I Fought The Law (And The Law Won), Vol. 3

In this episode of Motley Fool Rule Breaker Investing, Motley Fool co-founder David Gardner explores a handful of memorable laws and principles that help explain how people, businesses, markets, and institutions actually behave — from the sublime to the silly.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

This podcast was recorded on June 3, 2026.

David Gardner: “I'm breaking rocks in the hot sun. I fought the law and the law won. I fought the law and the law won. I needed money because I had none. I fought the law and the law won.” The songwriter was Sonny Curtis. The year was 1958. I wasn't around back then to hear it. But then in this century, Rolling Stone put it as Number 175 on the 500 Greatest Songs of All Time List. The Crickets recorded it in 1959 as Sonny Curtis took the place of guitar from Buddy Holly, who tragically been lost to a plane crash earlier that year. Speaking of laws, there are actually two right there: the law of gravity, the law of mortality. Two laws. To me, rules govern many aspects of our lives, but are often, as is said, made to be broken. Breaking rules is, of course, what we’re all about on this podcast, breaking rules and investing in business and in life. Rules are rules, but laws are different laws. At least, how I'm framing things here this week, they run deep. The consequences of fighting them not good. Many of these are natural, like the natural law of entropy that matter over time gravitates to its lowest, most disorganized state. Other laws are societal choices. Thou shalt not steal. This week, I want to bring you a Foolish set of laws that apply to investing, business, and life. Some are sublime, some are silly. Each will be explained and illustrated. The aim? That's what The Motley Fool's aim always is to make you smarter, happier, and richer one law at a time. Only on this week's Rule Breaker Investing.

Welcome back to Rule Breaker Investing, Happy June. On the face of it, laws and rules don't sound like the way that you and I might want to spend our time during, let's say, a 45-minute jog, cutting the lawn, or driving somewhere, as many people do as they listen to this podcast. But as I did with the first in this episodic series, which was Sept. 1, 2021, I'm going to try to make it fun. Now, before we get to laws, let's talk briefly about rules. The main difference between rules and laws, as my Googling revealed earlier today, is the consequences of breaking them. You fight rules, you break them. You might have improved the world forever. Maybe you knocked out a Goliath as you broke the rules. As you fought the rules, you replaced him with something better in the same way that streaming video has ultimately replaced a few generations later. Do you remember these VHS tapes? You fight rules. You break them, you can break through, and breakthroughs power so much of our culture and our world today. That's breaking rules. But if you break laws, if you fight them, the consequences are not going to be good. Breaking rocks in the hot sun is a great example of the consequence of fighting the law. What I want to do this week is to introduce you to six compelling insights that we'll put forward as laws or something very near it. Now, these are eponymous, which means each one carries the name generally of the individual who came up with it, or to whom we ascribe this law. We're going to go as I already have in the first two episodes of this series. We're going to go from the sublime to the silly.

Perhaps not every one of these laws that we're going to be covering this week has such deep consequences of ignoring it for each, we're going to discuss No. 1, where it's from, No. 2, what it is. No. 3, how we can think about it? Finally, No. 4, the takeaway. Without further ado, let's get started. No. 1 is the Diderot Effect. Now, where is it from? I first read about it in James Clear's book Atomic Habits. In fact, I included it on a podcast a few years ago, as I briefly discussed that, but it fits so nicely into I fought the law and the law won, even if the Diderot Effect is an effect, not a law, that I wanted to lead off with it this week. The term was actually coined by anthropologist and scholar of consumption patterns, Grant McCracken. He did it in 1986. It is named after the French philosopher Denis Diderot, who lived from 1713 to 1784. Diderot, who first described the effect in an essay titled "Regrets for my old dressing gown or a warning to those who have more taste than fortune." Succinctly stated, I'm going to use James Clear's words. Here is the Diderot Effect. Obtaining a new possession often creates a spiral of consumption that leads to additional purchases. Of the French philosopher James Clear wrote, "Denis Diderot lived nearly his entire life in poverty. But that all changed one day in 1765, Diderot's daughter was about to be married, and he could not afford to pay for the wedding. Despite his lack of wealth, Diderot is well known for his role as the co-founder and writer of Encyclopédie, one of the most comprehensive encyclopedias of his time.

