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?

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"He's in good company," says Koten, the CEO of Mansueto Ventures. "Si Newhouse and Rupert Murdoch are planning to make big investments in business news." Koten is referring to Condé Nast's plans to launch

a new business title in 2007, and News Corp.'s planned business-news cable channel. "These are not properties that stand a chance of going backwards," he says, acknowledging that the magazines under his care, having been bled dry and neglected by Gruner & Jahr, have essentially hit rock bottom. "But the brands have a value beyond print." Inc.'s conference business, for instance, was once a major part of its operation, Koten says, and he's working to beef it up once again.

For Mansueto, picking up Fast Company and Inc. for less than 10 percent of what Gruner & Jahr paid for them in 2000 isn't much different from buying a ham radio receiver that's on sale for a third of what it's worth. Only this time, he didn't have to borrow money from a friend's dad to seal the deal. "Buy low, sell high," Koten says. "His view is that Gruner & Jahr bought at the absolute peak and hung on until they hit bottom."

"True, the magazine business is a bit in the doldrums today," Mansueto says. "But in my view, it's more cyclical than secular. It's not a long-term decline for the magazine business if you've got a strong franchise. The magazine business is not the newspaper business. Google and Craig's List are a real threat to classified advertising. But a monthly magazine-I think it's pretty hard to re-create that experience on the Web. If you look at Time Warner, their magazine business does, I don't know, $5 billion in sales, a billion in profit? I mean, that's not chump change."

But for all Mansueto's cold-eyed, analytical justifications, there is an emotional explanation for his new hobby. You don't try and fail to buy a city magazine, and then say yes when an expanding local entertainment magazine franchise comes calling, and then put in a bid for two business magazines all in the course of three years just because you think they're all good investments that happened to come over the transom. He likes magazines, and he wanted to own some. "They're very creative, interesting businesses," he says. "I love to read. I'm a magazine junkie. And so there's something about the great journalism, combined with compelling graphics, nice paper stock-that whole package I find very attractive if it's done right."

In fact, Mansueto says, Koten would like him to own more-he has raised the prospect of buying more titles. "The magazines are fun, interesting things," Mansueto says. "Might something pop up? It may. But I've told them, ‘Let's get these magazines working first, before we broach the subject of buying more.'"

Mansueto put about $250,000 of his own money into Morningstar during its first five years of operation. Just under half of that came from savings bonds that his father had bought for him as a child. Mansueto is still very close with his parents-he drives to their home in Munster, Indiana, most weekends for dinner-and he becomes emotional talking about his father's efforts to make sure he had a nest egg to start out with. "I had these savings bonds that my dad gave me when I graduated," he says. "You know, it's kind of touching when you see them, because they all have dates on them. I was born in September 1956. So there's one dated September 1956 for $100. And then there'd be one from October 1956. And so every month, my dad is going to the bank and buying me savings bonds since I was born. I felt that that's money that I didn't want to lose."

Family looms large in Mansueto's life. In 1998, he married Rika Yoshida, a Morningstar analyst. Today they have three children and live in a Lincoln Park condominium. Mansueto keeps strict work hours, 8:30 a.m. to 5 or 6 p.m., with an occasional Saturday at the office, so he can spend as much time with them as possible. Aside from his beloved early morning jogs along Lake Michigan and reading the occasional annual report, he has no other interests or hobbies to take him away from them-a fact of which he seems almost proud.

Four years ago, his younger brother John, a financial adviser who lived in the Chicago area, came down with what seemed like a bad flu. "I remember I had lunch with him," Mansueto says; "he was saying, ‘I'm feeling bad; I think I'm just going to go home and sleep.' And then a week later he's in the hospital, and a couple days later he's on a respirator." John was diagnosed with West Nile virus-there was an outbreak in Chicago that year. "He had a very severe form of it," Mansueto says, "where basically it was like polio. You lose the capacity to move your muscles." After a nine-month hospital stay, John was released in the spring of 2003. He was still weak, wheelchair bound, and in need of physical therapy. Because he had trouble breathing, his lungs had a tendency to fill up with fluid, which had to be drained at the hospital. On Friday, May 30, 2003, while John was on the way home from physical therapy, his lungs filled up too quickly and he drowned. Mansueto has difficulty talking about it. "I feel like I've led a golden life," he says. "With the exception of losing my brother. Compared to that, I've never had any bad thing happen to me. I still wake up in the middle of the night and think about it. We were very close."

In 2007, if all goes according to plan, Morningstar will move from its current location on West Wacker Drive into a new office tower at the long-neglected Block 37 site at State and Randolph streets in Chicago's Loop. (It's worth noting that nothing has ever gone according to plan when it comes to the long-vacant lot downtown; at press time, construction had been halted owing to the financial woes of the construction company contracted to build the development.) Mansueto and his team will share the building with CBS and WBBM–Channel 2; Mansueto hopes to build a huge financial information display at ground level on Washington Street, possibly a giant stock ticker that will roll out Morningstar financial data throughout the day. On top of the tower, he has secured the rights to add the Morningstar logo to the city's skyline, a prospect that one might expect would be a big deal for him-the name of the company he started nearly a quarter century ago from his living room will become a part of Chicago's landscape-but he demurs: "It's nice. It's not the Sears Tower. It's taller than Marshall Field's, but it's not as tall as many of the skyscrapers in Chicago."

The name that will soon loom above the downtown streetscape comes from Henry David Thoreau's On Walden Pond. "It was one of the first books I read when I was at the University of Chicago," Mansueto says. "I can still remember sitting in Regenstein Library, sitting in one of those very comfortable chairs, finishing that book, wondering, Gee, how is Thoreau going to end this book? And I get to that last line: ‘The sun is but a morning star.' And I pause, and look out over the quad, and the snow is coming down, and I think to myself: What the hell does that mean?"

He has since figured it out: "It's an optimistic statement. Something that's been around as long as the sun is still in its infancy. It's still a morning star. There's a rebirth that's just beginning. Thoreau, to me, is about independence, self-reliance, thrift. That's what Walden's all about."

It's vintage Mansueto. The thinking man's capitalist, he named the company that would make him a billionaire-and ostensibly help make countless investors who use Morningstar's data wealthier than they otherwise would be-after the work of a transcendentalist tax dodger. Is he aware that Thoreau was not exactly a fan of the accumulation of wealth?

 

This article appears in the June 2006 issue of Chicago Magazine.

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