Management interviews: the most underdeveloped skill in investing | Ross O’Toole

Management interviews might be the most underdeveloped skill in fundamental investing. Ross O'Toole has been investing for 25 years and read over 500 investment books, and he couldn't find a single one on how to actually conduct an investor-management interview.... so he wrote Breaking the Script, a field guide to getting management teams off their rehearsed talking points. We get into why "what" questions beat "why" questions, whether you should grade a plastic surgery CEO and a coal company CEO on the same curve, the case for recording your management meetings, and why asking for examples is one of the biggest double edged swords in investing.

I push back with my standing worry: management teams are really, really good salesmen, and I always walk out of these meetings wondering if I'm the patsy at the poker table. Ross's answers (build a longitudinal baseline over repeat interviews, ask for the negative example every time you get a positive one, and save the hard questions for the crescendo) are why this book went straight to the top of my "hand it to an intern" list.

Grab Ross's book, Breaking the Script: https://amzn.to/4fLg8RO

This episode is sponsored by Fiscal.ai: https://fiscal.ai/yav. Fiscal.ai is a modern financial data platform for global equities. In addition to their web-based terminal, they offer API access to real-time fundamental data: 20+ years of financial statements, ratios, segments, and KPIs, with data updating within minutes of earnings reports, not days. I'm not just an advertiser; I signed up with my own money to plug their API into the AI tools I've been building. Use my link, fiscal.ai/yav, for 15% off.

Chapters:

(00:00:00) Introduction

(00:02:00) Why management interviews are a double edged sword

(00:03:47) Why Ross wrote Breaking the Script

(00:07:15) Are we deluding ourselves? Testing management credibility

(00:11:53) Should you grade CEOs on a curve across industries?

(00:14:44) "What" vs "why": framing contentious questions

(00:18:27) Are interviews actually an alpha source?

(00:19:39) Where management matters most: deep value vs tech

(00:22:32) Would interviewing 2008 Zuckerberg have helped?

(00:25:14) Preparation and repeat interviews

(00:29:20) Should you record management meetings?

(00:31:54) Asking for examples: conviction builder or sales pitch?

(00:34:00) Always ask for the negative example

(00:36:00) Making management grade their own execution

(00:38:20) Interviewing companies under activist pressure

(00:41:30) Buffett's silver bullet question, reframed

(00:46:02) Question order: crescendo to the hard stuff

(00:48:29) Closing thoughts

Ross O'Toole / Breaking the Script: https://amzn.to/4fLg8RO

Links:

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Production and editing by The Podcast Consultant - https://thepodcastconsultant.com/