King empire

‘The Bond King’ details the rise and fall of notorious financial investor Bill Gross : NPR



ARI SHAPIRO, HOST:

Before getting into finance, Bill Gross learned he had a knack for numbers in Vegas. While recovering from a car accident in his youth, he read a book on how to win at blackjack by counting cards, then he put his new skills to good use in the casinos.

MARY CHILDS, BYLINE: Card counting enhances intuition. Gross was learning to sense the risk, when to lean harder and bet more when the odds were in his favor, and when to fold and wait for the game to heat up. Bet small; hold back, hold back. Bet big; double. It was like driving a stick shift or dancing.

SHAPIRO: This is Mary Childs, one of the hosts of NPR’s Planet Money podcast, reading from her new book “The Bond King: How One Man Made A Market, Built An Empire And Lost It All.” Mary, welcome to ALL THINGS CONSIDERED.

CHILDREN: Thank you very much for welcoming me.

SHAPIRO: So through the story of this man, Bill Gross, you tell a larger story of how American financial markets work, how people manipulate them, what happens when they implode. But I want to start with the man himself. You offer an anecdote that stuck in my head about a question Bill Gross would ask every job applicant. What was the question?

CHILDREN: It was do you prefer money, fame or power?

SHAPIRO: You have to choose one.

CHILDREN: You must choose one. Which one do you want?

SHAPIRO: How did he answer the question?

CHILDREN: His response from the start was that he wanted fame. He just wanted to be famous.

SHAPIRO: It’s not what I expected. What does that say about this guy?

CHILDREN: I think he knew he had that kind of desire for acceptance and love. He says he’s always been looking for that kind of way to draw the public’s attention to his heart and somehow fill it. Law? And you see this kind of thing as a common thing among celebrities, I feel. But it’s interesting in the context of fixed income management, which is not a super sexy industry.

SHAPIRO: (Laughs) Right. And yet he becomes famous and rich…

CHILDREN: Exactly.

SHAPIRO: …And powerful. How did he do it?

CHILDREN: He ended up being extremely good at bond trading. And it was – when he started, it wasn’t really a thing. Bonds were just pieces of paper that were kept in safes. Then you kind of clipped a coupon and got your interest payment. But Bill Gross kind of helped bring about this revolution, where you were buying and selling these bonds and saying – you know what? – It’s not so good to be bound anymore. I do not want that. I want this one. And you’re looking for capital appreciation.

SHAPIRO: Before reading this book, I didn’t fully understand the difference between stocks and bonds. Give us the CliffsNotes version for people who don’t have financial knowledge at this level.

CHILDREN: One way to think about it – a hyper-simplified way to think about it is – you know, you and I can play the stock market. We can go buy a little slice from GameStop or whatever and mount it on the moon. We can have fun. But there are huge institutional investors investing money on behalf of, you know, pensions, endowments, things like that. And they have so much money to invest. And the bond market is an even bigger and more influential playing field, I would say. They can invest, you know, $5, $10, $25, $50 million at a time, when, you know, you and I, I guess, won’t be able to do that.

SHAPIRO: You assume correctly.

(TO LAUGH)

CHILDREN: Today.

SHAPIRO: Today.

CHILDREN: Don’t bypass us.

SHAPIRO: Do you think the American financial system has become more like a Las Vegas gambling table during the decades that Bill Gross helped shape it? And is this the result of his approach to investing? I mean, how much credit or responsibility or blame does he get for this?

CHILDREN: I think more than anyone called it that. Like, it’s actually rather unusual, I think, for investment managers to say to themselves, I’m playing. You know, (laughs) they usually try to say, I do fundamental analysis. I do this and that and I make it very serious and very professional. And, of course, it is. But there is this very important element in which you make bets – you bet. And I think Bill’s attitude and his success in that area kind of created a model that other people found really admirable. And I think that’s been hugely influential in helping to develop a lot of those markets.

SHAPIRO: I often hear conversations about what sets the world’s greatest athletes or actors apart, but I haven’t often heard conversations about what sets this same type of financial investor apart. How are people like Bill Gross different from every other human in the world?

