Good Investing Talks - How to interview great? A chat with Will Barnes & Will Oliver (In Practise)

Episode Date: January 5, 2022

William Oliver and William Barnes run In Practise - a service for expert interviews. Here we took time to talk about the art of interviewing.

How to do great interviews. In this interview, I'm talking about the art of interviewing. I'm very happy to welcome will and will of in practice. They both have conducted thousands of interviews and are willing to share the knowledge in this interview. The first 30 minutes you can get to know in practice and what their mission is and what they are doing. And after this, we are diving into the art of interviewing. Enjoy the conversation. Hello, audience.

it's great to have two wills on. They run in practice and practice is supporting this channel for a few interviews. And I think as I just can shortly give an idea what these guys do and I find it extremely helpful with these two guys do, I want to also give a chance to first explain a bit what they do it in practice and then also talk about the art of conversation or what makes a good interview because some of you are active investors that have touch points with companies that have the chance to talk to management to experts and we want to give our knowledge we've combined over the years to talk with management in a good way to get more knowledge out of an interview

to you and I hope it's a fun conversation we're having today and maybe I built a bridge to the two wills so if you want to work for a practice you have to have the first name will or is this a fake news it's negotiable how did you guys get together and when did you find or decide to build and practice so glad to jump in um we met probably around five years ago now, while I was involved in building a content business for one of the major expert networks, a company called Third Bridge. And I had fallen into that role about two and a half to three years prior to meeting Will, where I straight out of university had an interest in investing, analyzing businesses. And the

This job came across, I can't remember exactly how I came across it, but there was this opportunity offered to spend your life interviewing executives, analyzing companies, reading a few hours a day. And I couldn't quite believe this was possible. So much so that I actually, so I went for a series of interviews, this expert network was starting this content business. they were looking for a generalist and there seemed to be a fit. I was offered the job and I actually kept the employment contract. I didn't sign it for the first few weeks

because I just didn't, I didn't think that it was possible that I'd be able to spend my time in the way that the management team at Third Bridge had described. So really, like very quickly, it was just, it turned into a dream and Will was hired into that business.

a couple of years after I arrived. And we basically spent a few years of our lives with operators, interviewing operators for the benefit of a number of different types of investors. We built products for credit hedge funds, distressed credit funds, high-yield credit funds, for private equity funds, looking at roll-ups in Europe, and interviewing operators of these businesses. And then eventually over time into more and more work in the public equity space for the benefit of hedge funds. So that work was really a lot of fun.

And it was during that time that Will and I started thinking about how we would design a system to do this work for 30, 40, 50 years. What would that look like? And so really, in practice, is borne out of, hopefully it's our, I suppose the business that you see today is one of the early versions of an answer to that question. How would you design a system to spend time with and learn from operators alongside the best investors in the world, the highest quality investors in the world? And so I think the way that we look and really will is the brains behind, the other will is the brains behind this operation. and very much our approach to studying companies. The way that we look at businesses, I think has attracted a certain community.

And, of course, that involves a huge amount of back and forth. So we're learning together, really, with a lot of investors that we admire. And what has emerged, one of more practical level, is this content subscription business, where we conduct interviews ourselves. We also have a small group of what we call premium partners who conduct part of their work in public on the platform.

And the idea is really to study great businesses to explore the mechanics, value chain power dynamics, operating realities of high-quality companies that is supposed to take a view on the sustainability of historical performance. I suppose a bit of a dream. to be involved and partner with high-quality companies over very long periods of time and share good ideas about these high-quality companies.

How many interviews have you both contacted over your professional life? I think Will's probably overtaken me. I think Will's between us, I think we count 2,600. I think I'm probably on 1,200 and Will's probably closer to 1,400. How much does the interview usually take 60 minutes, more? Yeah, about an hour. And with this whole experience, we will soon build a bridge to the question, what makes a good interview for you too.

But maybe let's go a bit back to in practice. And I'm interested, what is the idea of value you want to create for your platform customers and the people who listen to the interviews. Can't you tell us that one, too, and I think you've been a subscriber for a while, right? What value do you get? We have, it's interesting to look at kind of how the industry is structured and how it's evolved, right?

Because like you said, we was working at Ferb Bridge, having a great time, but selling subscriptions for 50,000, $100,000 to big consulting companies, P-E funds, hedge funds, and also across different asset classes. So, you know, we had a lot of work in distressed debt, European high-yield and obviously public equities as well. And so what we set out to do, really, was a couple of things. Like, firstly, to only study high-quality companies. We always say that we've we've had our time studying the over-leathered crappy businesses, you know. So our offering is focused on finding the highest quality companies, publicly listed

equities globally, you know, focus on Europe and in the US, also with a tilt towards XUS, right? So 60, 70% outside of the US is what we aim for. and also kind of 70% of our coverage will be sub 15 billion enterprise value. You know, those companies that we think are great, but can also become 10, 20 times the size. And so that was the first thing, was really kind of to leave what we was, leave what we were studying before in those different parts of the capital structure or different, you know, the debt market and the stress space. only focus on high quality companies, but it also make it affordable, right?

And so we were having such a great time, you know, learning from executives all day long with investors, and we just thought that this should be more widely available. There's no reason why only McKinsey or Bain or KKR should get access to this stuff, right? It should be, you know, wouldn't it be great if there was a model

where it was possible for a reasonable, you know, person to pay a reasonable price to get access to this stuff. So that's kind of the backdrop to how we positioned our offering and learned a lot along the way from other players in the market and how to scale. And now we found ourselves just really trying to provide high-quality content, you know, conducted by us internally, but also by our part. who are also professional investors, you produce high quality content at scale for a very affordable price. And that's kind of where we're at. And we look to, we only produce about

