Nobody’s Fool

The Motley Fool founders David and Tom Gardner try on a funny face for a grim economy

The Motley Fool founders David and Tom Gardner try on a funny face for a grim economy

Text by David Gignilliat / Photography by Seth Freeman

Tom and David Gardner
Tom and David Gardner

For Tom and David Gardner, there’s never been much difference between work and play.

For the last 16 years, their Alexandria-based company, The Motley Fool, has empowered individual investors to take control of their personal balance sheets with a whimsical yet direct approach to understanding financial markets. Their website,, is a beacon for do-it-yourselfers, visited by millions of investors each month. Their personal finance-themed weekly column appears in over 200 newspapers nationwide. They’ve authored eight books, including their most recent, “The Motley Fool Million Dollar Portfolio,” published in December 2008 by Harper Collins. Their most popular investment newsletter, The Motley Fool Stock Advisor, now boasts over 100,000 subscribers. And in 2009, the Motley Fool will enter the asset management arena, unveiling a family of “performance” funds for retail and institutional investors.

Yet for all their success, the true Motley Fool story may trace its origins back to Strat-O-Matic, a tabletop baseball game they played nearly 30 years ago as schoolboys in Georgetown.

Forever true to their humorous side, the Gardners ham it up for the camera.
Forever true to their humorous side, the Gardners ham it up for the camera.

“We’ve loved games as a family forever. We were raised by gamers essentially,” says David Gardner, 42, whose grandfather, H. Gabriel Murphy, was once minority owner of the Washington Senators. “Strat-O-Matic baseball was an early game for us. We played it a ton [with each other] growing up. But then, we started to realize, Hey, there’s more than [just] two teams in baseball.”

So they played around with it a little bit.

With David as commissioner of the American League and Tom overseeing the National League, they organized a 24-team Strat-o-Matic league among their classmates at St. Albans, an exclusive Episcopal prep school in Washington, D.C. They played during study hall, in the evenings after school and on the weekends. Their mother brought the neighborhood kids bagfuls of fast-food burgers while Tom and David kept track of statistics, compiled standings and organized the league’s labyrinthine schedule.

“I just remember kids [being] spread out over sofas, coming over to our house in Georgetown and just blanketing it with dice and humans. That’s a treasured memory for me,” David says.

Part of the St. Albans’ gamer crew was fellow classmate Jeff Zients. Jeff began attending the school in the seventh grade, became friends with the Gardner brothers and quickly found himself playing in Georgetown’s hottest underground Strat league.

“Wanting to acclimate and become part of the gang, I joined the league. I didn’t have a very good team, being sort of the rookie in the group. And I got frustrated that I was in last place, so I decided there might be an opportunity to actually earn some money,” Zients remembers.

He sold his player cards to other teams in the league, slightly unbalancing the league, David jokes.

In 2002, at the age of 37, Zients made Fortune Magazine’s list of the 40 Richest Americans Under 40 with a net worth of $149 million. As a former corporate chairman, he’s helped bring two business-to-business companies public. He nearly led a successful attempt to lure professional baseball back to the nation’s capital. Today, he’s the managing partner of Portfolio Logic, a highly successful local venture capital fund.

Zients sensed the talent across the proverbial lunch table, even back then.

“Among a bright group of classmates, they always shined as being great students, but also as being creative and energetic,” Zients says. “They’re competitive and smart, and that’s exactly what defines the Gardner brothers today. You saw it at an early age.”

Both Gardner brothers were English majors in college. Tom, the youngest, attended Brown, where he focused on creative writing. David earned a degree from the University of North Carolina, Chapel Hill, where he was a Morehead scholar. Their father, Paul, an international banking attorney, nurtured their love of investing from an early age and invested on their behalf since they were born. As they grew up, he taught them to buy companies that they were familiar with and could understand. When they turned 18, each was given a little bit of money to invest. Beyond that, they were on their own.

“Really learning how to follow companies is what Dad got us most interested in,” says Tom, The Motley Fool’s CEO and co-chairman. “Just like you follow a sports team, you can follow the story of a company and who the people are. And that’s always been much more important to us than what the quarterly earnings report says.”

David remembers some of his early investment picks. His first stock, Leaseway Transportation, he and Tom unearthed during the summer of 1984 doing research from Value Line reports. David and Tom bought Leaseway at $26 a share, sold at $42 and started looking for their next stock. They were hooked.

“While I didn’t learn much from the investment, because ultimately I shouldn’t really have been dabbling in an industry whose dynamics to this day I still don’t understand much, I did learn—luckily enough—that the stock market can be not only a lot of fun, but profitable, too. So it was a good first experience,” David recalls.

After graduating from college, David worked as a writer for Louis Rukeyser’s Wall Street, a popular investment newsletter published by the late PBS journalist and host. Tom headed west, teaching high school girls basketball while finishing his master’s degree in linguistics at the University of Montana.

Eventually they both returned to the Washington area in the early 1990s, and The Motley Fool began innocently enough in the spring of 1993 as an investment newsletter they compiled in a garage behind David’s home in Old Town Alexandria. The first month they sent out a few thousand copies and got 38 responses, mostly from family and friends. The newsletter contained their stock picks, a monthly investment article and what would later become one of their trademarks—witty, well-written “Foolish” content.

First came the company’s name, The Motley Fool. David’s idea, it was borrowed from a line in Shakespeare’s “As You Like It” (Act II, scene vii): “A fool, a fool! I met a fool i’ the forest, A motley fool.” In the play, Touchstone, a court jester entertains and enlightens the audience with his sly punnery, double entendres and cleverly shrouded skepticism.

