time, more up than down, when everybody who's listening to make sure they understand that. And that's why you should be a lifelong investor. 

I hope the Motley Fool business continues to thrive. We've had periods of down years, not many of them. We've had some great up years. That's going to continue. And so you have to love what you do otherwise. Why are you doing it?

You have one life to live. So from our standpoint, we were down to brass tacks at that point, restarting in 2001. But what we did do is ,at the time, we had our president of the company who was kind of helping run our company, Scott Shedler, no longer with our company today, but gave us a great 10 plus years or so. And Scott said, let's play some seven $1 million bets right now. 

So just to be clear on the finances of our company a little bit, why we had to lay people off. In 2001, we had, I'm going to say, 29 million in sales and 45 million in costs. Which sounds crazy in some senses until you think about what Venture Capital does, which is that it’s you do overspend your means in order to grow and you hope to grow into it, grow past it, get to the fun place where you actually make profits. 

We felt like we were on that track, but it was cut short by 2001 in a brutal way. So that's why we had to immediately lay off so much and retrench. But, so seven $1 million bets at the time, what were plausible things that we could make money at? And one of those was to start a newsletter, which is where we started In the first place. And that was really what ended up becoming our new business. A subscription business. So anybody hearing me right now, who's wondering, maybe you're in the throes of ambiguity, difficulty trying to figure out. Maybe get back to first principles and ask, why did you start what you were doing?

I also want to say, Mahan, that for a lot of us, you don't need to keep doing what you're doing if it's not working. Had we not figured out that we could go back to subscription and do that, we probably would have just folded and maybe restarted somewhere else. 

So I realized there's a lot of me that wants to be resilient and fight through everything for the big win, and I hope I'm doing that. But I'm also the first to say," Hey, cash in your chips and get out if you find yourself in a place that seems untenable or especially if it doesn't feel like what you feel called to do."

If it doesn't align with your life purpose, your work purpose, I'd be the first to say, try to change that up. But for us it did. And so it made it easier. We probably over cut back. Now thinking back, Mahan, we probably could have kept some more people, but we really wanted to be playing the long game, which is the only game that counts.

I always say to our employees wherever you are, I hope you're the longest thinker in the room for the context where you find yourself cause that's so valuable and the world needs it so much. And so we were playing a long game, even though we were still young people who just lived through a huge learning. 

And that subscription business began to take, people started to subscribe. It turns out people would ,you'd hope wouldn't you, they would pay for financial advice. You didn't have to offer it for free on the internet with an ad to click next to it. People would subscribe and even more important, if they had a good year, it sounds like Sal's had a good year or two, they would resubscribe, they would renew from one year to the next. And these days, a lot of us are seeing that model being used by the entire SAAS community, software as a service. Things that were not subscriptions back in our day, Mahan, if we had a day together that wasn't now, but you know, back in the day, it was Blockbuster.

It was transactional. It was late fees. Netflix really subverted the business model more than anything. Netflix turned what was transactional into subscription. So anyway, we happened upon that. Scott made a great call. That started to work and we've kind of grown it out ever since from that subscription model.

Mahan Tavakoli:You've done a fabulous job with that business, David. Additionally, you've been a big advocate and pretty actively involved nationally on the conscious capitalism movement. You're a big advocate for capitalism, but capitalism done right, and founded a chapter of conscious capitalism here in the region. 

So what are your perspectives with respect to what works in capitalism and bringing consciousness together, which you blend into both in terms of your investments, but also your priorities with respect to impacting the community?

David Gardner:Well, thank you for that Mahan and yeah, conscious capitalism in DC, I hope everybody will Google that. And I know you have so many people who are talented and the leaders around the Washington DC area listening right now. So this is a really important thing, and I hope you'll lean in and join in, especially if you are a business or an entrepreneur. We'd love to have you be part of us. 

What I'm about to say in a short course, and I don't want to overstay my welcome, Mahan. So I'm going to be quick on this, but if the short course I'm about to give you in approximately 90 seconds speaks to you, then I hope that you will think, look into conscious capitalism more and maybe join us in the chapter.

So there are four foundations of Conscious Capitalism Businesses. The first is that they serve a higher purpose. They identify it. The leaders act toward it, and people can point to it. Their employees know it, and its purpose over profits. Turns out, secret, the ones that do this best usually have the most profit of all. But you truly pursue purpose first. That's number one. 

Number two, there are four tenets. Number two is stakeholder orientation, stakeholder capitalism, some people call it. Basically you're not just trying to please one of your stakeholder groups, traditionally the shareholder and maximizing value, as Milton Friedman, an otherwise great economists, coached an entire generation to believe. 

No, we believe that you should be trying to please all of your stakeholders. You have a win, win, win mentality. Name each stakeholder, your employees, of course, your customers, your partners and suppliers. Maybe the environment, depending on who you are. It might be the federal government or some aspect of your community, depending on what your business is. And Oh, By the way, shareholders too, if you're for profit. But you create a win for all of them. It's a creative problem to solve for leaders. But when you solve it, it's such a stronger thing than saying, "You know what? We're going to pick one group 'shareholders' and we're going to maximize it for them." Everything else is subservient to maximize, usually in the short term for them. 