When Catherine the Great, no less, the Empress of Russia, heard of Diderot's financial troubles, her heart went out to him. She was a book lover and greatly enjoyed his encyclopedia. She offered to buy Diderot's personal library for 1,000 pounds. That, by the way, is more than $150,000 today. Suddenly, Diderot had money and to spare with his new wealth, he not only paid for the wedding but also acquired a scarlet robe for himself. Diderot's scarlet robe was beautiful. Beautiful in fact that he immediately noticed how out of place it seemed when surrounded by his more common possessions. He wrote that there was "No more coordination, no more unity, no more beauty" between his elegant robe and the rest of his stuff. Diderot soon felt the urge to upgrade his possessions. He replaced his rug with one from Damascus. He decorated his home with expensive sculptures. He bought a mirror to place above the mantel and a better kitchen table. He tossed aside his old straw chair for a leather one.

Like falling dominoes, one purchase led to the next. Diderot's behavior is not uncommon. In fact, the tendency for one purchase to lead to another has a name, the Diderot Effect. Again, as I conclude this excerpt from James Clear's book, he restates the Diderot Effect states that obtaining a new possession often creates a spiral of consumption that leads to additional purchases. That's the Diderot Effect and a little bit of history behind it, and now a thought or two, especially, I think, when we buy a new house. You are all of a sudden going to be spending a lot more money outfitting your new house, even maintaining your new house. Sometimes you'll be spending that money immediately or with maintenance over time. When I think of an obvious, clear Diderot Effect in many of our lives, it is that purchase of a new property because you're not buying a new property. Now, I do want to hasten to add that the end of Diderot's story is not, by the way, that he went broke. Surprise. It's not that he made a horrible decision, and we're not going to sit here in judgment. Of all of a sudden upgrading your possessions because you got a new robe or a new house. For a lot of us, those things are very pleasurable.

I want to say it's good to be aware of the Diderot Effect and to prove how it can be positive, let me give a separate example. Let's pretend an investor discovers the charms of Rule Breaker Investing. All of a sudden, a chain reaction occurs. They open a brokerage account. They start reading annual reports. They listen to podcasts, they read books, they join an investment community, and those things are all good. To be clear, my takeaway for the Diderot Effect is it reminds us that new purchases, sometimes new habits, rarely arrive alone. Before making any significant change in your life, I urge you to ask yourself not only what will this cost, but also what else might this make me want. There it is. Law No. 1, the Diderot Effect.

Onto Law No. 2, this one, Dunbar's Rule of 150. Where is it from? Robin Dunbar is a British anthropologist and evolutionary psychologist, who's best known for studying the relationship between primate brain size and social group size. While researching how humans and other primates maintain our relationships, he proposed what has become known as Dunbar's number. Here's the law. Humans can comfortably maintain about 150 meaningful social relationships at a time. Many aspects of human society, you can think about military units or villages, or how about companies from start-up to mature, and of course, friend groups do reflect what I think of as biological limits on our ability to sustain those connections. That's part of what Dunbar's done is, he makes it clear it's in our biology, it's in our brains. We can't really manage more than 150 of these things at a time. In fact, his work has made him one of the most frequently cited scholars in discussions about social networks and communities, etc.

Now at the age of 60, I find myself with more friends than I can count, but sometimes I had a friend of mine ask me the other day, Is somebody a friend if you haven't actually talked to them in five years? It's a good question. I'm not sure I can definitively answer that, but I think my friend was trying to convey to me that if we haven't really checked in with somebody for years, while we may have appreciation for them and affection for them, maybe they're not really a friend, at least in one important sense and I console myself for friends of mine who I haven't spoken to for five years or more, that I think I'm hitting up against Dunbar's rule of 150. Another situation where this suggests itself is at the end of each year, when we send off holiday cards to friends and family. I notice now in our fourth decade of marriage that, Oh, my gosh, we're sending out well more than 150 Christmas cards. That is an example of hitting up against Dunbar's rule of 150. You can definitely send out infinite Christmas cards if you like, but you should also ask yourself at a certain point: Why are you doing it, and how much connection can you really maintain?

