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WTT: You Can't See Everything

6m 51s

WTT: You Can't See Everything

This piece reflects on how we discover truth, inspired by the documentary "You Can See Everything" about Elizabeth Holmes and a candid conversation with a successful public equity manager. The documentary shows that more access and transparency do not necessarily produce more insight; the deeper Fielder dug into Holmes, the murkier the ground truth became. Similarly, the investment manager described client meetings during a period of underperformance as an exhausting ritual. Clients asked why he underperformed, what would change, and when results would improve—questions he felt forced to answer with reassurance rather than genuine knowledge, since no one can predict the future. The author argues that allocators' biases shape the questions they ask, those questions shape managers' answers, and the conclusions drawn may say as much about the interaction as about the manager. When performance disappoints, careful process evaluation often collapses into simple outcome judgments, encouraging managers to tell clients what they want to hear. Allocators may crave reassurance more than truth, and managers respond accordingly, leaving both sides feeling better without learning much. Rather than demanding more information and certainty, the author suggests asking different questions—what don't you know, what would change your mind, where might your process fail, and how do you distinguish a mistake from an unfavorable outcome. Observing how managers behave under pressure can also reveal temperament, accountability, and conviction. We cannot see or know everything, but we can recognize how our expectations shape the answers we receive and make it easier for others to revise their views.

Transcription

977 Words, 5904 Characters

English
Speaker 1The new documentary about Elizabeth Holmes and a candid conversation with a successful investment manager got me thinking about how we discover the truth. In this What Ted's Thinking, You Can't See Everything, I explore how the questions allocators ask can shape the answers they receive, and how our search for certainty can get in the way of understanding. I curled up next to my wife in big, comfortable chairs at an AMC movie theater last weekend to watch the remarkable documentary You Can See Everything. I expected to learn more about Elizabeth Holmes. Instead, I left thinking about how we discover the truth. The documentary offers a broad perspective on how we consume and interpret information. Nate Fielder implicitly poses important questions. How do we form beliefs? What do we know? And as Mark Twain said, what do we think we know that just ain't so? The irony of the movie title is that the more access Fielder gained to Holmes, the more confused we become about the ground truth. Sometimes more information and more transparency do not lead to more insight. I left thinking more deeply about how we form perceptions and make decisions when the information in front of us is incomplete, biased, or wrong. The day before, I had a long conversation with a close friend who runs a highly successful public equity firm. He had just returned from a week abroad visiting clients amid a period of underperformance. Each client asked some version of the same questions. Why did you underperform? What will change your fortunes? And when will performance improve? He said to me, it was all bullshit. They know I don't know what will happen, but I have to perform to make them comfortable. It was exhausting and left me feeling empty. Behind closed doors, I got access to a truth that rarely gets unearthed in a typical manager-allocator conversation. I've been thinking about his comment ever since. Allocators make judgments about people. We visit their offices, meet their teams, dissect their portfolios, study their track records, and learn from them. We don't know what will happen. We don't know and ask them to explain their investment process. We assume that more meetings, more access, and more questions lead to a better understanding of the manager. But what if the process itself shapes the information we receive? Our biases influence the questions we ask. Our questions influence the answers managers give. And the conclusions we draw may tell us as much about the interaction as they do about how a manager works. Turning back to my friend, when performance disappoints, our careful assessment of process often gives way to a much simpler judgment of outcomes. As a result, we lead managers to telling us what we want to hear rather than what they know. Think about the questions we ask when a manager underperforms. Why did it happen? What have you learned? What will you do differently? And why should we expect better results? Taken at face value, these questions can carry an unreasonable expectation that a manager can explain the past with precision, identify what needs to change, and offer a positive outlook on an inherently uncertain future. This is particularly true in the public markets, where cause and effect carry a lot of noise on any individual position. There's another uncomfortable possibility. Maybe allocators don't always want the truth as much as they want reassurance. Managers recognize this and respond accordingly. They emphasize their convictions, minimize their doubts, and present a plan. The result is a conversation in which both sides may leave feeling better without either having learned very much. My friend knew he couldn't predict when his performance would improve. His clients probably knew that too. Yet everyone participated in the ritual. He offered explanations, and a path forward. They listened, asked questions, and presumably left feeling a little bit better about staying invested. But did anyone leave the meeting with more insight? Perhaps there's more to these conversations than meets the eye. The questions asked when a manager underperforms may serve a purpose beyond their literal answers. Astute allocators might focus less on what a manager says than on how they behave under pressure. Testing a manager's temperament, accountability, consistency, and conviction at difficult times can offer insight irrespective of the answers the managers give. In the repetitive exhaustion of what felt like playing defense, my friend may have missed the exception to the norm, an allocator playing the game within the game. You can see everything shows that seeing more doesn't necessarily mean understanding more. The lesson isn't to stop asking hard questions, or doing the painstaking work of due diligence. It's to recognize that the questions we ask can influence the answers we get. We might benefit from asking different questions that deepen our understanding of what's really happening. Questions like, what don't you know? What would cause you to change your mind? Where might your process fail? And how do you distinguish between a mistake and an unfavorable outcome? These questions reveal more about a manager's judgment, insights that can compound over time. We can't see everything. We can't know everything. And no matter how much work we do, we can't know what's going to happen or the motivations of everyone involved. But we can get better at recognizing how our own expectations shape the answers we receive. Perhaps the best way to get closer to the truth isn't to demand more information and more certainty, but to make it easier for others to review the answers they receive. Thanks for listening to the show. If you like what you heard, hop on our website at CapitalAllocators.com, where you can access past shows, join our mailing list, and sign up for premium content. Have a good one, and see you next time.

