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How the Bond King Built His Market Empire – Mary Childs

How the Bond King Built His Market Empire – Mary Childs

Real Talk: The Charles Mizrahi Show podcast

How the Bond King Built His Market Empire – Mary Childs

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In 1966, he went to Las Vegas with $200 in his pocket. A short time later, he made thousands of dollars counting cards.

Bill Gross was soon looking for a way to use his skills to make money — big money. He turned American finance into his casino and became known as the “Bond King.”

Gross went on to found PIMCO, a leader in fixed-income management that has $2 trillion under management.

Author Mary Childs covers it all in her book, The Bond King: How One Man Made a Market, Built an Empire, and Lost It All.

And she shared with me how he did it and why the U.S. Treasury has Gross on speed dial.

Topics Discussed:

  • An Introduction to Mary Childs (00:00:00)
  • Bill Gross: Counting Cards in Vegas (00:05:26)
  • The Bond Market Opportunity No One Else Saw (00:10:41)
  • The Power of Regulating Your Emotions in Investing (00:16:56)
  • Losing it All (00:33:10)
  • Don’t Take Yourself Too Seriously and Be Humble (00:41:44)

Guest Bio:

Mary Childs is a co-host and correspondent for NPR’s Planet Money podcast. Before joining the team in 2019, she was a senior reporter at Barron’s magazine, where she covered the alternatives industry, the bond market and capitalism. Before that, she worked at the Financial Times and Bloomberg News. She’s written about the pioneering of new asset classes like time, billionaires’ proposals to solve inequality and diversity and discrimination in the finance industry. Before all that, she was also a Watson Fellow, spending a year traveling the world painting portraits. She graduated from Washington & Lee University in Lexington, Virginia, with a degree in business journalism and an honors thesis comparing the use and significance of media sting operations in the U.S. and India.

Gross worked as a reporter at The New Republic and Bloomberg News, wrote the “Economic View” column in The New York Times, and served as Slate’s “Moneybox” columnist. At Newsweek, where he was a columnist and correspondent, he authored seven cover stories. He is a bestselling author of eight books, including Forbes Greatest Business Stories of All Time; Generations of Corning; Dumb Money: How America’s Greatest Financial Minds Bankrupted the Nation; and Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy.

Gross was educated at Cornell University and holds an M.A. in American history from Harvard University. His great-grandparents immigrated to the United States from Aleppo and Damascus.

Resources Mentioned:

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Read Transcript

Charles Mizrahi: Mary, thanks so much for coming on the show. I was looking forward to it. We spoke, I think it was about a week or so ago.

Mary Childs:  I’m excited to be here. Thank you for having me.

Charles: Folks, the name of the book is The Bond King: How One Man Made a Market, Built an Empire, and Lost It All. Mary, first off, how do you get into bonds? Bonds are always perceived as boring and really staid. How did you fall into that?

Mary: I think part of it was I interned at Bloomberg News and Bloomberg is institutionally, just its DNA, is kinda bondy. Michael Bloomberg himself kinda came up in that world. I think that’s just woven into the company. I didn’t consciously perceive that as a motivation, but looking back I’m like, “Of course that’s what happened.”

There is this sense that some of the reporters on the bond coverage team were ferociously smart. I want to be like that. I want to be ferociously smart like that. There’s so much to do in the bond world that it did feel like, to me, that there was more to muck around with.

Randomly when I started at Bloomberg there was an opening to cover the credit default swap market.

Charles: What year was that?

Mary: This was after the crisis. So it was like no one wanted to do that job because the fireworks already happened. I was like, “Okay, let me have. I’ll do it.” Again, it’s the kind of market where people think it’s so boring. It’s just refreshing models and Excel spreadsheets.

Of course some of that is true. So much of that is not at all applicable. It was really fun.

Charles: Also, you’re the host of NPR’s Planet Money. What is that, one of the top five or 10 podcasts out there? Wow.

Mary: Thank you. Yes, it’s really fun. It’s a fun team and it’s so different from the kind of storytelling I was doing before. It’s this attempt to unpack the economy and the systems that make our world run in a really accessible and curiosity-driven way.

Charles: I listened to some of those podcasts, especially the one on carried interest. Really good stuff.

Mary: Thank you. I appreciate that.

Charles: You wrote this book, The Bond King, — by the way, is this the first biography of Bill Gross?

Mary: There’s another book inauspiciously also titled The Bond King from 2003. That one, in my view, the enormous influence that PIMCO would accrue really hadn’t come to fruition in quite the same way. That’s the only other one I’m aware of.

There are pieces here and there. He had his own book that had biographical elements to it. This is, twinned with its cousin the other Bond King, this is kind of the first.

