When is the stock market going to crash?
You definitely do not want my opinion about that.
It's the question nobody wants to ask out loud, but everyone's thinking it. Today, we're asking it directly to the man whose company exists to answer it. I'm sitting down with Kunal Kapoor, the CEO of Morningstar, a man who has spent decades at the intersection of data, markets, and financial decision-making at the highest level.
Go back to pretending like you are worthy.
He immigrated from India to the United States, landed his first job at Morningstar, and never left, ultimately becoming CEO of one of the most influential financial firms in the country. Was there an interview process?
Well, I think there was a 20-year interview process.
My name is William Salvi, and this is the CEO series, where we have real conversations with real CEOs. CEOs who run credible organizations, build strong cultures, and lead companies that matter. Let's go talk to Kunal.
All right. We are with the CEO of Morningstar, Kunal Kapoor. Kunal, thanks for joining us.
I appreciate it. You are actually the only CEO that we've and we've done like 70 interviews. You're the only one that's been at the same company for your entire career.
Okay. Well, you got to find a few more owner-operator type of folks for sure.
Did you think that when you were joining Morningstar, did you have the mindset of like, I'm going to stay here for as long as I possibly can or did it just happen organically?
I think it happened organically. I mean, it's hard to imagine anything in 10-plus year increments, right? So much can happen in your life. But no, I kind of came at it with a very positive mentality, embraced the mission, and it's always felt very natural to kind of build a career here as the firm has been built as well. You know, I was an analyst for many years and that's a great job to prepare you to do other things because by nature you're thinking critically. You're really trying to think about why something works or doesn't and it transfers very nicely into the business side of things.
When did it become clear that it was like, 'Oh, I'm in the running to become CEO'?
I never really thought of it that way. You know, Joe Mansueto founded the company. He was the CEO and I would have been fine if Joe kept running the business and so I didn't kind of wake up and think about that pursuing it.
I mean, I think like I was growing and I was having a great time and when it felt natural for Joe, that's when it felt okay for me, too.
Was there an interview process?
Well, I think there was a 20-year interview process. So,
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Are you nervous?
Why are you nervous? I'm not a user. I say that line like every time. Can you tell me what Morningstar does and is?
We have three large segments. One is what I'll call the business that Morningstar grew up with, which is our managed products data and analytics capability. This is where we do our mutual fund research, ETF research. We have all the data around it. Our second largest segment is PitchBook, which is the leading provider of data and analytics and research in the VC and PE space. And then our third largest business is credit ratings. And today Morningstar is the world's fourth largest credit rating agency. We have some other really beautiful, wonderful businesses. We are one of the two largest providers of managed accounts in 401ks here in the United States. And so that's a very mission-driven business if you think about it. We're helping people retire. We have a business where we help advisors build portfolios for end investors. That's our wealth business. We are a scaling business in the indexes space. So we just bought a local company here in town called Crux, which used to be part of University of Chicago.
So that's a very big opportunity. Congratulations.
Why do you think the interest has emerged in private markets?
Yeah, for a few reasons. One, companies are just staying private longer. And so if you're an investor, you're missing a greater part of their life cycle than used to be the case. Two, private credit is growing. And people have different definitions of what private credit looks like.
Does that mean like trading on margin? Forgive me, I'm also...
Basically buying the credit of private companies. Okay? If you're looking for capital, the avenues available to you have changed quite meaningfully and so that has changed. And then if you look at how people can invest, that's changing as well. It was very hard to get access to private credit and private equity and the vehicles are starting to come into play where advisors and even retail investors can slowly have that. Now does that mean everybody should have it? Absolutely not. I'm not advocating for that. But I do think in the right type of portfolio, especially with a long-term mindset, it might be the right thing.
How does one decide when to ignore the short-term market reactions and when to treat them as like an actual warning sign?
Well, you should always ignore short-term noise. For investors, there's very little upside in trying to time the markets and it's a fool's errand to try to do that.
I am interested like because a lot of people think like the market is being held up by seven stocks, seven companies. So you do not think we're in a recession though right now?
I don't think we're in a recession. I mean the data doesn't say we're in a recession. It's clear that the market as broadly defined, i.e. the stock market in the US, has very narrow leadership right now and a few company stocks have certainly delivered outsized returns.
How active are you as a trader yourself?
I'm not. So, my most active moments tend to be when markets are doing horribly because you want to rock and roll. It's time to buy.