Podcast Summary

Key Points:

  1. The documentary "You Can See Everything" about Elizabeth Holmes prompted reflection on how people discover truth and form beliefs from incomplete or biased information.
  2. More information and transparency do not necessarily lead to more insight, as greater access to Holmes only deepened confusion about the ground truth.
  3. A successful equity manager described client conversations during underperformance as an exhausting ritual in which he had to perform reassurance rather than offer genuine knowledge.
  4. Allocators' biases and questions shape the answers managers give, so conclusions may reveal as much about the interaction as about the manager.
  5. When performance disappoints, careful process assessment often gives way to simpler judgments of outcomes, pushing managers to say what clients want to hear.
  6. Allocators may want reassurance more than truth, leading both sides to leave conversations feeling better without learning much.
  7. Astute allocators can gain insight by observing how managers behave under pressure—their temperament, accountability, consistency, and conviction—rather than focusing only on their answers.
  8. Better questions—such as what you don't know, what would change your mind, where your process might fail, and how you distinguish mistakes from unfavorable outcomes—can deepen understanding over time.

Summary:

This piece reflects on how we discover truth, inspired by the documentary "You Can See Everything" about Elizabeth Holmes and a candid conversation with a successful public equity manager. The documentary shows that more access and transparency do not necessarily produce more insight; the deeper Fielder dug into Holmes, the murkier the ground truth became. Similarly, the investment manager described client meetings during a period of underperformance as an exhausting ritual. Clients asked why he underperformed, what would change, and when results would improve—questions he felt forced to answer with reassurance rather than genuine knowledge, since no one can predict the future.

The author argues that allocators' biases shape the questions they ask, those questions shape managers' answers, and the conclusions drawn may say as much about the interaction as about the manager. When performance disappoints, careful process evaluation often collapses into simple outcome judgments, encouraging managers to tell clients what they want to hear. Allocators may crave reassurance more than truth, and managers respond accordingly, leaving both sides feeling better without learning much.

Rather than demanding more information and certainty, the author suggests asking different questions—what don't you know, what would change your mind, where might your process fail, and how do you distinguish a mistake from an unfavorable outcome. Observing how managers behave under pressure can also reveal temperament, accountability, and conviction. We cannot see or know everything, but we can recognize how our expectations shape the answers we receive and make it easier for others to revise their views.

FAQs

Seeing more information does not necessarily mean understanding more. The documentary shows that greater access and transparency can actually make the ground truth harder to grasp.

Allocators' biases shape the questions they ask, which in turn shape the answers managers give. As a result, the conclusions drawn may reveal as much about the interaction as about how the manager actually works.

Careful assessment of process often gives way to simpler judgments of outcomes. This leads managers to tell allocators what they want to hear rather than what they actually know.

Not always—they may want reassurance as much as truth. Managers recognize this and respond by emphasizing convictions, minimizing doubts, and presenting a plan, so both sides may leave feeling better without learning much.

Astute allocators can focus less on what a manager says and more on how they behave during difficult times. This tests temperament, accountability, consistency, and conviction regardless of the answers given.

Questions like 'What don't you know?', 'What would cause you to change your mind?', 'Where might your process fail?', and 'How do you distinguish between a mistake and an unfavorable outcome?' reveal more about a manager's judgment.

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Transcription

977 words