Charles: I was in finance and managed money. I have heard of Bill Gross. I have heard of PIMCO. I never fully understood how a blackjack player in, I think it was the 1960s, was counting cards. He takes a boring section of the market, which is bonds, turns it into something fascinating.

He builds PIMCO into a multi-trillion-dollar — I don’t know how many assets?

Mary: That’s right.

Charles: The U.S. government confers with him, the Federal Reserve talks to him about what they are selling in bonds and then he has a dramatic fall. Before we get into the dramatic fall, why is it so important to know who Bill Gross was? Why did you write a book about this guy?

Mary: I think the most salient thing to me is he’s really fascinating and, as finance figures go, he’s incredibly reflective. In so far as you want a protagonist or a character to be able to shepherd you through these incredibly complicated structures and things that could be boring.

You really want that person to be intelligent, engaging and not just a stick in the mud or a jerk or something without nuance. To me, the fact that Bill is this reflective person and does drive to understand his place in the world and talks openly about that, all of that made him a rich character from a narrative perspective.

But more to the point, I think the bond market and finance itself both tend to be moated with jargon. To some extend this is just a byproduct of people doing it for their jobs. You get tired of saying commercial mortgage backed securities all the time and you are just going to make an abbreviation.

At the same time, it also serves to ostracize people and alienate people who might want to understand and who I would argue need to understand to be active participants in our society. It enables those people who do understand the jargon and keep that moat that they can charge higher fees to those people who are not on the other side of that island.

To me that’s really frustrating and annoying and a little bit of a scam. You should have access to this information. You should be welcomed into this information to understand better the systems that dictate so much about our economy and our lives. That’s the big pitch.

I feel like I can get a little soapboxy, so forgive me. But it’s also the mission of Planet Money too. This stuff is perfectly understandable. You just need a minute and you need an access point. For me, Bill Gross’ narrative was that.

Charles: Let’s start not at the beginning beginning but somewhere where it gets really interesting. Here’s a guy fresh out of college, he takes a couple hundred dollars. He starts counting cards in Vegas in one of the casinos. He goes to the casino and he builds it up and starts making money.

Then he starts thinking, what?

Mary: He starts thinking, “How can I replicate this? How can I take what I have learned here, which is to feel risk, to calculate when odds are in your favor and know with some reliability when the odds are not in your favor.” He did that through counting cards.

His view of that was he was taking back that edge that the casinos always have over you. It was unrigging a rigged system in his estimation. He was like, “What’s most similar to this? Where can I take these skills of finding an edge, finding this way to outsmart a system?” His answer was finance, which I think is very tidy.

I think a lot of people object to that, but I do think it’s right and he proved it.

Charles: Later on, one of his mentors and his idols, Ed Thorp, was also a card counter. Warren Buffett was also a horse player and handicapper. When you figure out the numbers, numbers are numbers. You figure out where you have the odds.

Charlie Munger, Warren Buffett’s partner, said investing is nothing more than trying to find the two-to-one favorite that’s going at ten-for-one. Mismatched odds. That’s all you’re really trying to find. No one did it better than Bill Gross.

So he starts making money and he says, “I’m going to take this magic and start to apply it to finance.” They don’t throw you out of the casino. There’s no limit to the upside. Your advantage becomes a competitive advantage over other investment houses. So what does Bill Gross do at this point?

Mary: He goes to business school. After he gets out of business school he goes to PacMutual, a life insurance company. Again, like you were saying, it’s this formal, buttoned-up place. It was very corporate, very staid. He goes in as a credit analyst. Part of his job is literally clipping coupons off the bottom of bond certificates to mail in and get an interest payment.

Charles: Folks, hang on a second, back in the day — for those who don’t remember — you actually had bonds and would literally clip the coupon. I remember when I first started on Wall Street there were couriers carrying satchels of zillions of dollars’ worth of these bonds through the streets.

Someone told me, “He’s carrying like $3 million.” I said, “What are you crazy?” That’s what they did. It was amazing before electronic movement of money.

Mary: It’s so radical to think about now that this was just a tangible, hands-on business. I think of it as arts and crafts. It’s so different than what it is today. The thing that turned this upside down was, at the time, there was this man in Southern California named Howard Raykoff who was going around and trying to recruit people to trade bonds with him.

Inflation was really high so there was a very strong argument to get rid of old bonds whose value was eroding and buy new bonds or trade in what was better positioned to capitalize.

Charles: Just to clarify for our audience, when interest rates go up and you have a bond that pays a 3% coupon, who wants a 3% bond when they can make 5% over there. So the value of this bond shrinks. They will get the 3% and if you hold it until maturity you get your money back.

But during the time between now and maturity, a lot of stuff can go on. That’s when this guy starts to say, “Wait a minute, we can trade that.”

