TIP754: Rule Breaker Investing w/ David Gardner

25:07There's no such thing as short-term investing. I would say that's trading. And trading is the antithesis of investing. Many people use those words interchangeably, and they're really opposites for me. And I know which one I want to do. And I know which one racks up to thousand baggers over the course of time. And which, the other one, has people spending too much time trying to make money, maybe half the time, which is how I define trading. So I'm sorry if you came into our podcast today saying you love trading and you're a trader. I mean, I'm happy for you if you love it. And I know some people can do it well.

25:42But the vast majority of media coverage is about short term, whether it's CNBC or even Barron's and Wall Street Journal. And so much of our actions with our own money are short term, and it's so harmful. And you're paying such an opportunity cost by not investing. Yeah. I mean, it reminds me of your interaction with Jeff Bezos, right? I mean, you believe that you were one of the earliest holders of Amazon. A lot of people can buy Amazon shares in 1997, and very, very few can hold it for 20, 30 years. You know, it's funny you say that because really, it's so lazy, and you're doing almost nothing to hold stocks.

26:26And I know you already get this, Clay, but the world at large, often, they're really enamored or amazed that I would still be holding my Amazon from 1997 or my Netflix from 2004, my Tesla from 2011, our Nvidia position from 2005, 20 years later, still holding. These have been the best stocks you could have owned over the last 20 years. And we just didn't jump in and jump out. We didn't feel the fear around these great companies. There's a lot of fear in 2008 and 2009 with the Great Financial Recession, a lot of fear about in and around COVID for very understandable reasons, a human tragedy in a lot of ways.

27:02So it's not like fear doesn't exist. It's not like markets don't go down, or it's not like companies don't self-inflict gunshot wounds sometimes with Quickster. If you remember what Netflix pulled somewhere around 2011, there are all kinds of mistakes and downtimes that occur over any meaningful period of time. And every one of these great companies is up 100 or more times in value with multiple drawdowns, often of more than 50%, whether it was the company itself or the market at large. these are all part of the normal process of being an investor. I hope your whole life long. And so, yeah, it was fun.

27:42Near the end of the book, I told my Jeff Bezos story. We won't do it here because I mean, I don't want to spoil it in full, but I wanted to tell Jeff in a room full of thousands of people that I might be the second lowest cost basis represented in the room. Of course, he has the lowest cost basis in Amazon stock. While it sounds amazing and so superhuman in some ways to hold a stock from 1997 to 2025, I didn't do anything. I'm the guy who worked the least. So I think it's really worth pointing that out. That's part of the pleasure for me of investing, using the wind at your back that the market provides us 9 % to 10 % annualized returns, which is amazing.

28:24And trying to beat that by finding not just all the companies with an index fund, but let's skip the bad ones and let's buy the best ones and let's buy them and hold them way longer than Wall Street will. And it works dramatically and capital F foolishly. Let's take a quick break and hear from today's sponsors. Curious about online trading, but haven't taken the first step yet? You're not alone. and plus 500 futures is a great place to start. The futures markets are moving fast. And with plus 500, you can explore popular assets like oil, gold, S &P 500, Bitcoin, and more. From crypto to commodities, there's always something happening.

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31:43Start your free trial at shopify.com slash TIP. In the book, you outline very elegantly the six traits of Rule Breaker stocks and six habits of the Rule Breaker investor, which I'd like to touch on today. How about we go through the six traits of Rule Breaker stocks, and we'll dive in deeper on a couple of them here. Robert Leonard Sure. Well, I'll just flash through the six right now then. Trait number one of the Rule Breaker stock is top dog and first mover in an important emerging industry. Almost every word there is loaded. We can talk more about that. That's the most important of the six traits, top dog and first mover in an important emerging industry.

32:25Number two is sustainable competitive advantage. Because after all, if we're going to be buying and holding as long as we're talking about, you better have a sustainable competitive advantage that that company owns or prizes maybe more than one of them. Number three, this is the first of the six traits that's not about the company, but about the stock. And this is very contrary in a way that, of course, the rule breaker in me loves. We want to see trait number three, stellar past price appreciation. Stellar past price appreciation. Those are the first three. The second three also go company, company, stock in terms of what we're looking at.

33:02So the fourth trait of the Rule Breaker stock is that it have good management and smart backing. I'm going to say it's about the humans. Stupid, and I'm saying stupid to myself or to all of us. Too often, people don't think about the human factor and don't even value or think about the value, let's say, of Jeff Bezos, what he represented to Amazon or what Elon Musk represents to Tesla stock and the company. They just sort of write it off. It's not being factored. So good management, smart backing, the character of the people and the people who fund it as well, really important. Number five, strong consumer appeal.

33:40Again, that's about the company. We're talking about the brand. We're talking about the choices that we make in an attention-starved world where there are so many things competing for our time. We got our kids to take to soccer. We have to do groceries as well. Oh, by the way, we're trying to invest in stocks. And we have our professional lives, which for some people are seven days a week in this work from home world, not just four or five the way it used to be. So all of these things are competing for our attention. Therefore, companies that provide a service or product that we come to rely on and we come to love and admire their brand, that's such an asset so that's the fifth trait and the sixth and final trait of the rule breaker stock which clay probably is the special sauce that brings them all together and this goes back to the stock again not the company this is very contrary i want the company to be broadly perceived to be overvalued i want people telling me aol completely overvalued amazon will never make money.

34:41They're so overvalued. Netflix is going to get put out of business by Blockbuster. It's totally overvalued. The list goes on. I used to think everyone's probably right, so I shouldn't buy that because it's overvalued until somewhere in my early 30s. I started to realize new insights and one of them was powerfully, when people say a great thing that has those first five traits and the sixth is it's overvalued, that's actually the best buy signal you could possibly have for those kinds of companies. So those are the six traits of the Rule Breaker stock. Let's touch on some of these more contrarian ones first.

35:17So the sixth one is that it should be overvalued. You explain, of course, that stellar past price appreciation and professional commentators are going to be saying it's overvalued, overhyped. I'm nearly certain that 95 % of our audience is going to listen to this and say, David, you've absolutely lost your mind. So you tell a story in the book of Tiger Woods. What can Tiger Woods teach us about buying overvalued stocks? Yeah, it's a great story. And again, a lot of us grew up with Tiger. And I mean, he's still around today, not what he once was. But in 1996, he was 20 years old. And Nike signed him to a$40 million contract.

