In Search Of Excellence - Joe Mansueto: Founder Of Morningstar And Self-Made Billionaire | E79

Episode Date: September 19, 2023

Joe is the founder and former CEO of Morningstar, a financial services and investment research firm that is one of the most recognized companies in finance. It provides investment research and investment management services to many millions of people around the world. Morningstar has a market value of $10.6 billion and Joe earned his spot on the Forbes 400 with a reported net worth of $5.6 billion. Joe also owns magazines Inc. and Fast Company, as well as two professional soccer teams – the Chicago Fire in the MLS and FC Lugano in UEFA League.Time stamps:02:11 Joe’s childhoodHad a lot of unstructured timeLiked to do various projects 06:33 Joe’s first entrepreneurial experienceWent to a ham fest with a friendBought Drake 2B receiver for $20009:19 The Room 607Studied at the University of ChicagoLived in a new dorm with no place to buy soda or snacks11:20 The magic of boldnessYou grow by going beyond your comfort zoneJust give it a try and be willing to stand out16:34 The Christmas tree businessRented a truck, bought Christmas trees, and set up a shopLearned that managing your inventory is the key to successBroke even, but learned a lot 19:50 Should starting a company be fun?It should be fun and you should enjoy itFinding something you are passionate enough 21:04 How important is perseverance as part of the passion?Left it and went into investingReal entrepreneurs won’t give up until they find a solution 26:27 Funding an entrepreneur that failedJoe would fund entrepreneurs that failedFailure is a great lesson, not a black mark 28:07 A night manager at Arby’sWanted to start a concept of healthy fast foodGot a job of a night shift manager at Arby’s in ChicagoFound out he hated it32:06 How important is customer satisfaction and customer service to our success?Satisfying customers is extremely importantLearning to deal with people is highly valuable 34:18 How did Joe get excited about investing?Book mention: John Train, The Money MastersStarted working in an investing company - Harris associates 38:47 The great revelation about the mutual fund industryHad a lot of reports and other materialRealized that he had valuable dataLooked deeply at the mutual fund industryIt was a very obscure industry49:27 How important is it to do research when starting a company?Research + instincts + judgementThe data is out there and it is extremely important to researchSponsors:Sandee | Bliss: BeachesWant to Connect? Reach out to us online!Website | Instagram | LinkedIn

So my roommate and I just opened up our own soda service in our dorm room. We called it the Room 607 Soda Service. And we just bought two large refrigerators, put them in our living room, and sold soda from our dorm room. I didn't come from a business background, so I just thought it was very interesting that you could kind of make money by finding a price discrepancy. And so that was kind of one little entrepreneurial moment in my background.

Even when I started a business, you're never going to hit a home run if you don't step up to the plate. You know, to hit a home run, you've got to be willing to go into the batter's box and give it a try. And, entertainers, athletes, motivational speakers, and trailblazers of excellence with incredible stories from all walks of life. My name is Randall Kaplan. I'm a serial entrepreneur, venture capitalist, and a host of In Search of Excellence, which I started to inspire and motivate us to achieve excellence in all areas of our lives. My guest today is Joe Mansueto. Joe is the founder and former CEO of Morningstar,

a financial services and investment research firm that is one of the most recognized companies in finance, which provides investment research and investment management services to many millions of people around the world. Morningstar today has 8,556 employees and operations in 29 countries, manages over $290 billion in assets, earned $1.9 billion in revenue over the last 12 months, and has a market value of $9.2 billion, all of which has earned Joe a spot on the Forbes 400 with a reported net worth of $5 billion. Joe also owns the magazine's Inc. and Fast Company, as well as two professional soccer teams, the Chicago Fire and the Major League Soccer League, and SC Lugano and the Swiss Super League. Joe and his wife, Rika, are also active and general philanthropists who have signed the Giving Pledge,

which promises they will give away half of their net worth during or after their lifetime. Joe, it's a true pleasure to have you on my show. Welcome to In Search of Excellence. Thank you so much, Randy. I'm delighted to be here. Let's start with your family. You were born in Munster, Indiana, a small town near the Indiana, Illinois border. Your parents met at a hospital. Your dad, Mario, was an ear, nose, and throat doctor, and your mom, Sarah, was a nurse who later became a stay at home mom to take care of you, your brothers and sister. You've described your childhood as classic suburban idyllic. Can you please tell us about the influence your parents had on your future

and your success? Yeah, my parents were a huge influence, I think, like most people. You know, I was blessed to be born into a very loving, supportive family and great moral models. As you mentioned, my dad was a doctor. My mom was a nurse and just very supportive of all of us kids. And, you know, whatever we wanted to do, they found a way to support our dreams and aspirations. And I think more than anything, you know, in terms of advice they gave us, just watching them, you know, get up, go to work every day, how they approach their lives, their values, the way they treated people. All of that, I think, rubbed off on myself and my siblings. And do you instill the same values in your kids today? Do you actually talk to them