Mary: That’s exactly right. I love the way you put it. If there’s a 3% bond, why do I want that when there’s a 5% available? It’s the ultimate FOMO. That does have very tangible and real consequences in the bond market.

So Bill Gross’ boss meets with this guy Howard Raykoff. His boss is kinda like, “Okay man, whatever. But why don’t you come meet with some of my young whippersnappers. You might get along.” They meet and this is the beginning, in my mind and in my telling, of the active bond market when Bill Gross and Howard Raykoff meet.

They start this lifelong friendship, but also a very lucrative business relationship where they trade with each other. What ends up happening is Bill pitches to his boss, “Can I have just a little money to play with and see what happens?” He’s off to basically start PIMCO from this shell corporation within the larger life insurance company, which is a little bit of spare change basically.

Charles: What does PIMCO stand for? What’s it an acronym for?

Mary: Pacific Investment Management Company.

Charles: Pretty boring.

Mary: I’m always like, “Should I capitalize the O?” It shouldn’t be, right?

Charles: It’s nothing fancy, folks. It’s boring stuff. Bill Gross sees an opportunity where no one else saw an opportunity.

Mary: If you think about how well the thing was working before, this is an insurance company and they know with some degree of certainty when they are going to have to make payments to their claimants. Bonds provide the opportunity to know when your money is coming in.

You can match those up so nicely if you are this company. The idea of disrupting that beautiful balance of your money coming in on this schedule and your money going out on that schedule introduces volatility and risk and potential for loss when you didn’t really have it before.

There was this institutional, “I don’t know about that!” But if you are putting up numbers like Bill and his team would, it’s kind of hard to argue.

Charles: Bill starts this company within a company and they give him free reign. How old is he? He was in his 20s I think.

Mary: He’s in his 20s.

Charles: He’s a young guy and he’s one of the few people who are money managers who, I think, served in Vietnam, right?

Mary: Yeah, in the Navy.

Charles: I don’t know if he saw combat. Do you know that or not?

Mary: He’s talked about it a little bit in his investment outlooks and his interviews. It seems like he was in a boat to take the people to the shore. He was sort of just babysitting the little boat while other people were on land. It sounds like he was near combat, but not super in it.

Charles: He learns about risk and reward from playing blackjack, as well as military experience. He has discipline. He goes and he has the nerve to say, “I want to be an innovator in this segment of the market.” Just impress upon us, Mary, how huge is the bond market?

Mary: It’s enormous. It’s trillions of dollars. I haven’t looked it up lately, but it’s just staggering the size and dominance of it, the influence of it. This is how governments and companies fund themselves. This is how they fund operations, how they pay for a new factory or new equipment.

This is how governments put out programs, pay for their functioning and pay their workers. I think the influence and importance of it is hard to overstate. It’s outshone by its smaller sibling, the stock market. The stock market is more accessible for people like you and me to just dip in and out of and trade in our accessible TD Ameritrade or whatever accounts.

Whereas the bond market is much more institutional. It’s much larger sums of money flying around at any one given time.

Charles: So he starts around 1970s or so, right? 1971?

Mary: 71, yes.

Charles: He starts this little thing and all the sudden it just grows. What’s the magic of it? Why is money attracted to him? Why is he making money where nobody was making money before?

Mary: Such a good question. There are a bunch of different answers. One is they were very good at marketing. Bill Gross, himself, is actually quite good at marketing. He doesn’t love the person-to-person engagement in client meetings, but he will do it and he’s good at it.

They also had a dedicated client services person, which was a bit radical at the time. That person — this guy Jim Muzzy — was just so warm and fuzzy. He was just a nice, warm person. He really understood the market too. So they had this very informed person in client services.

I think it was less seen at the time as a value add to have a person who knows what they are talking about in client services. That’s a structural part of it that was helpful. Also, I think Bill brought that “beat the system,” “beat the machine” mentality to the market. That certainly helped.

I think one of the main innovations he brought was just being aggressive and early to a new market. Whenever there was a new market or a new product, whether it’s emerging markets or inflation-protected securities or mortgages in general, the idea at PIMCO was if there’s a new thing, we jump on it.

He very much did this. Being early to financial futures and mortgages provided a lot of extra outperformance over decades for them.

Charles: He also does it at a really great time because you have inflation starting to kick up. United States goes off the gold standard. Look, Bill Gross would have been Bill Gross without this, but what a tailwind he had.

Mary: Absolutely true. This comes up a lot. This was the most fortuitous period to be in the exact seat he was in for decades. This was a long stretch of time.

Charles: It’s a long wave — 30 or 40 years.

