Tuesday, July 26, 2016

The Questions That Matter And The Questions That Don’t

Basic questions are good questions. They matter. We learn from them.

Yet people often apologize for — or don’t bother — asking them. What’s more, we malign basic questions as dumb or stupid. Inquiries so simple, it’s a waste of time to contemplate them. That’s prompted the popular defense of the basic question, which is the aphorism “There’s no such thing as a stupid question.”

But there are stupid questions, or at least questions that don’t matter. These are questions people ask when there is little chance that they will learn something from the answer. They include leading questions, preening questions, and statements disguised as questions. And while they can sound harmless, they prevent us from obtaining a better understanding of the world around us.


Fortunately, there are a few CEOs who see through this malarkey. One is Steve Wynn, head of an eponymous hotel and casino company. On his company’s third quarter 2012 call, for example, Wynn was asked by an analyst to expound on how stable the economic situation in Macau would be over the next few months. His response was that he didn’t know because “that’s not a question we ever deal with except during a call like this.”

On the second quarter 2013 call, that same analyst followed up with a question about go-forward 90-day market share. But Wynn exposes the farce of it all in his answer:

It’s hard to give you — to quantify this. I know we try all the time, but to tell you the truth, Robin, it’s sort of a waste of time for all of us…It’s the kind of super detail that seems to matter on these kinds of calls, but really amounts to nothing in the long run.

Like my question about the cash conversion cycle, the answer to a question about market share over the next 90 days is not material to any rational analysis of Wynn’s long-term prospects. Wynn at that time was a company with an enterprise value of more than $20 billion and revenues of more than $5 billion and plans to open a massive new resort in Macau in just a few years time.

But the analyst sounded on top of things — smart and observant with a keen eye for detail.

- More Here

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