We had the rare opportunity last week to sit down at 1871 with Joe Mansueto, the founder and CEO of mutual fund tracker Morningstar, for a fireside chat. Having known Joe for more than 30 years, and given the astonishing growth and success of his various business ventures, I'm always amazed at how modest and accessible he remains and what a great booster of Chicago and its entrepreneurs he's always been. When we finally wrapped up our own conversation, he made time to chat with more than a dozen of our member companies, to answer their questions and pose for a few selfies as well.
Joe and I have another connection, too. He's the owner of Inc. and Fast Company magazines, and thus this web site. He pointed out that his wife said at the time he acquired the magazines, in 2005, "at least he hadn't bought a sports team." I'm happy he didn't, too.
We covered a lot of ground in our chat, including the fact that the name Morningstar came from the last line in Thoreau's Walden, but there were a few of Joe's observations and comments that were somewhat surprising and really stood out for me. Here are the five that I think are valuable for every entrepreneur to consider:
He's Still Investing Solo
While he regularly makes outside investments with a group of other investors for his own personal account, he made it clear that-- even in an era when everyone is looking for strategic partners, joint ventures, and hoping to use OPM-- when it comes to Morningstar, he prefers to own 100% of the opportunity and go it alone. For two reasons: (a) to avoid conflicts and different agendas or inconsistent views on how to move the business forward down the line, and (b) because, if you're all-in, the upside (if indeed there is any) is much greater than if you hedge your bets.
He's Still Pitching Mutual Funds
When I asked him if he still believed that mutual funds were the best investment vehicle for 90% of the investing public, he said that--what else could the CEO of Morningstar possibly say? He also invests directly in stocks, which he says he does because it's fun. I asked him for some investing tips and, with appropriate disclaimers, he went on to talk about what he looks for in companies and investments. Highest on his list are businesses with sustainable competitive advantages (if there's any such thing anymore) including effective barriers to entry or "moats" as he called them, which make the companies' market positions defensible. Examples he cited include: high switching costs, strong brands, patent protection, etc. (See To Keep Your Customers Build More Moats.)
He's Still Scared
Taking a page from Andy Grove's preaching on paranoia, Joe said that when he is looking at new businesses, he always asks himself the question: "How is Amazon not going to kill this business?" As we have all learned, it's not about how you start the race, it's how you finish that separates the winners from the crowd of wanna-bes. It's great to invent something new and be the first mover, but you've got to keep looking over your shoulder for the fast followers running right behind you and make sure that you have a plan to keep ahead of the pack. (See First-Mover Advantage? Maybe, But Be Smart About It.)
He Still Recruits
I was a little surprised to hear that Joe is still actively involved in college recruiting for Morningstar. I've said before that I'm not even sure that most CEOs should be doing any hiring for their businesses, but he says that there's nothing more important to the future of Morningstar than attracting and retaining top talent. I agree with the goal-- my issue in many cases is with the person doing the job. (See How to Make Smart Hires, Even if You're CEO.) Just like everywhere else in life, it turns out that the best person in the business isn't necessarily the best person for a specific job or for every job. (See Bring Back the Peter Principle Please.) Of course, I'd be happy to have Joe doing the hiring for me any time.
He's Still Strategic
When I asked him about his role as CEO and especially what his priorities are right now, and whether they've changed over the years, he said he was focused on four areas. Talent, as noted above. Culture and creating an environment supportive of his people and conducive to their doing great work. Allocation of capital among competing priorities. And top of the list, strategy, which is, of course, a critical determinant of all the others as well. If you get the strategy and the values of the business right, the execution, while no less challenging, is at least a little easier to pull off. Strategy in cases like this is as much about saying "No" to things as it is about embarking on new initiatives. I got the impression that setting the course and then stepping back and letting his team get the job done was the basic philosophy that had clearly served him well.
As we concluded, I asked Joe about how strongly he relies on market research, focus groups, and other third party tools and input in evaluating and determining whether to launch new products. He said something that should ring true for every entrepreneur who's ever had to overcome the "wisdom" of the crowd or the mediocrity of the marketplace. He said, and I'm paraphrasing here, the next great American novel or next great business won't be written by a focus group or a committee, but by a committed and passionate individual writing from the heart and not for the herd. Thoreau couldn't have said it better.