Mary: Exactly. And he definitely knew that and talked about it. I think this is one of the knocks on him. He had so much structure around him, the situation, the environment was so conducive to his success. Was he really such a genius? I think that’s a little unfair, a little throwing rocks at your heroes.

Charles: I find that’s always said by people who missed out, right? In 1971 there were a lot of smart people who could have done it but didn’t. He did it. He gets the credit.

Mary: Exactly right. I completely agree with that. It was an undeniably fantastic period to be a financial investor. In his seat, in Warren Buffett’s seat, in all of these various influential roles around the market it was great.

Charles: Munger and Buffett say if they started 30 or 40 years later or even 20 years later they could not have had the structural advantages they had. Buffett was going around buying shares from farmers who had no idea what the value of their securities were.

You just can’t do that anymore. The information arbitrage is there. What happens is known immediately. They were taking advantage of what people knew, what people didn’t and real information. Sometimes they lead by weeks.

Mary: Exactly. I think someone at a conference asked Howard Marks what his best advice would be for investors and he was like, “Start your career in the late 60s.” Or something like that. Okay, I’ll be sure to do that, thank you.

Charles: Since you deal so much with personal finance and you probably hear this from so many people, they take their biggest advantage which is time. They have the time. Institutions don’t have the time. They have to put on a monthly or quarterly basis to beat the bogey, beat a benchmark, whatever it might be.

They have to make their investments. But an individual investor, as soon as you start trading, you play in their marketplace. You don’t have to trade when you just buy and hold and ride these things out, your advantage is humongous. So many people trade it away.

Mary: I think that’s exactly right. It’s hard when the market is plummeting to keep your head about you and not do anything. The best and worst investors would tell you that’s the time to be pouring money in the market, when things are absolutely falling apart.

You don’t want to try to time the bottom. I always laugh about the idea of averaging your dollar cost down. If you already have a position you bought at $100 and you buy more at $60, now your average price is less. Congratulations, you did it. That’s a funny thing investors will say to you if you are trying to write about their poor performance.

It’s a real thing. You talked about that discipline from military experience and from counting cards in Vegas. I think that’s super true. The ability to regulate yourself, your own emotions and your engagement with the market is really difficult and important.

Charles: It’s all about temperament. If you don’t have the right temperament you shouldn’t be playing in this. You shouldn’t be investing. Stay in a money market.

Not only does Bill Gross and PIMCO have the structural advantage, the customer person and have a great tailwind, he starts producing returns that are — I don’t know what’s a good word for it — magnificent compared to the benchmark. You don’t beat the benchmark by so much. You want to talk about that?

Mary: There was a lot of credit selection and looking at companies and saying whether this company was good and he wanted to invest in it or not. But what is more intellectually delightful for me is thinking about the structural trades he did. One being getting in early to certain markets.

International and mortgages being the most salient in that early track record — I’m talking about the 70s and 80s. I think it’s one of the tenants of what he called “structural alpha.” It’s how he characterized it. It’s not quite passive investing. It’s not quite factor investing.

But it’s trades that are replicable that are identifying themes and trends in the market that are robust and persistent and you can take advantage of the whole time.

Charles: Give me an example.

Mary: One is selling volatility, for example. If you think there’s no disaster imminent, that there’s not a war that could explode in everyone’s face or there’s not some massive inflation, you have to have some degree of certainty in the near term.

If you have that degree of light certainty — of course you can never quite predict when something terrible is going to happen — you can say, “I’m going to sell volatility.” Basically sell insurance, for lack of a more precise descriptor, that says markets are going to trade within this range.

If it trades outside, I will have to hand over the money I was given for this. But I feel pretty good about it. Bill was very good at predicting those ranges. I think more often than not, that was a winning trade for him and PIMCO. Just saying that everyone else wants to buy this insurance because they want to sleep at night. I don’t mind. I will sell it happily. I can sleep just fine.

Charles: He had no problem being on the other side of a trade to sacrifice his sleep so someone else could sleep better because they rewarded him for it. And he was right. He was right a lot of the time. PIMCO goes on and starts managing millions first, then tens of millions, then billions of dollars.

People are just beating a path until he becomes bigger than the index. He becomes the index. The U.S. Treasury speaks to him in 07 or 08 about a bond issue. Am I right about that?

Mary: They called him more or less for macro advice. What even is going on, how would you play this and what do you think we should be doing? The headline of the Times article was “Treasury Has Bill Gross on Speed Dial.”

It was such a tumultuous period and so centered around the market where PIMCO was influential and so knowledgeable. It only made sense for them to be calling Bill and asking him. In some sense, they were kind of locked in this weird relationship where Bill Gross and PIMCO were enormous buyers of government paper, but also of Fannie and Freddie mortgages which were quasi, sort of, kind of government backed.