Again, I'm saying that as much to myself right now as to you, dear listener. Now, I also think about stocks. How many stocks can we have in our portfolio? I do think there is no magic number there. I think the number of stocks we have in our portfolios can exceed Dunbar's rule of 150. In my book Rule Breaker Investing, I basically give near the end a quick guide to Rule Breaker time management, basically, how much time we should spend following our stocks. Rather than say, you shouldn't have more than 30 stocks or more than 150 stocks. I leave it up to you, the investor, to figure out how many stocks you want to have in your portfolio, but for sure, you can then divide them into three buckets. The first is stocks that represent more than 5% of your portfolio. Some of us have several like that. Some of us don't have a single stock that's more than 5% of our portfolio. But if you find yourself with one or more like that, I would suggest you spend extra time. You're reviewing the quarterly earnings. You're maybe listening to the conference call, you're monitoring trends, and evaluating analyst reports. I call that extra time. That's Bucket No. 1.

Bucket No. 2 are for stocks that are in the 1.5% to 5% range. That is as a percentage of your overall portfolio, and for me, that's regular time. Then, of course, that leaves us with stocks that are less than 1.5% of your portfolio, and for those, I suggest you give them downtime. Now, I'm not saying don't follow them, but if something has to give here, it would certainly be that group. In conclusion, even though I think it's hard to maintain more than 150 social relationships, I think for something as impersonal as stocks, you can actually choose your own adventure and decide what number you want to maintain. Of course, if you're a Gardner, Kretzman, continuum follower, then you already know roughly what number I might suggest for you. Dunbar's rule of 150. Dunbar's number as a takeaway here in conclusion, it reminds us that relationships are a finite resource. We do live in a world with huge social networks. We're often obsessed with scale, followers, and networking. The real challenge is not going to be meeting more people. It's maintaining meaningful connections with the people who already matter. I would say the goals not to know everyone. It's to know your people well enough that the relationship still matters. Years later, five or more of them, but especially thinking about who are your 150? What Dunbar's rule helps us to do.

Let's move on to Law Number 3. Law Number 3 is Goodhart's law. I first came across this one in the wonderful book, The Score: How to Stop Playing Somebody Else's Game. This is by past guest on this podcast, and I'm happy to say future guest Thi Nguyen. The game's philosopher operating out of the University of Utah. Thi wrote a wonderful book called The Score, which came out earlier this year, and I'm here to tell you right now preview. He's going to be joining me for our authors in August in a couple of months. If you want to get started reading The Score, I completely recommend that to you. It is an awesome book, and we'll be talking about that in more detail with the author in August. But I can't remember what page it is in his book, but Thi mentions Goodhart's Law. Now, Charles Albert Eric Goodhart is today an 89-year-old British economist. He worked at the Bank of England on its public policy in the '70s and '80s. He was at the London School of Economics. His work focusing generally on central bank governance and monetary frameworks. He's also done academic research into foreign exchange markets, but he's best known for formulating Goodhart's law, and here it is. When a measure becomes a target, it ceases to be a good measure.

Thi Nguyen talks about this extensively in different places in his book, but probably the most relatable example for most of us is when we think about learning and being a student. You're in it to learn, you're in it for the love of learning. Am I right? Isn't that why we send our kids to school? Isn't that what you wanted out of your schooling? I say that a little bit with my tongue in cheek because I didn't always approach my schooling that way. For me, personally, I often stayed up way too late, pulling all-nighters, cramming, slamming at home, trying to get the A, and not always learning as much as I could have. Why was I acting that way? I'm not going to blame Goodhart's law, I'll blame myself. But when a measure becomes a target, it ceases to be a good measure, and so the student and the grade point average. Is a great example of Goodhart's law. Grade point average, which on the face of it was supposed to measure how well you did in school by making it that measure at an institutional national level, certainly is the case here in the United States of America, true in many other countries around the world. As soon as you start saying grade point average is the goal, what's your GPA, higher equals better, guess what starts to happen? It ceases to be a good measure of learning because people start gaming the system. They take easier courses to get a higher GPA. They pull all-nighters and slam it home, cramming just for the exam and not really caring too much about the life’s learning they could have derived from that course. I think grade point average, which Thi Nguyen talks quite a bit about in his book, The Score is an excellent example of Goodhart's Law in action.

