Will Barnes & Will Oliver (In Practise): The art of interviewing

Will Barnes & Will Oliver, In Practise

“We say internally that the line of questioning matters more than the question.”

[00:33:35]

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Who speaks in this transcript

Will Barnes

In Practise

Will Oliver

In Practise

Tilman Versch

Interviewer, Good Investing

Tilman Versch [00:00:00] 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 Practise. They both have conducted thousands of interviews and are willing to share their knowledge in this interview.

In the first several minutes, you can get to know In Practise and their mission and what they are doing. And after this, we are diving into the art of interviewing. Enjoy the conversation.

Tilman Versch [00:00:28] Hello, audience. Today, it’s great to have two Wills on. They run In Practise, and In Practise supports this channel for a few interviews. I’ll shortly give you an idea of what these guys do. I find what they are doing extremely helpful. First, I want to explain what they do at In Practise and talk about the art of conversation or what makes a good interview. Some of you are active investors with touchpoints with companies that can talk to management and experts. We want to give you the knowledge we’ve combined over the years, talking with management in a good way, to get more knowledge out of an interview.

I hope it’s a fun conversation we have today. Maybe I built a bridge to the two Wills. If you want to work for In Practise, does your first name need to be Will, or is this fake news?

Will Oliver [00:01:32] It’s negotiable.

Tilman Versch [00:01:35] How did you guys get together? When did you find or decide to build In Practise?

Will Oliver [00:01:44] So, I’m glad to jump in. 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. 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 and analysing businesses. 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, analysing companies, reading a few hours a day. I couldn’t quite believe this was possible.

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. I actually kept the employment contract. I didn’t sign it for the first few weeks because I just 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, very quickly, it turned into a dream.

Will was hired into that business a couple of years after I arrived. We basically spent a few years of our lives 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, private equity funds, looking at roll-ups in Europe, and they are reviewing operators of these businesses. And then, eventually, more work in the public equity space for the benefit of hedge funds over time.

That work was really a lot of fun. During that time, Will and I started thinking about how we would design a system to do this work for 30, 40, and 50 years. What would that look like? And so, 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 highest quality investors in the world? And so, I think the way we look, and 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 more on a 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. The idea is to study great businesses to explore the mechanics, value chain power dynamics, operating realities of high-quality companies that are supposed to take a view on the sustainability of historical performance. And yeah, this is a bit of a dream to be involved and partner with high-quality companies over very long periods of time. I share good ideas about these high-quality companies.

Tilman Versch [00:05:50] How many interviews have you both conducted over your professional life?

Will Oliver [00:05:55] I think Will has probably overtaken me. I think, between us, I think we count 2600. I’m probably on 1200, and Will is probably closer to 1400.

Tilman Versch [00:06:13] How much does the interview usually take? Sixty minutes? More?

Will Oliver [00:06:17] Yeah, about an hour.

Tilman Versch [00:06:21] With this whole experience, we will soon build a bridge to the question of what makes a good interview for you two. But maybe let’s go a bit back to In Practise. I’m interested what is the idea of the value you want to create for your platform customers and the people who listen to the interviews.

Will Barnes [00:06:45] Can you tell us that one, Tilman? I think you’ve been a subscriber for a while. Right? What kind of value do you get? It’s interesting to look at how the industry is structured and how it’s evolved, right? Because like you said, we were working at Third Bridge, having a great time but selling subscriptions for $50,000-$100,000 to big consulting companies, PE funds, hedge funds. And also, across different asset classes. We have a lot of work in distressed debt European high yield. Obviously, public equities as well. And so, what we set out to do was a couple of things. Firstly, to only study high-quality companies. We always say that we’ve had our time studying the over-levered crappy businesses. Our offering is focused on finding the highest quality companies publicly listed equities globally focused on Europe and the US. We also have a tilt towards ex-US, right. So, 60-70% outside the US is what we aim for. And also, kind of 70% of our coverage will be sub 15 billion enterprise value. We think those companies are great but can also become 10-20 times the size.

And so, that was the first thing, trying to leave what we were studying before in those different parts of the capital structure or different debt market, in distressed space, only focus on high-quality companies, but also make it affordable. Right? And so, we were just having such a great time learning from executives all day long with investors. 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? Wouldn’t it be great if there was a model where it was possible for a reasonable person to pay a reasonable price to get access to this stuff? That’s kind of the backdrop to how we positioned our offering. We learned a lot along the way from other players in the market on how to scale. Now, we’ve found ourselves just trying to provide high-quality content conducted internally by us and our partners, who are also professional investors. We produce high-quality content at scale for a very affordable price. That’s kind of a wrap. We only produce about 200 a year right now run rate, but we’re looking three to four times the content we produce for the same price over the next three years.

Tilman Versch [00:10:00] You’ve studied many businesses. Which of these businesses do you copy for your own business, In Practise?