That promise wasn’t clear. I think every society has to make its compromises with private credit markets and how much the government will do and how much the private markets will do. In this case, it’s a weird intersection.

I think in my estimation, and I’m sure people who thought very carefully about it at the time will beg to differ, it just seems like people were like, “It’s fine all this is happening and Bill Gross and PIMCO have such influence in this exactly moment in history.” It was a weird time.

Charles: Let’s talk more about the guy. One of the things that I found in your book that was fascinating is that when Bill was interviewing people to work for him he would ask, “Do you want to be famous, rich or powerful?” When you first heard that, how did you find out?

Mary: He told me that. We were sitting over a pastry he did not eat and he told me that was his favorite interview question because it made people uncomfortable. It made them squirm. They knew there would be a right answer, but they weren’t sure what it was.

Any potential answer would reveal a vulnerability. He liked that it made them uncomfortable and got a good answer out of them.

Charles: I think it tells so much about the type of person he is. His answer to that was fame.

Mary: Fame. Always.

Charles: How do you see that as part of his downfall?

Mary: I think it’s interesting. The whole framing of the question presupposes that those are the only things, those are the values a person could or should have, which is itself an assertion. Then it leans into the one that wouldn’t lead you into money management. If you want fame —

Charles: Become an actor.

Mary: Right. Go on TikTok.

Charles: Back in the day there was no TikTok.

Mary: Oh, was there not? Okay. [laughing] But there is this kind of tension there where he’s in this unusual role for the aims he had. He did a good job with that. He became the face of the bond market. He became this influential figure. It’s upside down to think the bond market was the delivery mechanism for his fame goal.

It does end up, you know, fame is one of those things you can’t control the next headlines. You can’t generate the next headline exactly to your liking. In a sense, for someone like Bill, it’s never going to be enough. There’s never going to come a moment where he says, “That’s it. I have achieved it. I am famous.”

Then the next person become famous and everyone forgets about you five seconds later. There’s an insatiability built into these priorities. I don’t know how much that’s better than money or power. I don’t know if there’s such a thing as enough money or enough power.

But in this one I do think it wasn’t exactly fame that he wanted so much as adoration. I think he wanted to be revered, respected and adored. Then when things were more critical it was very hard for him to incorporate that and accept that.

Some people are like, “Bad news is good news. My name is in the headlines and I don’t care.” I don’t think he’s that kind of person.

Charles: He just thought it was a one-way street, it wasn’t going anywhere else. Good news, bad news, it’s not really so because there is bad PR. There is bad stuff that could be said about you. This is all I’m learning from the book. You met the man and spent days and hours. How long did this take to write?

Mary: Seven years.

Charles: You spent seven years sleeping with this idea, thinking about this. I know how it is to write a book. I will never do another one. It rips your guts out if you do it right. If you aren’t doing it right, you can get it out in a heartbeat. If you do it right, every footnote is researched. Every conversation is mined.

Here you have a guy where as you are writing this, I am reading the early chapters and knowing that his drive was for fame, it’s kind of foreshadowing when that fame is not there. I’m not trying to psychoanalyze or anything, but when the fame is not there he doubles down.

He tries to grab it. The business decisions, the people decisions, the life decisions are just not good ones.

Mary: They are not good ones. I think that’s well put. It’s a weird thing because I think he had this persona that was so effective for so long. Somehow in 2014 that changed. I think either he missed a trick and wasn’t able to see how that changed and wasn’t able to reintegrate new elements.

I don’t know. He wasn’t able to pivot in a way that would work. But I think it also made him spiral. The ways that he dealt with that only made things worse. He would bring this stuff up at meetings when everyone is trying to do job things like move the company forward and get the work done.

He’s like, “What do you think about it? Did we handle the Mohamed El-Erian resignation the way we should have?” Let’s do a post mortem on this thing he’s clearly not over with yet. Everyone else is like, “We’ve got to move on, man. This is not productive.”

In some sense, doing that post mortem can be productive. In another sense it felt like it was more personal than professional at a certain point. I think that was very frustrating for the rest of the people trying to run the company. It’s confusing for someone who had managed to keep himself together for so long.

This same personality had been working so well for 40 years and all of the sudden it’s a problem? Then it was like the dams broke.

Charles: I remember when this was happening, watching this and reading about it in the Journal. Here’s a guy who crafted his whole image for 30, 40 years or so. I kept contrasting it to Warren Buffett. It’s like if Warren Buffett freaked out publically or did some outlandish thing that was so unBuffett like.

You would say, “Wait a second, who’s the real guy here? Was that just crafted for the media and for me to be sucked in?” You felt, I wouldn’t say betrayed because I never invested with PIMCO — maybe I might have, I’m not sure. Bill Gross was the guy.