about these values and say, these are the values I want you to have? Is that the kind of parent you are? Or do they just watch you and Rika by example and follow all the great things that you do? You know, it's more the latter. It's also my leadership style. You know, rather than preaching a lot. And I know as a child, I think when people gave me advice, I tended to maybe discount it a bit. I thought I knew a little better. And so, you know, I always look, you know, look to, you know,

others to, you know, learn from success. But when people would tell me directly what to do, it wasn't as effective for me as watching what they did. And so I try to set a good example for my kids. And so just as my parents did for me, I think it's more by example than telling them, oh, you should work hard or you should do this or that. Because if the actions don't align with the words, you know, it becomes apparent very quickly to someone. And so, you know, I try and weave life lessons, you know, into dinner conversations where I can, but without being overly preachy. But I think it's more by the example, watching us, you know, how we live, my wife and I live our lives, treat people, you know, the kids see that and hopefully pick up on that. And so far,

you know, I've got three kids in college. I think we're pretty pleased with the way they've turned out. Let's talk about when you were a kid, you rode your bike around the neighborhood. You like to do things, building model airplanes. Can you tell us about your trips to the Walnut Room and the theater production you had in high school? Yeah. You know, as you may know, for someone in my age, childhood was very different than it is today. There was a lot of unstructured time. You know, if I ever said to my mom, hey, I'm bored, she would say, life is figuring out how to deal with boredom, you know, go figure it out. And so we'd ride our bikes around and figure it out. And so, you know, we always like to, you know, do projects, whether it was, you know,

you know, a puppet show or theater. You know, I did theater in high school, putting things together. But yeah, we used to love to come to downtown Chicago. You know, at Christmas time, the Walnut Room was a big place for people to go to at Marshall Fields, the big department store downtown. And that was a pretty, pretty special moment to go downtown. We didn't the big department store downtown. And that was a pretty special moment to go downtown. We didn't always do that in Indiana, but it was a special trip to do that. And so, but yeah, you know, just a really wonderful childhood, a lot of children in my neighborhood. So a lot of close friends and a lot of unstructured time where, you know, we had to figure out what to do. You know, one of the activities I loved was amateur radio, what is called ham radio,

building transmitters, receivers, and doing that with a group of kids and trying to figure it out. And I did that in grade school and, you know, wiring up antennas and using Morse code to talk to people around the world. I thought it was great fun. But I always liked to do projects. We had to figure out, I mean, this is, there was no internet, you know, there's not a lot of things to entertain us. So we had to make up our own entertainment. You talk about the ham radio, your first entrepreneurial experience came in the sixth grade. Tell us about the ham radio, how much money you made and what kind of impression it left on you and what'd you do with the money you made? Yeah. So as part of, you know, being a ham radio, we would go to these things called ham fests, where people would sell their used ham equipment, transmitters, receivers, electronic parts.

And I was pretty young. I probably was in like fourth grade. And I went to one of these ham fests with a good friend of mine who was also a ham radio operator. His parents took us and we were going through, you know, all of the, you know, the people with all their equipment. And I noticed there was a guy selling a Drake 2B receiver, which was a top end, you know, very high end receiver, normally sold for about $400. He was selling it for $200 or maybe a little less. And so somehow I asked or convinced my friend's father to lend me $200 to buy this because I knew it was worth a lot more than that. And I ended up buying it. And then I put an ad in the ham radio publication and sold it for four hundred dollars within the next year. And so I made two hundred dollars, which is a fourth grader. You know, back then was, you know, a wealth of riches.

But, you know, it taught me about, you know, that with some creativity or just, I don't know, thinking and that you could figure out ways to make money, which, again, my father was a doctor, mom was a nurse. I didn't come from a business background. So I just thought it was very interesting that you could kind of make money by finding a price discrepancy. And so that was kind of one little entrepreneurial moment in my background. As a fourth grader, how do you know even where to go on how to place an ad in a magazine? It's not like you can just go online today. Did you look in the phone book? Did you look in the magazine and just call somebody up? I think

that's pretty remarkable. I don't know another fourth grader or sixth grader who's ever done that before. Well, there was a very popular magazine, QSL, which is the greeting ham radio operators use when they talk to each other. It was the three letters QSL published by the ARRL, the American Radio Relay League. And it was the Bible that everybody read every month. And so this thing would come out every month and I would read it from cover to cover. I would have articles on schematics to make transmitters, receivers, but in the back were all these ads that you could place to buy and sell equipment. And so it was in this journal that magazine that everyone read that I

placed an ad. You have the entrepreneurial DNA. It sounds like you've've you had the ham radio sale. Tell us about the 607 soda service in the Shoreland dorm at the University of Chicago. Yeah, that was another entrepreneurial experience in my background is, you know, I was a student at the University of Chicago and the university had just purchased a new dormitory. The Shoreland Hotel converted it into a dorm. And I was the first class to move into this dorm. And there was no place, since it was a brand new dorm, no place to buy soda or snacks. And so my roommate and I just opened up our own soda service in our dorm room. We called it the Room 607 Soda Service because our room was Room 607. And we just bought two large refrigerators, put them in our living room, called up the Coke distributor, the Pepsi distributor, and got lots of soda and sold soda from our dorm room. And it was a great way to meet everybody in the dorm. It was

