The quote is from Stendhal, describing Talleyrand. I thought of it when I read the following excerpt from the Jeff Matthews book I just reviewed. To a young shareholder who asked how to learn whom to trust and whom not to trust, Buffett replied:
I sometimes fantasize about writing a book about one of Buffett's less-studied qualities: his skill at "applied psychology," what some people call street smarts and others call seduction or the manipulation of human behavior. The skill can be used on offense--to manipulate others--and, more ethically, on defense--to protect yourself from others' attempts to manipulate you.
Buffett's answer to the young shareholder was, I believe, deliberately incomplete. Applied psychology is kind of a dark art--you're not supposed to talk about how you do it, even though all of us do it in one way or another. In the above case of learning how to read people, yes it's important to learn how people give themselves away, but it's also important to help them along. If you want to learn about what someone else thinks is important, you give him every opportunity to do so. Let the other guy move first, don't show your hand, don't let your face or manner be a barometer of what you're thinking. Buffett's famous persona--the geniality, the always-open door and seemingly endless willingness to sit and listen, the kind word for everyone, the refusal to criticize anyone by name, even (or perhaps especially) those who deserve it most--all work like a kind of psychological alcohol to create an environment in which people are comfortable and at ease. And when people are comfortable and at ease, they let their guard down and reveal themselves for better or worse.
All of us are vulnerable to being seduced, to trusting those we shouldn't, to being played for a fool. The very wealthy are no exception, and in fact sometimes I wonder if they are not especially vulnerable, notwithstanding their obvious savvy in their chosen sphere. Politicians, (second/third/fourth/etc.) wives, charities, art dealers, Bernard Madoff, etc. all make a specialty of seducing the rich. Of all the rich people I've ever studied (and I've studied a lot of them), Buffett is among the least seducible.
When I interview professional investors, I try to imitate Talleyrand and Buffett:
First, I try very hard to fight my natural instinct to show off my knowledge and pontificate (that's what blogs are for). If anything I try to hide some of the things I (think I) know. There is an interesting dynamic that often arises when a non-expert interviews an expert to evaluate his expertise: Instead of making the expert impress him, the non-expert gets intimidated and finds himself trying to impress the expert with his own knowledge--the patient tries to impress the doctor with his knowledge of medicine, the homeowner trie to impress the architect with his knowledge of architecture, the art collector tries to impress the art dealer with his knowledge of art, etc. This is not only a waste of time, but it gives the "expert" (who may in fact only be an expert at seduction) too much of a road map as to what he should talk about. I want the ratio of my listening to my talking to be extremely high.
Second, I avoid the traditional Wall Street interviewing posture of intimidation and openly aggressive questioning, which I'm temperamentally unsuited for anyway. I want people at ease, not in "job interview" mode. I never make anyone wait or arrive late to a meeting. I never ask someone to open a window on the 50th floor of a skyscraper.
Third, within reason I don't say in advance exactly what I'm looking for an investor to tell me. As much as I can I want the investor to tell me what he thinks is important.