Will Barnes [00:10:10] There are many influences on the model. I mean, you know one.

Tilman Versch [00:10:15] Maybe three ideas per person, maximum.

Will Barnes [00:10:23] Any content business that has original content has to take influence from Netflix in a way, right. I mean, some of the shorts may still believe they’re right, and there were short pieces out there, but arguably, they’ve proven that the fixed scale leverage you get from investing in content, owning the intellectual property, monetising that over a large subscriber base is attractive. And so, that obviously had a huge influence on us, and we still look at that. Not that we’re anywhere near the scale of Netflix, obviously, but just look at that kind of structure in the business model and try to learn from them in terms of how they thought about scaling and also just reinvesting when everyone thought they were crazy when you’re a small scale is one thing that we still try and get our heads around. 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 so you can grow into it.

That was the major one. I mean, we’ve obviously taken some influence from Naked Wines and what they do and how they treat their winemakers, how we treat our executives, and how they also engage in the community with their Angels and with their winemakers. We’re taking some influence from them on how we hopefully can build a community. Those two are obviously, kind of top of mind. There are many more from just values and behaviours perspective that we take from. I mean, you can name all the great companies. Buffett and how he approaches running his business and allocating capital and stuff like that. So, it’s really a mixture of many things.

Will Oliver [00:12:29] Yeah. I mean, there are a few models out there that we find 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. The [12:57 incumbent] GLG, they run 70-75% gross margins. You can see the parallels with Naked and the wine industry, giving margin back to suppliers and customers. 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 just as noticing the structural opportunity here to give value back to suppliers to your supply-side and demand-side that 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’ve talked about and thought about a lot that we’re trying to live it ourselves internally in building a company, which is hard.

Tilman Versch [00:14:05] Naked is an interesting bridge to our topic of what makes a good interview or series of interviews because you’ve drilled very deep on this business, and I also did some drilling there. How do you select people you want to have for your interviews on certain businesses? What are your criteria for this?

Will Barnes [00:14:30] That’s a good question. It largely depends on the company, right? I mean, you know Naked pretty well. I mean, there are various angles you can take on exploring Naked. The obvious one that everyone does is just go to former C-suite or former guys who run a country or high up in the exec management team. If you look at Naked, one of the questions that I had or was potentially concerned about was just really the regulatory landscape in the US.

A part of the investment thesis is based on the value that they can redistribute basically as a winery to the consumer by not allowing the distributor to take a margin effectively or distributing that to the winemaker and the consumer. But if the regulatory landscape changes (i.e., either you can’t register as a winery anymore or the distributors have a lot of power), then they could start edging out some of the D2C businesses that could put Naked under a lot of pressure and just crush the investment case in the US. 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.

We’ve done a call with a guy who used to run one of the biggest wine distributors in the US. And yeah, it was one of our favorite calls we’ve done this year in terms of the stories he has to tell about the history of the market and some of these distributor families and the history of them. So really just trying to take a different approach on who would be interesting to add value to the investment case that maybe is not obvious. And so, we’re also trying to find people who are winemakers as well. I have a potential couple of interviews lined up with winemakers. Also, people that run wineries. One of those things that are also clear from Naked is that they could do a better job. It’s just explaining exactly how they manufacture the wine. Obviously, they’re very asset-light, yet they are a winery.

And so, what they do is lease space at wineries or spare space at wineries. But again, one question could be, is there a supply of space the management grows as much? So, all these things that are not obvious at first that we could dive into and understand exactly how our general managers have a winery work with Naked to get a different perspective on how this business works rather than just speaking to a former C-suite. It depends on the company that we’re looking at. We try to go on a few levels deeper than someone who’s not as obvious through the interview.

Tilman Versch [00:17:03] How many interviews have you conducted on Naked?

Will Barnes [00:18:00] I’m not sure. A few. A few. But yes, the thing is, what becomes interesting is that we could do an interview. One of the interviews that we mentioned about the regulatory landscape, right? The history of the wine market. That’s not specifically on Naked, but it is. So, Naked was the original idea, but if you read the interview and weren’t specifically aware of Naked, you wouldn’t necessarily think it was about Naked. And so, this also gets to the point about some of the approaches that we take to interview in is that you can have an indirect line of question about something really powerful in understanding something that might not be directly what you’re discussing.

So, from that interview on the wine industry, 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 weird art.

Tilman Versch [00:19:09] After conducting several interviews, did you feel that you understood Naked or is it like a constant painting that is changing over time? What are you drawing there?

Will Barnes [00:19:24] This is brutal. We were talking about the other day, running this startup whilst also learning in this way. It’s such an intense way to learn about companies through these interviews, kind of in public. You’re never finished. There’s always this anxiety that you’ve missed something or paranoia that you’re wrong. But part of what we do is also just to build a mosaic of different points of information that we can bring together to make a judgement about a company. You never fully understand or have all the information. Or else it would be too easy. It wouldn’t be a risk.