200 a year right now, run rate, but we're looking to, you know, three to four times the, the content we produce for the same price over the next, you know, three years. You've studied many, many businesses, which of these businesses that you copy for your own business and practice. There's many influences on the model, right? I mean, you know one that we've... Maybe three ideas per person, maximum. Ah, man, I think, well, any content business that has original content has to take influence

from Netflix in a way, right? and you know you they i mean some of the shorts may still believe they're right and there's still a short thesis out there but a lot arguably that they're proven that the fixed scale leverage you get from investing in content owning the intellectual property monetizing that over a large subscriber base is attractive you know and so that that obviously had a huge influence on us and we still look at that and, you know, look at Netflix, not the way any of the scale of Netflix, obviously, but just look at that kind of structure and the business model

and try to learn from them in terms of how they thought about scaling and also just reinvesting when everyone thought it was crazy, you know. When you're at a small scale, it's one thing that we still try and get our heads around. You know, it can feel uncomfortable at times where you're investing so much for the future, but you have to build a library for a bigger audience, you know, so you can grow into it. So that was the major one. I mean, we've obviously taken some influence from naked wines in what they do and how they treat their winemakers, how we treat our executives,

and somehow how they also engage in community and, you know, with their angels and with their winemakers, you know, we're taking some influence from them and how we hopefully can build a community. And, yeah, those two are obviously kind of top of mind. And then, I mean, there's many more from just a values and behaviors perspective that we take from, right? I mean, you know, you can name all the great companies, right? You know, Buffett and how he approaches running his business

and allocating capital and stuff like that. So it's really a mixture of many things. Yeah, probably. I mean, I would say there's a few models out there that we find really interesting businesses that are doing really interesting things for stakeholders. Will mentioned naked wines. I think structurally what you have in our industry is an industry with relatively large gross margins. all right the incumbent GLG they're around 70 75% gross margins and and what that allows us structurally which so you can see the parallels with naked and the wine industry giving margin back to suppliers and customers and there's something about in our case the way experts are paid and treated and the service level they experience and the value that ultimately the customer derives from the experience of the service. And so that was a big thing for us. And that was really just us noticing the structural opportunity here to give value back to suppliers,

to your supply side and demand side. That really has created a lot of oxygen, I think, for a range of businesses in our industry to emerge. and then we've had this obsession with quality and something we talk about, think about a lot that we're trying to live it ourselves internally in building a company, which is hard. Naked is an interesting bridge to our topic what makes a good interview or a series of interviews

because you've drilled very deep on this business and I also did some trilling there. How do you go about selecting the people you want to have four-year interviews on certain businesses. What are your criterias for this? That's a good question. It largely depends on the company. So, I mean, you know naked pretty well.

I mean, there's various angles you can take on exploring naked, you know. And the obvious ones is what everyone does is just go to form a C-suite. or, you know, former guys who actually run a country or high up in the exec management team. Some of the stuff that we've done is maybe a bit more differentiated is just, you know, if you look at naked, one of the questions that I had or was potentially concerned about was just really the, yeah, I guess the regulatory landscape in the US.

You know, a part of the investment thesis is based on this value that they can redistribute from, yeah, basically as a winery to the consumer by not allowing the distributors to take a margin effectively or distributing that, both to the winemaker and to the consumer. But if, you know, the regulatory landscape changes, i.e., either you can't register as a winery anymore, or. or, you know, if the distributors have a lot of power, then they could start edging out some of these DTC businesses, you know, that could put naked in a lot of pressure and actually just crushed the bill, the investment case, you know, in the U.S. So part of the work we've done was just trying to understand exactly how much power these distributors have,

given the history of them. And so we've done a call with a guy who was, who used to run one of the biggest wine distributors in the U.S. and yeah it was pretty probably one of our favorite calls you've done this year in terms of the stories he had to tell about the history of the market and some of these distribute old distributor families and the history of them and yeah so really just trying to take a different approach on like who would be interesting to add value to the investment case you know that maybe it's not the obvious and so we're also just trying to take a different approach on like who would be interesting to add value to the investment case you know that maybe is not the obvious

And so we're also trying to, you know, find people who are winemakers as well. I've got a potential couple of interviews lined up with winemakers. So wine makers, also people that run wineries because naked, I think one of the things that's not all so clear from naked, they could do a better job about is just explaining exactly how they manufacture the wine. So obviously they're very asset lia, yet they are a winery. And so what they actually do is lease space at wineries, spare space at wineries. But again, one question could be, you know, is there, if there's not that supply of space, then the amount of it to grow as much. So all these things that are kind of not obvious at first force that we could dive into

and understand exactly how general managers of a winery works with naked to get a different perspective on actually how this business works rather than just speaking to a former C-Suite guy. So it really depends on the company that we're looking at. We try to kind of go at a few levels deeper and someone who's a bit not as obvious to an interview. How many interviews have you contacted on Naked? I'm not sure.

A few. A few. But yes, and so the thing is, what becomes interesting is that we could do an interview on one of the, that interview that we mentioned about the regulatory landscape, right, the history of the wine market. That's not specifically on naked, but it is, you know, like, so naked was the original, you know, idea, but like if you actually read the interview and you wasn't specifically aware

of naked, you wouldn't necessarily think it was about naked, right? And so, you know, this also gets into the point about how, you know, some of the approaches that we take to interview in is that. You know, you can have an indirect line of questioning about something that actually is really powerful in understanding something that might not be directly what you're discussing. So from that interview that we had on the wine industry, you know, I got so much more confident or comfortable with some of the risks

potentially with naked and actually didn't even mention naked that much in the interview. So it's a, it's a. weird art. Do you have the feeling after this conducting the several interviews that you have understood naked or is it like a constant

painting? This changing over time what are you drawing there? It's brutal. You know, this is what we're talking about this the other day, how yeah, running this art startup

whilst also learning in this way. You know, it's like a such a high, intense way to learn about companies like through these interviews kind of in the public you're never you're never finished you know it's always this anxiety that you've missed something or paranoid that you're wrong and but part of what we do is also just to build a yeah I guess a mosaic of different points of information that we can bring together to make a judgment about a company you know and you never you never fully understand or have all the information you know

