The Quiet Billionaire

After an idyllic Midwestern upbringing, Joe Mansueto founded an enormously successful financial information company on the simple premise that people might like an easy-to-use guide to mutual funds. Now, the Morningstar CEO is turning his skills to the risky world of magazine publishing. Can he succeed again?

By John Cook

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If you happened to be driving down Hohman Avenue in Hammond, Indiana, in December of 1978, you may have seen a hand-lettered sign reading "Fine Pines and Awesome Balsams," designed to advertise the services of a small Christmas-tree business that had sprung up in the neighborhood just that month. It was a modest affair, as seasonal Christmas tree lots go: a rented parking lot filled with the aforementioned pines and balsams, snow fences to keep out thieves, and rented lamps to light the way after dark for families wandering through the merchandise, looking for that perfect tree. It was quite ordinary in all respects but for the proprietor: Joe Mansueto, the soft-spoken, contemplative, 22-year-old doctor's son who had rented the lot, lights, and snow fence, and hauled all the trees to Hammond from the Randolph Street Market in Chicago, was not your average tree hawker. For starters, he was on his way to earning his master's degree in business administration from the University of Chicago Graduate School of Business-an institution that seeks to prepare its charges for the executive ranks, not sap-stained grunt work. But as Mansueto counted out the change for those eight-foot pines, his young mind was already nursing the seeds of an idea that would turn him into a billionaire. And it had nothing to do with trees.

"I guess I broke even," Mansueto says today, sitting in a glass-walled conference room in the Loop headquarters of Morningstar, the financial information firm he founded 22 years ago. "I realized that the key thing is how you manage your inventory. If you're left with too many trees at the end, that can kill you. I think if I had done it another year, it would have been a moneymaker."

Mansueto knows something about making money. Morningstar, which he founded in his Lincoln Park living room, has become one of the most recognizable brands in the business of investment advice. Its star ratings for mutual funds have made it the Roger Ebert of the investing world-a universally recognized and trusted adviser that reduces the intimidating complexity of mutual funds into simple, at-a-glance evaluations. If you have a retirement account, or invest in mutual funds, there's a good chance that you've used Morningstar's services, even if you didn't know it-Mansueto has found a way to sell his data and analysis to just about everyone who handles or writes about money, from Yahoo to big brokerages like J. P. Morgan Chase to small-scale financial advisers.

In May 2005, Mansueto took Morningstar public, and his 78-percent ownership stake in the company he meticulously guided for more than two decades became worth more than $600 million overnight. Since then, the stock has soared 90 percent, catapulting Mansueto last year onto Forbes magazine's list of the 400 wealthiest people in America. His 30 million shares are currently worth $1.3 billion. (This past April, Mansueto revealed plans to sell up to 1.2 million of those shares, which at recent prices would fetch more than $50 million.)

It didn't take long for Mansueto to find some new toys to buy with all that money. Last June, just one month after the IPO, he surprised many by buying two struggling financial magazines, Inc. and Fast Company, from Gruner & Jahr, a division of the German publishing conglomerate Bertelsmann, for $35 million. A few months before that, Time Out Chicago-an attempt by the owners of Time Out London and Time Out New York to extend the successful youth-oriented weekly city guide to Chicago-was launched with a 50-percent investment from Mansueto. A few years prior to that, Mansueto lost out in an attempt to buy the very magazine you now hold in your hands when Primedia sold it in 2002. Though Mansueto says he entered the high bid of $37 million, Primedia decided instead to sell it to Tribune Company for $35 million.

Clearly, Joe Mansueto has a magazine jones. And he wouldn't be the first to make obscene amounts of money in the business world and use it to buy himself cachet in the form of a shiny new magazine or newspaper-Philip Anschutz, the billionaire founder of Qwest Communications, is launching a chain of commuter newspapers aimed at young readers; Bruce Wasserstein, the New York investment banker, bought New York magazine two years ago for $55 million; and the real-estate mogul Mort Zuckerman has his New York Daily News and U.S. News and World Report. But if Mansueto is indeed making a play to join the press barons-he is coy about whether or not more purchases are in the offing-he lacks one crucial attribute common to the ego-massaging billionaire who buys himself a soapbox: an ego.

"I've met a lot of billionaires," says John Koten, the editor in chief of Inc. and Fast Company, and the CEO of Mansueto Ventures. "And Joe is different. The important thing about Joe is that he's very substantial, not showy. I think of him as a real Midwestern billionaire. Whenever he says something, people know that, even if it's not loud or histrionic, they need to listen to what he's saying. There's a tremendous amount of strength there. It's almost Zen."