Tilman Versch [00:20:12] Yeah. It’s like this picture of the elephant that many blind people tried to touch in the room. Someone described it as full of hair. Another one described it as thick-skinned. The other one describes the nose. It’s quite interesting to see this.

And also, what you mentioned. I’m coming from a sociological background, and there you have the field of wine production itself, but you also have the relation. You have to research off the field of wine production to the field of power of politics, for instance, like the regulatory framework, that could change the rules in the field of wine production itself and 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 a great business.” It was very helpful to exchange parts of the company like your shares for money like [the Tesla playbook 21:13]. He was able to get this great attribution from the field of finance and exchange his shares for a lot of money, which enabled his business to grow and be sustainable over time. It also changed the rules in the field of car production. So, it’s fascinating how many layers of society you have to try to look at and understand.

Tilman Versch [00:21:40] And with Naked, one topic that interests me is my concerns with climate and climate change. Wine is a natural product. If you look at droughts and what is happening there, this society-nature relationship is also changing. It’s also a factor you have to consider when trying to get a deeper understanding. And yeah, interviews are super helpful for this.

Will Barnes [00:22:09] When we were doing work on Naked, the whole winemaking side is not too clear from the public reports that they have. You just see that they have Angels, and they market the wines, but the process of making the wine, the relationship with the winemaker, the winemaker’s relationship to the winery, the actual winery, not makers as a winery but the facilities. And also, why that matters.

So what we think that matters is because part of the investment case for Naked is also that there is this fixed cost leverage in the system. Right? So as you scale the volume per bottle of wine, everybody still wins for the winemaker. Naked can benefit from cost savings from buying the fruit on a longer lead time. The deeper use of more fruit on a better process can fill bigger tanks, bigger facilities, barrels, etc. And all this can be either passed on to the winemaker or passed on to the consumer.

And so, that’s not too clear from just looking at the overarching contribution margin they show. And so, I think part of it that we’re interested in is how much they can actually leverage that. Maybe they want to pass it on to the consumer just to drive volume and drive scale, but the point is that if they do continue to grow, and if they do get to a million Angels in the US, you could see a lot of fixed cost leverage that isn’t clear from the outside looking in.

Tilman Versch [00:24:05] Coming back to Naked and the series of interviews you’ve conducted. How have you conceptualised the limitations your interview partner can give you insights on? Like, if you talked about regulatory, you can ask where you set the limits in the questionnaires you’re asking, how do you build this awareness and also that certain borders and what you can get from an interview?

Will Barnes [00:24:32] It’s a good question. I think the huge caveat with all of this any primary research is that there’s always inherent bias in everyone, every comment, and interview. There will be a person who has seen the world and a business in the industry for their own eyes and therefore is somewhat biased in what they say.

So, you have to handicap the information you get, which is also part of the challenge of being an investor, right? We all look at similar information. We all read the same interviews, but what makes people better investors or worse investors is how they handicap that information and how you kind of judge what they’re saying.

And so, what we tried to do is provide an insight into how our business works, how winemaking 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 costs leverage could be embedded in the system). And so, really, what we try to do is lay out how business work, how our systems work, how people or companies behave, and then let you as an investor handicap that and decide whether you think that’s even worthy of building conviction or not.

Will Oliver [00:26:08] Well, there’s something very specific here around your question, Tilman, which is something we realise 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 looked at the mechanics of the system. You look at the way the business fits into the wider environment.

Looking at the arc of our coverage on Naked, where there’s probably around, I’d say at least seven or 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 a lot of investors that we see and this is because 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, you read the book first.

You don’t show up to the interview without doing your homework. That really involves identifying the circle of competence of the executive and not giving in to the temptation to stray beyond that, and not giving in to 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 because you’re so curious to go and ask them to comment. Actually, that is very likely to be outside of their circle of competence and not necessarily or almost it could 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.

Will Barnes [00:28:05] Yeah, I fall in this trap all the time. I guess it’s counterintuitive. Maybe it’s not. But the more senior executive they are, the harder they are to interview because they can talk about everything. They can speak about capital allocation, marketing, customers, whatever. Whereas actually, if you get someone a bit lower down the chain, it’s much easier to interview. And also, they can bullshit you easy, right? They know how to interview.

Tilman Versch [00:28:42] I work part-time in politics, and it has a lot of political elements. You have to be a generalist. You have to be able to talk about a topic, retirement policy. On the next day, you have to talk about career politics. Then the next day, you have to talk about climate politics. You have to be able to speak. You have to get your notes from the part of the business. You have to get your notes. You want one page where you’re able to speak. You have to listen in board meetings or get your reports, but you aren’t the one on the front.

