Lately, I have been thinking about the role of questions in an effort to uncover important information to help make the most informed investment decision possible as part of the due diligence process. Perhaps it stems from listening to peers’ queries in meetings with management, analyst fireside chats, and conferences. Perhaps it is because I spend a lot of time preparing questions for meetings to uncover important information to help make the most informed investment decision possible as part of the due diligence process.

In this first of a two-part series, we review available research to explore the power of asking questions, a simple way of asking more questions, and why it is so important to slow down and think through your questions.

We know that due diligence is critical in making investment decisions. As part of the research process, most firms speak with a knowledgeable sell-side analyst, manager, or investor relations team before making an investment decision. As such, it has always been curious why we analysts are not taught about framing questions so that responses are geared toward providing a better understanding of the business, industry, competitive advantages, and growth outlook with as much vigour as we are taught accounting.

Are our guts wrong?

A growing body of research has concluded that our instincts, our natural tendencies to think or react in certain ways when faced with a decision, are not as trustworthy as we might believe.¹ This is a result of decision-making pitfalls that include but are not limited to biases, false confidence, and irrational risk aversion.² According to questionologist ³ Warren Berger in The Book of Beautiful Questions, when it comes to important decisions, we ought to put more trust in evidence than feelings.

Investing on behalf of clients requires us to make choices in the face of uncertainty. The question is a tool for this precise situation.⁴ Questions enable us to “organize our thinking around what we don’t know,” says Steve Quatrano of the Right Question Institute, an inquiry research group. Questions enable us to see a bit more clearly and take a step forward.⁵

Further, in the world we live in today where a million “answers” are at our fingertips, Berger posits that, as a result, the value of questions is rising faster than the value of answers. “Only by asking the right questions are we able to sort through that glut of information, make sense of it, and figure out how to best use it,” he writes.⁶

The origins and benefits of questionology

The study of questioning is rooted in research on conversational analysis that emerged in the 1970s.⁷ Since then, the topic of questioning has been studied in multiple isolated fields, and these fields emerged with their own frameworks and methodologies. The study of asking questions is not new and has been tackled by academics, scientists, and philosophers for years. However, this area of study has recently re-emerged in popularity.

On improving decision-making, Berger argues that asking better questions can spark creative problem-solving, strengthen personal relationships, and enhance leadership. Interestingly, question asking is one of the few interventions that has been shown to make people more emotionally intelligent.⁸

All of these are outcomes. What is less clear from the research is someone’s proclivity to ask questions.^{9, 10} While it comes naturally to some, asking questions is a skill that can be honed and continuously improved. However, the first step in becoming a better questioner is very simple. Professor Alison Wood Brooks of Harvard found that all you need to do is go into a conversation thinking, “I need to ask more questions,” and you will. Of course, the sheer number of questions is not the only factor that influences the quality of a conversation: The type, tone, sequence, and framing matter too.¹¹

The simplest and most powerful thing that happens when we ask ourselves questions is that it forces us to think and engage in what psychologist Daniel Kahneman calls “slow thinking,” which is “deliberate, effortful cognition that tends to lead to better decisions, choices, and actions.”¹²

Slow down and keep it critical

As our lives move faster and become more complicated, more time needs to be allotted for inquiry, contemplation, and critical thinking. The pressure to get more done without asking why we are doing it, what we are doing, and whether we should be doing it at all is the paradox we face.¹³

Asking thoughtful questions at the right time, in the best order, helps to make the best investment choices and take a step forward in the face of uncertainty, when it matters most to our clients and their portfolios.

The next article of this series will provide insights and techniques on type, tone, sequence, and framing questions to help you get the answers you need.