Mansueto may be a billionaire, but at Morningstar he's cubicle bound like the rest of us. He's never had an office, and prefers being open and accessible to his employees over being "cramped" behind closed doors. There's a fairly good chance that no other billionaire has spent six weeks, as Mansueto once did, working as a night manager at Arby's-not because he needed the job but because he was considering opening a restaurant and was curious about the business. For someone who has devoted his life to helping other people accumulate wealth, he is remarkably uninterested in its trappings. According to his friends, the closest thing to an extravagance in Mansueto's life is the seven-year-old BMW he drives (approximate blue book value: $21,000), which is notable mostly because of the significant step up it represents from the used Mitsubishi Montero with rust holes in the floor panel that he continued to drive well after he earned his first million. "He is splurging when, if he sees a sweater at the Gap he likes, he buys it in several colors," says his longtime friend and former business partner Kurt Hanson. Indeed, Mansueto showed up for an interview wearing what looked suspiciously like a Gap charcoal turtleneck sweater and blue jeans. "I think Joe is genuinely self-effacing," Hanson says. "It's not that fake self-effacing that politicians do. He has no psychic need for a 2,000-square-foot corner office with a mahogany desk."

No one who has ever met Joe Mansueto would peg him for a Christmas tree salesman. He is quiet, unassuming, and intensely thoughtful, with a medium frame and well-tended hands that don't advertise an aptitude for hard physical labor. He is a ringer for the actor Michael Moriarty, who played an assistant district attorney on Law & Order; he shares Moriarty's purposeful gaze and open face. And yet anybody who has met Mansueto also knows that selling Christmas trees for a month just to see how it's done-just because he was curious-is precisely the sort of thing he would do. He seems blithely unaware of the status barriers that make it unlikely for a recent MBA grad to be managing the night shift at Arby's, and he has a penchant for following his curiosity wherever it leads him. In the late 1990s, when Morningstar began to establish a Web presence, he decided he'd better learn about the online world. So he set up a charmingly primitive Web site he used to keep friends and family up to date on the progress of the birth of his first child, Jenna. He did the entire project himself, from registering the domain name to writing the software code that allowed users to post messages on the site. "I always enjoyed just kind of seeing how business works," he says. "At the end of the day, you have more money in your pocket than at the beginning of the day. It's kind of interesting how that works."

Mansueto got his first sense of how it works when he was in the sixth grade. Born in 1956, he grew up in Calumet City, Illinois, near the Indiana border, in a neighborhood he describes as a classic suburban idyll-riding his bike around the neighborhood, football in the street, trips into the city on the weekends for lunch at the Walnut Room. His parents met at a hospital. His father, Mario, was an ear, nose, and throat specialist; his mother, Sara, was a nurse who left the profession to stay home with Joe, his brothers, John and Daniel, and his sister, Connie.

As a child, Mansueto was a ham radio enthusiast. His first successful act of entrepreneurialism was when, at a ham festival, he saw a receiver on sale at a steep discount. "I knew it was worth, say, $300," he says. "And this guy was selling it for $100. I remember borrowing $100 from the guy's father who took me. And I went and sold it for about $300. And you know, as a sixth grader to make $200 in a month, I was in heaven. I thought, Gee, this is easy. How you can buy something and sell it for more-I was just kind of amazed how that works."

Mansueto carried that gee-whiz fascination with making money to the University of Chicago, where he went as an undergraduate and stayed on to earn an MBA. To hear him tell it, Mansueto's time there was like a scene out of Real Genius, the 1985 geeks-gone-wild Val Kilmer vehicle, but with do-it-yourself business ventures instead of Kilmer's elaborate, gonzo physics experiments. He and his roommate, Hanson, launched the Room 607 Soda Service out of their dorm room in the Shoreland. "I think we did it more for the entrepreneurial fun than for the money," says Hanson. "We found you could call the Coke distributor and he'd roll up ten cases of Coke to your room." Students would stop by 24 hours a day for soda and chips, and Mansueto and Hanson each pulled in about $500 in profit per quarter.

The same ethic informed Mansueto's Christmas tree venture a few years later. "Here's a guy with an MBA from one of the best business schools in the country standing in the middle of all these trees," recalls Jeff Jarmuth, another college friend, who now advises hedge funds. "And he was always really good at investing, even back then, so money wasn't an issue. But he was as happy as a clam, because he was running the show."

After graduating, Mansueto and Hanson went into business together, launching Strategic Media Research, a consulting firm that did market research for radio stations (Hanson had interned at a few stations during college). They set up shop in Northbrook-because, Hanson says, the suburb's name looked classy on the business cards-and conducted phone surveys designed to tease out the demographic characteristics and consumer habits of people who liked groups such as the Eagles. After about a year, Mansueto realized he didn't want to be in radio, and he decided to strike out on his own.