Looking ahead Featured

8:00pm EDT July 26, 2008

John W. Rogers Jr. hasn’t yet overcome his greatest challenge.

As founder, chairman and CEO of Ariel Investments LLC, he’s facing the challenge of dealing with an inhospitable stock market as his firm focuses on investing in high-quality companies and avoids the more volatile commodities sector.

“What we’re doing is staying the course,” Rogers says. “The worst thing you can do when your style is out of favor is go chase what worked yesterday. This is a game that’s won by people who see the future and not by those who follow the past.”

In leading his 99 employees, he works to help them build better relationships with people at the companies they hope to work with because he believes relationships are the key to growing any business.

Smart Business spoke with Rogers about how he trains his employees to be like investigative reporters in order to better build those key business relationships.

Focus on the future. It takes some discipline, and you have to read, study and meet with management teams and experts who understand the economy and the various industry sectors.

It’s about gathering as much information as possible. We tell people internally not just to focus on the people you know at the companies you invest in ... but to develop relationships deep in the company where people can give you a different insight than sometimes the top management will. Then you also need to develop relationships with your competitors, who often have great ideas and thoughts about the markets and maybe a different perspective.

Show up at the conferences and the trade shows. If you’re trying to see the future, you need as many people bringing all the diverse viewpoints to the table, and then you can make your final judgment after you’ve had a chance to study all of that.

Get better information. We’ve talked to investigative reporters to get tips on how they gather insights and information. We train young people how to gather information from places where people don’t want to give information. That’s what makes for good investigative work.

We’ve been using a company that helps you to be a better questioner. They also consult and guide you on how to determine whether the information you’re getting is truthful or not.

They teach you everything about how to read a press release more skeptically, how to read body language from people if you’re meeting them face to face, how to ask presumptive questions, and different ways to ask questions and follow up with a question to elicit information that people maybe wouldn’t be comfortable talking about.

Read between the lines. See whether people have terms that show a lack of conviction. They’ll say something like, ‘We hope to achieve this,’ or if you’re talking to someone they might say qualifiers, where people put something in front of the statement that minimizes the power of the statement. You have that in writing or verbally.

You’re looking for clusters of movements. They call it have an ‘anchor shift.’ They shift in their seat in a demonstrable way and maybe touch their face. They’ll be doing three or four things at once that give you a feeling that they’re very uncomfortable. They’re often a sign that people aren’t being candid.

Ask presumptive questions. If a company is in an industry where there’s big-time problems, you might try to talk to them first in a sympathetic way and say, ‘We understand that you’re facing gale-force winds, and it’s got to be tough for you, and in this environment, we’re guessing you’re probably going to earn $3.25 a share at best, down from the $4 estimates we had.’

Giving the presumption that they’re going to earn less than what they anticipated, you learn a lot by how they respond to that. They say, ‘Jeez, there’s no way we’re going to earn $3.25,’ or maybe they’ll say, ‘If things continue to be as tough as they are out here, maybe that will be an optimistic number we’re looking at.’

Make people comfortable. Get people warmed up that you’re not there as a confrontational Woodward and Bernstein investigative reporter and that you’re trying to develop some trust and serve shared perspective with the people you’re talking with.

Get people away from their offices. Meet with the management team if they’re in town and have a drink; go to lunch. ...

You develop a different kind of relationship when you get someone away from the office and the formalities of an interview and establish a real friendship that can be helpful.

Ask better questions. Do your homework beforehand. Be prepared to understand the key issues you want to talk about, so you can zero in on and follow up on the key point and not just ask a laundry list of 20 questions, and ask those 20 questions no matter how the conversation goes. Focus on what seems to be the key issue that drives long-term profitability for the business.

It’s trial by fire, by watching other people do it, and have a coach come in and help you hone your skills. When we go out to visit companies, we try to talk afterward about what were the good questions, the important questions, the questions that weren’t so good and help people be better at it. Hopefully, they learn by observing the way we do it.

HOW TO REACH: Ariel Investments LLC, (312) 726-0140 or www.arielinvestments.com