So that's a broken model and responsible for the excesses are sometimes the lack of capitalism, traditionally practiced. So conscious capitalism, the other two tenets are simply conscious leadership and conscious culture.

Well, you and I have been talking some of that conscious culture in our talk together. Conscious leadership is something that I think you exhibit, Mahan, and some of my favorite people in business understand that your organization can't grow past your own level of consciousness. Some of the most admirable people that I know realize that, that they needed to grow as a CEO, he or she needed to level up in order for their organization to get bigger. So it's infinite. 

There's no way to ever be fully conscious, but we're seeing a lot of conscious awakening towards systemic injustice, racism, and other things that are part of business, but also part of our history and the business people who recognize that in 2020 are making great strides. Obviously much more still has to happen, but that's conscious leadership and conscious culture. 

So those four tenets, higher purpose, stakeholder integration, conscious leadership, conscious culture. Those things equal great capitalism. 

And a reminder that capitalism is the best model humanity has yet invented when it's done properly. There are aspects of socialism that you might hear kind of laced into that. But boy, do I prefer capitalism over pure socialism. And I think history over and over again has proven why. 

You know, you take Germany, you split it with a wall. You give one side of it, capitalism. The other side of it, socialism, communism. You let them go for 40 years. Who's trying to jump over the wall, which direction and why? That's a very evident learning that you and I have had in our own lifetimes.

Mahan Tavakoli:It’s obvious, David, with your Conscious Capitalism Movement, you’re trying to correct some of the excesses of what had taken place and being misunderstood based on fragment thoughts or other excesses because of other reasons. That’s why I love what you’re doing in Conscious Capitalism. We rather throw the baby out with a bath of water, you’re looking at what are critical ingredients that can make this system successful.

David Gardner:Absolutely. And you know, it's not like this is brand new, by the way. There have been businesses that have practiced business this way for decades. Actually in our greater Northern Virginia area, a very quiet company we don't hear very often. Mars. Yup, that Mars. Some of us think of it as a candy company, but they're actually just as big in pet care pet services, veterinary services today. They have an amazing culture. They're very quiet about what they do, but boy, have they lasted for decades. They have the most humble Spartan headquarters you could imagine. 

I visited, I don't know if you've had that chance yet Mahan, but I got a chance earlier. Actually it was through our conscious capitalism DC chapter. We had a field trip to Mars headquarters. They couldn't be more humble and Spartan. Less arrogant. And any other company that I could think of that has $38 billion in sales, they're part of this, by the way, a wonderful book called "Completing Capitalism." I recommend it to everybody's consideration. 

But I mean how many great family businesses often or mid-major size businesses that run below the radar are actually showing how beautiful business can be? What are the businesses that people love in their home towns that we go to?

Like, I think about businesses I admire around DC. Founding Farmers is an incredibly great business. That's largely a local concoction. Dan Simons, his business partners. They've done amazing work. Nationally, they've been recognized as having some of the best restaurants in our country today. That's a DC company. There are lots of others I can think of. 

So sometimes it's just about realizing what we already have here in the DMV and making sure that we celebrate those players.

Dan Simon said, we want plastic straws out of these restaurants and they led the way. Years before, that was something that became more environmentally aware and more culturally relevant. And so usually the visionary is out there and  seeing things ahead of us. So I've always tried to listen to them when I can invest in them.

Mahan Tavakoli: Fabulous. And that’s how you make a difference both through your investment, through being a champion for Conscious Capitalism. And as I mentioned early on, we can go a lot deeper on each and every one of these areas, David. 

Just curious, when people come to you for leadership advice, because you had tremendous success as a leader both for your organization, initiative such as Conscious Capitalism, are there resources that you typically recommend?

David Gardner: You know, I would say from a leadership perspective and there's a little bit of a recency bias here, there's a new book out this fall. 

First of all, there are infinite books on leadership. And before I mentioned this book out this fall, I'm going to mention that I think Warren Bennis, is one of my favorite writers on leadership and, "On becoming a leader" is a wonderful book that I've enjoyed a lot.

People like Drucker. People who say things as Drucker did, "culture eats strategy for breakfast." I love that kind of thing. I think culture does eat strategy for breakfast and we try to abide by that at the Motley Fool and we try to buy investments in companies that get that. The importance of culture, how it's going to outlast any strategy and, and how important that is.

So I'm a sucker for these, some of these examplars that I grew up as a younger guy hearing from. But I will say that the founder of Conscious Capitalism who happens to be on our board of directors and is one of my heroes, John Mackey, founder of Whole Foods. He has a book called "Conscious leadership", which was that third tenant. I mentioned that third foundational element. If you've not heard that phrase before. You're like, "What, what would that be? Conscious leadership?"