Will Barnes [00:29:21] Obviously, we look for C-suite executives and those on the executive board, but actually, a lot of the interesting insights can come from that kind of the second tier of management, right? Those typically on the ground relaying the information to the C-suite can give us a different perspective. If you can interview them in a certain way, you can get really differentiated raw insights rather than something that’s brushed and kind of regurgitated from the C-suite.

We do look to focus on how we can find executives that don’t typically interview all the expert networks. How do we find those that are actually on the ground or have a 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?

Tilman Versch [00:30:20] There are two things you have to reflect on when you’re doing such an interview. I think one is like the blind spot the person has because the person just looks in this direction and doesn’t reflect about himself often because he is talking from this position, describing 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. It’s like there’s a career often attached to such a job and a certain history in the company. You also have to reflect this level. How are you going about these two ways of reflection if you’re hearing the statement or the data you’re getting from an interview?

Will Barnes [00:31:09] I mean, there are so many stages we go from. One of the things we would mention just as a caveat is that we have the luxury of doing this as a profession in a way, right. We do hundreds and hundreds of these a year. And so, we have the luxury of speaking to the person we’re interviewing for 30 minutes to an 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 are kind of thrown into the Thunderdome with the executive. They’re straight on the call, and they’re on the recording. So, it’s a very different environment. 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 a founder, whatever it may be, which also really informs us of what we can discuss in the interview. So, that’s why we were so filled that we could produce differentiated content. Not because we’re necessarily better. It’s just because we were coming at this from a different angle. 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 to one specific company, like the history of the wine industry.

The way we see this is that we’re trying to build our business around some of those kinds of structural factors that make us produce differentiated content that’s kind of hard to replicate elsewhere in the industry. I mean, spending time with the executive and giving us the agency to produce differentiated content that is not just on a company or any public company.

Tilman Versch [00:33:22] How detailed do you script your interview before you go into a conversation? Do you already have a certain plan where you build the conversation?

Will Barnes [00:33:35] I mean, it’s a great question. We say internally that the line of questioning matters more than the question. Sequencing questions that get you to what you want to know is more important than just asking what you really want to know. I think that’s also something that we learned from making mistakes. If you want to ask Nick Devlin how much he’s grown in the US or what their margins are, you got to just come out and ask him straight away, but there’s probably a more intuitive way to get to that answer, which means asking certain questions beforehand. So we think a lot about structuring our questions in a natural way that builds trust with the executive in the first 5-10 minutes and builds a narrative around what we want to discuss.

I’d have typically one or two pages, but the interesting thing is that you can use that, but you can’t stick to it too rigidly. You have to listen. This is part of the art of the conversation. You can have a structure. I mean, I literally had this case today. I was interviewing a lady from ASOS. We talked about how they source products and how they merchandise the products. She pretty much has come out in the first five minutes as like, “All these businesses are the same.” ASOS, all those same assortments. You have to listen to that. I had my structure, and you have to kind of listen to the executive. And so, it makes it really difficult to balance those two things of planning and structuring the conversation and listening to the executive. We haven’t found a good way. There’s no easy way to do it. I don’t know. How do you listen, right? How do you be present? It’s just a lifetime practice, I guess.

Will Oliver [00:35:47] It’s really hard. I think Will is much more heavily involved in interviewing than I am today at In Practise. We’re responsible for different aspects of the business, but certainly in my time, and I think it’s totally 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 very long scripted 30 question list to two or three themes, and then a sense, of course, of what subheadings, or how you break down those themes. But really, it’s so interesting.

I find that in interviewing and asking questions, listening, and this element of how to listen is often really underappreciated basically. It’s engaging 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 and listening to your interest, the way you’re animating, your physical response to our questions, your body language, our levels of excitement in where we go, the way we answer questions or don’t answer questions, and your reading of why. You can ask. I 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.

I mean, if there’s anything I’ve learned from Will and the level of rigour 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. I mean, he’s one of the few people, I think, who conducts this work with a deep ability to listen. And that’s really derived from a lot of preparation.

Will Barnes [00:38:10] I also realise that I’m not listening to this, right. I can go back to old interviews, and I can tell that I had a structure of questions that I wanted to work through, and I was just working through them. The executive could have said anything, and it didn’t matter because I was just going to the next question effectively.

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 couldn’t listen. I wasn’t listening.” And that’s also where a lot of the time 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 takes you to listen to try and actually dive into understanding why the executive may be saying some things.

It’s really difficult because I also struggle, especially with investors. Investors are paid for an opinion. You have an opinion and make it. You put your money where your mouth is and, therefore, essentially get emotionally attached to that opinion. But actually, if you want to really learn from the conversation, you have to be unemotional about it and put your judgement and your assumptions to the side. And therefore, listen to the executive. But you also have to understand the context and the company from different points of view to be able to tango with it.