35:55And he had never played a single professional hole of golf. And you might imagine, given that Nike had 10 years before, had opened up a big contract with someone named Michael Jordan, and Nike 10 years before that had paid$2.5 million to Michael Jordan. Here we are 10 years later,$40 million, the equivalent of$80 million today for a completely unproven golfer. Seemed crazy at the time. And yet, in that year of 1996, by the end of that year, Sports Illustrated had named Tiger Sportsman of the Year. And it brings chills to me a little bit to think about what he took on as in his first press conference at the Greater Milwaukee Open, when he had just finished his first round of professional golf, he started with the words, hello world.

36:49And that was not unpremeditated. That was actually days later, Nike's campaign that it unleashed around Tiger. But I love that story because you have somebody appearing dramatically to overpay. And by any normal yardstick or any historically based wisdom, you would think, no way, that is a crazy mistake. And he went on to basically be one of, if not the greatest golfer of all time. And so for me, that's an instructive story. And I just started learning from that example. And I started thinking, why did that work? Because that ended up being a brilliant, low cost basis investment, basically by Nike in Tiger Woods.

37:34It's a model for what Rule Breaker Investing is and does. And by the way, if Tiger were a stock, I'd still be holding. That's my way of saying, with almost every great investment, we just keep holding. There has to be a great reason to sell. There can be, we can talk about that, Clay. But it's a great story. And I think the reason it works, and not every golfer is Tiger and not every stock is Intuitive Surgical or Apple. But the reason it works is because Tiger was truly great. And a company like Intuitive Surgical, unleashing the DaVinci Surgical robot on the world 20 plus years ago from a standing start position with a nothing brand has proven itself to be truly great.

38:15These days, Intuitive Surgical has a higher research and development line on its income statement than most of its competitors have revenue lines. We're talking about truly Apple, truly great companies. And that's what I'm focused on. I basically want to find excellence, buy excellence and add to excellence over time. I sell mediocrity. That's how I invest. And I learned that through, not Tiger, I really learned that through the stocks that I picked over time. But Tiger is a great metaphor, analog example for anybody who's skeptical that buying stocks would make sense or that you could beat the market.

38:54And if you made me beat the market with 60 % of the stocks on the market, I'd have a hard time because they're not great. I'm focused on true greatness. The people that are running the companies, what the companies do in this world, I want to feel great about what they're doing, et cetera. So I hope I didn't go on too long, but that's my, we can all learn from Tiger, but not Tiger. We actually can learn from Nike because they're the investor. They're the ones who actually put the money out, took the risk, just like you and I do when we buy stocks. And as value investors, we're oftentimes hardwired to want to bargain.

39:29So when we see a stock that's up substantially, we just tend to avoid it because our gut instinct is telling us we miss the boat. We're supposed to be very valuation focused and focused on price. I'm reminded in the book you outlined, when you purchased Intuitive Surgical in the 2000s, the PE was something like 70. So someone will look at that and say, there's no way that Intuitive is worth two or three times as much as their competitor that's at 20 or 30 times earnings or whatnot. I think what people could maybe be missing there is that these exceptional companies aren't just two times more valuable.

40:04They're not just three times more valuable. They can be a thousand times more valuable. So the market might be looking ahead, say, one to two years and see a lot of potential growth there. But if you're an investor, there's still a lot of potential of what a company could achieve. It's so true. And obviously, part of what I love is that all of my greatest stock picks were so overvalued when I picked them. And these are the companies that went on to go up 100 or more times in value from that position of being so overvalued that you have to discard them, put them in the won't invest there now pile.

40:42And you're making me think, one of the things I love doing in the book, Clay is telling stories. And just based on my own experience, sitting here in my den trying to beat the market. And there's a story I didn't tell in this book that I want to tell briefly now, because you just triggered it for me. The one time I met Steve Jobs, we were at a conference, it was the Business Week, that magazine, the Business Week conference, I think it was 1996. And we were keynoting that morning and Jobs was keynoting the lunchtime talk. And at the time, he was the CEO of Apple and Pixar. And people were like, Steve, how can you do this?

41:22You're trying to be the CEO of two different big public companies. And that seems like a total misallocation of your time. That's what he was hearing from Wall Street institutional investors, etc. And he told a brief anecdote that he basically said, you think I miss spending my time? Well, then you're really not going to like that I spend one day out of every five in the work week, simply interviewing new hires at my companies. You might think that's a real misexpenditure of my time as well. And Jobs went on. But here's the deal. Most people think that somebody who's great is maybe two to three times as good as somebody who's good.

42:02But Jobs said that morning, in my experience, somebody who's great is 40 times better than somebody who's good. and that's why I spend, said Steve Jobs, one day every week just interviewing new hires. Obviously, not only did Pixar and Apple go on to crush it, but ironically, near the end of his life, Steve Jobs ended up being the single largest shareholder of Walt Disney Corporation, something he didn't even start out with because Disney bought Pixar. He got a low-cost basis on his Disney stock and held it. So we're talking about, obviously, an iconically great entrepreneur, or the kind of Tiger Woods-like figure that I look for in the business world.

42:45By the way, I find a lot more of those figures in the business world than the world of politics. I live in Washington, DC. I would even say, in some ways, the world of sports. I have been so incredibly enriched by focusing my time on the private sector and thinking what is really great and who are the great leaders that I know. And we've talked about a lot of them, and we'll probably still talk about a few more before we're done. But that's my Steve Jobs story. It's not in the book, Clay. It spoke to what you just talked about, which is intuitive surgical at 71 times earnings is not just good, it's great.

43:17And great is worth a lot more than people are willing, it seems to pay for at early stages. And so I and my fellow rule breakers try to take advantage of that by being early. And yet it's not just about one side of the trade, it's that you keep holding past everybody else as well. That's how you actually maximize what the stock market can give us as investors. If you want to maximize your gains, you find early and you hold past everyone else, even sometimes to points that it hurts. Yeah. One of the key insights here, I think, is that the qualitative factors can be just as, if not more important than the quantitative, the numbers, the PE, the balance sheets.

43:58So it's really important to look at things like the CEO, the brand, the culture. All these are incredibly important and are incredibly valuable in these amazing companies. But you can't find that line item on a balance sheet. Talk more about better understanding the qualitative factors and some of the things you're looking for in these top dogs, these first movers in the emerging industries. Probably my favorite chapter in the book. And thanks for asking about that and calling that out, Clay. And I hope everybody will go out and read Rule Breaker Investing. But even if you don't, just find a buddy's copy and read chapter 12, because I think that probably is my greatest contribution that I make to investing thinking in the book.