a self-service model. We'd sit at our desk and study, and there was a change dispenser. People would come in. We'd leave our dorm room door open. People would come in, help themselves from the refrigerator, leave the money, take their own change while we studied. And we would both make about $500 a quarter from this little enterprise. And, you know, I did it as a curiosity, a way to make a little money, but also just, you know, I was just curious about business. How does this work? And so I found I really enjoyed it. It was a great way to meet people. People were happy. There was a place to buy soda. So you got that sense of fulfilling a customer's, you know, desires, their wants. And I just thought it was fun. And so that was another entrepreneurial experience at a young age that, you know, I think came around to,

you know, be meaningful to me. So many successful entrepreneurs that I know. I think of Brad Keywell, who comes to mind, who's a very good friend who I'm sure you know from Chicago, who created greeting cards at six years old and he sold them. to place an ad in the magazine or calling a Coke distributorship as a student and convincing them to somehow sell you soda in a dorm room is really incredible. The entrepreneurs that I mentor out there, I tell them one of my sayings is go get it. And it sounds like that's yours as well. How important is it to look beyond the first curtain and go to the third, fourth or fifth or sixth step to really get that relationship that you want to need to be successful going that extra mile that people don't really do? Yeah, it's really important is to be proactive and try. You know, there is a sense of when you

do those things of being audacious, you know, will this really work? You know, when the Coke distributor first walked into our dorm room, you know, he kind of sighs and says, OK, like surprise. It's not a business. You know, a couple of kids in their dorm room and you kind of get over that moment and you think, hey, this is going to work. You know that he didn't just turn around and and leave. And so there's that moment of, you know, boldness, you know, that he didn't just turn around and leave. And so there's that moment of, you know, boldness. You know, there's a saying from Goethe that I like that whatever you think you can do or dream you can do, begin it. That boldness has a, you know, a magic about it. And it's true. A little boldness does have a magic about it. And every time I've taken a step where, whether it was with Morningstar, taking out that first ad, there's that sense of,

wow, or, you know, I sold Christmas trees at one point and putting up a sign on a street, you know, as a kid. And, you know, there's a feeling of a bit of audaciousness that you're not sure if it's going to work. And And but you find you're rewarded, you know, for that little courageous step of trying. And so, you know, for would be entrepreneurs, somebody who's thinking about, you know, starting a business, give it a try. You know, it feels a bit audacious. You know, you're going a bit beyond your comfort zone, but that's how you grow, you know, by pushing yourself a little bit and going a little beyond what you would normally do. And as I say, it feels a little audacious to do these things. You know, I'm not normally a loud, demonstrative person. So maybe for my personality, it feels even more, you know, audacious. But yeah, you're rewarded for those

steps of those little courageous moments of, you know, just starting and But yeah, you're rewarded for those steps of those little courageous moments of, you know, just starting it and giving it a try. What I tell my mentees is what do you have to lose? If you don't ask, you're not going to get it. Is that your advice as well? And how do people get over the fear of doing all this? As you know, I have a summer intern class. Shout out to Nick Skok for making the introduction to us today. Thank you, Nick. They're often wondering and they often say, gosh, I'm afraid to do that or it's too bold, as you said. What's your advice to them? If you don't shoot, you're not going to score. Yeah, I've always thought of that. Even when I started a business, you're never going to hit

a home run if you don't step up to the plate. You know, to hit a home run, you've got to be willing to go into the batter's box and give it a try. And, you know, it's kind of the old saying, it's better to ask for forgiveness than permission. You know, if you wait and kind of, you know, make sure everything's okay, you may have missed the moment. So just give it a try. As you say, what have you got to lose? When you think about it, you know, more, you know, in a cold, clear way, there is really not a lot of downside. And so I think you've got to be willing to be, you know, to stand out and it's not always going to work, but you'll learn something by the experience. And, you know, it's not going to be fatal. It's not going to be terrible, you know, and I think people often let their imagination get away with them a bit.

And they think, you know, of the downside too much. And I think you have to be a little more convinced of the opportunity, what you're trying to build, and have a passion about something. And think of what you're wanting to accomplish and let that be the focus and not the negativity of what could go wrong. This episode of In Search of Excellence is brought to you by Sandy.com. S-A-N-D-E-E.com.

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beach visit again. Plan the perfect beach trip today by visiting sandy.com. That's www.sandee.com. The link is in our show notes. Stay sandy, my friends. So you're at Chicago junior year. They have a program called the Professional Option Program. You went on to get your MBA there and you mentioned the Christmas tree business that you had. Tell us about your slogan, fine pines and awesome blossoms and what lessons you learned there, particularly with respect to managing inventory. You have to remind me of this, Randy, my slogan as a young marketeer. Yeah. And so one one December, you know, I just decided to, you know, make a little money. And so back in my hometown of Munster, Indiana, actually was the neighboring town of Hammond, Indiana.

