Dumb questions are actually rarely dumb. Successful people understand this and consequently ask lots of questions, many of which may seem simple, naïve or even plain dumb. Essentially, they would rather be ridiculed than make decisions armed with less than a clear understanding of all relevant information.

The collapse of the once all-conquering Enron provides a dramatic example of this. Before its bankruptcy in late 2001 Enron was one of the world’s largest conglomerates employing 22,000 staff and had reported revenues of US$101bn. Fortune magazine named Enron “America’s Most Innovative Company” for six straight years. It was untouchable or so everyone thought at the time.

It started to unravel when a reporter innocently asked Jeff Skilling, the CEO of Enron, an apparently “dumb” question – “How did Enron make money?” Skilling abused the reporter calling her an ill-prepared incompetent. She was, however, the first person to ever ask whether Enron was actually profitable. Soon afterwards Skilling verbally attacked a Wall Street Analyst who requested for the third time Enron’s quarterly balance sheet with the earnings statement. The analyst pointed out to Skilling that Enron was the only publicly-listed company that could not release a balance sheet simultaneously with its earnings statements. Nobody else had raised it so Skilling replied with “Well, thank you very much, we appreciate that . . . asshole”.

Inevitably it was discovered that Enron had NEVER made any money and Skilling is now in jail serving 24 years for multiple counts of fraud and insider trading.

A similar thing happened with the collapse of the U.S. mortgage market. Homebuyers frequently didn’t understand the consequences of interest rate resets in their mortgages, taking on debt they inevitably couldn’t repay. Banks ignored the risks and encouraged them to borrow more and paid high commissions to mortgage brokers to write more business.  At the same time, regulators praised complex and risky mortgaged-backed securities. Many financial commentators and economists still insisted in 2007 that financial markets were in good shape. Few understood but everyone acted as if they did.

Mark Twain once said “whenever you find yourself on the side of the majority, it’s time to pause and reflect.”  Would it have been any different if the dumb, obvious questions had been asked? It’s hard to tell. It might not have stopped the problems but it may have contained the damage. Part of the problem seemed to be that people didn’t want to look dumb and just went along with the consensus view. They didn’t understand what was happening or why. Perhaps greed played a part too.

The best solution is to simply ask questions if you don’t understand something. There is little merit in remaining quiet and attempting to appear “smart” versus asking the obvious question which might improve your understanding and lead to better decisions being made.

Here are a few “dumb” questions that I have found particularly useful over many years:

  • I’m not sure I understand this. Is this what you are saying?
  • Can you explain it in another way to make it simpler for me to understand?
  • Simply explain to me why we’re doing this?
  • What if? (we didn’t do this; we did something else etc.)
  • How do you know that what you are saying is correct?

It takes guts to ask those dumb questions. However, in my experience, it is the people who are willing to do it who usually become the most successful. This is because they have placed the fear of looking stupid below their goal of making the right decisions. In the end, they understand that a curious mind and a healthy willingness to publicly say “I don’t understand” could be as important to a prosperous future as anything else they do…

[facebooksimplelike]