44:39And it specifically arises from watching these six traits and seeing the first five, when they work in concert together, you just find amazing companies. And they're always going to be premium priced. They're always going to look overvalued. Starbucks will always look like I'm overpaying for a coffee company. By the way, the coffee itself, people would say is overpriced. How could that possibly work? And I think the key insight, I didn't have it as a young person, and I didn't even have it until writing this book. But as I finally thought about why do these companies, the ones everybody says are overvalued, these end up being the best stocks of the generation.

45:17And the reason I think, there are probably more than one, but the biggest reason I found is that what matters most in business, there are no numbers for the things that matter most. You just called a few of them out right there, who the CEO is. Does anything matter more? Lots of things matter. And let's go back to a football analogy, since we're about to hit football season here. The quarterback obviously matters. These are the highest paid players on the field. The media typically glorifies them, probably over glorifies them. They're forgetting about the offensive line and the contributions that enable the quarterback to do his thing.

45:53But in a lot of ways, the CEOs are, of course, the quarterbacks of American companies. And while we spend a lot of time thinking about Tom Brady, we actually don't have any line on the financial statements to express the value of the CEO. We've talked about some incalculably valuable CEOs in our time together. There are also CEOs who are destroying value out there. There is no line on the financial statements to adjust for the CEO. That's not the only thing. You called out a few others. I'll just hammer down on one more, the brand. It's obviously the fifth trait of Rule Breaker stocks, strong consumer appeal, Starbucks, Apple.

46:35The biggest companies and the best companies in most industries are the ones with the best brands. And there's no line item for brand on the balance sheet. There's no number. We're adjusting our price to earnings ratios, our price to cash flow, or price to book ratios. So I've just covered two of the things that really matter maybe the most in business. And especially as an entrepreneur myself, I know how important it is to say, who's running this thing? And by the way, what's their reputation? And is that a brand that people love? I know how important those things are. And there is no adjustment for it in most people's valuation models.

47:15And let's throw in two more. I'm not going to speak to them. But innovation, Can you innovate? There's the R &D line that tells us a little bit, but not that much. And then the culture of a company. I am a big fan of company culture and thinking how important that is. Sometimes I describe myself, it's not on my business card, but I could be a cultural anthropologist, a corporate culture anthropologist. I hope you will try to be too. I hope all of us will, because that actually matters maybe more than anything else. CEOs come and go, leadership teams can change, but the culture at companies it's very hard to change.

47:51And when it's powerful, it is beautiful and so strong. And when it's the opposite, it is a death knell. You can buy a company that looks like it's so undervalued. Why? Because it has the worst culture in American corporate culture today. So those are the things that cause these companies to win or lose in the marketplace. They're inputs. Earnings and cash flow are outputs. Working all of our valuation models off multiples of outputs without scrutinizing or putting numbers on or paying attention to, the inputs, I think is crazy talk. And I think in a lot of ways, that's the standard that people have been taught in terms of how to value things.

48:31And so as a rule breaker, while I don't right away have my own answer, I think that's for others, maybe younger people than me, like maybe you, Clay, people to discover in the future, what are good proxies for things that matter more than what we're valuing stocks off of today. So that I think is a powerful insight in the book. I obviously speak more to it. There's a lot more in the book than that, but that's maybe my favorite point that I hope people will think hard about. One of the other concepts I really resonated with was this concept you shared that you've referred to as cheating. So it almost feels like investing in itself is cheating, right?

49:09Getting to own, get exposure and build your wealth and compound over time. So this is covered in the chapter on competitive advantages. And you got this sort of concept from Seth Godin's piece titled Cheating. And I'll briefly quote it here to give the listeners an idea of what you're getting at here. So he writes, Starbucks is cheating. The coffee bar phenomenon was invented by them. And now whenever we think coffee, we think Starbucks. Amazon.com is cheating. Their free shipping and huge selection give them an unfair advantage over the neighborhood story. And then he closes out that piece by saying, why aren't you cheating?

49:43The point is that some businesses just have an unfair advantage over their competition because there's all these sort of factors that almost have a Lollapalooza effect, right? That just make it impossible to stop them to some extent. But it almost appears that they're cheating. You walk into a Costco store and it's just amazing. That of course leads to strong returns for long-term investors, which is the term you hate. It's what delivers returns for investors over time. So that's, of course, what we're looking for. So talk more about this concept of cheating. I really love that you found that and pulled that out.

50:17I think it's just such a brilliant short piece by Seth Godin, one of my favorite business authors. And what Seth is really talking about, as you just spoke to, he's using a naughty word and obviously cheating in most contexts is a word with a very negative connotation and rightly so. And I know you and I and Seth would all be the first to say that. And yet it seems like people who are endowed with incredible natural abilities, we're talking about sports, somebody who can dunk a basketball, I would say is cheating relative to the rest of us who can't dunk a basketball. People who can read really fast.

50:52I have some of these people that I know. Maybe you're one of those people, Clay, you read my book. I bet you read it faster than I can read. There are some remarkable, fast readers and learners, that appears to be cheating. They spend half their time on homework than I do. They retain more of their reading than I do. It seems like, in Seth's words, they're cheating. And he does end that little piece by saying, why aren't you cheating? In other words, why aren't you taking advantage of the natural or situational advantages that you find yourself owning? And yeah, to me, that's a great explanation of why some companies win dramatically and others don't in the marketplace.

51:30And as investors, we're trying to find the former and avoid the latter. And so looking for, I would describe this as business-focused investing. I think more of the world is doing trading than investing. And I think maybe more of the world is doing zigs and zags, chart analytics, the movement of sea slugs and oceans kinds of trading than what I think is much more important, which is looking at the businesses themselves. So I don't really want to look at stock charts. And I think you really should know and deeply care about the company you're buying stock in, what they do. And if they succeed, I hope it's a better world in your mind than if they hadn't succeeded.

52:12I was raised to think I'm a part owner of the companies that I'm buying. When we went to the Safeway in Washington, D.C. Saturday mornings with our dad to get groceries, dad would say, hey, kids, look, chocolate pudding. We own some of the company that makes that chocolate pudding. Let's go get more chocolate pudding. That's an awesome dad. But what he was teaching us from an early age is we're part owners. We can be through the miracle of the stock market and the ownership culture that I hope we're never taking for granted in our country, Clay. We can be part owners of the things that we love.