There was an empty lot that I knew about. And so I just, you know, I rented a flatbed truck. I went down to the Water Street Market, bought a truckload of Christmas trees, brought them down to Hammond, Indiana, and set up shop. I cajoled a cousin of mine to help me out because it was kind of long hours. It was cold. I needed a little help. And yeah, I just painted a sign, pine pines and awesome blossoms. And people would stop by. And it was a great experience. You know, it lasts a month. But I quickly learned, you know, I kind of broke even on this, that managing your inventory is the key to success, that I earned enough money to pay for

the electric lights, the fencing, the inventory. But my profit was really the inventory that was left over, maybe about 30, 40 trees. I miscalculated a bit. You can't sell your very last tree. You've got to have some inventory. And so inventory management, not having too many trees, not having too few trees. I imagine it's the same in car dealerships, a lot of businesses, but managing that inventory is going to be a key to turning a profit. And so I broke even, you know, I learned a lot, but to me, it was more of a learning experience too. I'd hoped to make some money. My profit was really the leftover Christmas lights that lit up the lot, you know, the fencing, all of this equipment that I had purchased. I guess that was my profit, too. But we had so much fun. You know, it's hard to underestimate

the joy, you know, when you sell a family with young kids a Christmas tree. the kids are just so excited, delighted. And so really seeing the light in the customer's eyes as they take away one of the trees that you have set up in your lot, you know, it was just a lot of fun. And the snow is lightly falling. And it never seemed cold to me, even though I'm sure it was very cold. It was just a very warm, you know, fun experience that I did for a month. But, you know, another data point and kind of this entrepreneurial journey that I found myself not consciously, just kind of out of curiosity, kind of going down. So Christmas time is a fun time, as you mentioned, family, happy times. You said that one of the reasons why you did the Christmas trees and sold them was to make the world a better place. You've also mentioned that it was fun. Should starting a company be

fun? And if it's not, and you see a huge business opportunity in front of you, should you do it anyway? I don't think you should. I think it should be fun. It should be something you're extremely passionate about. You're going to spend most of your waking hours at this endeavor. So you better like it. You know, if it's a big opportunity, but you don't like it, I don't see the point in pursuing it. You know, you better find something you really enjoy. You know, I've been fortunate. I don't think I've worked a day in my life, you know, at Morningstar. I've enjoyed every minute of it. Yeah, there's ups and downs, but, you know, it's a journey of building something. And so I think like most entrepreneurs, I would counsel, you know, would be entrepreneurs to find something they're passionate about, something they enjoy doing.

Otherwise, I think you're nuts. I don't know why you'd want to pursue something that you don't enjoy doing. And so find something where you can kind of turn your passion into a business opportunity or find an opportunity around something you're passionate about. Then you'll throw yourself into it, hook, line, and sinker. And your odds of success, I think, will dramatically escalate. When you graduated, you and your roommate Kirk started a firm called Strategic Media Research, which conducted market research for radio stations. You didn't like that. You were not passionate about that. So you left. And as you mentioned, passion has been one of the keys and the important ingredients of things that you want to do in your success. How important is perseverance as part of the passion? And are they closely related first cousins or are they brothers and

sisters? No, that's right. So right out of business school, my college and business school roommate and I started a business doing research for radio stations. And that was his passion. He had worked for radio stations in downtown Chicago through college and business school. And we had an idea around that, that we both worked on for a couple of years, but you know, for a couple of years that was his passion, not mine. And so we're still great friends today. He's still one of my best friends. He's still doing that, that, that business. And But I left and wanted to pursue something, an entrepreneurial business around my passion, which is investing. But it was still an important experience for me. I saw in a little more depth how to put a business together through that

experience. So that was a very important formational experience for me was starting that business. But then, you know, I guess the second part of your question, perseverance is huge for entrepreneurs. You know, that you're going to have ups and downs. And it's interesting. I do a lot of, a fair amount of venture investing today. And I often debate with the person who helps me with this venture portfolio, you know, is it the business idea or the entrepreneur that makes the difference? And we kind of look at, you know, our history of investing and invariably it's the entrepreneur. If there's somebody at the helm who just does not want to give up, will not give up, and will iterate, you know, and revise and find ways to make it work. And the original business plan is typically not what works.

But they've iterated on it, and it's something else that works. And the entrepreneurs who fail are the ones where the initial plan doesn't work. And then they say, well, that's just business. You know, not all of these work. And they've kind of closed up shop and move on. But the successful ones iterate and find a way to make it work. You know, I remember I worked with, after the radio business, a venture capital firm, a guy named Carl Thoma, who has a very successful venture firm today, Thoma Brabham. And, you know, Carl would often say, there must be some way to make this work.