Had this opportunity. Yeah. I came here and when we toured this facility like these tables were filled.
It was nice. Yeah. It was good to see.
Yeah. People are meeting now, too. It's very open and casual.
Yeah. Gabe is looking at me like, 'What are you doing?' Sorry. Go back to your meeting, Gabe.
I'm doing important stuff. Do you ever worry, say if you kept growing, you got 15,000 employees, 20,000 employees. Do you ever think any of that juice would go away just because inherently it's hard to keep that when you're big?
For sure. I don't wake up and think about how many people we're going to be. I wake up and think about how we can be larger in the context of who we serve, what the size of the business looks like relative to who we have. But when people ask me what's the thing that keeps you up at night, I always say it's the next person we hire at Morningstar because it's very much reflective of whether the next person is going to come in and uphold our culture and behave in the way that we want and the independence and the trust people have in our brand. It's super important and you see it in other places where one person can mess it up and so we certainly, I certainly am very focused on it from that perspective.
I'm excited to have the opportunity to head Morningstar in 2017 and beyond. I've been at Morningstar almost two decades now and probably the most important reason I came to Morningstar was not only to feed my interest in investing but also because of the mission-driven nature of Morningstar's work. And so I'm very excited to be leading an organization that at its core is trying to do the right thing for investors.
How was it taking over from a founder?
It was great. Joe's unique in many ways. He's a good human being. But also he was just very thoughtful about how he affected the transition. And you know, one of the gifts he gave me was that he essentially allowed me to step in and he kind of took a backseat and while he's my mentor and I go to him for any big decisions or things I need a second opinion on, he gave me the space in a way that sometimes I think you hear about transitions and they don't go well because it's hard for people obviously to easily give those things up and Joe did like a really good job and he weighs into the right spots and he's chairman of the board and so we have a great relationship but that really helped a lot just the way he thought about it.
At what point will you say to yourself wow like this is a beast that I am now leading and there are certain things it's like culture or like the early level employees like there's certain things that I can't control.
You can in the sense that you're always leading by example. And part of being a great leader is when you set a tone at a certain level, the expectation is you make it flow through the rest of the organization. And so I'm not the only person responsible for interviewing, but when people see me interviewing and see my style, I hope they're learning from it, too, and they're taking it into their interviews. And so there's definitely that capacity. And one of the most important things about leadership is the example you're setting and what that means for how people follow you and whether they follow you in a way that they believe is the right way to do things. And so it's really, really important.
There's many things that are important, but I'll start by saying financial results are really important. Like, I want to just say that because it enables everything else. You have to succeed financially to do all the things you want to do for all your stakeholders, right? And so all the soft stuff matters, but financial results really do matter and we are very disciplined about making sure that we do that because it creates growth and opportunity for everybody, right? And so maybe not the answer you're expecting, but that's what I would say. I also just think it's also really important that we have a mission that people are motivated by because I think we get discretionary effort because people want to make a difference. And I think discretionary effort is awesome because it means that it's more than just a job for people. They're coming in because they want to make a difference. And guess what? That translates into better financial results in my view as well. Because people are stretching in that capacity. So, I want it to be a place where not only do we do well for all our stakeholders, but that our stakeholders also feel like we're doing it in the right way. And I think that's always been an important part of Morningstar.
What was the hardest lesson that you've experienced as CEO?
You know, Morningstar has grown over time and one of the things you find is that people generally like the concept of change unless it's happening to them. And I would say some of the hardest lessons are in leading through change because it may seem obvious to you and you may have all the right intent and all the right tools, but how you bring people along on some of those journeys can be quite challenging and difficult. And I think some of my early lessons were that I sort of just always took for granted that if I was leaning into something and setting the goals in a certain way, especially when there's meaningful change, that the org would kind of come along and it's amazing what a strong force inertia can be and also how much uncertainty can get in the way of people wanting to do certain things. Many of my early lessons on today is really around how intentional I need to act myself to get people moving on this journey of change. Just because you say it's going to be so doesn't mean it's going to be so. You have to enable it. You have to get after it. And so I think you can half-bake things very easily and you have to avoid that very much.
All right, most Googled question. So we did pull this off of Google and it's not just about Morningstar. It could be about, you know, the market or stocks. And I just want to preface this with he is not providing investment advice.
Don't you have to say that?
So, how credible is Morningstar?
