The words we choose when we talk about investing reveal a lot about our thoughts, biases, and motivations. This week, a little rant on diction, etymology, and cliché, along with some thoughts on how better to speak of our investing motives.
Rule Breaker Investing
The Language of Investing
It's the Rule Breaker Investing Podcast with Motley Fool co-founder, David Gardner. And welcome back to Rule Breaker Investing, a delight to have you with me this week. And I hope you enjoy a good rant or two because that's what we're going to be doing this week. It's not something that I do all the time. I'm not sure. I hope I haven't ranted too much in our first 30-plus podcasts for Rule Breaker Investing, but I'm going to do it a little bit this week, not railing against any one person or idea, but really rather against language. Specific language that I see, I would say, misused when it's applied to the stock market. So we're going to be talking about terms that you will hear all the time, regular habits of verbiage that newscasters, friends, perhaps you yourself have fallen into. So I do it sometimes too, and I'm going to call them out one at a time, and we're going to explore that, and we're going to try to get a little bit better. And at the end, I will provide a few extra pet peeves just because this is my rant and pet pee podcast. So I keep a long list of pet peeves. Just it's kind of fun. I have it in Evernote. It's one of my favorite Evernotes. In the case you want something bothers me, I'll just add it to the list. So I have this long list, and certainly one of my pet peeves, by the way, are people who keep long lists of pet peeves, but that's a side note just between you and me. So let's start with Arroydder's headline a while back. It was, quote, "momentum stocks sink," end quote. And the article begins, "Momentum shares like Netflix and TripAdvisor sold off sharply for a second straight day, leaving investors anxious about how much further they may fall. And further down, we hit another of my pet peeves." In the same article, quote, "The day's action in momentum names typically high growth companies, mostly in the tech and biotech sectors that led 2013's rally." End quote. So language. That's really what we're about here, specifically diction, and it gives us a window into other minds. And if you've forgotten some of the terms from poetry class on a Matapiah anyone, diction is word choice. So it's the often unconscious decision to use this word, not that one. And I think coming alive to diction, watching for it. And as we're going to be doing this week, hunting it, I think it rewards us with valuable insights into the degree of thought, and sometimes the psychological motivation behind a person's words. As I mentioned, I do this with investing all the time, but first, let me mention how it really started for me. It was with analyzing sports. So sports was where my English major sensibilities first led me away from things like sports stock radio and toward baseball, great Bill James by extreme contrast. So for example, sports stock radio is full of debate over who is the MVP. When it's clear, really, that simply first defining what most valuable player is would solve most of the puzzle and save hundreds and hundreds of hot air hours on sports talk radio. Because after all, some people just looking at the underlying assumption, some people think the most valuable player is the person that you draft first. If you had all of the players in a league or a sport, who would you take first? That's for them the most valuable player. Somebody else thinks it's whoever was the best contributor to his or her team. Who was the person who added the most value to that team? And usually it would be the team that won it all. And that would be the most valuable player. And those are fundamentally different constructs they're related. But what's really happening in sports stock radio is that people don't examine their underlying assumptions about what defines something like, in this case, most valuable player. And so you end up with endless names being batted about and debates when we just need to agree on the term in the first place. So that's kind of how it started with me for sports. And by contrast, there was Bill James, who was an early pioneer in saber metrics for those who know the scientific study of baseball. He was lionized by the book Moneyball and then the excellent movie made out of that book. Still haven't seen the big short, by the way. I know everyone says, "Got to go see it, definitely going to see that movie." I know it's really well done. Anyway, James saw with visionary acuity how much sports analysis relied on cliches and the threadbare thinking that often lies behind those. And so he was applying a scientific approach to baseball. He was making hypotheses, gathering data, and putting him play new theories. And he wound up basically upending the baseball intelligentsia at the time, which by the way was a bit of an oxymoron back then, but his tool, though, was very simple. It was questions. It was really, ultimately, it was words. He's a writer. And so it was his own words, basically denuding the often inadequate thinking behind the words of others. So that takes us back to the Reuters story. So what is a "momentum stock"? I mean, try right now yourself to define it. Turn to that person next to you in the car, or that you just jogged past and asked them for a sec what a momentum stock is. And maybe you shouldn't do that. Not a lot of people would have an answer, but I would submit it's not a very satisfying exercise. But the market recap that I called out seems to do so later. It was using terms like high growth, mostly tech, and lead 2013 rally. By the way, this article is pulled from 2014. So that's why it's mentioning the 2013 rally. This could have been written yesterday, of course. But let me suggest my own synonym for those companies, Netflix and TripAdvisor in the article. And I would go with the phrase "leading innovators." I mean, that's basically how I see Netflix and TripAdvisor, and really a lot of the stocks we talk about here on the Rule Breaker Investing podcast, and that many of us are invested in. So while others, I would say, nearly demonize them by making them sound like, I don't know, flighty, unreliable beasts. We are buying not momentum stocks, but leading innovators. And it's not surprising that those companies are often high growth. They often use technology, and they do, in fact, often lead rallies. In seconds, since I mentioned this from that same article, what does it say about a speaker or a writer that he or she would use the word "name" as a synonym for corporation? Again, from