There's got to be some way to make this work. And that always stuck with me, you know, that there's got to be some way that if you think about a problem long enough, hard enough, it's kind of like a physics problem or something. The problem, the answer isn't apparent in the first couple of minutes you look at it. But if you noodle on it and you keep at it and keep chipping away, you keep peeling away, eventually you come up with a solution. And so it's that perseverance that things that seem very daunting, impossible at first blush, if you keep at it and keep chipping away, you keep chipping away and you refuse to give up, take, you know, no for an answer that it can't be done.

I think ultimately you'll find some level of success. We look at it the exact same way as an entrepreneur. When we started our first tech company and even before then, I had the mentality that if someone dropped me off in the middle of the Pacific Ocean with a raft, I was going to find land no matter what. And that's the mentality I always had, never going to give up. And that's exactly what we look for in founders for companies that we look at and put money into. Like you, I've gone back, I've looked at the deals that have worked, looked at the deals that have not worked.

And to use your exact words, it's invariably the founder or founding team that makes the difference here when funding companies, um, a hundred percent of the time. And like you said, um, it almost never ends up how you started. So every business plan we look at, we say, okay, well, what could go wrong here? And the answer is tons of things and things you can't even think of as you think of all the things that go wrong. And it's been fun to coach and mentor and watch people iterate on their business and just go through all the bumps and the bruises that every single one of us goes through when we build companies. Yeah, I think it's much easier to do that if you're really passionate about the area that you started a business in. If you started it just because it's a big opportunity,

you're more likely to, you know, give up on the downturn. But if it's something you're passionate about, I think you'll see the odds of you sticking with it and pushing. But I think you're absolutely right, Randy, that mindset should be there that I'm going to find a way to make this work. You know, there's got to be some way to make it work. And like you in the life raft, you'll find land eventually. So many entrepreneurs, for lots of reasons, don't they start companies and they don't work. They go bankrupt. They do try to try different things to work. Sometimes they just don't work. Do you fund entrepreneurs who have failed before?

And if so, what do you look for when they come back a second time? Yeah, I would fund an entrepreneur who's failed before. I mean, I think that's a great education for somebody. You know, I've done that. And, you know, I asked them what they learned with their failure. And, you know, one common thing that people have learned who do it a second time is that, uh, you know, they spent money too freely. Maybe they raised money and then they ended up, of course, they went out of business. So they ran out of money. And the second time around, they're much, much more frugal.

Right. And, uh, you know, I do think it is often the second business that really succeeds. Even for me, you know, we mentioned the radio business and I did that for a year or two. And that was never really a home run. You know, it survived, but it never flourished. You know, I love my co-founder there, but I think we had different attitudes about spending money and we would often argue about, you know, ways to spend money. And so it was really liberating for me, once I started my own business, I could spend money or not spend money, you know, in ways that

made sense to me. And so I learned something through that experience. And so I think somebody who's gone through that, you know, the odds of success actually go up, somebody who's failed before, to me, it's not a black mark on somebody. And it's almost the reverse. I think it's a positive. I've been saying for years, again, as part of my mentorship program and to my mentees, if you're going to buy a McDonald's, go get behind the counter for two months and go work in the kitchen and do your own due diligence that way. And I think due diligence is so important in deciding not only what we want to do in life, but just to learn. It's true in the venture deals we

do. Some of our biggest mistakes have been relying on big venture firms who are investors in the deal that they've done all of the due diligence so we don't have to do our own. And that's been a disaster at times. You had a stint at Arby's, which for those of us, for those of you who don't know out there, it's a fast food sandwich chain with 3,300 stores around the country. Tell us about Arby's and your experience as a night manager and what you learned in that job. Yeah. So one of the ideas I had, crazy ideas, after I wound down the, you know, left the radio business was a concept for healthy fast food. And so I like to take care of my health. I like to eat right. I like to exercise. And I looked around at the food options via fast food and was dismayed.

This is pre-whole foods. And I thought there could be an opportunity with healthier fast food. I'd worked at a few restaurants in high school, dishwasher, kitchen prep, but I'd never really managed one. So I thought, you know, before I embark on this, it's a big endeavor to start a business. I better go see what managing a restaurant's all about. So I went and I worked as a night manager at an Arby's in Chicago. And I found I absolutely hated it. It's, you know, God bless those who work in restaurants. I found restaurants kind of the hardest work for the least amount of money. But you've really got to manage the personnel tightly. It's tough to turn a profit. It's hard, exhausting work. You do a

swing shift. You work. You're up late. You've got to be up early the next morning. And then I just found I wasn't that passionate about it. And so after a couple of months, I said, hey, this isn't for me. And that's when I pivoted. But it was a great learning experience. And, you know, thank goodness I didn't put any capital into actually starting something. But I think like your advice to would-be entrepreneurs, it's spot on. I give the same advice, you same advice to somebody very young. If you've never worked in the area