or otherwise it would be too easy it wouldn't be a risk yeah it's it's it's always it's it's it's like this picture of the elephant that many blind people try to touch in the room and someone describe it's full of hairs other one describes it's a thick skin and the other one is describing the the nose or yeah it's quite interesting to to see this and also what you mentioned i'm I'm coming from a bit of sociological background and there you have the field of wine production itself, but you also have the relation, you have to research of the field of wine production to the field of power, like of politics, for instance, like the regulatory framework, that could change, that could change the rules in the field of wine production itself, and also the

field of finance, which we are in a bit ourselves like investors, if they say, okay, this business is the future and this business is the great business but was very helpful to exchange parts of the company like your shares for money like the Tesla playbook he was able to get this great attribution from the field of finance and changed like the his shares to a lot of money and enabled his business to be able to grow and be able to be sustainable over time and also change the rules in the field of cap reduction. So it's fascinating how many layers of society you have to try to look at and understand. And also with naked, one topic that interests me is more where I have my concerns is like

climate and climate change because wine is just like natural product. And if you look at droughts and what is happening there, this society nature relationship that's also changing. And it's also a factor you have to consider when you try to get a deeper understanding. And, yeah, interviews are super helpful for this. Exactly. And also, I think, you know, when we was doing work on naked, yeah, the whole winemaking side is not too clear from the public reports that they have.

You just, you see that they can, they have angels and they market the wines. But actually, the process of making the wine, the relationship with the winemaker, the winemaker's relationship to the winery, you know, the actual winery, not naked as a winery, but the facilities. And also why that matters or what we think that matters is because, you know, part of the investment case for naked is also that there is this fixed cost leverage in the system, right? So as you do scale the volume per bottle of wine for a winemaker, everybody still wins, right? And naked it can actually benefit from cost savings from buying the fruit on a longer lead time and deeper. So more fruit on a better prices, can fill bigger tanks, can fill bigger facilities,

barrels, etc. right and all this can be either passed on to the winemaker or passed onto the consumer and so but like that's not too clear from just look at the the overarching contribution margin they show and so i think part of it that we're interested in is actually how much can they actually leverage that you know maybe they want to pass it all onto the consumer just to drive volume and drive scale but the point is that actually if they do continue to grow and if they do, you know, get to a million angels in the US, you could see a lot of fixed cost leverage that isn't really clear from the outside looking in.

Coming back to Naked and the series of interviews you've conducted, how have you conceptualized the limitations your interview partner can give you insights on? Like, if you talked about regulatory, you can ask about where, where do you set the limits in the questionnaires you're asking? How do you build this, this awareness and also like that are certain borders and what you can get from an interview? It's a good question. I think the huge caveat we've ordered this, any primary research, is that there's always bias, inherent bias, and everyone, in every, comment and interview there's going to be a person who has seen the world and a business and the industry for their own eyes and therefore is somewhat biased and what they say so you have

to handicap the information that you get which is also part of the part of the challenge of being an investor right so we all look at similar information we can read the same interviews but what makes people better investors or worse investors is how they how they actually hand handicap that information, you know, and how you kind of judge what they're saying. And so what we try to do is really provide an insight into how a business works, you know, how wine making works, how naked works with the facility. And then we can lead you to some of the questions that may matter, i.e., what fixed cost leverage could be embedded in the system. And so really what we try to do is really lay out how a business work, how a system work, how people at a company behave, and then let you as an investor handicap that, you know, and make a decision on whether you think that's either worthy of building conviction or not.

Well, and there's something very specific here around your question, Tim, which is something we've realized more and more over time. it's not trying to do too much with one person. As Will mentioned, you build out the map, you look at the mechanics of the system, you look at the way the business fits into the wider environment, and looking at the arc of our coverage on Naked, where there's probably around, I'd say, at least seven, eight interviews that trace the arc of the business, but where we're really restricting the conversations to the circle of expertise

of the executive. And that's where spending time, really investing a lot more time than people, I think than a lot of investors that we see. And I suppose we do have the luxury being a content operator to probably spend a little bit more time with executives before interviews. But as any good interviewer would do, as they say in the industry, right, you read the book first. You don't show up to the interview without doing your homework. And that really involves identifying the circle of competence of the executive and not giving into temptation to stray beyond that. And not giving into that temptation, especially if you have someone very senior at the business

who probably has an opinion on who can probably speak really clearly and persuasively. This is the real temptation that comes up is to, because you're so curious, to go and ask them to comment and actually that that is very likely to be outside of their circle of competence and not necessarily or almost it can be quite unlikely that its value add to the audience so really mapping those drivers onto a very clearly defined circle of competence and being disciplined and by the way i say being disciplined it's easy to say much harder to do yeah i've fallen this trap at the time like you get and it's weird because Well, I guess maybe it's kind of true to, maybe it's not, but like the CEOs and the more senior the executive, the harder they are to interview, because they can talk about everything.

You know, they can speak about, you know, capital allocation, marketing, customers, you know, whatever. Like, whereas actually, if you get someone who's a bit lower down the chain, it's much easier to interview. And also, they can bullshit you easier, right? Like the CEOs, right? They know how to interview. I part-time work in politics and it has a lot of politics elements. Like you have to be a generalist. You have to be able to talk to a topic retirement policy.

On the next day you have to talk about queer politics. On the next day, you have to talk about climate politics. So you have to be able to speak. You have to get your notes from the part of the business. Not from a part of the business, but you have to get your notes. One pager where you're able to speak. You have to go at listening board meetings or get your reports, but you aren't the one on the front. And that's also what we try to, obviously we look for C-suite executives, right, and those on the executive board.