It’s a paradox. You can’t just let the executive stand up and just preach because everyone’s just like, “Ah, 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, understanding different points of view, and then using that as ammo when you need it, but actually listen to the executive. It’s almost like a paradox. You’ve got a structure, but you got to put the structure away.

Tilman Versch [00:40:35] Yeah, you have to have a toolset of thesis or lose ideas often 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.

Will Barnes [00:40:51] And then also be willing to play both sides, right? If the executive takes one side, you’ve got to understand what the back case of the bookcase is because that’s also what is differentiated insight. What is the insight that makes you go, “Wow, that was great. I really learned something.”

Typically, it comes when you’re pushing the executive to the edge of their competence. And typically, what we think is when you’re actually really creating a new insight on the spot. Sometimes what we find in the great moments in this work is that when you get an executive that almost says, “I didn’t even think about that.” or like, “This is a great point. I didn’t have that thought before this conversation.” You almost create new thoughts or opinions on the spot because you’re taking the executive to the edge of their competence or somewhere new they haven’t been before. They can leverage their experience and all this unconscious experience and knowledge. It comes to the forefront in these interesting new moments. That’s where we try to look to push the executive is really to the edge of their competence.

Tilman Versch [00:42:20] Do you ever wish to give your interview partner something after the interview as part of the trait you’re doing? The interview partner get something out of the conversation, or what is your expectation there?

Will Barnes [00:42:37] You mean the executive or some of our investor clients?

Tilman Versch [00:42:43] Not in terms of financial or something, but like intellectual insight.

Will Barnes [00:42:50] Yes, with the executive. So the executives that we interview, yeah. I mean, obviously, every executive we interview gets paid a fair fee for their time. But yeah, I mean, typically, they do this work because they learn. They also learn, right? They had a great time. Other people said that they want to speak to investors because they enjoy the conversation. So, it’s also an intellectual job and a fun thing that they can do.

Will Oliver [00:43:18] And with preparation, there’s actually a real mutuality to the exchange that can be built. As you can imagine, the more there’s an exchange of value, the more trust is built or, the more trust can be built if you give yourself a chance. It’s not always a direct result. I mean, it’s what we’re saying, right? There are 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. 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 frontlines of the business, they’re not sitting in the boardroom. They don’t have that capital markets view necessarily, 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 in speaking to a lot of it and spending a lot of time with investors today and our partners, friends in the industry, that people could do more in driving mutuality to the exchange and appreciating that even though you’re speaking to someone that’s at the frontlines 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.

Will Barnes [00:45:10] One thing I would say when Will mentioned premium partner. We actually call up 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 were also thinking a lot about how we can give them something additional beyond the interview that they can take.

A lot of our premium clients come to us and say, “Can you listen to the interview and give us some feedback on how we ask questions?” because they want to improve the quality of their work. Next year and I guess going forward, we’re looking at 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 mini-workshops, give feedback sessions with our investor clients. Because really, if we can bring the quality of the interviewing up, it just benefits the whole ecosystem, right? Everyone gets to read better interviews, plus the investor gets to conduct interviews better. So next year, a focus for us will be how we give our premium clients. We’re highly selective about which clients we work with for which we lead into the interview. So they have to be obviously portfolio managers, fairly concentrated portfolios, low portfolio turnover, quality-focused, fundamental investors. How can we help these investors really do the best primary research? And then, just every interview should be great. That’s kind of our goal for the next few years.

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Will Oliver [00:47:01] Yeah, I was just going to add this element, Tilman. I think an aspect of your question that we can maybe offer something on 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? What is a win for this executive? We exist in an industry, in the primary research space that is very transactional, where there’s a fee, you show up at the session, 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 of 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.

Tilman Versch [00:48:34] You already described you’re in the middle, or you’re the middleman between the business world you’re discovering and the financial world.

Will Barnes [00:48:44] Winemakers and Angels.

Tilman Versch [00:48:46] Yeah. How do you go about this language difference? If you’re a winemaker, you have different terms, different ways of describing the world, different focuses, and also different languages. If you’re a woman at ASOS, there are different terms. There are different languages. How do you go about this? And also, like the background, you have to translate this finally into something the investor can understand. Like, return of capital, these terms we have in the financial world, how are you trying to manage these language differences?

Will Barnes [00:49:25] You got to speak both. You got to speak both. Going back to this second tier of management, right? We’re happy to have people on the frontline. Typically, those people don’t think about return on increments or investing capital. Increment of return on a dollar of capital that is invested, but what they can do is tell you how it works so they can lay out step by step every single process of what they may do. They should be able to give you the dollar amounts in a monthly or a weekly or whatever kind of period you’d like. We leave it up to the investors to calculate the back of the envelope, sort of invested capital.

