The Gross Recipe

Bill Gross Sketch

Do you know Bill Gross? Over the years, I have come to know him pretty well.

He is a busy guy and I consider myself fortunate to have regular access to his wit and wisdom. Frankly, considering that he is the co-CIO of one of the world’s largest asset management companies and has such a prominent position in the industry, it has been surprisingly easy to get on his calendar each month.

Relationships developed over a period of years have a way of revealing interesting things about a person, his habits and the way he thinks about the world. As it happens, over the last 15 years or so, beyond his investing prowess, I have also learned some very personal and sometimes not too flattering things about Bill.

So instead of waxing poetic on just how smart Bill is or discussing his views on where markets are headed, I will share a few of his personal stories with you (but please, keep them to yourself – some of this is really embarrassing and should not be for public distribution).

I first met Bill back in the late 1990s. The tech bubble was still in its pumping up phase. Bonds did not have the luster that they do today. What became readily apparent, right off the bat, was that Bill has no qualms about telling it like he sees it. Whether addressing the current state of the economy and the bond markets, politics or the status of his sex life and odd experiences in the bathroom, Bill always says what is on his mind.

Here are some of the things I have learned about Bill through the stories he has told me during the course of our relationship:

1. A charming young lady named “Greedy Greta” Mueller gave Bill a very exciting evening in a parked car in the Los Altos hills in California at the age of seventeen (Bill that is; he never told me how old she was). This was certainly a formative event for him.

2. In his mid twenties, he got into a nasty car crash while driving his Nash Rambler and had the top of his scalp torn off. A plastic surgeon sewed it back on. Without the intervention of the doctor, Bill’s hair would have ‘receded’ and thinned far more quickly than it has over the last 10 years or so.

3. Once, he was invited to the Gate’s residence to meet Bill and Melinda Gates. In his sometimes absentminded way, in the process of introducing himself to Mr. Gates, he extended his hand and said, “Hello, I am Bill Gross, it’s nice to meet you, Mike“. He called Bill Gates Mike! Positively embarrassed, Bill said that he soiled his underwear.

4. Bill peaked sexually at around 20 years old ((seems like Ms. Mueller got (nearly) the best of him – see 1. above)).

5. Bill can’t draw a stick figure, he can’t paint a simple picture or even color within the lines as well as my four year old son can. Apparently (according to Bill) he is missing the right lobe of his brain – I’m not kidding!

6. He got a C- in his CAPM class in business school and just one job offer following graduation. Without any other option he took the offer from what would become the owner of PIMCO. A seemingly lucky course of events (!?) -not exactly the storybook makings of the whiz-bang bond-king he has become.

7. During his military service in Asia during the 1960s, Bill ran a payday advance type scheme taking advantage of the ‘short of cash but need to party’ situation he found his less mathematically adept fellow sailors in.  Though he certainly regrets it in retrospect, he said that he had made several hundred percent on some of the short term ‘loans’ he extended to sailors headed ashore for an evening of fun. Think if the Total Return Fund returns 250% in 2013 – investors would crown him as not only Bond King but Global Bond Emperor!

8. If you ever meet Bill at a cocktail party and he says ‘pleased to meet you” he is lying through his teeth. He dislikes cocktail parties and small talk. He has little patience for hearing about other peoples’ kids’ escapades or the challenges of physical ailments. He would rather spend his Saturday evenings sitting at home watching re-runs on television.

I could go on with these stories but you might get the wrong impression.

As many readers will have surmised, these stories are all from various editions of the “Investment Outlook” – a series of monthly essays that Mr. Gross has been writing and distributing to a broad audience for 30 years. Filled with musings about everything from the bond market to the functionality of the modern toilet, the distinct voice of Mr. Gross and his opinions have had a particularly strong resonance with readers for decades.

I have been an avid monthly reader since the late nineties. This is how I have gotten to know Mr. Gross. He has ‘told’ all readers of the Investment Outlook these stories.

Though primarily serious discussions of pressing financial topics, periodically elements of his life experiences (as illustrated above) are used in his writing. These often ‘humanizing’ lead ins give a sense of personal connection to broader and often less tangible topics. He delivers to his readers a true sense of ‘where he is coming from’. He often shakes readers from their traditional framework for addressing a concept and orients them from his own.

But foremost Bill is a terrific investor though he sometimes denies it. In listening to him, he gives one the sense that he is down to Earth and humble – remarkable particularly considering his extensive accomplishments (and unlike many of his contemporaries). He is personable and able to deliver complex ideas about the markets and global economy in a way both clear and accessible- important and rare within the investment community.

I often use Bill Gross and his “Investment Outlook” as a prime example of a tool through which an asset manager can build a relationship with investors. It is a means to not only demonstrate ‘thought leadership’  but also to give investors the sense of one’s humanity (sometimes too coarse for the taste of some). Yes, Bill Gross has sex, goes to the loo, dreads getting old and finds himself in embarrassing situations.

Regular communication of this sort aids asset managers in developing and maintaining robust relationships. It can be the backbone to an informed and committed investor base. It helps to weave confidence and brand loyalty.

A successful communication and client servicing model designed to meet the expectations of sophisticated investors (investment consultants, manager research teams, etc.) must incorporate the ‘voice’ of the manager as prominently as possible. Further, it is a means to standout from the sea of mediocre market commentaries published every month. It is one thing to be good at what you do, it is quite another to be differentiability good.

Further, with thousands of clients spread around the world (like PIMCO has) or dozens (for smaller shops), a PM’s time must be used efficiently and carefully balanced between the portfolio, business management and client demands.

Asset management is a people business. This is particularly evident when looking at the industry from the investors’ perspective. Once the critical but standard due diligence is done on a manager during the selection process, it is largely humanity, in all its flaws, that instills a sense of trust and commitment. These are key elements that imbue the decision process of hiring of an asset manager as the caretaker of one’s money (or, as it is so often the case in our industry, someone else’s). Investors want to ‘know’ their manager.

But with every recipe, there are risks of overcooking. The dangers with this Gross ‘recipe’ are apparent – key man risk and cult of personality (aka “star manager”) being two of the most commonly identified when the voice (and face) of an individual becomes synonymous with a firm.

What might be a greater danger (one that Propinquity has been exploring and experimenting with in its own ‘test kitchen’ of late) is the very validity of the recipe that combines more than ‘a pinch’ of the personal with the professional in this age of (hyper) reality TV, Facebook and Twitter – through which every last detail of a person’s ‘personal’ life might be known.

In fact, what works so well for Mr. Gross is that investor-readers do not know everything about him. There is always something unknown remaining for the reader’s imagination to create for him/her self. Perhaps it is this ‘just enough’ status that, like properly managed Fed monetary policy, is the recipe for success.

 

Roland J. Meerdter
Managing Partner

 

(For those interested, there are 20+ years of Investment Outlooks posted to the PIMCO site. I have taken slight liberties to connect the dots of a couple of these story segments – linking them together to make for a larger narrative. I have made every effort to not detract from the spirit of Mr. Gross’s own efforts in the process. I wish him continued success).

[Thanks to Baldwin Berges for his pictorial contribution. Baldwin works with businesses in financial services to help them tell bigger and better stories. His approach is refreshingly insightful as are his collected views.  www.baldwinberges.com & www.bd-insider.com]