But actually, a lot of the interested insights can come from that kind of second tier of management, right? Those that are typically on the ground that are relaying the information to the C-suite, right, but actually can give you a different perspective. if you can interview them in a certain way, you can get really differentiated kind of raw insights rather than something that's brushed and kind of regurgitated from the C-suite. So we do look to try and focus on, you know, how do we find executives that don't typically interview

all the expert networks? How do we find those that are actually on the ground or have direct relationship with customers or whatever it may be that we're looking at? which means they're also going to be harder to interview because they sometimes haven't done this stuff before but you can really get interesting insights from the second tier of management there are two things you have to reflect on when you're doing such an interview i think the one is like the plan spot the person has because the person just like looks in this

this direction and doesn't like reflect about himself often because he is a like talking from this position describes how the world is from his position this is one thing I think you have to reflect on and the other one is also like it's close to this is like there's a career attached often to such a job and a certain history in the company and you also have to reflect this level how are you going about this two ways of reflection if you're hearing like a statement or the data you're getting from an interview? I mean, there's so many stages we go for. I mean, I think the one of the things we would mention just as a caveat is that, you know,

we have the luxury of doing this as a profession in a way, right? So we, you know, we do hundreds and hundreds of these a year. And so we have, we have the luxury of, you know, speaking to the person we're interviewing for 30 minutes and hour beforehand. really preparing it in detail, sending the list of questions to them, making sure they're really comfortable. Whereas investors that typically use expert network services, they are kind of thrown into the Thunderdome, right, with the executive.

And like they get straight on the call and they're on the recording. So it's a very different environment. So we have the luxury of not only just understanding who the person is, what they think about the company, the world, the industry, details on why they might have been left or fired or misunderstanding with the founder, whatever it may be, which also really helps us,

informs us of what we can discuss in the interview. So that's why we also feel really that we can produce differentiated content because we're just, you know, not because we're necessarily better, just because we're coming at this from a different, for an angle, you know, we're coming at it from a space where we can spend a lot of time with the executive beforehand. We can prepare with them a lot. We can also do interviews that maybe are not directly relevant for one specific company, like the history of the wide industry,

you know, so we can, it's, you know, the way we see this is that we're trying to build our business around some of those kind of structural factors that make it, make us produce differentiated content that's kind of hard to replicate elsewhere in the industry. I mean, spending time with the executive, but also giving us the agency to produce differentiated content that it's not just on a company or any, any public company. How detailed do you script your interview before you go into a conversation? do you already have like a certain plan where you build the conversation to I mean it's a great question

we say internally a lot that actually the line of questioning matters more than the question you know so the sequencing of questions that gets you to what you really want to know is more important than just asking what you really want to know and I think that's also something that we we learned from making mistakes right of historically we'd get on an interview and you know if you want to ask Nick Devlin how much he's grown in the US or you know what their margins are you know you can't just come out and ask it straight

away but there's there's probably a more intuitive way to get to that answer right which which means asking certain questions beforehand so we think a lot about structuring our questions in a way that is natural that, you know, builds trust with the executive in the first five, ten minutes, builds a narrative around what we want to discuss. And so we would have, I mean, I'd have typically like one or two pages, but the interesting thing is that you kind of, you can use that,

but you can't stick to it too rigidly, you know, you have to listen. This is part of the art of the conversation, right? You can have a structure of, I mean, I literally had this case today. I was interviewing a lady from ASOS, for my lady of ASOS. and we was talking about buying how they buy how they source products right and how they merchandise the products and she pretty much just come out in the first five minutes was like all these businesses are the same yeah ASOS like they're all those same assortment and so she she kind of like that froze yeah and you have to listen to that you know you

can't I had my structure and you have to kind of listen to the to the executive and so it makes it really difficult to balance those two things, right? Or planning and structuring the conversation, but also listening to the executive. And, you know, we haven't found a good way to, you know, there's no easy way to do it. Like, I don't know, how do you listen, right? How do you be present? It's just a lifetime of practice, I guess. It's really hard.

And I think Will is much more heavily involved in interviewing. that I am today at in practice, we're responsible for different aspects of the business, but certainly in my time, and I think it's probably fair to say for Will, this element of thinking of lines of questioning and thematically about an interview has become massively more prominent. In contrast to early days of a very long, scripted 30-question list to really two or three themes and then a sense of course of what subheadings or how you break down those themes but but really it's it's um you know the the topic it's it's so interesting i find that in the topic of interviewing and asking questions listening is and this element of how to listen

is often is really underappreciated basically it's it's actually engaging you know almost on a meta level today as we're interacting right now in this conversation, having a sense for what we'd like to talk about, but also being dynamic in listening to your interest, the way you're animated, your physical response to our questions, your body language, you know, our levels of excitement in where we go, the way we answer questions or don't answer questions, and your reading of why, you know, you can ask a, or want to explore, an avenue with an executive and they can give you resistance, but that resistance can be implicit. And either you listen to that or not. But there's this, and I think so much of it,

I mean, if there's anything I've learned from Will and the level of rigor with which he approaches interviews where you're looking at 10, 12, 15 hours of preparation around the business to be able to listen actually and one of the yeah i mean he he's one of one of the one of the one of a few people i think that conducts this work that has a deep ability to listen um and and that's really derived from from a lot of preparation yeah also also realizing that i'm not listening a lot of time, right? I can go back to old interviews and, and I can tell that I had a structure of questions that I wanted to work through, and I was just working through them, right? And the executive could have said anything, and it didn't matter because I was just going to the next question, effectively.