the article, "The day's action in momentum names." And I'm seeing this phrase used a lot these days. I mean, is the stock market just composed of names? Are names what's employing millions of Americans? To me, that's trader talk. So basically, what's happening is the speaker is objectifying and disconnecting the stock market from the business world. And so I think implicit in some of the terms that we've just covered, momentum stocks, momentum names, you can see the underlying thought, which is often, I would describe, the opposite of what we do and how we talk about stocks at the Motley Fool. And on all our podcasts, this one included. So there you have it. A few observations on the first couple of phrases or words this week that we're ranting on, momentum stocks and names, both of which I think show the underlying thought as rather superficial slapdash and not particularly connected in with what investing really means. So let me see. We'll call those number one and two. So I've got four more. So we got three, four, five and six this week. And here's number three, directly related to one and two. But it's the word investor, the word investor. It is a beautiful word. It is a deep word. It is frequently misused in common parlance, at least by my way of thinking. Because let's talk about the actual etymology of the word. So the word comes from the Latin investiri. And I never did take Latin. I managed to avoid that throughout my schoolboy years, but I do respect it. And I do like etymologies, certainly as an English major and a reader and thinker. And the word meant to put on the clothes of. So that's what investiri meant in ancient Rome. And that's where we derive our word, investor. And I love that term because for me, it's like, well, a lot of us are going to watch the Super Bowl at the end of this week. And you're going to see a lot of people there wearing the shirt of the home team that they're cheering on in the Super Bowl. And that's how I think you and I should generally be about our investments. I think you're putting on the shirt, you're a fan. You're not about to flip the shirt. And if your team goes through a five-game losing streak, or like we've seen in the stock market, I would say a really bad five-week losing streak, you're not going to sell your team, sell your stocks. And you've kind of internalized your affection and interest and the spirit of the thing whose clothes you're wearing. And that's kind of what I think investing is about. And so it is by definition, long term, therefore, anything that uses investor or investing in a way that is not truly long term, which I would describe as three years plus. Then I think it's a misuse of the word. And I think you and I should be a little hardcore on this with the media or with our friends and make it clear that what they just heard or said, invest or investor, if it wasn't, then I would say that's trading. That's a trader. In fact, to me, the opposite of the word investor is the word trader. Somebody who usually uses language like names and talks about momentum stocks and has essentially objectified the act of stocking some of your own capital, hard earned, hard won, and becoming a part owner of a public corporation through the magic of the stock market and then letting that ride and trying to add to it over time. So that word investor I find is frequently misused and I would encourage you and me to hold each other accountable and make sure that it's used properly. In fact, anytime you ever hear me say, I think I've said this before in our podcast, if you ever hear me say long term investing or long term investor, in my mind, that is a tautology. It is an unnecessary redundancy by nature, investing investor are long term. Therefore, if you're near me, you may give me a dead arm. If you hear me say long term investing or long term investor outside of the context I'm talking about right now, because I don't think we should ever say that. I think that is what it is and the more people who get that, the more people realize it's tautological and I shouldn't even go there. And let me say one last thing about investor and that is just that I think everyone is an investor. You are an investor, not just because you listen to Motleyful podcasts or this podcast or it's called Rule Breaker Investing. That's not why. It's because all of us, every time we spend a dollar or a Euro or a one, every one of us is making a choice with that money and we're investing it. Now it's not really long term in this way, but what I really mean to say is whether you spend it on a stick of gum or that dollar to your 401K retirement plan, you made a choice about that money. It was self directed, everything in the end is self directed by the way, even when you decide to check the box and give your money over to an index fund, that was a self directed decision that you made. And I think the more people who realize this, they'll see that the old, what's at the heart of the Motleyful is I think the idea that you can do this. You can invest and by the way, you should invest. In fact, I talked about this, I think last week's podcast, my mental image is of the reverse debt clock example I gave where your future net worth right now is ticking down and you could watch it live if you're not invested. So for anybody that is not invested, their future net worth is eroding as we speak because of the opportunity cost of waiting to get capital in the long term beauty of the stock market. All right. That was a long one. That was number three, the rest are shorter. Number four, number four is the word correction. I don't know when this started, but the idea that when the stock market goes down, that's called a correction. And we say the market is correcting and it's only when it goes down. I don't agree with that. I think that that is more bad thinking hidden in a wrong headed term. Why is it correct when the stock market goes down? I guess the idea is that the market is overshot to the upside. And so it's correct then that it should return to a lower place. But by the same logic, any time the market undershoots, which it clearly does just as much, it's also correcting when it rises. And the notion that we only apply this positive term, correct, correctness, correction to drops in the stock market to me really goes against the truth of the stock market, which is two years out of every three, the market rises in value. And over the course of your life, it will rise a great deal in value. And that's really what's correct. Number five, number five is the word bubble. I just don't like the metaphor bubble, the bubble popped, we say the stock market, really American business, really