52:47And I think, therefore, you should take that very seriously. And if you do, you will do better numerically with your returns than if you don't do that. That's been my lived experience. And so, yeah, I think that this form of approaching the markets is business focused. And therefore, we should be looking as anthropologists of the business world, we should be asking with intellectual curiosity, why is Costco so darn good? And how can Starbucks get away with charging$2 more than anybody else for that same cup of coffee? And the list goes on. Apple. I mean, Apple has gone through so many different evolutions at this point.

53:28It's really fascinating as a business-focused person to ask, why were they mediocre for a long time? And then those PC and Mac ads start showing up and Apple starts breaking out with the iPhone, etc. So I am fascinated by business. I don't need an MBA degree because you and I can get it every day just by studying Jensen Huang and NVIDIA or Elon Musk and Tesla, their strengths and their weaknesses as people, but of course, even more the companies. And so, yeah, I think it's really helpful to be a business-focused investor. And that's the tradition from which I'm writing and we're speaking to. I want to be sure to get to the rule breaker habits as well.

54:10So how about you walk through these and we'll touch on a couple of them as well. Sure. Run through them quickly again. So rule breaker habit number one is rule number one, let your winners run high. That, like my traits for the stocks, the first one is the most important. So rule number one, let your winners run high. The second is to add up. Don't double down. Rule breaker investor habit number three, invest. We've talked about what that word really means. Invest for at least three years. Number four, follow the four tenets of conscious capitalism. Number five, max 5 % allocation. That is to say, any new position you take in your portfolio, I don't think you should be risking more than 5 % of your overall net worth in that position.

55:06Max 5 % allocation. And finally, rule breaker investor habit number six, aim for 60 % accuracy. You alluded to this earlier when you said we're trying to beat the market, our batting average. We want that to be ideally 600, 60 % or so of the time. you should be trying to beat the market when you buy stocks directly. All right. Starting with the most important one, let your winners run high. So let's talk none other than NVIDIA. So it was April 15th, 2005, you recommended NVIDIA. So it's been over 20 years of holding that stock and it's been one of the greatest investing success stories out there.

55:47But it wasn't all sunshine and roses. The journey was not a straight line up. Stock lost more than 80 % in 2008, over 60 % in 2022, even after it's become an enormous company, it still has these big drawdowns. And that would have tested even the most patient investors. So walk us through your mindset going through these gut-riching drawdowns, because you even mentioned earlier that you sold the 3D company on a 90 % drop. So maybe it potentially crossed your mind to part ways with Jensen Wong. So talk more about holding through stocks like NVIDIA through these drawdowns. Well, Clay, a minute ago or so, you said it's not all sunshine and roses, and that's not just true of holding NVIDIA over a long period of time.

56:30That's true of life. It's not all sunshine and roses, and that's always going to be true of your stock market portfolio over the course of your life and of any individual stock, because we're talking about the rule breakers, which in my experience are the greatest stocks of any generation for very logical reasons that we've been trying to elucidate in our conversation. These are companies that are just phenomenally great companies. And so, yeah, you want to buy them as early as you can, and you want to hold them as long as you can, which is what we've done with NVIDIA. And it won't ever be all sunshine and roses.

57:01And you already referenced 80 % drop. So yeah, I recommended it in April of 2005. It was like a four-bagger a year later. So we made four times our money in that first year. And yet, 2008-9, all of a sudden, that four-bagger, we're now underwater from our original position. So as NVIDIA goes from a big winner for us early to underwater, that doesn't feel good at all, never will. And fast forward, the stock fully recovered, and then kept going, and then went more than that, and then went sideways for five years. As the market is going up, it goes sideways, and then it drops. Just 2022, as you mentioned, it's a mega company, It's Nvidia, two-thirds of its value in a single year.

57:43And all of these are waypoints on the way to the greatest stock of the last 20 years. And so part of what I love about chapter one of the book is telling the story, and we're abridging it here, but just making sure people understand what a rollercoaster ride it's going to be if you're going to be playing to win, as I do, over the only term that counts the long term. this is the best stock of the last 20 years and the 20 years of holding it were dramatic up and down and since it's never going to be all sunshine and roses i think you have to ask yourself what are you in this for and for me i want to keep owning the best companies of our time the only reason i ever sell generally actually the number one reason i sell clay is when a position like NVIDIA or Amazon gets too big within my portfolio.

58:35It's eating my whole portfolio. Almost anybody who's ever held a stock up 100 times in value, if they're not selling some of it off to redeploy some of that, they're going to be dramatically overweighted in that stock. So the number one reason that rule breakers sell is the best reason of all. It just keeps going up. But the second reason I would sell is if I've just, the company counts for nothing, It doesn't really matter much anymore. And so I'll eventually just... I'm usually the last guy out of any bad stock, like 3D Systems. Others had sold it well before I did. Some made a profit, eight or nine bagger.

59:10I didn't. And the benefit of holding winners and losers to the very end is dramatically in your favor because of the winners. So of course, NVIDIA, when it goes up 1 ,300 times in value. It wipes out every single bad stock I ever picked in my 30 years of stock picking for The Motley Fool, and then some, just that one position because of the dramatic gains that you get. And by the way, we've had many other great stocks besides. So I'm glad that NVIDIA is as popular and big as it is today because it basically provides a front and center, page one view of what we've done at The Motley Fool and Motley Fool Stock Advisor, where we bought and held it for 20 years.

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1:02:45Whether you're a fast-growing startup or a global enterprise, Vanta is here to help you automate your security and compliance and earn, improve trust. Get started today at vanta.com slash T-I-P. That's V-A-N-T-A dot com slash T-I-P. Robert Leonard What's also just so fascinating for me is that all these companies aren't just benefiting shareholders. They're benefiting, in a lot of cases, all of society. So you get into the topic of conscious capitalism, which you mentioned, and it's really all about creating a win-win for all parties. So it could be a win for customers, a win for employees, a win for shareholders, a win for society.