And I can read back some interviews and be like, this executive is basically shouting at me about something that matters, but it wasn't in my structure. So I just, I couldn't listen. I wasn't listening. And that's also where a lot of the times in the industry, you'll get some of the same types of interviews, right? Because typically analysts have similar questions. They ask similar questions to similar executives,

and therefore they get similar answers, right? And so it really takes you to listen to try and actually dive into understanding know why the executive may be saying some things and it's it's really difficult because what you know what also i struggle with is especially of investors right like you have to have an investors are paid for an opinion you know you know you have an opinion on naked you know you put your money where your mouth is and therefore you potentially get emotionally attached to that opinion and but but actually if you want to really learn from the conversation you have to put

you have to be unemotional about it and put your judgment and your assumptions to the side. But, you know, and therefore let the, you know, listen to the executive. But you also have to understand the context and the company and different points of view on the company to be able to tango with them. So it's kind of like, it's a paradox, right? Because you can't just let the executive stand up and just preach because everyone would just be like, oh, this is bullshit. He's just kind of saying what he wants. then you can't also push your own agenda. So it's this paradox of understanding the context,

understanding what matters, understand different points of view, and then using that as ammo when you need it, but actually listen to the executive. Like it's almost like a paradox. You've got to structure, but you've got to further structure away. Yeah, you have to have a tool set of thesis or lose ideas

of in business you can put out and relate and attach to what the person just said and just put it up try to test it also and then also be willing to play both sides right if the executive takes one side then you've got to be able to understand what the bear case or the bull case is and actually because that that's also like you know what is differentiated inside you know what really is what is insight that makes you go wow that was great or that you know really learned something you know and typically it comes when you're pushing the executive to the edge of their competence you know and typically what we think is when you're actually really creating a new insight on the spot you know and sometimes what we find is the great moments in this in this work is that when you

get an executive that almost says, ah, I didn't even think about that. I'm like, this is a great point. I didn't even realize, I didn't have that thought before this conversation. You almost create new thoughts or opinions on the spot, you know, because you're taking the executive to the edge of their competence or somewhere new they haven't been before, and they can leverage on their experience and all this unconscious experience and knowledge they have it comes to the it comes to the forefront in these in these interest in new moments you know that's kind of what that's where we that's where we try to look to push the executives is really

to the edge of their competence do you have wish to give your interview partner something after the interview as as as as parts of the trade you're doing with an interview like that the interview partner gets something out of the conversation or what is your what is your expectation there so you you mean the executive or you mean the some of our investor clients not like in a not in the not in the term of like financially or something like this but like intellectual inside yeah so with the executives so the executives that we interview yeah i mean obviously every executive industry gets paid a fee you know a fair fee for their time but yeah i mean typically why they do this work is because they learn they also learn right they they have a great time a lot of people say to us that they

want to speak to investors because they enjoy the conversation. So it's also an intellectual, you know, job and fun thing that they can do. Well, and with preparation, there's actually a real mutuality to the exchange that can be built. And the more, as you can imagine, the more there's an exchange of value, the more trust is built, the more or the more trust can be built. you give yourself a chance. It's not always a direct result. But there's certainly, I mean, as well we're saying, right, there's a number of reasons people get involved. From the financial consideration where appropriate to the aspect of learning, from a discussion partner, from another

perspective, right? You have the operator world. And especially if you're interviewing at a level of the company that we tend to be most interested in, which are operators closer to the front lines of the business. They're not sitting in the boardroom. They don't have that capital markets view necessarily of which an investor can really bring into the conversation and add a ton of value to help the operator situate where their part of the world fits into wider dynamics. So that's a very clear reason to participate. And a way in which I think actually in speaking to a lot of in spending a lot of time with investors today and our partners, friends in the industry, that actually people could do more in driving a mutuality to the exchange and appreciating

that even though you're speaking to someone that's at the front lines and really they have the knowledge that you're looking for, you as a practitioner and an investor can actually add a lot of value if you've prepared really well to that person's life. which then increases the quality of the interaction and can lead even more information to flow. There's the one thing I would say when you mentioned premium partner, Tillman, so we actually call out the investors that we,

our premium clients, so hedge fund, money managers, that conduct some of the interviews that we now record and publish. We call those people our premium partners. We're also thinking a lot about how we can give them something additional beyond the interview that they conduct, right? So, you know, a lot of our premium clients come to us and say, you know, can you listen into the interview and give us some feedback on how we ask questions? Because they want to improve the quality of their work.

So we're, you know, next year, and, you know, I guess going forward, we're looking at how can we, how can we improve or help investors do the best primary research, i.e., the best interviews, as possible. So that means we're going to host like mini workshops, your feedback sessions with clients, with our investor clients, because really, if we can bring the quality of the interview in up, it just benefits the whole ecosystem, right? Everyone gets to read better interviews, plus the investor gets to conduct the interviews better. So next year, a focus for us is going to be how do we, how do we give our premium clients,

and these are typically, these are very, you know, We're highly selective about which clients we work with, right, which we let in to do interviews. So they have to be, obviously, you know, portfolio managers, fairly concentrated portfolios, low portfolio turnover, quality focus, fundamental investors. How can we help these investors really do the best primary research and then just every interview will be, which should be great, you know? That's kind of our goal for the next few years. Yeah, I was just going to add this element, Tillman, to, I think, an aspect of your question that we can maybe offer something on, which is looking and really making, and it's so simple, but often overlooked, what is a win for the person that you're working with, right? What is a win for this executive? We exist in an industry, in the primary research space, that is, that is very transactional. where there's a fee, you show up at the session, right? You've got your list of questions, and you're kind of in this extractive mindset.

And investing just a little bit of time in understanding what you can do for this person beyond the few hundred bucks that they're being paid, which frankly, for most executives, if they have a lot of experience and they've been in a profession for 10, 20, 30 years, a few hundred bucks is really not particularly relevant, right? It's a formality. It's not to say it doesn't matter at all, but there is so much more in terms of win-win that can be achieved over a couple hundred bucks.

And that's where understanding and investing a bit of time is in understanding what a win is, what kind of information can be exchanged, and what kind of information can be volunteered on the part of the interviewer to increase the mutuality of the experience. You already described you're in the middle or you kind of middleman between the business worlds you're discovering and the financial world and... Winemakers and angels.

Yeah. How do you go about like this language difference? There are certain like if you're a winemaker, you have different terms, different ways of describing the world. focuses on also different language. If you're a woman at ASOS, there are different terms. There's different languages. How do you go about this?

And also like the background, you have to translate this finally into something like the investor can understand, like return of capital. Like this terms we have in the financial world. How are you trying to manage this language differences? You've got to speak both. you got to speak both I think also it's the one thing that we

believe and going back to what we said about you know we're happy and actually looks we seek this called them second tier of management right so we're happy to have people in the front line and

typically those people don't think about you know return on incremental invested capital right increment of return on a dollar of capital that's invested. But what they can do is tell you how it works. So they can lay out step by step of every single process of what they may do. And they should be able to give you the dollar amounts in a monthly or a weekly or whatever kind of period you'd like.

