Joe Mansueto Featured

7:00pm EDT March 27, 2006

Joe Mansueto is proof that a hobby can turn into a successful business. Mansueto had a passion for investing and in 1984, he used that passion to develop products and tools to help mutual fund investors make better investment decisions. Morningstar was born, and today, the $227 million company is a leading provider of independent investment research and caters to a variety of investors. Mansueto, chairman and CEO of Morningstar, has received the Rosenthal Award for Excellence in Investment Research from the University of Chicago and the KPMG Peat Marwick High Tech Entrepreneur of the Year Award. Smart Business spoke with Mansueto about the importance of passion and patience when starting a company, how to find the best employees and how he is making Morningstar a global name.

On starting a company

Read everything that Warren Buffett (CEO of Berkshire Hathaway Inc.) has written. Go to berkshirehathaway.com, read all the annual reports, and I think it will give you some really great advice about what are good businesses, what are bad businesses, how you can develop competitive strengths.

You have to be patient. Successful businesses aren’t built overnight. It’s going to take five or 10 years to really build a successful business. If you think you are going to do it in a few years, you are deceiving yourself. You need to be prepared for that long haul, and you have to have the patience and perseverance to see that through. Sometimes people are in such a hurry, they get discouraged when they don’t see immediate success.

Try to build a business around a passion of yours. If you can build a business around a passion, then it’s not work, it’s something you really enjoy, and your odds of success go up. If people start a business merely because they want to make money or they envy the profit margins of certain businesses, that’s probably not the best reason to start a business. It’s not going to see you through the down times. You have to have passion and exude passion for what you are doing.

Starting a business is a full-time activity. It’s more of a lifestyle choice, and it’s going to consume you. You have to prepare to run your life in a way that accommodates that. It has implications not only for yourself but those around you. If you are married, what does it mean for your spouse? If you have a family, what does it mean for your family? When I started Morningstar, I was single and unencumbered in every which way. I had no mortgages, no family, so in some ways, it was very conducive to spending a lot of hours working. Today, I have three children, and it’s a different set of circumstances.

On finding and training employees

There are a lot of liberal arts graduates who don’t quite know how to make the transition to the business world. In our early years, we did a lot of hiring of very bright people with liberal arts backgrounds who went into many roles here. The down side is, it takes a little longer to train those people, but I think over time, they can learn the finance side and you get very strong talent. We did some slightly unusual things in hiring that other financial information companies probably didn’t do.

We are always looking for the best minds, maybe looking less at the particular background of somebody but getting the right person with a good ability to reason and communicate well. It’s kind of like the sports team that hires the best athlete. He’s not so much looking to be the quarterback right now, but instead of just looking for quarterbacks, look for the best athlete to draft and then find a way to use that athlete. In a similar way, we are always looking for the best talent and not so much trying to hire a business school graduate to fit into a certain role but have a more expansive view of the kind of person we would consider. That diversity in hiring has worked well for us.

We have an MDP program — management development program — where we hire leading graduates from universities, principally in the Midwest. Typically, we bring them into, say, our product support area.

They may work a year in product support, getting to know who our customers are, supporting all of the products. Then they might rotate to our data area and spend a year compiling our databases, learning how that’s done. After a couple of years of this rotational program, they can go into more specialized roles, be it product management or an analyst role.

Once they have that body of knowledge, then they can go on. A lot of times during that two-year period, they are getting a CFA or they might be going to night school getting an MBA. We certainly support a broad-based training and educational program. We pay for MBA schools, CFAs training, etc.

On growing internationally

First, it comes down to people and making sure that you have the right group of people. We try to hire overseas people in the same way that we hire people in the U.S.

We want to have one Morningstar globally. We want to have the same kind of office space — it sounds inconsequential, but it’s really important to have the same physical space — all over the world. We have a very open atmosphere at Morningstar. There are no private offices — we support collaborative teambuilding and teamwork — so that we have the same look and feel globally.

We want the same client experience globally. If we are hiring the same kind of people, they need to behave the same way with the clients overseas. We need to offer the same kinds of products that we have in the U.S. overseas. More and more, we are creating global products, products that are developed here or overseas that are multilingual, multicurrency. We are supporting global products capabilities. Those are some of the things that we do to ensure that there is a consistent experience with Morningstar, no matter if you are in Milan, Hong Kong, Tokyo, Australia or Chicago.

HOW TO REACH: Morningstar, www.morningstar.com