And so, this is actually part of the differentiation that we think we can provide is bring in those kinds of insights about how our system works, bringing them to investors in an interview format, and hopefully going forward, 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 make a judgement then.

Will Oliver [00:51:21] 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, they’re not getting impatient. It’s really quite simple and often quite difficult to do if the message isn’t getting across. But then also really investing time and understanding the operator’s worldview. You could do that in the pre-call. You can do that more dynamically in the interview. But I think the main way I would answer that is by investing time and being patient.

Will Barnes [00:51:58] It’s interesting because I literally had this again today with the ASOS lady I interviewed. Most of the industry will look at the gross margin of ASOS or Boohoo or these fashion retailers. But actually, she doesn’t really look at gross margin. She’ll look at the intake margin, the intake margin, which is basically you go and source the materials and the clothing. You ship it from Asia or Europe to the UK. You have some kind of landed cost. And then, if you sold it at the full price like the RRP, that would give you an intake margin, which she looks at. But actually, what really matters is the net intake margins after promotions.

Typically, when we ask investors, “What are you asking about Boohoo or ASOS?” They’re like, “I’ll take a look at the gross margin.” But actually, this lady will talk about the intake margin. So like, stuff like that. It’s actually differences in language and how they look at their business and how it takes, you know, asked to go and really lay that out and hopefully learn ourselves about how people think differently and just trying to be aware of what really matters.

Tilman Versch [00:53:23] So, it’s not only understanding numbers. It’s obviously understanding the use of the context of the numbers in the industry?

Will Barnes [00:53:32] Yeah, exactly. I mean, the gross margin is constructed of certain drivers, right. For example, the ASOS gross margin is down from 51-52% six years ago to 45% today. Right? And if you are someone that they just give you the kind of standard answer of like Brexit, freight, shipping, and a bit of increased buy-in prices or discount, but a discount is the kind of the real one you want to get to the bottom of.

And so, when we asked her today, this is what we try to kind of unpack, which was like, what is really driving that? And then you get into the language differences of she won’t really speak about gross margin. She’ll talk about net intake margin. They’re just focusing on actually practical differences in language that can help you actually have a conversation with her where she thinks in that intake margin rather than gross margin.

Tilman Versch [00:54:49] When did you realise that you have to say, “Stop. Hold a minute. Please explain to me what you mean with your margin concept in the interview.”

Will Barnes [00:54:59] Luckily, I’ve done a lot of fast fashion work so that I can go straight to the net intake margin. Years ago. I remember doing fast work in the fashion space with New Look. That business was practically going bankrupt. The big problem they had was exactly that. They had a very high intake margin. I shipped the product to the UK. It would be a great margin if I sold it at full price. You’ll have a 60-70% margin. But actually, they were discounting every single product by like 40% to sell it.

And so, I learned that actually, the only thing that really matters for fast-fashion retailers 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%.

Tilman Versch [00:56:09] Maybe let’s go a bit back to the idea of building trust. You already said that preparing, sending out the questions beforehand, and giving your interview partner something besides the compensation they get are ways to build trust. Are there any other, maybe also smaller, hacks you found to build trust?

I heard this Mel Robbins video a few days ago, and she has this hack of standing up and going to the mirror and giving yourself a high five because it helps you love yourself a bit more. Is there anything you found in your interviews to help bring you to your conversations?

Will Oliver [00:56:56] Love always helps, though. I’ve got to say that’s never going to hurt. Self-love, love of others, that’s really good stuff. I think specifically, it is really being clear 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 is going, making sure that they understand that the information isn’t going to immediately flow to one of their competitors or the management team of a competitor firm or a business that they’ve invested in. Simple things like that. So being really, really clear about what success looks like for you and what your motivations are. Really investing a couple of minutes in that can actually have a really material impact on a conversation.

I mean, if you just think basically about trust, where does trust come from? It’s really around transparency and intention. If I understand what you’re trying to achieve and 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, Will and I were talking about the other day. There are also situations where it’s extremely hard to build trust, where incentives maybe are not necessarily aligned. That’s a whole different story. I think the types of conversations that we’re talking about, the conversations 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. It truly 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 being of service and useful. The more you are of use to someone else, the more trust flows naturally. It’s not something that’s particularly mysterious. Right?

Will Barnes [00:59:21] There’s some sort of challenge there. Actually, while we have the luxury of coming at this work from a different angle than investors because naturally, investors have kind of flown into a transactional relationship, right? They pay an expert network to speak to the executive that’s getting paid. 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 to the CEO you’re speaking to, or the executive, that you care about what they have 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 we’re looking to help the executive share their learnings and share what they’ve learned over their career. We’re trying to create a bit of a different experience, so it doesn’t necessarily mean that we can be better at interviewing. It just means that we come at the interview from a different angle.