And in subject to, you know, we leave it up to the investors. to then go and calculate the back of the envelope, right? You know, return investor capital, you know. And so this is actually part of the differentiation that we think we can provide is, is bringing those kind of insights about how a system works, bringing them to investors in an interview format, and hopefully going forward and we can make it more digestible rather than just 60 minutes format, but bringing that insight to the investor and letting them kind of digest that in their own

style. So yeah, it's really about trying to effectively translate how the operator thinks, how they work their day-to-day, translate that into something digestible for the investors to then make a judgment. Patience. I think it's Such a good question. It's setting aside or really bringing patience to the table, setting aside your preconceptions, when someone doesn't understand what you're saying and not getting impatient. It's really quite simple and often quite difficult to do if the message isn't getting across. But then and also really investing time in understanding the operator's worldview. So you could do that in the pre-call. You can do that more dynamically in the interview. But I think that way I would answer that is is investing time and being patient well but it's it's certainly I mean the way it's interesting because I literally had this again today with the ASOS and the ASOS lady that interviewed you know and most of the industry will look at the you know the gross margin of ASOS or boo-hoo or these you know fast fashion retailers but actually she doesn't really

look at gross margin you know she'll look at the intake margin the net intake margin right which is basically the you go and source the material and the clothing, you ship it from Asia or the Europe to the UK, you have some kind of landed cost. And then if you sold it at the full price, you know, like the RIP, that would give you a margin, an intake margin, which she looks at. But actually, what really matters is the net intake margins are after promotions. So if you, you know, typically when we ask investors, like, what do you want to, what are you, what are you, you know, asking about, about Boohoo or ASS? They're like, I'll talk about the gross margin.

But actually, this lady would talk about intake margins, you know, so like stuff like that is actually differences in language and how they look at their business and how, you know, it takes, you know, us to go and really lay that out and hopefully learn ourselves, right, about how people think differently and just trying to be aware of what really matters, you know. So it's not only understanding numbers, it's only understanding the use of the context of the numbers in the industry. Yeah, exactly. And also just, you know, the, I mean, the gross margin is constructed of certain drivers, right? And typically what we've found is that just by asking, you know, if you just ask the executive, why is the gross margin?

For example, the ACEC's gross margins down from like 51, 52% six years ago to like 45% today. Right. And if you ask someone that, they would just give you the kind of standard answer, right? Like Brexit, freight, shipping, and a bit of like buying, increased buying prices or discounted, right? But discount is the kind of the real one you want to get to the bottom of, right? And so when we asked her today, this is what we tried to kind of unpack, which was like, what is really driving that? And then you get into the language differences of she wouldn't really speak about

gross margin. She'll talk about net intake margin. So just focusing on actually practical differences in language can help you actually have a conversation with her where she thinks she thinks in net intake margin rather than gross margin. When did you realize that you? have to say stop hold a minute uh please explain me what you mean with your margin concept in the interview yeah luckily i've done a lot of fast fashion work so you know i can go straight

to net intake margin but yeah it took me for this is you know years ago i remember doing i remember doing first work on um on the fashion space with you know with new look and that business was really in, you know, practically going bankrupt. And, and the big problem they had was exactly that. They had a very high intake margin, i. shipped a product to the UK. If I sold it a full price, it would be a great margin. It would be, you know, 60, 70% margin. But actually, there were discounting every single product by like 40% to sell it. And so I learned that actually The only thing that really matters for a fast fashion retailer is the landed margin and the promotional spend, which basically means that the quicker you get to market, the better because you reduce your promotions, which is why Zara is so good, because they only discount 10% on average, I think. The average in the industry is like 40%.

Maybe let's go a bit back to the idea of building trust. you already said that preparation sending out the questions beforehand also trying to give your interview partner something besides like the compensation they get are ways to build trust are there any other maybe also smaller hacks you found to build trust um for like i did did hear this mel robin's videos a few days ago and she has this hack of like standing up and going to the mirror and giving yourself a high five because it uh It helps you to love yourself a bit more. Is there anything you've found in your interviews that they help to bring you forward in a conversation?

Love always helps, though. I got to say, that's never going to hurt. Self-love, love of others. That's really good stuff. But I think specifically it is really being clear about. about what your motivations are, really being clear about what your objectives are, and not assuming that the person that you're speaking to

is clear on that. In the context of executive interviews, it's making sure the executive understands where the information's going, making sure that they understand that the information isn't gonna immediately flow to one of their competitors or the management team of a competitor firm of a business that they've invested in.

You know, simple things like that. So being really, really clear about what success looks like for you, what your motivations are. That really investing, a couple of minutes in that can actually have a really material impact on a conversation. Then, I mean, if you just think really basically about trust, you know, where does trust come from? it's really around the transparency and intention. You know, if I understand what you're trying to achieve in your intention, we can establish trust probably more quickly. If I understand that we're swimming in the same direction,

it's going to be much easier for me to trust you. And then, you know, Will and I were talking about the other day, there's also situations where it's extremely hard to build trust, where incentives maybe are not necessarily aligned, and that's a whole different story. I think the types of conversations that we're talking about, the conversations that you have that I think we've enjoyed very much on your channel, are based on a coincidence of interests, right?

You're swimming in the same direction as your conversation partners, and there clearly is a degree of trust that they have with you. And so that really comes out of, I think, transparency and intention and then just a genuine attitude of caring and of being of service and being useful and the more you are of use to someone else the more trust flows naturally it's not something that's particularly mysterious right although I think this is also the challenge though like we've you know and actually why we have the luxury of of you know coming at this work from a different angle than investors because naturally investors are kind of thrown into a transactional relationship

right they pay an expert network to speak to the executive that's getting paid or or they're speaking to management in a certain environment and so it takes a lot of work to kind of break that down and show the CEO you're speaking to or executive that you actually you know you care about what they have got to say and you'd love to help them in some kind of way. And so we can come at these interviews from a different angle where, you know, we're looking to help the executive share their learnings and share, share what they've learned over their career. And it just, you know, we try and just create a bit of a different experience.