Well, John actually came to speak to us earlier this year at our chapter. It was the national press club. We had over 500 people there that night. Remember when people used to have face to face conferences, Mahan? I'm looking forward to that returning. But John filled the house, the national press club. The topic of his talk was leading with love. Now that's not something that you'd expect to hear from a CEO of a company with tens of thousands of employees, or frankly, somebody who's overseeing a portion of our federal government today.

And yet it is so important when you actually think about what it means, and what it looks like. And so that's one of the chapters of this book, conscious leadership leading with love. That's the talk he gave us all. And if you were there that night and inspired, I think you're really going to love his book. I think it's a spectacular work on leadership, by somebody who's learned so much, I think it has gotten continuously better. It's still a faulty person as we all are, but somebody who's created a lot of value in this world. And, and certainly is, my visionary behind conscious capitalism. Somebody that I follow.

Mahan Tavakoli:And that is a great recommendation, David. And you are a person that yourself, you lead with love. Whether it is the way you approached your team and organization. Whether you all at the The Motley Fool, deal with your subscribers, or the love you have for this entire community. 

And the love you have shared with me as I said at the very beginning, you are very impactful on my thinking on a whole host of issues from purpose driven organizations, to purpose driven conversations, to how to be more impactful. So I could, and will carry on this conversation with you. 

I really thank you for taking the time and joining us on the Partnering Leadership podcast. I would highly encourage people to listen to your podcast, Rule Breaker Investing. It is fabolous insights, you post great conversation both on investment and general conversations. So I’m very thankful for having you as part of this conversation, David.

David Gardner: Well, thank you, Mahan. It truly was my pleasure to join you. I think you and I first started talking about this earlier this year. And this year has been a topsy turvy crazy time. I'm so glad that we found the time. Congratulations on the launch of your podcast. And I want to say two quick things in closing.

The first is simply that, my brother Tom, who's our CEO, leads with love as well as anybody that I know. And I had occasion to mention Tom, once or twice during this talk, but he really is the person who is driving The Motley Fool today and behind our culture. I am co-chairman and co-founder, but Tom is a spectacular leader you might wanna have on the podcast at some point. 

And then the second thing that I'd like to say is just that, these topics I think are so important. And so, au courant and we're coming into the election season. I'm looking for love out there. There's not a lot there, but once we get past this election, I hope that people will start to realize that each of us as fellow Americans are unified with each other to try to make it better for all of us.

And in particular, in closing Mahan, your leadership of Leadership Greater Washington, in my own experience with Leadership Greater Washington as a member of the class 2019, one of the highlights of my last 10 years got me much more in touch with the city in which I was born, a city that I take great pride in.

And I see so many great leaders like you in and around the DMV every day. And I hope everybody isn't taking that for granted. We're here for each other and there's no time in my life that I think that that's a more important thing to remember

Mahan Tavakoli: Beautifully said, David. Thank you. Much love to you, David Gardner.

David Gardner:Fool on.

David GardnerProfile Photo

David Gardner

Co-Founder of The Motley Fool

David Gardner is the Co-Founder and Chief Rule Breaker at The Motley Fool, a financial services company he started in 1993 alongside his brother, Tom. In Shakespeare, the court jester—or Fool—was the one person who had license to speak the truth to the king or queen. In the same way, The Motley Fool has been speaking truth to Wall Street for 26 years, empowering millions of people to take control of their financial lives. The company’s purpose is To Make the World Smarter, Happier, and Richer.

As Chief Rule Breaker, David wears many hats including investor, podcaster, author, and lecturer. David has developed his own style of investing, called Rule Breaker Investing, which seeks to invest ahead of the crowd in the most innovative companies of our time and continue to hold shares well after the crowd has sold. Millions of people and dollars invest alongside David following his stock recommendations made in the company’s flagship service Motley Fool Stock Advisor where he has bought and held stocks like Amazon and Netflix, each up more than 100 times in value (and counting). In October 2018, David celebrated making his 200th consecutive monthly stock pick for Motley Fool Stock Advisor; those 200 picks returned an average annualized return of 20.7% over those 16+ years, vs. the market’s S&P 500 average of 7.5%.
Part of The Motley Fool’s mission to make the world smarter, happier, and richer involves a focus on improving the world’s workplaces. With its unyielding focus on workplace culture and employee engagement, The Motley Fool has twice been named Glassdoor’s #1 Best Medium Sized Company to Work For in America.

David is a recipient of UNC’s prestigious “Distinguished Young Alumni Award.” He loves games of all kinds, especially board games, having a collection of hundreds of them, which the Gardners have played a lot over the years with their three children. David served on the Individual Investor Advisory Committee of the New York Stock Exchange for 15 years and the Folger Shakespeare Library board for 10 years. He currently serves on the Board of Directors of the Conscious Capitalism Institute and is a graduate of the Leadership Greater Washington Signature Program Class of 2019.

These days you can also find him hard at work with a team creating a mobile game to make the stock market fun and accessible for everyone. If you run into him in person, be sure to ask him about Spiffy-Pops.