“Your business as the fool was to tell the truth with a sense of humor and not to fear the consequence of telling the truth,” Tom says. Both brothers often don oversize court jester hats (also displayed prominently in the company’s logo) for their television and public speaking appearances. “The king and queen would allow the fool and because the fool would look foolish, truths delivered with wit were acceptable and not cause for imprisonment.”

Around the same time they started their newsletter, the Gardners began using a then-nascent American Online service, initially as customers, then as contributors to AOL’s personal finance portal after Tom posted an offer for a free copy of their Motley Fool newsletter to one of AOL’s discussion boards. Response was amazing and popularity for the newsletter grew quickly. They met with AOL executives in the spring of 1994 and were awarded a contract to build a personal finance site on their service. The AOL-backed Motley Fool site launched August 1994, about the same time the Internet began its inexorable march to worldwide ubiquity.

“We started answering people’s questions on AOL and all of the sudden realized that it was more fun to answer peoples’ questions online than to crank out our little newsletter for our parent’s friends,” David says.

From there, the company grew in quick bursts. The Motley Fool incorporated in January 1995, and a book deal with Simon and Schuster validated their ascent from online to mainstream media. Their first book, “The Motley Fool Investment Guide,” became a New York Times and Business Week best-seller. Donning their jester hats, David and Tom became regulars on CNBC and other news telecasts. A cover story in Fortune Magazine in April 1996 only cemented their status as new media darlings, as rock stars of the investment round table. In 1997, the Gardner brothers created and launched a weekly syndicated newspaper column.

Cut from a different cloth than most Wall Street experts, the Gardners use common sense and literary panache to break down the barriers between investors and their investments. If Wall Street is an elephant, The Motley Fool eats it one witty bite at a time. Their annual April Fool’s Day pranks, like discovering Shakespeare’s stock portfolio or putting together an IPO for a meringue company, poke fun at convention yet also instruct. Both brothers are articulate, precise and fluid with their language, peppering their discourse with enough thought-provoking analogies, humor and literary flourish to make both an English professor and a capitalist proud.

But the lifeblood of The Motley Fool website is—and always has been—the community itself. The company’s mission is “to amuse, educate and enrich.” To that end, users can ask questions, share advice and experience with fellow investors in the message boards. They can get stock quotes at any time. With just a few clicks, they can subscribe to any of the Fool investment newsletters. Or learn about how to plan for their retirement.

“We’re facilitating the growth of a community around almost any aspect of money decision-making. We have our view that we’ll give you chapter and verse, our little Gideon’s Bible view on what you should do for any of these things, but then we always want you to go and take that little booklet, and ask others which chapter and which verse speak to you and what’s worked for you,” David says. “And I will submit that many financial services entities do not want to bring all their members together so that they can talk to one another.”

The last 12 months alone have offered an avalanche of foreboding news for individual investors, who have seen oil prices spike to over $140 a barrel, government takeover of home mortgage lenders, the collapse of Lehman Brothers, the sale of Merrill Lynch and the government bailout of several banks and financial institutions. The major stock market indices have seen their gains pared back to mid-1990s levels, and the future remains murky.

The current conditions of economic turmoil may endure longer than many expect, Tom suggests.

“This [recession] is very unique because the problems are emerging from inside the financial sector. And the problem with that is that every industry is reliant on capital. … This [credit crisis] impacts literally everyone’s business. What’s sad about it is that it’s come about because of excessive leverage tied to short-term compensation by Wall Street banks,” Tom says. “I know that individuals were buying too much house, taking on too much mortgage or possibly too many mortgages and were too short-term about how long they planned to own that home, but if you really want to lock down the problem, I think it emerged from Wall Street and a little bit from our political process.”

Yet sometimes out of crisis can also come opportunity, David posits.

“I take no solace and I have no glee, but I do have a lot of opportunity here at the age of 42 … to really take advantage of this situation. I really think that for young adults, this is truly a golden opportunity to start investing.”

Though David and Tom are no longer orchestrating fantasy baseball leagues, they continue to find ways to play. David—who invented Motley Fool’s CAPS, the company’s unique stock ratings service and “my first game design,” he jokes—owns over 300 strategy board games. He says sometimes he buys them just to read the rules and to understand the game’s constraints.

“I do think [strategy games] make you smarter. They focus your thinking in a way that’s so pure and microcosmic. It’s like you’re running a simulation of your thinking, and you’re allowed to watch it play out in a brief period. If you win, great, you’re happy. If you lose, then you have a great lesson to learn from, and then you take that in other aspects of your life.”

What a Fool Believes
Words of Wisdom from the Fools

On retirement:
“I don’t really like the word retirement. It feels like a disengagement, an unplugging, and I don’t think that’s what anybody should aspire to in life.” —David Gardner

“We want a better world for investors, so I look out across the landscape across our space and say, Please allow your customers to talk to each other because they’re going to end up understanding what they invest in and getting better results and being less emotional in difficult times if they do.” —Tom Gardner

On silver linings amid economic dark clouds:
“So much of investing is about time—how much time you still have left, and the compounding effects that lots of years can create for people. And so, the younger you are, in a way, the more pleased you should be by all this chaos. It’s caused some wonderful companies, Apple, for example, to be trading for less than half of what they were just a year ago.” —David Gardner

On how to choose a financial advisor:
“You just need to make sure that the incentives … in place for anyone providing advice [are] aligned to support and be wildly successful for you, as opposed to undermine and hurt your financial position.” —David Gardner

On doing it yourself:
“You have to determine how much of a role you want to play. There’s some great arguments for rolling up your sleeves and doing as much as you can of it yourself. Our strength as an organization is that we feed that. Our weakness is, also, that we feed that.” —Tom Gardner

On what to look for in an investment:
“Try to understand the company and its business model; look for companies that don’t have meaningful amounts of debt on the balance sheet; try to find companies that have an ‘ownership’ feeling around the center.” —Tom Gardner

(July 2009)