Here you have an icon and legend in the bond market. This guy was a big as Warren Buffett, there’s no question about that. In terms of his status, he was the guy. To see him start to unravel — is that a good word? Would you say that?

Mary: I think that’s right. I do think a huge part of the problem was this difference between how he was perceived in this image he crafted and then the everyday experience of him. I don’t think he was super aware of that experience. Part of that speaks to I think when you’re in power, especially so long, and you become this legend, you see yourself as this hardworking person getting the job done, getting the best execution and trade ideas.

Whereas everyone else is like, “It’s the bond king. He didn’t look me in the eye.” Your role changes. You have to notice that at a certain point. I don’t think Bill did. People around him are like, “This guy is kind of mean. This guy is brash.” The culture changed too in the world outside PIMCO.

So PIMCO didn’t change, but the context of PIMCO did. We aren’t really as keen on low-key abusive workplaces anymore. The culture is that intense bearing down on people to get the best ideas. Bill was not this adorable, folksy guy we had all been watching on television.

He is to some extent, but on the other side he’s intense and harsh and will berate you in a meeting. He didn’t notice that. Once it all spilled forth, I do think there’s this perception where we as news consumers and people who don’t know Bill that well but we see him on TV, I think everyone — there was an element of he lied to me.

Right? He was putting forward this thing. You feel betrayed.

Charles: You said it right. You feel betrayed. It’s so weird to say, but there’s a vulnerability. You start to link up with that guy. I have the same relationship with Buffett and Munger. If Buffett and Munger came out with something radical tomorrow it would crush me. It really would.

If Munger abused his wife. What are you crazy? You don’t want to feel that.

Mary: Right. You feel personally betrayed.

Charles: Especially with Gross — maybe I’ll put a link down below in the description — if you read his outlooks every quarter they are just — I don’t know. He starts with a song sometimes. Just brilliant the way he pulls so many different elementary wisdoms altogether. He makes it so easy to understand and folksy.

Then here you have a guy like, wait a second, that’s not the same guy I am reading about.

Mary: Exactly. That’s not the guy I knew. And you feel the rug pulled out from under you. I think that creates resentment and anger toward this guy that was a legend, but it also feeds more of it. People will start to look for those stories, then more and more comes out.

Then all your behaviors get translated through that mechanism. If everyone is seeing you as bad, suddenly you are bad all the time. Every time he tried to regain control of the narrative, yes, some of his decisions were super misguided and only helped to fuel the fire.

But at the same time, even if you had executed perfectly … like I am thinking about the Morningstar speech he did in 2014 where the content of the speech was so good. It was all about structural alpha, the keys to the kingdom, this is what I did to help PIMCO outperform over decades.

It was so good. But there was a little intro that was just basically unhinged and freaked people out given the context of this media storm around him it just added to the fire. People were like, “I have to pull my money out from PIMCO because this guy is not making sense.”

If he had turned the dial down on that and up on the structural alpha stuff, would he have been fine? Could he have recovered from this? Yeah, maybe.

Charles: We talked about how one made a market, built an empire. I think they were managing $200 billion or $300 billion. Is that a right number?

Mary: Yeah, the flagship fund was about $300 billion at its peak in the mutual fund. It’s wild.

Charles: It’s just amazing. The last part is: and lost it all. Just walk us through that. By the way, it’s not a matter of money he lost. He’s still an extremely wealthy guy. When you wrote “lost it all,” what are you talking about?

Mary: First of all, I appreciate this question. People have said, “He didn’t lose it all. He still has money.” And that’s all there is? Thinking about what Bill values, he valued his position in the markets, he valued the measuring stick of his track record, he valued being the bond king.

He valued the fame, the brand, the image, all that stuff we’ve been talking about. Those were his goals. I think it’s clear he no longer has those. There is other collateral. His marriage fell apart with his second wife and his relationship with the son from that marriage.

It’s super sad and it bums me out to think about. But he’s started over. He’s building himself anew. He got remarried and says he’s very happy golfing in Palm Springs. He’s always reinventing and always looking for new ways to come to the table fresh.

I think the world that he built over 40 years, this life he built including his home, his marriage, his commute into work, it was a devastating couple of years — 2014 through 17ish. No, 2019 is when he retired from Janus and threw in the towel and finally said it wasn’t going to work anymore and gave up.

Charles: You touched upon his proximity to where PIMCO was. Just share that with us.

Mary: He lived in this gated community in Laguna. Very beautiful. I never went inside the gate, but you can imagine. You drive along the highway for a little bit, you take a right and he was at his office. When PIMCO was considering other locations when they needed to move into a bigger space, they talked about other places and moving the entire company to a different state, a different campus, they considered spaces in Irvine.

