Ask Me Something I Can't Answer

Key Takeaways

• The strongest conversations I have with investors are the ones where somebody asks a question I can’t answer on the spot.
• Improvising an answer is a habit, and habits show up under pressure. If someone smooths over a question they don’t know the answer to, that’s information about how they’ll handle a problem you can’t see yet.
• I’ve been on the other side of this. When my own company was coming apart, the people I needed were the ones who’d tell me the truth, not the ones with a comfortable answer ready.
• “I don’t know, let me get you that” costs about four seconds and buys the only thing that matters in this business.
• If you’re evaluating anybody with your money, ask something hard and watch what happens in the pause.

I had a call a while back where a guy asked me something about the structure of a deal, and I didn’t have the number in front of me. Not a trick question. A fair one. I just didn’t have it.

I told him: I don’t know, let me get you that.

He told me later that was the moment he decided to work with us.

That still strikes me as strange, and then it doesn’t. Because think about what he was actually testing.

The tell isn’t the answer. It’s the pause.

Anybody can sound good on the questions they’ve prepared for. That’s not a skill, that’s a script. What you learn about a person is what they do when they hit the edge of what they actually know.

There are two moves available in that moment.

The first is to fill the space. Reach for something adjacent, say it with enough confidence that it lands, move on before anyone circles back. It works most of the time. Most people won’t check.

The second is to stop and say you don’t know.

I’ve done both. I want to be honest about that, because I didn’t arrive at this as some principle I was born with. Earlier in my career I was very good at the first one. I could talk. I could make a room comfortable. And when you’re running fast and everything is working, filling the space feels like competence.

It isn’t. It’s a habit. And habits don’t stay in the room where you formed them.

What I learned from being the guy asking

When my oil and chemical company came apart — I’d built it to over $150 million a year in revenue, and I lost $35 million of my own money when it collapsed — I spent a stretch of time asking other people hard questions and needing real answers.

I found out very quickly who filled space.

There were people around me with an answer for everything, delivered smoothly, and almost none of it survived contact with what was actually happening. And there were a small number of people who said some version of I don’t know, that’s outside what I’ve seen, let me find out. Those were the ones worth having.

I wasn’t in a position to be charmed. I needed to know what was true so I could decide what to do. Every comfortable answer I got cost me time I didn’t have.

That’s the whole lesson, and I paid a lot for it.

Why this matters more in private investments than almost anywhere else

If you buy a stock, you don’t need the person selling it to you to be honest, because you can look up everything about it in about ninety seconds.

Private deals don’t work like that. A lot of what you’d want to know isn’t public. You’re relying, to a real degree, on what the people running it tell you — which means the question isn’t only is this a good deal. The question underneath it is do these people tell me true things when the true thing isn’t flattering.

You can’t determine that from a pitch. A pitch is the prepared material. Everybody’s prepared material is good.

You can determine it from a question they weren’t ready for.

So ask one. Ask how they’d handle a project that goes past its timeline. Ask what happens to your position if a property doesn’t sell for what they underwrote. Ask what the worst outcome they’ve personally been through looked like, and what it cost.

Then stop talking and watch the pause.

If you get a smooth answer to every single question, you have not learned that they know everything. You’ve learned that they don’t say I don’t know. That’s the tell.

What I do now

I say it. Out loud, on calls, in front of people I’d like to work with.

I don’t know. Let me get you that.

And then — this is the part that actually counts — I get it, and I come back with it. The sentence is worthless if the follow-up doesn’t happen. Saying “I don’t know” and then never returning is just a slower way of filling space.

It costs about four seconds of looking less impressive. What it buys is that when I do tell somebody something, there’s a reason to believe it. I spent a very expensive few years learning what that’s worth.

I’d rather be the guy who has to go look something up than the guy whose answers you have to double-check.

Ask me something I can’t answer. It’s the most useful thing you can do on a first call — with me, or with anybody else holding your money.

Investing involves risk, including possible loss of principal. Nothing here is an offer to sell or a solicitation to buy any security.