What we can learn from the uniqueness of Bill Gross
Bill Gross’ retirement last month was met with a large dose of hero worship and a touch of good riddance. Even in the autumn of his career, Gross split opinion in the investment community, turning bond veterans misty-eyed at the memory of his heroic feats and leaving others pleased that one of the biggest, baddest dinosaurs had, at last, limped from the building.
Personally, Gross has always been something of a hero, a man who practically invented the industry that I’ve worked in for my entire career. The firm he founded, Pimco, has been a cornerstone of today’s thriving fixed income market. As he rose to become king, Gross also built the kingdom.
A graduate of Duke, Gross served with the Navy in Vietnam and won at the blackjack table in Las Vegas before starting as an analyst at Pacific Mutual Life. He founded Pacific Investment Management Company (Pimco) in 1974. His timing was perfect, pitching into the early years of a bull market as rates tumbled and remained low for over 30 years. Gross’ Total Return fund, $300bn in size at its peak, outperformed all competitors, crowning him the ‘Bond King’. Pimco grew into a $2 trillion behemoth and Gross’ charisma, expertise and drive were at its heart.
By contrast, the final chapter of Gross’ career was, without doubt, disappointing. Ousted by a Pimco power struggle in 2014, his move to Janus was considered a coup. There, Gross set out to recreate what had worked so well at Pimco. But fixating on how to outperform his old shop, taking huge risks and battling significant withdrawals, Gross’ performance has been roughly flat over the last five years. Midas had lost his touch and, last month, he retired.
The great rise and swift fall make summing up Gross’ career complicated. He’s a man riddled with contradictions. Softly spoken, a yoga practitioner yet furiously intense and individualistic, he has always done things differently. From his trademark colourful ties to his even more colourful investment letters, Gross always wanted to stand out. But whilst his legendary temper made enemies of colleagues, friends and family alike, Gross always recognised the value of a team, and his failure to gather a strong enough unit around him at Janus was one reason why his career ended so abruptly. But that isn’t how he should be remembered.
My favourite Bill Gross episode is one that stands in contrast to the siloed and fierce caricature that we’ve all heard so much about. A famous post that he wrote in 2013, when Pimco stood on the summit of the fixed income mountain, still resonates strongly. It starts with a great line:
“Am I a great investor? No, not yet.”
I love the words, ‘not yet’. Even a king must continue to learn. And the reason for his doubt?
“Investing and the success at it are predominantly viewed on a cyclical or even a secular basis, yet even that longer term time frame may be too short.”
And, in admitting that timing and, by extension, luck is everything, Gross passes up the crown:
“There is not a Bond King or a Stock King or an Investor Sovereign alive that can claim title to a throne. All of us, even the old guys like Buffett, Soros, Fuss, yeah – me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience.”
This sentiment speaks volumes and it should be a lesson to us all. Despite being at the top of his game for decades, Gross still retained the presence of mind to ask whether he just got “generationally-lucky” and admit that, quite possibly, he did. This level of insight coupled with the humility to make it public is a rare combination.
It’s hard for those who have had great success to look objectively at their histories in an effort to unpack what part circumstance and luck played versus talent and skill. This “flaw” isn’t unusual – it’s a standard part of human nature. And it can be even harder for finance professionals, as confidence plays such an important role in success. But Gross didn’t just understand the role of luck in retrospect. Knowing that he was lucky at the time was likely one reason why he had such an incredibly successful career. It’s indicative of a brain that is wired to deal with natural psychological biases and constantly adjust and account for them.
Gross has Asperger’s Syndrome and says that being able to separate himself from some social norms has, “allowed me to stay at 30,000 feet as opposed to being on the ground.” This distance served him well. Sure, as he admits, “that’s not necessarily good in terms of one-to-one. People think you’re angry or an a-hole”, but it also allowed him to compartmentalise and objectively make decisions and take actions that were required when times got tough.
Gross’ personality quirks remind us of other investment legends, such as Buffett, Soros or Dalio. These guys have all been blessed by incredible market timing beyond their control. And whilst this has meant that they’ve all been running downhill, not all of them have been willing to admit that chance might have played such a large part in their success.
In this way, as in so many others, Gross is pretty unique. And that makes him a legend worth praising and learning from.