For someone who consistently reads more than one hundred books annually including dozens of titles on value investing, I knew nothing about Bill Gross, one of the co-founders of PIMCO. That changed after I read The Bond King by Mary Childs which is the most complete account of this iconic money manager starting with a Hollywood-like origin story and continuing with his creation of a new industry but ending with an exit he probably never envisioned.
Interview Highlights
- What’s wrong with the interviewer’s book stack of investment books?
- Why do so few know Bill Gross outside his industry?
- A Warren Buffett or Peter Lynch analogy is incomplete. Is a Bogle comparison better?
- A quick overview of the PIMCO business model and the original three-legged stool.
- Who is more important in this industry, the CEO or CIO (Chief Investment Officer)?
- The type of people PIMCO wanted on their team.
- How do firms of this size continue to function?
- The Bond King’s original story starts with scalping basketball tickets and continues in Las Vegas counting cards.
- Wouldn’t you have enjoyed being a fly on the wall listening to Bill and Ed Thorpe talking during their first meeting?
- Bill’s ability to see around corners and being a contrarian.
- The humility of Bill Gross.
- Mary shares her favorite trade from the book.
- Is there a Bill Gross coaching tree, and if not, why not?
- Would there have been a different ending had there been someone like a Bill Campbell in Bill’s life?
- Is there another book in Mary Childs?
Reflections on The Bond King
Over the years, I’ve read many books on investing, and one of my favorites is by Jim Rogers entitled Investment Biker. If Mark Twain were around today to read it, he’d call it Huckleberry Finn on wheels.
I’ve never read any books about bond traders unless we can count Liar’s Poker by Michael Lewis. With full transparency, terms like technical trading, structural alpha, strangles, quantitative easing, and stable disequilibrium are a bit intimidating to a country kid from Missouri who has worked with small growth-centric businesses over the past 25 years.
However, what I found was an entertaining read including how a card counter wanted to do more than clip coupons from bonds collecting interest through the terms of these financial vehicles. Similar to books about legendary leaders such as Alan Mulally, Hunter Harrison, Joe Coulombe, Ed Stack, and Rich Snyder, similarly we find business insights about Bill Gross in the form of innovation, entrepreneurialism, finding the right talent, and other critical management tenants to build and grow an enduring firm. Oh yes, Mary provides a front-row seat to numerous great trades and trading strategies during Bill’s career.
Was Bill Gross someone we’d want to work for? Between money, power, and fame, he preferred fame. Does that help you to answer the question? But he was also an intellect driven by an instinct beyond money as he stated, “From the get-go, my motivation was to be famous. My desire isn’t to make money. I have more money than I know what to do with. My desire is to win–and win forever.” While the words may come out differently, that’s the mindset of every gifted CEO I’ve served over the past 25 years.
Here are some other observations I gleaned from Mary’s book on this complicated and complex personality:
- I’m always interested in the shoulders that successful professionals are standing on. While Ed Thorpe was an influence on Gross, you’ll enjoy Mary’s mention of Hyman Minsky. I’ve highlighted the line, “Too much stability sows seeds of instability.”
- Giving is hard work, but I admire and appreciate the structure and thought Bill Gross put into philanthropy (and I’m sure that’s still the case today). The discussion about the $10,000 and $15,000 checks was interesting.
- I vehemently disagree with anyone who thinks Gross was lucky. While the investment climate was generally favorable over his 40-year career, he still had to 1) generate trading ideas, 2) act on those strategies, and 3) remain patient. How does someone make money during the financial crisis of 2008-09 while others were losing everything? In 2009, “Total Return (his fund) had delivered 13.8 percent. Over the past three years, the fund had doubled to some $200 billion in the open mutual fund alone.” Even if he flew in tailwinds, he still had to keep the plane in the air moving in the right direction.
- Yet investing is still hard. “You rise to the top, and then you gradually erode, and out.
- In the end, I felt like I was reading a Shakespearean tragedy. Total Returns quit delivering, there was the El-Erian fiasco, an ungrateful exit, a Janus fund that could never find its way, and a painful divorce. You’ll need to do this on your own, but there are strong takeaways in these final chapters and the epilogue.
If Mary ever does an updated version, how about a brief appendix on the business model of a money management firm like PIMCO? In the early chapters, we learn about how partners share the profits, but what’s behind the backstage look like in this industry? What are the profit margins? How about the return on equity? Is cash flow consistent? That was NOT the purpose of this book. Still, I’m curious.
My rating? I’m biased. I love talking to authors after I’ve read their books. Does that impact my scoring? Maybe, but I’m still sticking to five stars on this one.
“Hey, I know that name.”
I told numerous CEOs that I was getting to interview Mary Childs several weeks before the interview. Everyone said something like, “She’s on Planet Money.” That’s right. Now then, go buy and read the book.
In case you are not familiar with our guest, Mary Childs is a co-host and correspondent for NPR’s Planet Money podcast. Previously, she was a reporter at Bloomberg News, the Financial Times, and Barron’s.
While she says there is not another book in her right now, I’m still following her on Amazon.
Similar Episodes
If you liked this show, here are three other investing-oriented shows to consider:
Leave a Reply