In the end, it was just like but then they would have to do something new. Bill Gross wouldn’t be able to just drive his morning commute. You know, you get into a rhythm. You don’t notice you are driving the morning commute. You are thinking about other things.

Having to wake your mind up to the directions and take a new right to Irvine and navigating all this new stuff, I think he was uninterested in that. They ended up moving from one building to about 300 feet away to their current building. His was the vote that counted here.

I think he was uninterested in having to navigate a new morning commute, which I think is a bit symbolic, right?

Charles: It’s unbelievable. This was 2019 you said he retired? Since then, what has he been doing? Have you been keeping up with him?

Mary: A bit, here and there. It’s one of those things where I sat with him for so long for so many years and he was so generous with his time there comes a point where we are journalist and subject. We’re not pals. This isn’t like I’m going to get coffee with him just to catch up.

I think that’s good and appropriate. It’s a healthy separation and boundary. We email periodically. I am happy to hear he is doing well. He wrote his own memoir, his own narrative of his life, and published it two weeks before my book came out.

I think what happened there is my fact checker sent him a list of facts to check. I think he took the measure of those and thought, “That’s not what I wanted.” And chose to make his own stack of facts, which is absolutely his right. I am glad he did that.

I think he’s been engaging on some of the meme stock stuff, which has been fun. He’s continued to publish his investment outlooks. I think it’s less than monthly now, it’s more like when he feels like it. But those are still what he thinks will happen and what inflation is doing and where the best investments are, and so on and so forth. He’s keeping at it.

Charles: Mary, let me ask you the last question. Why should someone read your book? They are looking at it and saying, “Is this is a book about a tragic figure? Is this a book about investing?” What’s this book going to teach me? I’ll give you a big windup on this one.

I always look at a book and say I am going to invest three, four hours of my time, what am I going to be able to gain out of it? Unfortunately, that’s real. I don’t read fiction that much. That’s a sad thing. But I always look at a book and say, “What am I going to gain out of this?”

If I asked you that prior to reading it, I am going to tell you what I thought and what I gained out of it. When you wrote this, you said it was seven years. I know that’s a lot of work. It becomes a compulsion. It chips everything away. The person on the other end who’s reading it, what message did you want to get through?

Mary: I did sincerely want people to learn about the bond market, which I know sounds a bit blah. But I do think this narrative is such a roller coaster that you will have fun and get off at the end of the roller coaster and be like, ‘Oh, now I know what she’s talking about.”

That’s a real goal is that people come away from it better able to answer questions and feel engaged in the world around them in that way. There’s a real tangible —

Charles: But let’s be real, Mary. You could have written that book about anyone. It didn’t have to be a person. You could write a book about the bond market.

Mary: True. I have mentioned the reflective nature of Bill and some of the people around him. I think it does engender when people know people are talking about themselves in a self-reflective way, I think people join in a bit. It’s like this managerial King Lear.

It’s like this corporate showdown that becomes so petty. One of the things I found so cathartic was the pettiness in it. It’s just reassuring to know that at every income level, at every measure of success, humans are humans. We’re always going to be like, “I can’t believe this person disrespected me in this incredibly small way and I am not going to let it go.”

This reads like fiction, especially in the back half when it becomes more about that falling apart in 2014. The thing to take away from that is it’s made me think a lot about self awareness and the gap between being reflected and self aware. I think Bill was reflective and certainly no person can be fully self aware. Of course that’s just not possible.

Charles: That’s why we have spouses.

Mary: They are very helpful. But I do think, for me, that’s been a big takeaway of thinking about how you are perceived in public and what everyone is bringing to the table that you might not know about or what your actions are saying when you don’t mean it.

It’s been gratifying in recent months to talk to people who were in the room with Bill or were aware of what was going down. They are like, “It didn’t occur to me to think of it that way. I didn’t know that Bill was thinking this. I didn’t know so and so thought that.”

Being able to unfurl all the complexity of human emotion and all the little, petty disputes that we get ourselves locked into was cathartic and also a cautionary tale.

Charles: Good stuff. When I read this, I’ll give you my take on this. When I read this I knew something of the problem and how it was going to end because it was in the papers and very public, but I never saw it from an insider’s view, which you present. It is really great stuff. You did outstanding.

Mary: Thank you. I appreciate that so much.

Charles: I learned from this, don’t take yourself too seriously and be humble. Pride cometh before the fall. It’s just a matter of when you try to live for fame and try to be famous — I know money you can never have enough or power you can never have enough, but there’s a limit. Fame is insatiable. Young, beautiful, 20-year-old actresses in Hollywood. Just in another five or six years there’s going to be a new crop coming up.