global business is not something that pops. When things pop, I've watched bubbles do this, I bet you have to, they disappear, they're gone. And it creates kind of this scary notion that if you really listen to this term or think about it, that your money will just vanish or it'll all just go away in a fleeting way. And that's just not true. It's not true of business. It's not true of money invested in business through the stock market. And so this one isn't as important for me as the word investor or the use of the word names that I talked about earlier. This is more of a side light, maybe I'm getting a little thin in my list here at this point. But I just, that's not the right metaphor. And so especially if you have, I don't know, younger people that you're connected to your children or your nephews or grandchildren, I don't think bubble is the right way to describe the years 2001 or 1929 because the market didn't go away at all. In fact, it came back dramatically from every one of those bubbles, so-called popping. So I'm not here in this case to top it with a better term. I'm just here because I'm allowed to do that a little bit this week. I've given myself that permission to just complain a little bit and encourage us to think better. Now, number six, and number six are just the two words that are frequently used to describe your motivation and my motivation as we think about the stock market. And they're both negative words. And you hear this all the time. And I think again, it casts doubt and darkness and worry around the whole idea of the stock market. Again, from the Motley Fool, the company that's saying to you, "You can do this," and you really can. In fact, we have millions of people who've got invested thanks to our company, and we're going to go for millions more than that in the coming few decades. But the terms fear and greed, the idea that these opposite motivations all the time are what's driving your money decisions. Fear during times like this where the stock market is selling off. But then the opposite, reverting in uptimes to greed. I don't know why we have negative words around people view the stock market or how you and I think. I'm not personally motivated by fear, and I'm not motivated by greed. Things that motivate me are words like courage or fortitude or generosity. I see a lot of people motivated by these things. And if I were to try to replace fear and greed, the words that I'll replace each one with are, in the case of fear, I would say caution. And in the case of greed, I might say opportunity. Those are really the emotional motivations that I have, caution at some points, and a sense of opportunity or opportunism at others. And for me, the world would be much lovelier if people use and thought in terms of those terms than the whole idea that it all comes down right down there at the lowest level of Maslow's hierarchy of needs. If you're familiar with it and much talked about framework, you know, we're at the bottom level, just mere survival. I think at the top of Maslow's hierarchy of his pyramid, I think it's self-actualization. But it's kind of levels of consciousness or motivation and the needs that we have. And when we talk in terms of fear and greed, I think we take everybody down to the lowest level. And that's not really a level that I want to live at. And I don't think that the stock market should be thought of in those terms. So thus much for my six or so terms and phrases that I wanted to go after this week in service, I hope, of better thinking on your part and my part. And I would say the financial media's part as we talk about what we do here at the Motley Fool, which is together we invest. All right, I did mention since I'm just on a minor rant role, I wanted to throw in a few freebies from my pet peeves list that don't necessarily relate to money, but maybe business. And I just have three to close out with. One is the phrase. And when I used to interview CEOs on a regular basis on our NPR radio show back in the day and our AM radio show back before this, back before the Motley Fool had podcasts, we used to do it through the traditional means. And I interviewed a lot of CEOs and the ones that would say, you know, quote, "I always hire people smarter than I am," end quote. I grew so tired of hearing people tell me that that I started wondering, is that really what you do? Or do you really want to do that? I mean, if you're the CEO, I want you to be the smartest person, I would think. If you're always hiring people, if that's so easy for you to do, I'm not sure you should be CEO. So that's one of my business pet peeves. People who say that they always hire people smarter than you. I would say always hire smart people, that's great. But I think it's kind of false modesty speaking a lot of the time with that phrase. Number two, how about this? When you're on a plane, we know you have a choice when you fly. So thank you for flying blank. If you're like me, you really didn't have much of a choice which carrier to fly. It was that time, that city, that destination, and it was that plane. So I've always thought it was a little self-congratulatory of the airlines to conclude your flight with the, "We know you have a choice when you fly." This is from the industry that gave us the unnecessary word, "deplane." So maybe we shouldn't expect too much. And then finally, last one this week, number three, the phrase, "Let's think out of the box here," you know? I mean, this suggestion typically put forth in some sort of a meeting is to me anyway, itself by now such a terribly in the box phrase that I doubt it ever elicits for the speaker what he or she is hoping for. Let's think out of the box here. By the way, what is the box one gets out of? I did find a really good line from Jay Peck. I just wrote that down. I don't know if that's an author. Not sure who Jay Peck is, but Jay Peck said, "A set of walls, each an unchallenged assumption." Well, thanks a lot for listening in this week. I hope you've had fun. I certainly had, I arguably may have had more fun than anybody listening this week. I won't do this too often, but I hope it was of value. Next week, I'm going to cover five supernova stocks that I really like right now. Certainly during a time where the market is dropping and there's a lot of anxiety about that. I'm seeing a lot of companies that I think represent a compelling long-term buy. So let's talk about a few of those next week. Thanks a lot for listening on David Gardner, Fool on. As always, people on this program may have interest in the stocks they talk about, and Miley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com. [music] [BLANK_AUDIO]