Tilman Versch [1:00:36] The business world is a world that’s more about suits and presenting themselves in a bit uniform way. And often, humour isn’t used that much. It’s more about control, and emotions are rarely used in business. So maybe let’s talk about how you use humour and emotions or how you process emotions in conversations. Do you use humour? Do you try to laugh with your guests and make jokes? Or is it something you try to avoid?

Will Barnes [1:01:11] Yeah. I think this is exactly the point, right? The fact that we can come at these interviews and set them up and stretch them differently, that’s not a fixed transaction of experience, allows the executive to be far more relaxed. We had a joke about this. I realise I keep bringing this ASOS lady because it was a couple of hours ago, right? She couldn’t get on the Riverside as well, right. She couldn’t get a riverside, right. So we had a joke about that. And then, just little things like this can make someone relax and be calm. She basically came out in the first five to 10 minutes and just said that these businesses are not really differentiated. And then, they’re all kind of converged on their assortment, and it’s much of a muchness, and customer behaviour is not sustainable. You can actually bring out there what they really think about stuff if you can make them comfortable.

I think we’re lucky. We realised that we’re really lucky that we can actually spend time with the executive beforehand. Warm them up, get to know them, come from a different angle within investors. We try to give a differentiated perspective from this content, which is why we were so focused on doing our interviews because we feel like we can actually add some value that maybe the executive wouldn’t necessarily give women investors.

Tilman Versch [1:02:49] And with emotions, I think, they could be telling if there’s someone who was fired, more on a pissed mode, or someone really passionate about it. How do you process this for you and how you conduct the interview, especially if you think about the form you present the interview. We can go to this in a second question.

Hey, Tilman 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.

Without further ado, let’s go back to the conversation.

Tilman Versch [1:03:58] How do you go about your emotional reactions? If you have the feeling that something triggered you in the conversation or you say, okay, after the interview, this was interesting information, but it’s hard to stand this person to a certain extent. How do you reflect this in the way you produce your interviews? Maybe it’s not the best example, but there’s also your own emotion that might open up some things.

Will Barnes [1:04:30] Actually, this tells you more about yourself rather than the executive. If you’re getting pissed off or tense up when you hear something, it tells you a lot about yourself, right? And actually that I was attached to a view that actually is not right. I get that sometimes. Sometimes I’ll make a structure of an interview and look to work through that and the executive, “You focus on the wrong thing. This is what we should focus on.” And you’re like, “Shit. I’ve completely missed this thing that’s actually really the most interesting point.” And if you don’t listen to that and you keep kind of going on your structure, you don’t listen. It’s just ego effectively. So, a lot of the time, when we feel uncomfortable, it’s even because we’re too attached to our view of how something works, or it’s just a kind of ego getting in the way.

Tilman Versch [1:05:30] I think there’s a quite interesting book called Just Stand and Do Nothing. That’s also quite an interesting way of leading. I don’t have it behind me, but it’s an interesting method that helped me be behind it. It gives some rules to allow the other person to fill the room.

Will Barnes [1:05:56] But again, this is the paradox, right? Because we used to do this back at Third Bridge. We get someone great. And obviously, the great CEOs can be not overpowering, but they can control the conversation. And so, again, this is the paradox between standing there and doing nothing and letting the executive be and let them speak. But not too much, because you just let them preach. So it’s, again, this paradox between letting the information flow but guiding where it flows. Making sure the air flows to something they think is relevant and what you believe really does matter for the company. So it’s typically always a paradox, which makes it so annoying but also interesting and fun.

Tilman Versch [1:06:48] Thinking about the translation you do for your investors, you transform your conversations into transcripts. You usually do them in real-time, 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 these elements of emotion, voice, body language can be reflected in this? This question’s quite hard, but maybe I have to ask it.

Will Barnes [1:07:25] It’s impossible, right. It’s difficult. I think that’s why the audio is important, especially for the ones we do. I think you tell a lot by the tone in someone’s voice. Obviously, video is better, but sometimes the video doesn’t work.

Will Oliver [1:07:38] It’s not a great answer, frankly, but I think how we kind of cheated on that is by releasing the audio for In Practise hosted interviews for that first-party content 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 a good transcription and bad transcription. But ultimately, text can never capture or will almost never capture body language. It will 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 audio-visual to text, 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.

Tilman Versch [1:08:44] Maybe you can try to use some emotional notes you’re taking after you made the conversation. Like, you can write down anything that a transcribing person should add, like, where you had the feeling, okay, yeah, here, you have to listen to the audio. There’s a certain emotional level that was quite interesting.

Will Oliver [1:09:09] That’s tricky because 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 a conversation for you to decide. I think your 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 is diving deep into his reflections of lessons for the most part. 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 in a really quite extreme level of objectivity as much as possible to the annotations function on the interview page, and it would be the same.

