“Beliefs are hypotheses to be tested, not treasures to be guarded.” - Philip Tetlock
Over the last 10 years, we have personally conducted over 2,600 expert interviews and witnessed 100s of investment funds interview senior executives. After our fair share of mistakes, we’ve seen some patterns emerge that contribute to a greater likelihood of surfacing insight into a company’s long-term earning power through primary research interviews. There appear to us to be two fundamentally different approaches to interviewing.
The first, which is dominant in the industry, is what we would call “extractive”. Analysts approach the conversation like a dentist would approach the extraction of a patient’s tooth. The expert is typically regarded adversarially in this approach; an opponent whose knowledge is to be “extracted”. The analyst aims for tight control of the conversation in an attempt to extract the most value per unit of time through a set list of questions. In this approach, the expert is typically regarded suspiciously, with emphasis placed on the assumption that the interests of the expert and the analyst are not aligned.
This approach may be useful in a simple fact-finding mission. But for a long-term investor, our experience suggests it rarely yields insight. Although one may surface basic, decontextualized facts, the exchange rarely succeeds in exploring the depth of an expert’s knowledge. Given the analysts’ tight control of the conversation, the interview often becomes an exercise in confirming one’s priors. Any chance at surfacing differentiated insight is especially limited.
The second approach is what we would describe as “dialogue”. The dialogue approach is rooted in what Visa founder Dee Hock would call the art of “educing”, which means to bring out or develop something latent or potential. Dialogue is inherently collaborative, as opposed to extractive.
It is to see the expert as a partner rather than a competitor, and involves structuring the exchange as a win-win. There are three pillars to a dialogue approach:
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