The Motley Fool

• 1. Introduction

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  The Motley Fool takes its name from a Shakespeare play, specifically a character in As You Like It: the court jester, the one figure allowed to speak uncomfortable truths to the Duke without losing his head. When brothers David Gardner and Tom Gardner, along with Todd Etter and Erik Rydholm, founded their financial advice company in Alexandria, Virginia in July 1993, they were betting that ordinary people deserved the same honest information that Wall Street insiders hoarded. What started as an investment newsletter would, within a year, spark a hoax that made national headlines and land the founders in The New Yorker. How did a company named after a Shakespearean fool end up shaping federal securities regulation? And what happened when its most celebrated stock-picking system turned out to be a lesson in its own right?

• 2. A Shakespearean Name

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  Shakespeare's comedy As You Like It gives the company its philosophical anchor. The court jester in that play occupies a rare and dangerous position: he can tell the Duke the truth, and keep his head on his shoulders while doing so. Every other character risks punishment for plain speaking. The fool alone is protected by his apparent absurdity. David and Tom Gardner saw that dynamic as a metaphor for what financial advice had become by the early 1990s. Professionals dressed in the language of expertise could obscure bad information indefinitely. A fool, wearing the mask of irreverence, might actually be the only one telling the truth. That framing shaped everything from the company's tone to the congressional testimony it would later deliver on Wall Street practices.

• 3. The April Fool Lesson

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  In 1994, The Motley Fool posted a series of online messages promoting a sewage-disposal company that did not exist. The stunt was an April Fool's joke with a deliberate educational purpose: to show readers how easily penny stock promotions could mislead investors. The hoax caught the attention of The Wall Street Journal, which ran an article on it. That same August, the Gardners converted their one-year-old investment newsletter into a content partnership with America Online. By December, they had been profiled in the "Talk of the Town" section of The New Yorker. The following year brought a book, The Motley Fool Investment Guide, which reached bestseller lists for both The New York Times and Bloomberg Businessweek. Bloomberg wrote about the company's "Fanatical following", while a PBS Frontline episode dismissed the company as "20-somethings" giving "so-called advice". The early tension between enthusiastic readers and skeptical press would define the company's public image for years.

• 4. The Foolish Four Collapse

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  Toward the end of the 1990s, The Motley Fool promoted a stock-picking system they called the "Foolish Four". It was adapted from the Dogs of the Dow method, which selects stocks from the Dow Jones Industrial Average based on high dividend yield. The company published a book on the strategy in 1999, and the method attracted serious outside scrutiny. Journalist Jason Zweig acknowledged that favoring high-dividend-yield stocks was a "sensible" starting point, since such stocks tend to trade at lower valuations by several common measures. But Zweig challenged the Foolish Four's wilder claims, including the assertion that investors could "crush mutual funds in only 15 minutes a year". He also questioned the needlessly complicated mathematical formulas the Motley Fool applied on top of an otherwise straightforward approach. Also in 1999, researchers McQueen and Thorley published a paper using the Foolish Four portfolio to demonstrate a broader problem: any trading strategy reverse-engineered from historical data is vulnerable to overfitting, and the effect is only worse when a bestselling book publicizes the method to the masses. By 2000, Motley Fool writer Ann Coleman conceded that the Foolish Four "turned out to be not nearly as wonderful a strategy as we thought". When the dot-com bubble collapsed in 2001, the company removed 80% of its staff across three rounds of layoffs.

• 5. Rebuilding the Business

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  February 2002 marked a deliberate restart. The Motley Fool shifted away from advertising revenue and launched a subscription model, anchored by a program called Stock Advisor, which delivered monthly stock picks and premium educational material to paying members. The company also built international operations, eventually establishing a presence in the United Kingdom, Australia, and Canada. Two markets proved harder to sustain: in October 2019, the company announced it was closing its Singapore operations, and in October 2020, it shut down its Hong Kong presence as well. In August 2018, a personal-finance sub-brand called The Ascent launched to offer product reviews and free educational resources. September 2019 brought two more extensions: Millionacres, a subscription service focused on real estate investing, and a mobile game called Investor Island, which launched on the 17th of that month.

• 6. Taking On Washington

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  Representatives of The Motley Fool testified before Congress on topics ranging from mutual fund fees to the Enron scandal to the IPO process, consistently pushing for fairer disclosure rules. One campaign produced a measurable result. In 1999, the Securities and Exchange Commission proposed Regulation Fair Disclosure, a rule that would require companies to release material information to ordinary investors and Wall Street analysts at the same time. In December of that year, Motley Fool author Bill Barker wrote an article urging readers to submit comments directly to the SEC's website. The letters poured in. After the regulation passed, former SEC chairman Arthur Levitt credited the response in the Wall Street Journal edition of the 2nd of July 2001, saying that two-thirds of the letters supporting Reg FD came from Motley Fool readers, and that without them, the regulation would not have passed. A company started by brothers in Virginia, named after a Shakespeare jester, had influenced how American corporations disclose information to the public.