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. There are many levels to that because, of course, on some level, our views are shaping the conversation, 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 creating the space, much like you said with, I guess the thought you had around this book, which I interpreted, correct me if I’m wrong, I interpreted as 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. 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 of 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. 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 lifetime’s game.

Tilman Versch [1:11:32] Yeah, it enables certain self-organisation. For your recommendation, don’t just focus on the transcripts. Get your ears and eyes dirty by watching the videos and hearing the audio. And also, get out if you can do some research besides that. Is there anything you want to add on what makes a good interview and what isn’t a good interviewing process? I think we covered a lot.

Will Barnes [1:12:08] I mean, we can speak about this stuff for hours. 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.

Tilman Versch [1:12:29] One point which I tend to find interesting is the time dimension of interviewing. With this interview, I’m not time constraining my interviews. For me, it ends when I feel satisfied with the information I get. How about you? Do you have a certain time constraint? Do you sometimes go, “Okay, I would go on auto with these questions because they both add another layer, and this person had to leave”? Or is it like, “Okay, this interview wouldn’t be time-constrained. We will end when we are satisfied with it.”?

Will Barnes [1:13:17] I think that would be the dream to get to some kind of Joe Rogan level, where it’s just an unconstrained conversation for two to three hours. But the challenges of that, obviously, these executives are busy. They typically do this either within their working day, or hopefully, we try to prioritise them outside working hours so they can be more relaxed and can go over. But yeah, we tend to put an hour and a half in the diary and just kind of at least try and get one hour of recorded content out of that. It gives us space and time to warm up, get the executive comfortable, and rescan our content, which is exactly what we think really matters. That’s the goal, right? Joe Rogan long-form interviews with CEOs would be pretty fun.

Will Oliver [1:14:11] Well, and conversely, I think some interviews could also be half an hour, right?

Tilman Versch [1:14:16] There’s this other book that’s behind me. It’s called Open Space Technology. There’s one rule in open space. “It’s over when it’s over. It’s not over when it’s not over.” Sometimes, if you have a question or a topic you need to discuss in 15 minutes, and you have the answers, it’s fine just to let it go and then it’s over. You don’t have to try to get too deep into some topics. Sometimes you discuss a topic for 90 minutes or two hours, and you don’t feel like it should be over that you have to do another interview or another follow-up or whatever. It’s quite interesting.

Will Barnes [1:14:55] That’s what makes this work so fun, right? I mean, you can do 10, 20 hours of interviews on Naked and still not be done, which is why we see this as a lifetime work because we’d always be doing interviews and research and speaking to investors and executives on all companies. It’s kind of what we just want to do with our lives.

Tilman Versch [1:15:20] We are all from a European background. If you talk to executives in the US, they often use superlatives like great, fantastic. The way people from the US talk is a bit different. It’s also different in other regions. Germans, for example, tend to be very serious and strict in conversation. They are not that emotional. How do you go about these cultural differences?

Will Barnes [1:15:56] This is a good one. It makes it fun. The job of engineers is a bit harder to crack than the US marketers.

Will Oliver [1:16:09] I mean, that’s it. American executives tend to be easier to relate to. 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? Just don’t take it personally. Right.

I mean, frankly, it’s probably also quite a bit easier for Europeans because if you’re from the States, 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, etc. I think that maybe comes a bit more naturally to us. I don’t know about you, Will.

Will Barnes [1:17:00] Yeah. I mean, it just goes back to the point that you mentioned about truly understanding who you’re interviewing. That goes for everything from the culture, the way they are likely to conduct the interview, how they’re likely to prepare, the role they’ve been in. Again, it sounds simple, but if you’re interviewing certain engineers or digital marketing executives, you can completely interview them in a different style to get them to the edge of their competence. It just comes from doing the work where they are.

Will Oliver [1:17:45] And then, if you’re speaking to an English executive, and they tell you performance wasn’t great, it probably means it was shit.

Will Barnes [1:17:55] Exactly.

Will Oliver [1:17:57] If you speak to a German executive and they tell you performance wasn’t great, performance is probably not bad.

Tilman Versch [1:18:04] Yeah, I can underwrite this. That’s true, yeah. It’s a fascinating topic also, these cultural differences. I think we should end it here for now. Thank you very much for your time and deep insights. I hope the viewers who still stay till now have some ideas, what they can use for their interviews, and are also interested in trying out In Practise. You’ll find the link below and can try out their work. There are also some free interviews, I think, on your website.

Will Oliver [1:18:41] That’s correct. We have a free tier on the site.

Tilman Versch [1:18:44] So register there. Thank you very much for staying till the end of the conversation. Goodbye to all of you. And also to you two, bye-bye. Bye.

Will Oliver [1:18:56] Thank you.

Will Barnes [1:18:58] Yeah.

Will Oliver [1:18:58] Ciao!

Tilman Versch [1:19:00] As in every video, also here is the disclaimer. You can find the 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.

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