that you're thinking of starting a business, by all means, go work in that area for a year or two, maybe not too long, but a year or two, and learn on someone else's dime. You'll get invaluable experience that, trust me, will be extremely valuable to you when you go to start your business in that field. Even if it's you find out, hey, I don't want to do this. I know many would-be lawyers, you know, before they go to law school, they work as a paralegal and they think, hey, this is not what I thought law was. It's not like I saw on television. And then they scrap the whole law school plan. And so to, you know, have that experience of,

you know, try it a little bit, get some experience, because it might not sound like it looks reads in the brochure. And so you really need to go try it. And I think your advice is really, really valuable. Are you looking for your next great gift to surprise a friend, colleague or loved one? Bliss Beaches makes the perfect gift. This best selling bright and beautiful coffee table book by Randall Kaplan features stunning drone photography from exotic beach locations around the world. It makes the perfect gift. This best-selling bright and beautiful coffee table book by Randall Kaplan features stunning drone photography from exotic beach locations around the world. It's the perfect housewarming gift, a great addition to any home or office, and a fun and creative alternative to bringing a bottle of wine to somebody's house for dinner. Bliss Beaches is available for purchase on Amazon,

where it has glowing reviews and a five-star rating. Get your next amazing gift and order a copy of Bliss Beaches by clicking the link in our show notes. I worked at a restaurant also in high school and college. I was a waiter at Chi Chi's. And I learned so much about customer service, serving people who some are nice, some are mean, some are generous, some are cheap, and just the constant need to please people and be on your game all the time. How important is customer satisfaction and customer service to our success in building companies or in just being a professional in a regular company? Well, it's huge.

It's what it's all about, you know, satisfying a customer. You see it when you sell a Christmas tree to someone, you sell them soda from your dorm room. You can look in the customer's eyes. Are they happy or not? And it's at a very granular level. You experience it just as you did when you were a waiter at Chi Chi's. And so everyone should have that experience. If you're too far removed from that customer experience, you're back coding in the back room. You don't see how customers interact with your software. I think it's going to be really hard to understand, you know, if the product or service you're delivering really resonates with your audience. And so I think you've got to get up close and have that experience on a very personal level. And I always

counsel, you know, people at Morningstar, get out, you know, meet with advisors, go to their space, see how they use our products. I think you have to experience it and not just, you know, look at feedback forms and surveys. And to me, business is very personal, you know, one at a time. You know, people vote with their dollars. You have to get their dollar to win. And so you've got to get out there and see it firsthand. And so having some experience like that, learning to deal with people, hugely valuable. So I wouldn't, you know, I've learned something from every job I've had, good or bad, of what to do and what not to do. And just like you and your restaurant experience, super valuable to get any work experience. I tell that to my kids. You'll learn something

from every job. So many of us who have had some success in our life have experienced a moment where something ignites us. We said, oh, gosh, that's incredible. I want to do that. I know what I want to do. I know that I want to be in this business. As we move through your career, can you tell us about the Acorn Fund and Roger Langer and Ralph Langer and the book, The Money Masters by John Train and this really obscure money manager whose stock was trading at $300 a share at the time? Yeah, that was my epiphany. And so, as you mentioned earlier, I went to business school after college at the University of Chicago, and I learned all about efficient markets. And I understood it. I got it. But the message I learned was you can't beat the market.

So fire your stock analysts, invest in passive index funds, which was a bit revolutionary at the time. Today, it's kind of common accepted practice. But fortunately, I read a book called The Money Masters, as you noted, by John Train, which is a fantastic book. If you're interested in investing, I would recommend it. And the first chapter is on Warren Buffett, the obscure money manager who you referenced. And when I read that, you know, the light bulb went off in my head that here was an approach to investing that made a lot of sense to me. And moreover, here was somebody who did it with integrity, loved doing it, did it with humor and zest, enthusiasm. And that's when I really, really got interested in investing.

And you're right, Buffett at the time, he's a household name today, but at the time was very obscure. Berkshire Hathaway, today it's in the hundreds of thousands of dollars. Is it $500,000 a share? Yeah, $531,000 as of yesterday. $531,000. That's 1,770 times where it was trading back in the day when you were a Warren Buffett devotee for the first time. Yeah, it was $300 a share. Buffett owned half of it.

His net worth was $150 million. And yeah, it was obscure. But again, it was more the reasoning, the approach that really resonated with me. And that's what got me super excited about investing. Again, I'd learned about it at the University of Chicago. It didn't excite me. And that's what got me super excited about investing. Again, I'd learned about it at the University of Chicago. It didn't excite me. But reading about Buffett, his approach. So then I was like a sponge. I read all the Berkshire Hathaway annual reports. He describes his philosophy in more depth. I ended up working at an investment firm in Chicago, Harris Associates, which practiced a Warren

Buffett style of investing. And I got to know that firm because I would do my research on companies that were kind of in the Warren Buffett mold, the types of companies he liked to invest in. And I often looked down and I saw that the largest shareholder was Harris Associates. And I kept, ah, who is this firm? So I went and I did my research on this firm. And I saw that they were the largest institutional shareholder in Berkshire Hathaway. And so I went and I worked there. And they had a fund at the time, the Acorn Fund, run by Ralph Wenger. So I got on the inside of an institutional money manager, but also got an inside peek into a mutual fund and how that worked.

