My colleague Siying, an equity analyst, likes to draw. A few years ago, an art teacher told her she may surprise herself if, rather than focusing on drawing an object, she tried to draw the negative space instead. Intrigued, Siying played with the idea, and found, to her delight, a surge in creative impulse. What she did not yet realize was how well this concept could be applied as a mental model within investing.
In art, negative space is that which surrounds an image. As Israeli illustrator Noma Bar explains in his book Negative Space, “an artist using ‘negative space’ relies on the space that surrounds the subject to provide shape and meaning.” You have probably seen the telltale example of using negative space in the image of a vase, which, when looked at another way, seems to show two faces staring at each other. This is a classic example of an artist using the negative space to convey an idea.
Drawing the negative space is also a useful mental model in investing. In this case, the mental model is used as a way of approaching a problem from a new angle. If we invert the question, and re-frame it to focus away from the object, what kind of answer do we get?
Consider the following situation in which Siying used “negative space” to elicit more useful information from a CEO of a domestic Canadian business.
Siying: What markets would you invest in?
CEO: Oh, well we’re more opportunistic than that.
Siying: Ok… well, are there places in which you would not invest? [using negative space]
CEO: (Pause) Well, we’d never invest in Vancouver, as there are two competitors there with large existing shares of market.
In this situation, Siying was able to circumvent the CEO’s vague, generic answer around capital allocation opportunities and extract more specific information that could help her better understand management’s intentions. It was a demonstration of what makes this mental model often so effective: its ability to flip a question on its head in a way that elicits new information.
Our team frequently applies “negative space” in the interviews we conduct with management teams, especially when we find ourselves stuck in a particular line of questions that are not yielding useful answers. If we get thwarted by a particular question, we will often ask it again, this time in the inverted manner. Often, this yields more detailed and specific answers. For whatever reason, people seem to answer positively framed questions differently than those that are negatively framed.
Of course, this mental model has much wider applications than management interviews. It is useful whenever it could be energizing to change the perspective on a question – whether that is in a business meeting or our personal lives. This kind of approach can help us create just a little wedge of new thinking to start to get us unstuck.
I am told by Siying that she rarely gets the chance to draw anymore. However, from our discussions, it sounds like this mental model continues to be the impetus for many creative leaps.