1:03:30And as you put in the book, look, there's a bit of a conundrum here because all customers want to pay less. Every employee wants to be paid more. Every partner or supplier wants to be facing out the shop window. And every shareholder wants you to double the stock price tomorrow. So what is it, do you think, about conscious capitalism that allows all parties to win? Well, I have had the great fortune of being on the board of Conscious Capitalism for several years, and I've been in and around the movement, that's how I think of it, for 20 years just about now. So I know what this looks like, and not every company does this, but let's just go with Chick-fil-A, which by the way, I mean, I wish that company were public because I would have bought and held that for decades now.

1:04:16We would have done incredibly well together. You know, Chick-fil-A, while on the face of it is a chicken fast food restaurant, it is an amazing company. The esprit de corps among their employees, the feelings that customers have about Chick-fil-A, their decision not even to open on Sundays, which would go against most other companies out there, I mean, everybody else in the industry, are all so distinctive and such strong signs of corporate culture. And so that's conscious capitalism. They're winning for everybody. They're winning for their farmers who send them the chickens. They're winning for their customers who keep going back in some of the longest drive-through lines I see, and yet they move faster than anybody else's drive-through line.

1:04:59You see the employees and how much they enjoy working for the company. I mean, it's not the easiest industry to work for. This is an employer you'd want to work for if you're going into that industry. And that's true of so many other conscious capitalism companies. They're generally the best place to work kinds of companies in the industries at large. And of course, they're winning for their investors. It's just that not all of us get to, unfortunately, invest in Chick-fil-A, but it's just a fun example a lot of us can relate to. But Clay, solving problems by asking questions differently is what rule breakers do.

1:05:35And that's what I'm trying to do in my book, Rule Breaker Investing. And that's what Steve Jobs said. He said, think different. And so if you want to think different and be really successful in business, you start saying, you know what? The purpose of the corporation is not to reward shareholders, which was 20th century chapter and verse teaching. And most of the Fortune 500 CEOs in the 60s and 70s, if you got their paper annual report, they would say, we're here to benefit shareholders. That's the purpose of capitalism. Well, John Mackey, founder of Whole Foods Market and a bunch of other visionaries some years ago started saying, is that really the purpose of business to reward shareholders?

1:06:14Or is it to create a win for your customers first, for all of your employees by being a great place to work, for your partners and suppliers, for the environment, planet Earth, if that's relevant to your business model or your local community for some businesses. And also, by the way, by the way, if you're creating all those wins for those people, guess who else is almost certainly going to be winning? Your shareholders. But if we take, John Mackey would say, if we take just one of those stakeholders, the shareholder, and we say the purpose of the corporation is to max it out for shareholders.

1:06:48Can you see how that torques bad decision-making and creates all kinds of bad incentives, et cetera? And when people say they don't like capitalism, by the way, I love capitalism, but I love conscious capitalism. The people who say they don't like capitalism, they're reacting to the bad incentives and some of the bad dogs out there who often get the headlines. Chick-fil-A doesn't get the headlines. It just keeps grinding away. And most of the companies we've talked about in our conversation today and all the ones I try to fill my portfolio with, I truly believe they bring a breaded vision to the world.

1:07:18They make the world a better version of itself in the future for their efforts. And Clay, I truly, and I'm not speaking here to investors, I'm speaking to entrepreneurs. There are a lot of entrepreneurs listening to us right now. If you're trying to win for all of your stakeholders, not just one group, you're so much more likely to win sustainably and in a way everybody can embrace. And I've seen it firsthand. And so I know that's how I want to invest as well. And that's why it's investor habit number four for the rule breaker investors. Follow the four tenets of conscious capitalism. There are three others we're not even speaking to, but thank you for calling that out.

1:07:53It's always worth talking about. It's just such a fascinating concept to see like Costco, for example, keeping prices extremely low and somehow that ends up being good for shareholders in the long run. But I can't help but also call out by just so many public companies or companies can have this vision and this culture initially, they go public and then just over time, shareholders chip away at what the company used to be and it just becomes something different gradually over time. I'm curious if you ever find yourself between a rock and a hard place where you buy a stock, you develop some sort of emotional connection to it and it delivers these great returns, but you see it sort of take a turn and just the things have changed over time.

1:08:35How do you deal with that in terms of so many public companies can just get a lot of pressure from Wall Street, a lot of pressure on these hitting the next quarterly EPS estimate? Yeah. How about you talk about that? Well, I think that it's always going to be true that public companies feel pressure more so than private companies to perform on a quarterly basis. And even as big and successful as NVIDIA is, it seems like often we're casting our market dynamics, what are their earnings going to be? That seems to matter so much as a bellwether for the market, just that one company. And I don't view things that way myself, by the way, but that tends to be how media coverage works.

1:09:12So I would say that it's natural that as any organism grows, its parts specialize, and it becomes more and more unwieldy. And so in a lot of ways, that's why Rule Breaker Investing works, by the way, because we're buying the Davids, not the Goliaths. And one of the great things that I learned from Clayton Christensen, the brilliant Harvard academic who invented disruptive innovation, at least that phrase, as he talked about disruption. The key is that it often happens because big companies, you think that they're amazing and untouchable, and we need to break them up because they're too big and too successful.

1:09:51But actually, anybody who's ever, and I've not been, a battleship captain, or let's go with an aircraft carrier captain knows how long it takes to turn that thing around. And so as these companies get bigger and bigger, they actually become more vulnerable, not less, even though media coverage makes it sound like Facebook is unstoppable in the same way that AOL was once viewed as it merged with Time Warner as this huge juggernaut that couldn't be stopped. So I think that it can be true that the companies that we buy as little acorns, as they sprout into gigantic oaks and then throw off more acorns that create more oaks and whole forests around them and they become this juggernaut like meta platforms is today some people are going to start jumping off the ship saying i don't actually support what they do anymore or social media and my kids etc and it's understandable when you start hitting high high scale that some of these effects can be negative walmart is on the one hand amazing in the sense that it's given lower prices to so many Americans really at an incredible scale.

1:10:54And it also squeezes all of their partners and suppliers, and a lot of them don't like Walmart as much as somebody that might premium sell their goods. So these huge effects can be positive and negative. I try to look at things holistically, and I ask, if that company disappeared overnight, would anyone notice? Would anyone care? And while there are certainly haters for any of the great companies that we've talked about in this conversation. Some people do, in fact, hate meta platforms. Some people hate Jeff Bezos. Some people, for other reasons, hate Elon Musk, or not even the people. Let's just go with their companies.