You know, so it doesn't necessarily mean that we're, that we're, that we're we can be better at interview and it just means that we come at the interview from a different angle the business world is a world that's more about suits and presenting themselves in a bit uniformed way and often like humor isn't used that much it's more about control and emotions are yeah i rarely used in a business context so maybe let's talk about how you use humor and emotions or how you process emotions in conversations do you use humor try to you try to be to laugh with your guests and make jokes or is it something you try to avoid yeah but i think this is this is exactly the point right the fact that we can the fact that we can come at these interviews and can

set them up and structure them in a different way that's not a fixed transaction of experience allows the executive to be far more relaxed. You know, we had a joke about, I mean, I'm going to keep bringing up the ASOS lady, but I said it was a couple of hours ago, right? She couldn't get on the, I use Riverside as well, right? So she couldn't get at Riverside, right? So we had a joke about that.

And it just, little things like this can make someone relax and be calm. And then, yeah, and she basically come out in the first five to ten minutes and just said that these businesses are not really differentiated. And they're all kind of converging on their assortment and that it's much of a muchness and customer behaviour is not sustainable. So you can actually bring out their really think about stuff if you can make them comfortable.

I think we're lucky, you know, we realize that we're really lucky that we can actually spend time with the executive beforehand, you know, warm them up, get to know them, you know, come at the interview from a different angle than investors. And we try to give a differentiated perspective from this content, which is why we also focus a lot on doing our own interviews because we feel like we can actually add some value that maybe the executive wouldn't necessarily give within investors.

And with emotions, they are also, I think they could be telling if there's someone like who was fired and is more like in a pissed mode or someone who's really like passionate about it. How do you process this for you and the way you, when you conduct the interview, especially if you think about also like the form you present the interview, but we can go to this in a second. question. Hey, Tillman here. I'm sure you're curious about the answer to this question, but this answer is exclusive to the members of my community Good Investing Plus. Good Investing Plus is a place where we help each other to get better as investor day by day. If you are an ambitious, long-term-oriented investor that likes to share, please apply for Good Investing Plus. Just go to good minus investing.net slash plus you can also find this link into show notes i'm waiting for your application and without further ado let's go back to the conversation how do you go about your

own emotional reactions like if if you have the feeling like that something triggered you in the conversation like or you say okay after the interview this was interesting information but it's hard to stand this person to a certain extent or like how do you reflect this in the way you produce your interviews maybe it's not the best example but like there's also your own emotion like that might open up some things but exactly but this tells you more about yourself rather than the exactly right if you get and pissed off or, you know, or you're, or you, or you, you, you, you're, you, you, you're, you, you're, you, you, you, you're, you, you, you, you're, you, you're, you're, you're, you're, you're, you're, a lot about, about yourself, right? And actually, that, I can't, at a time, sometimes, you know, I make a structure of an interview and, and, like, the executive, like, actually, you're focusing on the wrong thing. This is what we should focus on. And you're like, oh, shit, like, I've completely missed this thing that's actually really the most interesting point. And, and, And if you don't listen to that and you can keep kind of going on your own structure,

you know, you don't listen and you're just, you know, it's just ego effectively. And so a lot of the time when we feel uncomfortable and it's even because we're too attached to our own view of how something works, or it's just kind of ego getting in the way. I think there's a quite interesting book. It's called Just Stand There and Do Nothing. And that's also a quite interesting way of leading. And maybe I don't have it behind me, but it's an interesting method that helped me to let yourself be behind it, like give some interest graph rules and otherwise give the room for

the other person to fill this room. But again, this is the paradox though, right? Because we know, we used to do this back at Ferbbridge and we'd get someone great. And obviously the great CEOs, they can be, you know, not overpowering, but they can control conversations, you know. And so, again, there's this is paradox between standing there and doing nothing and letting the executive be and letting them speak, but not too much because you just let them preach.

So it's, it's again, this paradox between letting the information flow, but guiding where it flows, you know, making sure that it flows to something that is, you know, what they think is relevant and also what you believe. you know, really does matter for the company. So it's typically always a paradox, which makes it so annoying, but also interested in fun. Thinking about the translation you do for your investors

is you transform your conversations into transcripts. Usually do them on Riverside as we hear right now, so it's video and audio. But the transcript is just like, yeah, this kind of information is just a piece of paper. filled with some letters how do you make sure that this this elements of emotion voice body language can be reflected in this it's it's quite hard this question but maybe I have to ask it's impossible right it's difficult I think that's why the audio is important especially for

the ones that we do like I think you can tell a lot by tone and someone's voice obviously video is better, but sometimes video doesn't work. I think that it's not a great answer, frankly, but what we, the way we, I think we kind of cheated on that is by releasing the audio and for in practice hosted interviews for that first party content, part of our part of what we publish, we release the text and the audio and occasionally the video. But I think, frankly, I mean, if you find an answer to that, we'd love to know. I think there's good transcription and bad transcription, but ultimately text can never capture

or will almost never capture body language, we'll almost never capture the intensity of tone. And in a conversation, that's a lot. It's not everything, but it's, you know, even if you're missing in the translation from audiovisual to text, you know, That 10% here and there of missing meaning can make a difference. I don't know if we have a better answer than just really making an effort to publish the audio. Maybe you can try to use some emotional notes you're taking after you did the conversation like that you write down. If there's anything the transcribing person should add like where you had the feeling,

okay here you have to listen to the audio there's a certain emotional level that was quite interesting I did cover but it's super hard and otherwise that's tricky because you wouldn't want to also I think part of what we want to be true to in what we publish is the primary nature of the information and what we want to put in your hands as a subscriber is the outcome is the conversation for you to decide and as soon as we so I think we think editorially really carefully about you know and I think question also pertains to what kind of synthesis could we offer on top of the content. Where do we place that on the site? We write a weekly email, where Will, for the most part, is diving deep into his reflections of lessons. We purposely keep that separate from the actual