CHILDREN: I think one of the ways they are characterized in particular is that they’re emotionless, is that they can pull back from the kind of roller coaster of emotions that you and I might be on. You know, and that’s…

SHAPIRO: That’s true. Like, millions of dollars are at stake here.

CHILDREN: Like, I would sweat. Law? And they just don’t.

SHAPIRO: Yes, okay.

CHILDREN: They just don’t – as much as possible they manage to contain these emotions. And, you know, they’ll be telling you all day that, oh, I’m very, you know, stoic. I manage my emotions very well. Now, of course, there are very sharp moments in the book where this clearly breaks down. But that’s a big part of the brand.

SHAPIRO: That’s true. But the title of your book reveals that he did not stay on top of the world.

CHILDREN: A bit of a spoiler, I guess.

SHAPIRO: That’s true. Law. It’s there on the cover. And you explain the exact reasons. But more broadly, do you see this as a story of pride? Is this – the classic Greek myth of Icarus who flew too close to the sun? Or is there something else going on here? Like, what’s the biggest lesson?

CHILDREN: I think there are a lot of different lessons. I personally learned a lot of lessons from this with me. There’s a classic one that says, oh, you know, his company got too big. And I think there is some validity to that argument. You know, they were buying stuff that looked like him, what the hell is that? And how do you value it? Like, are we investing in real estate and just, like, entire buildings now? And yes, they were. So I think it’s, like, success itself is, you know, kind of a curse. There comes a time when it becomes almost untenable and impossible to manage.

SHAPIRO: Are you saying that this fall was almost inevitable?

CHILDREN: I think there’s a way to deal with that or delegate, but a lot of people who reach those heights reach them because they’re control freaks. Law? They are…

SHAPIRO: Yes.

CHILDREN: …Very micromanaging (ph). They want to keep an eye on everything. And that can be an ingredient for success. And the flip side is that you have to be able to let go. A lot of this book is about, you know, it was time for Bill Gross to figure out how to step back, and he couldn’t. So that inability, more than anything else, I think, was probably kind of the seed of the fall.

SHAPIRO: I also want to ask you about your personal experience working on this book because it describes a culture of so much entitlement, arrogance, authority, toxic masculinity – like, choose your word.

CHILDREN: (Laughs) Yeah.

SHAPIRO: There aren’t many characters that seem particularly likable. And these are people you’ve dedicated years of your life to understanding…

CHILDREN: Yes.

SHAPIRO: …And write about it.

CHILDREN: Yeah.

SHAPIRO: So how was it?

CHILDREN: (Laughs) It was a bit painful. Like, sometimes, you know, you’d have the women’s march – which was happening in the big world, and I’d be here on a golf course being introduced to the friends of a source as his girlfriend. Like, it wasn’t ideal sometimes. And part of the job here is to relate to all the people in your book, in your – you know, the world that you’re trying to write about and meet them where they are. And at a certain point, it gets super unhealthy. It was quite harmful. I’m glad the project is finished.

SHAPIRO: Then why did you persevere for seven years? Why did you think it was a big enough story to tell that it was worth putting up with all that rudeness?

CHILDREN: So to speak. Yeah, I think…

SHAPIRO: So to speak.

(TO LAUGH)

CHILDS: I think that’s partly because, you know, I’ve gone too far and I don’t understand the basics of sunk cost. I just couldn’t leave. I had already done so much. But on the other hand, I think PIMCO is such a central part of our economy, you know? And it shocked me when I started covering this company in 2014 that there wasn’t already a book on PIMCO and Bill Gross. There is often this kind of gap between what we know in the financial press and what the general public is even aware of. And trying to bring things from our little island of finance into the big world – you know, that’s what I do at Planet Money. That’s what I wanted to do with this book. It is, I think, extremely important for us to understand what is happening on this island.

SHAPIRO: Mary Childs is one of the hosts of Planet Money on NPR. And his new book is The Bond King: How One Man Made A Market, Built An Empire And Lost It All.” Thank you, Mary.

CHILDREN: Thank you very much.

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