For those of our listeners and viewers who don't know what a mutual fund is, can you explain what it is and how many there were back in the day? Yeah. So a mutual fund is a pooled investment vehicle. So investing in stock instead of investing in stocks directly, you buy a mutual fund and you get a whole portfolio. It could be 50, 100 stocks. So you have instant diversification, you have low cost, and you have professional management with one purchase. And so these are the best way, I think, for most investors to go about investing in the stock market and to take advantage of the capital markets. So if you love investing and want to do your own research, it's perfectly fine to

invest directly in stocks. But if you want to delegate that to a professional money manager, that's what mutual funds are for. So we talked about the ignition moment that many of us have on our path of success. For many of us, there's also an aha moment. Can you tell us about the type of research you did, setting away for prospectuses, the problems that people had accessing good information. And then one night, your one bedroom apartment on Clark and Wrightwood Avenue, what happened that night? Yeah. So one of the things I would do to teach myself about investing is to write a way to mutual funds run by great money managers. People like John Templeton, Kurt Lidner, Albert Nicholas. There was a whole host of really terrific money managers who ran mutual funds.

And I would write away to get their materials, to get their quarterly reports, their prospectuses. And I would look at their holdings to see what they were buying and then try and reverse engineer the thought process. So John Templeton is buying HSBC Bank. Why is he buying that bank? What did he find attractive about it? And then I would go research HSBC. And so I did this to teach myself about stock investing.

But as I did that, and I had all of these mutual fund reports, you know, on my dining room table in my apartment, it occurred to me, there's a lot of great data. It's a huge hassle to send away, you know, to write away to all these mutual funds, call them up every quarter to get their materials. that there's a lot of good information here for investors. And if you were investing in these funds, there's not a lot of good sources of information that you could turn to to make an intelligent choice. And so the light bulb went off that, hey, if I could compile all of this information into a compendium, I could help investors and mutual funds make better investment decisions. And that was the aha moment. And I started to look more deeply

at the mutual fund industry. And I could see it was growing. You know, there was about 400 equity mutual funds in the country at this time. You know, it was, you know, very small, you know, maybe a few hundred billion dollars today. It's in the, you know, in the U.S., probably 25, 30 trillion dollars, double that globally. And so it was a very small, obscure industry, the mutual fund industry. But I was really enamored with the concept of a mutual fund. Again, I thought it was the best way for the average investor to go about investing. To me, it was a very democratic notion that Joe Sixpack, the guy working at a steel mill, could have the very best money managers managing his investment savings for pennies on the dollar. Before mutual funds, that was only open to the

Morgans, the Rockefellers, people with a lot of investment assets who could hire great money managers. But with a mutual fund, the average person could get the very best money management talent at very, very low cost and get instant diversification. And so I felt evangelical about these things, that more people should know about them and people should be able to find the right ones to meet their their needs and their risk tolerances. I think there's great opportunity for individuals and to start companies to compile data that's very, very difficult to do. It's very manually intensive. And as a founder, you need a large team to do it. Morningstar motivated me.

And when I saw what you were doing to start Sandy, my beaches company, we have created the largest beach resource in the world. The beach travel industry, tourism industry is five trillion dollars a year. Most people don't realize that when they think about the beach business, they don't think about it that way. And we started out eight years ago saying, OK, this is interesting. I was on a trip with my wife, Madison, then my girlfriend, and we were looking for a black sand beach in Santorini. And we were staying at a nice hotel. I only mentioned the fact it's a nice hotel because the concierge there should know a lot more

about what to do and where to go and beaches, especially in Greece than a regular person. And she got out a paper map and unfolded it and drew with a Sharpie a place on the map where it looked like there was nothing there. There was no longer the line to the road. She said, I think there's an old barn house out here. So we drive out there in a mini Cooper Fiat convertible. I don't remember. It was a hot day, convertible down, 90 degrees, no water, no bathroom, no shower.