1:11:30Some people hate Amazon. Some people hate Starbucks. Some people hate blank. Net-net, these are companies that are providing, in many cases, life-saving or incredibly important services every day, run by people that are trying to make good decisions. I've met a lot of them and talk to them. They're not hoping to be evil dictators. They're basically trying to create value for everybody that are part of their ecosystem. And so to close my shaggy dog answer, if I felt like my company was now no longer on the side of good, but on the side of evil, then I would sell that stock. But a lot of this is subjective.

1:12:07One person who hates Amazon, somebody else really, really loves Amazon. I think more people love Amazon that will admit it. And I think that would be a good example, sort of a lightning rod company. Is Amazon good for the world at large or not? I think it's wildly obviously true that it is. But if you disagree, I'd be the first to say don't buy the stock because I think you should be making your portfolio reflect your best vision for our future, not mine. Yeah, so well put. My next question is, for those that are interested in adding new rule breaker stocks to their portfolio, On the one hand, all these massive mega companies are some of the biggest innovators in the market, right?

1:12:49Amazon and Google and whatnot. So they're the Goliaths of today in many cases. For those looking to add new stocks that are potentially rule breakers, how do you think they should think about market cap? Should they focus more on smaller companies that have more room to grow or focus on companies that still have these rule breaker traits, but might be a much bigger size than they once were in the past? Well, first of all, thanks for calling out Market Cap, because I love Market Cap. And on my own little podcast, the Rule Breaker Investing Podcast, we play a game show four times a year at the end of each quarter, the Market Cap Game Show, since I love games, therefore had to make a game show out of guessing company Market Cap.

1:13:27So I love Market Cap. And I don't think it's something to target specifically as an investor. I think it's something to know whatever you're invested in, like to care about the Market Cap. In a world of people who don't really know what market cap is, you're going to be well served by caring. And I would say often I would shoot for companies in the$5 to$25 billion market cap range. If you're looking for earlier stage and hoping that that might be the next Amazon or the next NVIDIA, they're going to start there, right? Not at$4 trillion. So I think it's worth paying attention to. But more than anything, I think it's about the company's opportunity in this world.

1:14:08So I don't shy away from buying a new stock of a company that has a$2 trillion market cap, because a lot of people think that's almost like a ceiling, like nothing could get bigger than that, right? And they were saying that before there was ever a trillion dollar market cap. Will there ever be one? And the answer is, heck yeah. And a lot more are coming. And a company like NVIDIA could easily go multiple times to value from where it is now over the next 10 to 20 years. So I wouldn't get too hung up on the idea that you need to find small cap market caps. I think you should be asking yourself, is this company, more than anything, I might be asking myself this, and this is another test that you read in the book, Clay, but my Cola test.

1:14:48And the Cola test is basically, let's think about Pepsi and Coca-Cola. And let's ask ourselves, if we've just bought a stock, whatever its market cap, and if we kind of think of that as the Coca-Cola of its industry, like I would say, intuitive surgical is the Coca-Cola of the robot-assisted surgery industry. The cola test is, can you find a Pepsi to that Coke? Does a near analog or a clear competitor exist? And the companies that I love most of all are when you cannot find a Pepsi to that Coke. When that company is doing something that nobody else is doing at a scale that no one else can challenge.

1:15:34Blue Ocean is ahead. And so it doesn't really matter to me what the market cap range of that situation is. In fact, a lot of companies that get over$100 billion and are staring at the possibility of a trillion dollars, which by the way, is 10 times a 10 bagger off of a$100 billion company. Those companies at$100 billion market cap have resources and possibilities that don't exist for a company that only has a$5 billion market cap. So in a lot of ways, you're de-stressing and de-risking your investment by finding companies that pass the COLA test, even if they're quite big. Those are some of the best companies out there.

1:16:13So that's how I think about what companies I want to be invested in. Market cap is a factor, but it's more of a descriptor, not something I'm screening for. So David, you advocate for a 20 to 25 stock stock portfolio of individual stocks that is diversified across a wide range of industries. So this can be a bit difficult, I think, for a lot of people that work full-time jobs. They have a life. They don't just read stock reports like some of us all day. So there's this fine line between understanding what you own and still being broadly diversified. If you have 20 to 25 stocks, I think for a lot of people, they own some companies that they might not understand that well.

1:16:54So how do you go about staying within what Buffett would call a circle of competence, but also being broadly diversified in the market? Well, first of all, I'm a humanities person. I mentioned earlier, I'm an English literature major. And while we don't tend to get the big salaries coming out of schools, it seems like it's all the engineer types. I do think that we have some advantages as well. As people from history, literature, the list goes on the arts drawing connections between things that other people might not notice because they're kind of siloed and they're specializing in something and so that list of my seven 100 baggers that you shared at the beginning of our interview for anybody who wants to go back and rewind the tape here they're going to hear seven company names that are completely different companies different industries not the same technology as an investor i'm not trying to own a certain sector or flood my money into a given technology.

1:17:51I actually love being a mile wide and an inch deep because even though I'm only an inch deep, I'm actually seeing across a full mile in ways that other people aren't noticing or seeing. So I think what Rule Breaker Investing is doing, specifically Clay, is it is enabling people to see with new eyes that they wouldn't have had otherwise. And specifically what I'm talking about is seeing the traits that make up the great stocks of this generation and the next generation. So while somebody is probably going to know more about that, might even work at the company or work in that industry, whereas I'm just a stock picker.

1:18:31And yet, I think what the six traits for Rule Breaker stocks do is they give pattern recognition that I built up over time as a humanities person that has helped me not feel like I have to know everything about genomics or everything about AI or everything about anything, but just know enough to be dangerous, willing to risk money to put it in something because I see the pattern of things that have worked. And I won't just say as a stock picker, I'm also an entrepreneur. So I have one of my favorite lines from Buffett, and I love so many Buffett lines, I'm a better investor because I'm a businessman and a better businessman because I'm an investor.

1:19:13That is such a true statement. And you're head nodding, and I hope a lot of other people are too, because too many people in this world, I think, cut off one of those things. They're like, they're in business, but they got their own company and they're so busy that they're like, I would never invest in stocks, just so you know. I just give my money away to my money guy. I need to be an entrepreneur. And then there are other people, the opposite. They've got their trading station 3000, and they've got their charts. And they're like, I don't really work in business. And I would never spend time.

