The Making of an Inc. 500 CEO: My Favorite Job

A close-up article that features one CEO, and how he took his start-up publication to the top of the heap.

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Joe Mansueto was searching for the right job in the right company -- one that would suit his lifestyle, his intellectual curiosity, and his sense of community. He founded Morningstar to create it

If you've heard of Morningstar, then you've probably heard of Don Phillips. He's the publisher of Morningstar Mutual Funds (MMF), the fund investors' bible, Morningstar's cash cow. Phillips gets quoted a lot. He shows up from time to time on Wall Street Week with Louis Rukeyser. His is the public face of Morningstar, a face that goes with a blue suit. Most people, when they meet him at conferences and whatnot, assume Phillips is the owner.

Not so. The hidden face of Morningstar is a face that might go better with a puppet: apple cheeks, eyes like blue marbles, a knobby brow, a Nixonian nose. It's the face of Joe Mansueto, Morningstar's founder, president, and sole owner. At 37, Mansueto is five years older than Phillips, but you'd never guess it. He wears weekend clothes to work every day: khaki pants, a cotton polo shirt (green today, purple tomorrow), moccasins. He'd rather listen than talk. When he does open his mouth, his voice sometimes breaks. On his own turf, in the airy reception room at Morningstar's new headquarters, in Chicago's north Loop, Mansueto, tentatively extending his right arm for a handshake, makes you want to put him at ease.

Mansueto started Morningstar 10 years ago, in a one-bedroom apartment, with $80,000 in personal savings. His interest in mutual funds was unusual for the time, almost cultish, like his childhood fascination with ham radio. "I just believed in them as a concept," Mansueto says now, "that the long-term fundamentals of mutual funds were very positive, that they were the best choice for maybe 90% of investors."

That potential 90% of the investing public became Morningstar's market. Mansueto's radical idea, as it evolved, was to cover mutual funds the way they might be covered on the sports page: with stats, rankings, analysis, and critical commentary based on interviews with the fund managers. His readers, he assumed, would be investors like himself: bright, curious, independent -- "people who wanted to choose among funds and try to make intelligent choices."

It was pretty clear from the start that Mansueto was onto something. His first $6,500 advertisement in Barron's yielded about $25,000 in paid subscriptions. Readers responded enthusiastically. "My eyeballs popped out of my head," says Cathy Gillis, then an unemployed former history major, now a Morningstar editor. "I was just floored. I had to be a part of it." (Don Phillips, once a disillusioned graduate student at the University of Chicago pointed toward a Ph.D. in American literature, saw in Morningstar a chance to head off in a whole new direction. "My plan was that I'd become an English professor, but I'd be an active investor on the side," says Phillips. Now he reads on the side.)

The product was right, but so were the times, and both played a part in Morningstar's growth. After the crash of 1987 the stock markets erupted. From the trough of October 19, 1987, to the peak of January 31, 1994, the Dow rose 2,240 points, or 129%. As stocks soared and interest rates sank, certificate-of-deposit savers all over America became mutual-fund investors. Novices jumped in with their IRAs, their 401(k)s, and their kids' college money. Fund managers such as Fidelity's Peter Lynch became financial superstars. Fund assets soared, from $770 billion at the end of 1987 to $2.1 trillion in 1994. Today more than one in four U.S. households has a mutual-fund account.

Morningstar rode the wave, building on its reputation as the mutual-fund authority, expanding its coverage to closed-end funds, variable annuities, and foreign stocks, and offering new products via fax, floppy disk, and CD-ROM. As recently as 1990, the entire company comprised 35 people shoehorned into the back half of the fourth floor of Chicago's historic (read: dingy) Monadnock Building. Today Mansueto has close to 400 employees ("We had 10 people start last Monday") spread across four light-filled floors in a glittering new office tower with Morningstar's rising-sun logo on its front. Revenues surpassed $1 million in 1989, doubled in each of the next two years, nearly tripled in 1992, and doubled again -- to more than $21 million -- in 1993. Numbers like that will put you on the Inc. 500 list; Morningstar has been there four times, climbing steadily to #136 on the current list.

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