An Interview With The “quiet Billionaire” | Kerr Financial
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An Interview with the “Quiet Billionaire”
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JM01Joseph Daniel Mansueto (born September 3, 1956) is an award-winning American entrepreneur, self-made billionaire, philanthropist, and the founder, majority owner and CEO of Morningstar, Inc. In 1984 Mr. Mansueto founded Morningstar out of his Chicago apartment with an initial investment of $80,000 that he had accumulated in savings. The venture then transformed from a quarterly publication to a global investment management and research firm, and in 2005 Mr. Mansueto took the company public. Today, Morningstar is regarded around the world as one of the most recognizable brands in the investment management and research field, and Joe Mansueto is widely regarded as one of the most influential and revolutionary figures in the business of investment advice.

In this exclusive interview with Kerr Financial, Mr. Mansueto opens up about being a business owner and investor, the role investing has played in his life, and his outlook on certain aspects of today’s investment landscape.

You have been referred to as the “Quiet Billionaire” before, and have expressed that you do not see yourself as a billionaire but as someone who loves building great companies and investing. How has this outlook influenced the role investing has played in your life? What are some attributes that really pique your interest in an investment – that tell you it could be interesting?

 My approach to investing is the same as my approach to building a company.  I want to build a great company in Morningstar and I want to invest in other firms that I consider great businesses.  It’s very similar.  These are businesses that have some sustainable competitive advantages – what we call an economic moat – and have great enduring cultures.  Once you find them, the idea is to hold them for a very long period of time.  I still own over 80% of my original Morningstar shares from the founding of the company in 1984.

Companies that pique my interest are doing something unique.  They have created things that competitors can’t replicate.  It could be an intangible asset like a well-known brand, a cost advantage, a network effect or efficient scale.

As a business owner and investor, who has been the most influential person to you? What did he or she teach you about entrepreneurship, business and/or investing?

If you know me, there’s no surprise here – Warren Buffett.  Warren articulated an investment philosophy that is the same as the one I just described – focusing on finding great businesses and buying them at attractive prices.  But he’s also practiced business in a highly ethical way and done it with an infectious enthusiasm. 

His annual reports are the best business education you’ll get.  They are fun to read and highly informative.  While the media can often be critical of business, his annual reports are a celebration of business.  Business done the right way is admirable.

In 2015 you were recognized as one of the 10 most influential individuals in the fund industry by Mutual Fund Wire. Given the quantum leap in the amount of financial information readily available online today, as well as the rise in passive investing, do you believe that active fund managers can outperform the index over the long-term?

Absolutely.  People have wrongly given up active management.  In aggregate, active managers won’t outperform – they are the market.  But there are exceptional talents in the fund industry that are worth doing research to find.  Managers who can find great businesses, understand them and hang onto them while they grow over the years.  You can’t build a sports team from average players and expect to do well.  But if you can draft LeBron James, your team should do better than average.

You have stated before that one of the biggest changes in the investment industry you have witnessed since launching Morningstar over 30 years ago, besides the market’s tremendous growth, is the rise of the financial advisor. Can you elaborate on this sentiment? Moreover, given the meteoric rise of robo-advisors and FinTech, and the way they are impacting the investment landscape, do you believe they have the ability to replace human advisors?

When I started thirty years ago, no-load funds were the hot thing.  Everyone thought they’d take over as the dominant way to buy funds.  But investors voted with their feet and flocked to advisor-sold funds.  Why?  Because investors want to speak with someone about their financial life.  You don’t want to get your retirement plan wrong.  There’s no safety net.  People’s affairs get complex – there’s a divorce, a special-needs child, care of elderly parents and so on.  So it’s extremely helpful to work with an advisor.

Robo-advisors have a place.  They are helpful for people starting out and accumulating assets.  These are investors with low balances whom most advisors can’t serve well.  But over time they will need an advisor.  Robo-advisors will get more sophisticated but it will take a while. 

What is your outlook for markets in 2016? What advice can you offer entrepreneurs and investors who get discouraged or impatient in times of market volatility and/or economic downturn? 

I think 2016 will be an OK year for investors.  The volatility in oil prices, China and the U.S. Presidential race have reverberated back to the markets.  But the overall economy is solid.  Low oil prices help the consumer and the consumer is 70% of the economy.  We export little to China and there isn’t vulnerability for the U.S. economy.  So I feel good about the markets.  The fair value of the 1,400 companies covered by our equity analysts is 91%.  So we are not in an overpriced market either.

Do you have any business and/or investing mistakes or regrets? Things you would have executed differently if you had a second chance?

Nothing major – I like the way things turned out.  There are some small things such as when we started to expand globally, we did that through joint-ventures with local partners.  Over time, we’ve gone back and purchased the remaining shares in those ventures.  That took time and effort.  With hindsight, it would have been better to expand with fully-owned operations overseas.

Are there any books on business or investing on your reading list that you can recommend to us?

I like “How Google Works” by Eric Schmidt and Jonathan Rosenberg.  I recommended it to my senior team.  There are many lessons in it for building a great company with a terrific chapter on the importance of the hiring process.

The 2015 Berkshire Hathaway Annual Report is just out.  Warren Buffett’s letter is always a great read.  He has an uncanny way of putting things into context that clarifies issues.

As told by Joe Mansueto to Kerr Financial Advisors. JM02

Kerr Financial

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