You will never, ever be famous forever. There will always be some beautiful person coming up right behind you. Fame is fleeting. You mentioned when the general would come, the hero of the war would come. He would be in his chariot and march through the streets of Rome.

There would always be a slave next to him. This is all fleeting. It will pass. You look at this and this guy had everything, but it still wasn’t enough. He cared more about his outer scorecard than his inner scorecard.

Mary: That’s well put. That’s a discipline, teaching yourself about that inner scorecard.

Charles: You’re just not that important in the big scheme of things. It’s what you do for the world, not what the world does for you. That’s what endures. If you try to make it the other way around, eventually like at Morningstar, the mask will come off. That’s just my take.

I found throughout life you can’t be one way in public and one way in public. It just does not work out because eventually there will be that one moment in time. That’s why I’m so amazed — not amazed, I shouldn’t say amazed — but it’s why I revere Munger and Buffett so much.

They have been consistent both in and out. Even when I read Alice Schroeder’s book, [Snowball], and I interviewed her many years ago, there were people who wanted to say bad things about Buffett but they were waiting until he died because they didn’t want any retribution.

Even the negative parts of it were still not so —

Mary: Not so bad, yeah.

Charles: Yeah. I understand the business. It was still something where I said it’s not so crazy.

Mary: It’s a matter of characterization versus something grievously or objectively unforgivable.

Charles: I couldn’t say it better. That’s really it. It was a speed bump, it wasn’t a new highway. That’s the way I see it. Even people who aren’t into finance, bonds or anything, you mentioned it was cathartic to see everyone is human. You are right. You’re right, obviously.

Mary: Thank you. It was a scientific discovery I made [laughing].

Charles: Right, stating the obvious. For those people who look at this, they are just like everyone else. I guess we like to watch people in power or fame fall for the same things we would. That’s human nature unfortunately.

I think what’s great about this book is you are not so judgmental. You are really balanced. You really don’t bang him over the head with a hammer. Would you say that? Do you try to fight that?

Mary: Yeah, I try to fight that. I find it uninteresting if people are painted as caricatures. Okay, I don’t watch cartoons so why would I be reading this? The thing I think is interesting is when the people are nuanced, have motivation. If I am judgmental, not only can I not express all that nuance and difficulty people might be struggling with, but I won’t get it.

No one will tell me all that stuff if I am judgmental. I have to take whatever assumptions, presuppositions I have about the world and the people, I have to set that aside to be a good reporter. Go into their world, absorb what they think is important. Absorb what they need to talk about.

Because there’s always some great, big thing that needs to get out. If you can suspend your own self in a way to meet them where they are, that’s when you learn more about them and actually are able to communicate that information. I have judgments, but I am gratified to hear they are not in the book.

Charles: I didn’t see them. I didn’t feel it. Look, there are always going to be because you wrote it.

Mary: Sure.

Charles: I felt it was very balanced. There were times you could have kicked him in the head but you didn’t.

Mary: Thank you.

Charles: I think there’s a lot of restraint in getting the story right. The name of the book is The Bond King: How One Man Made a Market, Built an Empire, and Lost It All by Mary Childs. How is the book selling by the way? It’s been out since March? April?

Mary: Out since March. It’s doing amazingly well. I am so happy.

Charles: Did you think it was going to do this well? Seriously. When you are writing a book about bonds and the bond king, really?

Mary: I was definitely nervous about it. It is about bonds. Every minute of me working on it I was like, “This stuff is going to be too late. All this stuff happened in 2014. Who is going to care?” But it sold so well. People are being so kind about it. We are in our second printing already, which is amazing.

I am just feeling really lucky. People have been really nice.

Charles: Second printing in only five months, four months.

Mary: It was actually the first week. It was crazy.

Charles: So your publisher didn’t have high hopes if they put you in the second printing.

Mary: Arguably, yes. They were like, “This book is about bonds.”

Charles: We’ll print three of these and see who it goes and we’ll give her one.

Mary: Exactly. That’s not not what happened probably.

Charles: Wow, continued success. That is absolutely outstanding. Folks can catch you on?

Mary: On NPR’s Planet Money. I am regrettably on Twitter and I have a newsletter I occasionally update.

Charles: On NPR you have a podcast how often?

Mary: I probably will put out one or two a month. Sometimes three in a particularly busy month. It’s varied. As you said, the carried interest loophole. We just did a show about the Inflation Reduction Act and to what extent it actually reduces inflation. It’s kind of a wide range of economic concepts.

Charles: Beautiful. Mary Childs, continued success. Thanks so much. I really enjoyed this.

Mary: Thank you so much. So kind. This was really fun.

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