Another maybe a corporate example that comes to mind, company decides that it wants to improve its customer service, and so it's going to begin measuring its average call length. As soon as you make that the measure, have you ever worked at a company like this? Have you ever worked in this context? As soon as you make average call length, the measure, guess what starts to happen. Your reps start learning that shorter calls are rewarded and start giving short shrift to some of your customers. It is an unintended consequence. In fact, in a lot of ways, Goodhart's law is a law of unintended consequences. You can probably come up with some more examples yourself. It's really worth keeping an eye on this. Again, when a measure becomes a target, it ceases to be a good measure. In conclusion, metrics can work. They can work well as indicators, but they often work poorly as goals. The moment you or others start optimizing for the metric itself, instead of the underlying reality that it was designed to keep track of, Goodhart's law may already be at work, and you can start to spy it out and maybe make changes in your own life or your organization, Goodhart's law.

On to law number four. This one, like a few of the others, isn't actually a law. It's a principle. It's the Shirky principle. Now, if my research is correct, this is actually from our friend Kevin Kelly, the co-founder of Wired and multi-time guest here on Rule Breaker Investing. Talked to Kevin earlier this year. I'm a huge fan of his Substack, his Kevin Kelly blog that you can subscribe to for free, or like me, if you want, pay him because it's that good. But it was 2010. I didn't actually read this column from Kevin Kelly, but as I researched the Shirky principle, it turns out, I think Kevin quotes Shirky's line at the top of an essay in 2010, and he calls it the Shirky principle. Now, Clay Shirky is an American pundit, a writer, a consultant on the social and economic effects, specifically of the Internet and how it affects technology and journalism. For some time, Clay Shirky has been the vice provost for AI and technology in education at NYU, New York University. He's written about and been interviewed on the Internet since pretty much 1996, which at this point is the last 30 years. Here is the Shirky principle. Institutions will try to preserve the problem to which they are the solution. When I think about the Shirky principle, the first thing that comes to mind is the danger for some not for profits out there, often, they're started to exist in order to solve a problem. But the bane of some not for profits, I'm certainly not going to name any here, and maybe you in your own experience can identify one or more of these.

The bane is that sometimes they actually maybe even unwittingly are preserving the problem in order that they can continue to be a living solution, in order that they can continue to survive themselves. Not for profits can definitely fall prey to the Shirky principle, but they're not the only ones. How about consultants? I would always be looking askance a little bit at my consultant, whoever he or she or it is, whatever they are doing or consulting us on, make sure they're not just creating a permanent job for themselves. As your consultant. They might be trying to preserve the problem to which they are the solution. Another example a little bit closer to investing comes to mind. That's financial TV. On the face of it, financial TV exists to help viewers understand, keep track of the markets. But I would say, as a Rule Breaker invest, if you really understand the markets and investing, you don't need to spend so much time watching them. Ironically, perhaps, the institution of financial television begins to gravitate very naturally toward things like daily predictions and hot takes and constant market drama. The problem itself becomes part of the fuel that keeps the institution running. Our uncertainty, our anxiety about the markets is not being solved. It's actually arguably being preserved, sometimes even encouraged or increased by financial television, so Caveat Emptor.