We get out there. There's tons of old barns out there. We don't see a road, but we saw something that could be a road with weeds taller than the car. A field of dreams moment where the cornfields are taller than a person and you can't really see. So we said, all right. She said, I think that's it. I said, I really don't want to go. I was thinking of the movie taken where, uh, people get kidnapped in a foreign country. And I'm thinking there's no wifi and of course no cell service. So our body's not going to be found or we're going to be held for ransom and killed. And we ended up, I didn't want to go. My wife is younger than I am more adventurous. And she said, let's go. So wanting to be a good boyfriend and a curry favor with her, I said,

all right, we'll go. And we were driving for a mile, Joe, on this road. It didn't even look like a road. It was a, a divots and potholes. And we, we get to this clearing and that was the aha moment where we said, okay, there's this beautiful black sun beach with this beautiful light uh red slate um that we light out on uh and we said gosh this is this incredible this was really hard to get to so i went back to my hotel i googled greek beaches and of course it was in greek.. So I changed it to.us. And I thought, okay. And there were just mom and pop websites. So I thought, okay, this, this, there's got to be

something more than this. I went back and checked the U S there was nothing like this. And so I thought, geez, this is, this is a really difficult problem. There's 212 countries throughout the world. You can't really Google how many beaches there are. No one's going to give you that. We have over 100,000 beaches in the database. And we had to do things similar to what you did is we had to say, okay, what's the information people want? What's the information they care about the most? So we came up with 100 categories of data. And it's taken us eight years to compile the data. As I said, we have over 100,000 beaches and 100 categories of data for 212 countries. And when people go to book

a vacation or a beach vacation, they check on average 40 different websites. And if you're looking at beaches, you can't get everything on one page and one website. Some of these are usually blogs, their trip advisor, their reviews. So we said, all right, we want to make a one-stop shop here. And as I thought about the problem, I thought, well, Morningstar did this. And I knew Morningstar well. I don't know if you know this, but when I was working at Sun America, all the bankers would come in, you know, the Goldman bankers and the Morgan Stanley bankers. And I was technically in the Corp Dev group, although I reported to the CEO and our founder. And we were looking at companies to buy.

And Morningstar was on the list. And so I was the research guy. It's something I was very good at. I could find things that people couldn't find. It's been one of the hallmarks of my success, but it's really your company. And then there was also a company called saving for college.com, which you probably know when 529 plans came out, it was the same thing, you know, 50 States regulated, some had mutual funds, you looked at fees and they created a huge business

from that. So I said, geez, you know, this is another similar problem to Morningstar, where it's a huge business, no one's done it, why haven't they done it is difficult to do. And that's what we created at Sandy. And it's been, like you said, a ton of fun. You're passionate about the financial business. I love beaches. It's my happy place. And it's been so fun to create something where you tell them what you're doing. And they said, that's a great idea. It's not like one of our venture portfolio companies where we have a new water with new pH levels or vitamins or whatever that is.

Or people say, yeah, okay. It's fun to say, here's what we're doing here, Sandy. And every single person says, I love the beach. That's a great idea. So I'm going to give you some thank you to being one of the impetus of starting my company, Sandy. And I'm hopeful we'll have a successful resolve similar to what you've done at Morningstar. It's taken you, I know, more than 20 years to build a very successful business, but one step at a time. Well, I love your idea, Randy, and, you know, kudos to you for pursuing it. And I'm glad we had a very small part in inspiring you to build a database and get it done. And you were smart. You had an area that you're passionate about, beaches, and you found

that there was a void of information. And it's not easy to compile the data. You found a way around that, got over the obstacles, you got it done, and you're having a great time doing it. And that's, you know, exactly been my experience at Morningstar. And so, you know, it's a double-edged sword. If it was easy, it would already be done. And so the fact that it's hard, you know, that's the opportunity. And so it shouldn't bother somebody that it's hard to do. It may take a little brute force to compile the data and a little manual key stroking in and, you know, paper copies of this and that. And it's not all efficient from day one. But you get started and you build it and you get customer reaction. So I love your idea.

You know, I wish you all the best and I will use your site after this conversation. It sounds fantastic. Thank you. We talk about research, something that you did very well, something I've done very well. I think it's a lost art. How important is it to dive into the nitty-gritty and do your own research when starting a company or even thinking about going and finding a new job? Because a lot of time, the grass is not greener on the other side you just haven't done your research to know what it's like when you're going to get

there yeah it's hugely important to do your research um i wouldn't rely solely on research it's got to be research plus your instincts and your you know your your your judgment um but uh you know i know when I interview somebody at Morningstar, if they haven't done the research on our company, you know, the odds of them getting a job go way down. It's over. Yeah, it's like if you haven't done your research. And so it's kind of table stakes these days to do the research. You've got to do the research. And today there's no excuse. The data is out there. It's not that difficult. But, you know, when I started, as I mentioned, you know, the Investment Company Institute has a lot of data on mutual funds.

How many there are. Are they growing? You know, who's buying them? And so, you know, you want to immerse yourself in all of that data. And it's a mosaic. You know, you want to pull it in from wherever you can get it. And the more data you can have from different sources, quantitative data, talking to people, you know, and getting their judgment, you know, you know, hugely important. And so anything that ups your odds of success, you know, it's going to be time well spent, it'll have a high return on investment. And so, yeah, you've got to do your research and, you know, that's just the beginning. But yeah, you've got to lay that foundation. Thanks for listening to part one of my

amazing conversation with Joe Mansueto, the CEO of Morningstar. Be sure to tune in next week to part two of my awesome conversation with Joe.