1:19:43I'm just all about making money on the market. Both of those two people are cutting off half of their learning. And the key to the Buffett line is you're better because you're the other. And so it's not like a 2D plane. It's actually a gyre. It goes up three dimensions over time. The better you get at one, the better you'll get at another and at the other. And it just keeps going. Like that's been my lived experience. And so I think it's incredibly valuable to recognize the traits of rule breaker companies. And I see them as an entrepreneur myself. I see the importance. In some ways, I have a friend who read this book.

1:20:19He was the first person to read it, Dan Simons, who started founding farmers restaurants here in Washington. And he read it all in one afternoon. He actually called me because he canceled his meetings because he wanted to finish the book. And he said, what you've actually written here is not an investing book. This is a book about business and life. I'm an entrepreneur. These are the lessons I want my employees to have. And while that is an incredibly high compliment coming from somebody I deeply respect, it actually should be true in a sense of any investing book. Because what you're really doing is as an investor, you're asking, what do I want to be a part owner of?

1:20:50And therefore, what is going to win in the marketplace? And what are the factors and traits that we can find And from robotic surgery to electric cars to coffee, the list goes on. There are rule breakers in every industry. So by calling this rule breaker investing and talking about rule breakers, I think I'm taking a new angle that people haven't had before across every industry if they want to use it. Well, I'm happy you mentioned what your friend mentioned to you just about the book and living a good life because I think it ties in well to my next question. One of my favorite things about just tuning into all your public appearances, reading the book and whatnot is just how positive and optimistic you are.

1:21:31So it just shines through in everything you do, your personality, your messaging, your investing approach, the way you run your business and whatnot. It reminds me that if you have the mindset that you have this very pessimistic view of the world, you're never going to own a 10 bagger, a five bagger, a hundred bagger, because you just don't believe that the future is going to be better than it is today. So I think that optimism is such an important trait to be a good investor. So I'd love for you to talk more about the importance of optimism, not only as an investor, but living a good life. Well, thank you very much, Clay.

1:22:06And I know I'm speaking to a fellow optimist. I really appreciate your bright demeanor and all that you bring to this podcast and the people that you interview. and that shines through for me as well. You know, Henry Ford once reputedly said, whether you think you can or whether you think you cannot, you're right. And I've always taken those words to heart. What I've realized about optimism is it's not a state of mind. It's not just that. It's actually a creative force. So whether you think we can or whether you think we cannot, you're going to be right. Therefore, as an entrepreneur, surrounding myself with private sector people my whole life long, that I've learned so much from, I see them go out and build things that never existed before.

1:22:49One of my favorite conscious capitalists, Roy Spence, who started his own branding and marketing firm, GSD &M in Austin, Texas, one of my favorite conscious capitalists, he said, you know, it's the greatest joy in life, David, putting something there that wasn't there before. You could say that about a child. You could say that about a business. The world is always going to be to the doers. And doing doesn't mean not thinking too, but it does in the end mean doing. And the only people who can scale great companies, the only people, frankly, who can scale a small business from zero employees to one are going to be people who think they can.

1:23:28And while we're going to be wrong and any number of bad stock picks or bad mistakes we've made at my own business, The Motley Fool over the years, that's going to happen. But it all happens in service, I hope, of purpose. of why you're doing what you're doing, especially for entrepreneurs. You talked about conscious capitalism earlier. The first tenet of conscious capitalism is purpose over profit, higher purpose. And the crazy little secret here is that the companies that truly pursue purpose often have the highest profit in their industries, Chick-fil-A being one example we talked about. But most of the industries are led by companies, the best companies, I would say Old Dominion freight line in the trucking industry, a completely different industry.

1:24:14We haven't talked about this at all. That is a brilliant purpose-over-profit, multi-generational, family-run public company that I love. And I love lots of others. I think it's so important to surround ourselves with positive voices. It's not always easy today in our society, and some who've read what probably is my favorite chapter in my book, which is my chapter X. At the end, it doesn't have a number. It's just entitled Excelsior. I loved writing that chapter probably more than anything in the book. But I think that what I recognized is that purposeful work done by purposeful people that convince others to go to work for them, who can buy into the vision, people who can make visions into reality, it's such a beautiful thing.

1:24:56And it's led to all the technologies we're using today to broadcast or reach people, what we're wearing, what we ate for breakfast, all of the things. And there's such better quality than existed 500 years ago or 5 ,000 years ago. And so the story of humanity is one that was built by people who say, yes, we can. And I'm not here to say that if you can't get there, that there's anything wrong with you. There are lots of pessimists in the world. There are a lot of people right down the middle, realists. But my favorite position is rational optimism. And there's a great book by Matt Ridley called The Rational Optimist.

1:25:29After my amazing new book, Rule Breaker Investing, I completely recommend everybody go read The Rational Optimist by Matt Ridley, because you'll see that the story of humanity was, it's to the doers, and in every generation, as Ridley documents, most people thought it's all going down. Probably the apocalypse is coming, and during my lifetime, of all lifetimes, and things are not going to be as good for my kids as they've been for me, and that is a consistent recurring belief that people have, and it's been rationally disproven and wrong. And if you figure that out early in life, that's going to stead you better than if you never figured it out at all.

1:26:08So there's some words about optimism, one of my favorite words. Yeah, that's just wonderful. I mean, in line with that Henry Ford quote, whether you think you can or you can't, you're probably right. I mean, when it comes to markets, whether you're an optimist or a pessimist, you can find great reasons for either one. You can kind of choose your reality and choose to live in that reality. And that's, we all, to a large extent, control our own destiny through that mindset that you share there. It's no wonder the wonderful things you've built with The Motley Fool and the wonderful portfolio you've built.

1:26:38So I applaud you just for sharing that message in the book and on our show here. But I have one final question before we move to the handoff. So it was in the introduction of your book that you told the story of being featured on the live TV show, The View, which has millions of viewers. And the stock you shared on the show was Starbucks. So at that time, it was in the late 90s, Starbucks had around 1 ,900 stores worldwide, and today it operates 40 ,000 stores. I feel like I'd be doing the listeners a bit of a disservice by not asking you the same proposition today, given how well you've done over the years.

1:27:14So how about you talk about a rule breaker stock or two that you'd like to share with the audience here in 2025? Well, thank you. First of all, let me say that we've talked about a lot of different companies. If anybody does a transcript of this podcast and simply grabbed every public company that we've talked about and build a portfolio, I would feel really good about that. So I never think it's about one stock, you know, what is the next NVIDIA? And often it's like the joke is the next NVIDIA is NVIDIA. And that's been true, by the way, for years now. Like when the company had $100 billion market cap, which sounded like a lot, what was the next NVIDIA?