Another example of the Shirky Principle comes to mind when I think about disruptive innovation. Clay Christiansen, the Harvard Business professor, the fantastic mind behind the the innovator's dilemma and certainly one of my heroes, one of my inspirations, as I think about breaking the rules and those six traits we're looking for in rule breaking companies, the reason that disruptive innovation happens is often because for profit companies are trying to preserve their place in the world, their existing product or service. Often they keep just trying to improve the thing they already have. Sometimes they're trying to charge more and more for it over time. What that ends up doing is they're preserving a status quo that gets disrupted by an upstart, by a David who shows up in Goliath's field and all of a sudden conks Goliath out with a surprisingly disruptive stone, and that explains in a lot of ways, innovation, entrepreneurship, and why I love Rule Breaker Investing. It's, again, the Shirky principle in play. Institutions will try to preserve the problem to which they are the solution.

My takeaway here is, well, I would say Shirky's Principle doesn't mean that institutions are evil. I would just say it means incentives matter. Whenever you encounter an organization dedicated to solving a problem, it's worth asking, does this institution benefit more from solving the problem or from the problem continuing to exist? That question alone can make you a much wiser observer of our world, the Shirky Principle. Two more. Number five is Sutton's Law. Now, where is this from? Well, it's from William Francis Sutton, who lived 1901-1980, better known as Willie Sutton, American bank robber. During his 40-year robbery career, Wikipedia reminds me he stole an estimated $2 million. He eventually spent more than half of his adult life in prison. From which he escaped three times. For his talent at executing robberies in disguises, he gained two nicknames Willie the actor and Slick Willie. Sutton is also known as the namesake of Law number 5 here, Sutton's law, although, as I'll mention in a minute, he actually denied originating it. What is Sutton's law? Here it is. When diagnosing, one should first consider the obvious. If you've ever been to medical school, if you're a practicing doctor, I think you've heard of Sutton's law. It also applies a lot in technology, debugging computers, which I'll mention a sec. But let's go back to Willie Sutton for a second. The law is named after this bank robber who reputedly replied to a reporter's inquiry. The reporter was asking, you know, Willie Sutton, "Why do you rob banks?" He said, "Wait for it, because that's where the money is." In Sutton's 1976 book, which was entitled, Where the Money Was, he actually denied having said this, but he did add that if anybody had asked me, I'd have probably said it. That's what almost anybody would say. Sutton continued. It couldn't be more obvious.

Well, when I think about Sutton's law, first of all, I do think about the importance of diagnosing, which occurs in many contexts. I already mentioned the medical one. Doctors are often taught and reminded that the first thing they should suspect is the obvious thing. Only then, if you can cast that one out, should you start looking deeper, but it happens all the time in technology, too. One of my favorite streaming shows, The IT Crowd, which the Gardner family has watched over and over again, features two British comedians. Actually, one of them is Irish, but the characters names are Roy and Moss, and they basically are the IT department in a large, faceless British corporation, and they occupy the basement of their building. They're a total sideline. They don't get much respect from any of the other employees, although the CEO takes a shine to them. But the number one answer they give at the help desk when employees call down for their help cause something's wrong with their computer or the Wi-Fi is not working their classic line is, "Have you turned it off and on again." Indeed, I have used that to good effect myself many times over the years with many different technological and electrically powered items. I bet you've done the same yourself. Dear listener, have you turned it off and on again?

Often, that is the simple diagnosis that gives you success, Sutton's law. First, consider the obvious. Here's another example one I go back to from time to time on this podcast. Let's pretend you've dropped a text to a friend and they haven't responded for quite a while. The natural take for most of us is to think it's our fault. It's something we said or didn't say, something we shouldn't have done. Whatever it is, that friend appears to be upset at us because he or she has not responded for quite a long time. Now, Shirzad Chamine, who wrote the wonderful book, Positive Intelligence, and I'm quoting from that right here, says, even as an expert in this field, Shirzad said, I've been humbled by how difficult it is to correctly guess another person's needs and intentions. I've learned that it is critical to check with them. Rather than assume. Assumptions regarding others’ intentions are often incorrect and provide much of the fuel for conflict. Our internal judge is much more certain about the other person's true needs and intentions than our data and our own experience warrants.