interview and the interview page. We do have an overlay of notes, but we try to bring a really quite extreme level of objectivity as much as is possible to the annotations function on the interview page. And it would be the same way. I think I would answer your question around a kind of emotional dimension and note-taking. Anything that would interfere with the power of the primary experience is something we never want to take away from you as a customer. We don't want our views clouding. And there's many levels to that, right? Because of course, on some level, our views are shaping the conversation and what we choose to focus on or not. And I suppose a lot of the processes that we've described to you all fit under a rubric or a category of getting

ourselves out the way, creating the space, much like you said with, you know, I guess the thought that you had around this book, just sort of get, which I interpreted, correct me if I'm wrong, I interpreted is just get out the way, create the space, get out the way, allow the water to flow, get the rocks in the river out the way, because the water wants to flow. And incredible things can happen when you let go and start paying attention. And really, a lot of our processes follow that principle. Get out the way, get ourselves out the way, listen so that you can make up your mind, but you can get as close to an unfiltered experience as you possibly can. And it's very exciting to deepen our processes in that regard because I think there's a long way to go

in that way it's kind of a lifetimes game yeah enables a certain self-organization and for the year also the recommendation don't get like don't just focus on the transcripts also get your ears and eye dirty by watching the videos and hearing the audio and also get out if you can do some but research besides that but that's another point um is there anything you want to add on what makes a good interview and what is in good interviewing process i think we covered a lot i mean we can speak about stuff for hours right it's it's something that we're going to think about a lot and try and like we said we're going to work more with our investor premium clients and try and really formulate a process to help them and help us conduct better

interviews continually maybe maybe also one point which i tend to find interesting there's this time dimension of interviewing and i usually as with this interview i'm not time constraining my interviews it's more like when i have the feeling that i'm satisfied with the information i did get out of this how is this about you like do you have your interview partner's a certain time constraint and you sometimes have the feeling like okay i would have like to go on all with this free question because they would add another layer and this person had to leave or is it like that you say okay this interview isn't time constraint it's it's the interview we do and we ended if we satisfied with it.

I think that would be the dream, right, to get to some kind of Joe Rogan level, where it's just a much like an unconstrained conversation for two, three hours. The challenges are that, obviously, these executives are busy and that they typically do this within their working day or hopefully we try to prioritize them outside work and hours so they can be more relaxed and can go over. But yeah, we tend to put an hour and a half in a diary. and just kind of at least try and get one hour of recorded content out of that. But it gives us space and time to, yeah, to warm up and get the executive comfortable

and then at least get an hour of content that is exactly what we think really matters. But that's the goal, right? Joe Rogan, Joe Rogan long-form interviews with CEOs would be pretty fun. Well, and conversely, I think some interviews could also be half an hour. right i think the yeah there's this this this um another book that's behind me it's called the open space technology and there's one rule in open space it's it's over when it's over and it's not over when it's not over so sometimes if you have an question or a topic you discuss 15 minutes and you have the answers it's fine to just let it go and then it's over and you don't have to try to

get too deep into some topics and sometimes you discuss it a topic like 90 minutes or two hours and you don't have the feeling it's over and then you have to do another interview or another follow up or whatever it's quite interesting that's what makes this work so fun though right i mean you can you can do 10 20 hours of interviews on a come naked and still not be done you know which is why we see this as a lifetime's work because we'll always be doing interviews and research it and speaking to investors and and executives on all companies is it's kind of what we just what we want to do about us. Maybe like as a final topic because we are all a bit European background persons and especially

if you talk to executives and executors in the US, it's often it's great. It's fantastic. Like the super superlatives in the way US people talk are a bit different. It's also like in other regions like germans tend to be very serious and strict in conversation not that emotional how do you go about this this this this ultra-cultural differences this is a good one makes it fun the german engineers are a bit harder to to crack than the u.s marketers you know i mean that's it And American executives tend to be easier to relate to. And, you know, there's a difference between Spanish, the Italians, the Germans, the Nordics, not to take it personally. If you're interviewing a Russian and they're not smiling, right?

It's just don't take it personally, right? And I think, I think that's also, I mean, frankly, it's probably also quite a bit easier for Europeans because you are, you know, if you're from the state, you can travel around your whole life and experience a vast range of things within America, Europeans tend to spend a lot of time abroad. You're used to spending time with Italian people, Spanish people, etc. So I think that maybe comes a bit more naturally to us. I don't know about you, Will.

Yeah, I think it just, I mean, it just goes back to the point that you mentioned about truly understanding who you're interviewing. And that goes from everything from the culture, through the way they are likely to conduct the interview, the way they're likely to prepare, the role that they've been in. You know, again, it sounds simple, but if you're interviewing certain engineers or digital marketing executives, like, you know, you can interview them in a different style

completely, you know, to really get them to. at the edge of their competence. So it just comes from doing the work on who they are. And then just, you know, phraseology, right? If you're speaking to an English executive and they tell you performance wasn't great, probably means it was shit. Yeah. Right.

Exactly. If you speak to a German executive and they tell you performance wasn't great, performance was probably not bad. Yeah, that I can underwrite this. That's true. Yeah. Fascinating topic, also these cultural differences. But I think we should end it for now, for here. Thank you very much for the time and the deep insights. And I hope the viewers that still stay till now have some ideas what they can use for their interviews and also have an interest in trying out in practice. You can't the link below and can try out their work. There are also some free interviews, I think. on your website that's correct we have a free tier on the site yeah so register there and thank you very much for staying to the end of the conversation and to all of you a bye-bye and also to you to

bye bye thank you see yeah chow as in every video also here is the disclaimer you can find a link to the disclaimer below in the show notes the disclaimer says always do your own work what we're doing here is no recommendation and no advice. So please always do your own work. Thank you very much.