1:27:48Yeah, NVIDIA. So And that's sort of a joke. But without joking, I'll just say that there are many companies that I think fit one or more traits of Rule Breaker stocks. And we've talked about those here. And obviously, I go on with more depth in the book. And when you can find a company with four or five or six of them, then I feel really great about it. A lot of the companies that we've already talked about do. So a quick example, Intuitive Surgical. Company is amazing. We're living in age where we're moving from the human hand operating on people to, with much more precision, minimal invasion, we're actually getting solutions.

1:28:29If you have prostate cancer, you can have your prostate gland taken out in a way that has you walking off of the hospital bed the next day. In years past, it would take two or three years to recover from the wounds that you underwent as part of that surgery. So that's a simple example of a company that I do not see any cola to Intuitive Surgical's Coke. It is a company that now counts itself at a much higher market cap than when we first bought it about 100 baggers ago. And I love that company over the next 20 years because I think most, if not all, surgery is about to become robotically assisted.

1:29:08And there are no other players out there at any scale compared to intuitive. So that would be an example of a rule breaker that I love today, that I've loved for 20 plus years now, and I love over the next 20. But here's a company name that we haven't mentioned once during our conversation, Axon Enterprise. Axon Enterprise, you're nodding your head, Clay, because you know the company and you follow the markets. But most people, if you tap them on the shoulder on the street and say, hey, what do you think about Axon Enterprise? They look at you funny. And that's because this company operates a little bit under the hood in an industry that we all know, law enforcement.

1:29:46So Axon Enterprise was, first of all, Taser, and has changed its name since when it merged with Axon, because in addition to the non-lethal weaponry that Taser's represent, which is an incredibly great technology that saves lives every month across the world. So that was Taser. Then they added police body cameras. In an age where people want more transparency from the police. Most police walking around the United States of America today are being filmed with what they're doing. They're also wearing body armor, which is good on them. And Axon provides both of those. And all of those films, they have to be saved somewhere.

1:30:23They're up in the cloud somewhere. Specifically, they're at evidence.com, which is also owned by Axon Enterprise. So they are basically offering subscription services back to all the police departments to house their videos over the days, weeks, months, and years. That is a remarkably beautiful competitive position. I do not see any Pepsi to Axon Enterprises Coke. This is not a development stage company. I don't think we need to look at tiny... I avoid all penny stocks. I have no interest in tiny micro cap companies because they're not likely going to change my world anytime soon. And I'm looking for the world shapers.

1:30:58I want the companies that are the best stocks, the best companies of this generation. So those are a couple. I could just throw out a few more names because names are fun, right? Palantir is very obviously a rule breaker. And when it's described as the most overvalued stock of all time or on the markets today, I'm glad that I bought it more than a year ago. I didn't get into the ground level. I often don't, but I tend to get in early and I tend to hold way past everybody else. Rocket Lab, I really like a lot. That's another recent rule breaker that I bought into. It's a company that at the dawn of the commercialization of space, they look pretty well positioned.

1:31:34So we talked about the first trait of the rule breaker stock. It's the most important one. Top dog and first mover in an important emerging industry. We didn't talk that much about that last phrase, but I just threw it down a bunch of times there because important emerging industries are where the rule breakers are born. That's where we want to be focusing our investment attention, trying to find great companies with visionary leaders that are there. So these are all stocks that I own personally, and I own many others besides, and I hope people will have a heart for buying stocks directly. Because in a world that is being constantly told that it would just be luck to beat the market averages and just index, because who can pick stocks?

1:32:14I have completely disagreed my entire life. I have a friend who said the other day, this is a great line, Clay, you can use this anytime with anybody. here's the question you ask. You say, what's something you believe that most people don't believe? And that's just a great question to ask anybody. It's just a fun conversation opener, water cooler stuff. But when you can turn your answer into a business potentially, if you're an entrepreneur who believes something that most people don't believe, and then you build it and they come, Field of Dreams, that's one of the most powerful things you can do.

1:32:46And I would say The Motley Fool was started by a couple of brothers who believe something most people don't believe. And that is that you can beat the market averages. I think this book contains basically every last thought because it is my last stock market book. It has every last thought for me as to how to pick the great companies. And I don't want to index because I have to buy all the bad and mediocre companies. I'd far more rather focus my time and effort. My returns are so much higher because I pursued excellence and continue to do so every day in business, investing, and life. And Clay, this conversation was one of my favorites.

1:33:25I really appreciate you putting in the time, especially to read the book. I tried to throw in as many jokes and make it as fun and readable and as much of a page turner as I possibly could. So I hope people who do buy the book love reading it and will share it with other people in their life, especially younger people, to get them switching on to investing, what it really means, pursuing excellence, not just with your stock picking, but with who you associate with in life. I hope there are a lot of good lessons that people will learn. Excellent, David. We always enjoy bringing you on the show, so I really appreciate you and just all the wisdom you share, not only on our show, but through all the work that you do.

1:34:01One of the things that I just love about the book is that it just makes investing so approachable, right? You're not diving into valuation methods and balance sheets and whatnot. So I just applaud you for what you've done in creating this wonderful book. Thank you, sincerely. Before I let you go here, where can the listeners go to get a hold of the book? I would say wherever fine books are sold, wherever you enjoy buying books, whether it's online or off, whether it's Barnes & Noble, Amazon, or I will say having spent in front of a microphone last month, three straight days reading from page one to page 230.

1:34:39I really loved doing the audio book. It is my voice. I'm getting to read my stuff. And so if you're not already tired of hearing me after the wonderful interview that Clay just threw down for all of you, the book is an audio book as well. And I had so much fun doing that too. Yeah, it should be out. I mean, it comes out September 16th. You can pre-order anywhere. and I really hope it's the kind of book that people will be buying five years from now, not just five weeks from now. So this is my final stock market book. Sports terms, I know we're sports fans, Clay, so I'll just say I was swinging for the fences.

1:35:12I hope I left it all out there on the field. That's what I was trying to do. You certainly did, David. Thanks again. Thank you for listening to TIP. Make sure to follow We Study Billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor's Podcast Network. Written permission must be granted before syndication or rebroadcasting.