Again, I was just quoting Shirzad Chamine there. But that is another great example. When diagnosing one should first consider the obvious, it's often about them and their situation. Maybe they're really busy, maybe they're tired or out of the country. It's not about us. When diagnosing, one should first consider the obvious. Sutton's law, in a sense, pairs beautifully with the old kiss principle. Do you remember this one? Keep it simple, stupid. Before reaching for the complicated explanation in life, Sutton's law reminds us, check the simple one because surprisingly often, that's where the truth is hiding. Five down, one to go. I mentioned there's a progression here from the sublime to the silly.

Let's close it out with Number 6, Gardner's Law. Now, where is this one from? Well, the first public unveiling of Gardner's law came on this podcast in 2016, ten years ago. I would say now, given its age, Gardner's law may now have come to maturity, and it's time for this to be recognized more publicly. I'm going to help it out right now by restating Gardner's law ten years later. "Any stuff that is referred to, particularly on Internet merch and ecommerce sites as "cool stuff" is by that very fact alone, completely and inherently uncool." I first dreamed up Gardner's Law. It was the 1990s. The Internet was just starting, e-commerce was happening. There were magnet sites like amazon.com or even buy.com, which ended up not being much of a stock. Fortunately, I never recommended that when I picked Amazon, but I also noticed an increasing number of homegrown sites, smaller sites that wouldn't necessarily be about merch or stuff, but would always have a link to their store where you could buy their stuff. I noticed some of them would say, "Buy our cool stuff, or here's our cool stuff," or they'd actually name their link to their shop on their website, "Cool stuff." This started in the 1990s, but it does persist to today. I think if you call your stuff cool stuff, you have just by that very fact alone made it completely and inherently uncool. Now, there are two words there, and it's natural to focus on the word cool because as soon as somebody starts calling their own stuff cool, it obviously starts to lose its coolness.

On the one hand, Gardner's law could be predicated largely on misuse of the word “cool.” But I also want to say something about the word stuff. I think that stuff is too generic. I think you're hurting yourself if you're using the word stuff for whatever you have in your store. There are many more interesting synonyms or you could just be direct and say what it actually is in your store. But please, for the love of God, don't call the merchandise on your Internet site cool stuff. As I close this one out, I want to mention that there is a wonderful Wikipedia page that features some of the laws I've shared with you this particular week, and the page is entitled, List of eponymous laws, laws named after a person. It's just a long list of links to articles on laws and principles and adages of the sort we've seen today. I want to express my concern and in some cases, my disappointment that under the rubric E-G, the one starting with the letters E-G at present, Gardner's law, despite now being over 10-years-old, referring to a phenomenon that has existed on this earth for approximately 30 years that Gardner's law is at present, not listed on the list of eponymous laws.

Now, modesty and Wikipedia's rules preclude me from actually typing that in myself, but you now have a link. You can link directly to my July 20, 2016 unveiling of this law, or you can even link to this podcast as well, where I once again quote this law, "I believe that the more people, specifically webmasters overseeing sites, usually smaller sites that happen to have a merch function, I believe this world will be made better if Gardner's law is broadly recognized and appreciated." Again, I can't go in and type in anything about me or that I'm creating on Wikipedia, but does that mean, dear listener, does that mean you couldn't.

Thanks for joining with me this week, Let's just review the six laws. In conclusion, Number 1, the Diderot effect, obtaining a new possession often creates a spiral of consumption that leads to additional purchases. Number 2, Dunbar's rule of 150, humans can comfortably maintain about 150 meaningful social relationships at a time. Number 3, Goodhart's law. When a measure becomes a target, it ceases to be a good measure. Number four, the Shirky principle, institutions will try to preserve the problem to which they are the solution. Number 5, Sutton's law. When diagnosing, one should first consider the obvious where the money is. Finally, Gardner's law. Any stuff that is referred to, particularly on Internet merch and ecommerce sites as cool stuff is by that very fact alone completely and inherently uncool. We'll return back to investing next week. I'm looking forward to our next episode of Stock Stories, welcoming in some of my favorite Motley Fool writers and analysts, telling a stock story around our virtual campfire. In the meantime, I hope June has started well for you. Fool on.

David Gardner has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.