Beyond The Headlines
That One More Question
From my early days investing to ChatGPT and Silicon Valley Bank
Investing is all about the quality of questions. I’m coming up on two decades of my career. I have sat down and talked to countless executives from various companies. I have listened and read through more quarterly earnings than I dare to admit. It’s been all in the name of learning. I heard many answers, but it was the questions that stood out to me. I kept collecting them in the process. They proved to be evergreen and continue to help me find the answer that can make or break an investment. Let me explain.
I was part of a snowshoeing adventure this winter. My companions were bright, seasoned investors. We had great conversations and some good laughs. We enjoyed the mountain vistas and were ready to head back to the valley. The ski bus stop appeared ahead of us, where we waited for a bus. The bus proved to be a mini Van. We asked the most obvious question: how many seats do you have? The answer was 7. Our group was larger than that. Some immediately volunteered to take a snowy shortcut on foot and walked off the road.
We got in and started our drive. In a few minutes, we arrived at the next stop. A couple was waiting there, but there was no room for them to join us. They asked a question we didn’t think of asking: “when is the next bus coming?” The driver said 5 minutes. You can imagine the look on our faces. I wondered why nobody in this crowd of professional investors, including me, asked that question!
As professional investors, all we do daily is ask questions, look for an answer, and paint a picture of the world and each investment in that context. When it came to catching a bus, we didn’t deliver. I smiled and started thinking about the quality of the questions we ask. Sometimes it just takes one more question to make it or break it. What is that question? That’s where the true value of a good investor lies.
In the early years, I would sit and listen to the questions others asked. Back in the day, the meetings used to be in a conference room at a nice New York City hotel where a big bank would host an event. I had a scheduled time slot. I would enter the room with 3-5 other analysts or portfolio managers. Everybody had a chance to ask questions. I was curious about the answers to my questions, but as you probably can guess already, I was even more intrigued about what others wanted to know.
There were some extreme moments, too. I was sitting across the table from a CEO of a major company, one of the biggest players in its industry. The rest of the group wanted to figure out the next quarterly earnings and the timing of a recently announced acquisition. They wanted to know how to adjust their elaborate financial models to a penny. I asked about the long-term, and the company was making some big shifts that could improve profitability in the next 3-5 years.
The CEO accommodated the short-term focused questions, but then he turned to me and gave me his full attention. He smiled and appreciated that I cared to know where he was leading the company in the long run over where the earnings will fall in the near term.
I continued to improve the quality of the questions over the years. I also dropped many questions from my repertoire. Right off the bat, I sometimes tell the management that I have no interest in the next quarter’s earnings; I’d like to understand where this company can be in 5 years.
I remember vividly sitting down with a CFO of a mid-sized company with a lot of potential ahead. She quickly answered all the questions about the immediate future, and for those willing to stay longer and listen, she painted a picture of a much bigger and better business ahead. We ended up owning it on a few occasions until, eventually, it got acquired by a bigger competitor.
I wonder when my appreciation for questions started. I don’t think I was an easy student to have. My inquisitive mind wouldn’t let me stay silent for too long. I’d raise my hand and ask away. I remember one course in corporate finance at my French grad school. The professor eventually asked me if I could represent all students in the group to the faculty and give my feedback about the curriculum. I also liked staying until after the class was over. I knew some students had questions they’d only ask when everyone was gone. These were the best questions anyone asked, and usually, only a handful of us was left in the room to hear them.
I gave my TEDx Talk – The Great Investor in You, five years ago. I enjoyed the talk, but the best part was the questions. I stayed behind, and I heard story after story and countless questions for the next two hours. Many of them, I still remember. Many of them gave me a new perspective, though; one might think I was there to give a new perspective to my audience. I like to think it was a win-win for both me and my audience.
I kept that practice throughout my life. I wait for that one more question. I credit it for many opportunities that I seized and pitfalls that I avoided.
As I’m putting the finishing touches on this article, two phenomena are happening. First, hardly any conversation with anyone I know can pass without ChatGPT being brought up. Second, from Larry Summers to Elon Musk, Silicon Valley Bank has been on everyone’s mind in the last few days.
Let me briefly tie both back to the quality of questions and how that one more question can make it or break it.
ChatGPT is an AI-powered tool to get answers, write essays, code, and a lot more. Remember, though, it’s up to us to ask the right questions, and the better the quality of the question, the better the answer can be.
Silicon Valley Bank is a commercial bank headquartered in California. On March 10, 2023, the bank failed after a bank run on its deposits. What’s a bank run? Depositors run to the bank and try to get all their money out. I grew up in Poland, and in the 1990s, we watched bank runs on nightly news often enough to remember to ask a few more questions before depositing money.
Silicon Valley Bank, you’d think it’s just another bank, but if you look closer, it’s the second largest bank failure in U.S. history. Its depositors are VC firms and start-ups. With the downturn in the tech industry, on the one hand, and rising interest rates, on the other, the bank collapsed.
The closer you look, the more interesting the story gets. Many remember the FDIC deposit insurance in the U.S. If the bank fails, $250,000 per customer is covered under the insurance. Now, 85% of the bank’s deposits were uninsured since they exceeded the amount mentioned above.
How do banks navigate around drastic interest rate policies: from an overnight cut to zero three years ago to a quick ramp-up to the highest levels in 15 years last year? It’s not the last question worth asking; there will be more.
Whether you are waiting for a bus, buying a stock, investing in a start-up, or even opening a bank account, the quality of the questions matters, and sometimes it’s just that one more question right when you are almost out the door, that question that can make it or break it.
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