The muffled clatter of hands on computer keyboards is the loudest sound greeting Don Phillips as he enters his office on the fourth floor of the venerable Monadnock Building. The receptionist, himself busy at two side-by-side computers, offers Phillips a hushed hello, careful not to break the morning quiet. Phillips’s voice mail will do that. When he presses the phone button for his early messages, he opens his day to an international panic–the recorded voices of half a dozen frantic reporters pleading for a callback. It’s mid-September and the world’s currency markets have gone nuts. Responding to an aggressive hike in German interest rates, the central bank of Sweden has raised its rates to 300 percent, in effect closing down that country’s credit market. The British pound and French franc are in free-fall, and the value of everything Germans make or own is soaring. The once seemingly inevitable econom- ic unification of the Continent appears doomed. Financial reporters in the U.S. are having trouble understanding it all. Coverage from the first day of the crisis was a mess. A day later they fall back to the “what will it mean to the man on the street?” angle. One of the places Americans will feel the crisis is in their mutual funds. One out of four Americans owns shares in a fund, and whether they know it or not most of them probably have some money tied up in overseas investments. Many have a good portion of their assets in funds that invest only in Europe. Phillips, the publisher of Morningstar Mutual Funds, the nation’s premier data source on the fund industry, is the guy reporters call first.

In the last seven years, Don Phillips and his colleagues have amassed an unrivaled wealth of information on America’s favorite investment tool, making Phillips an indispensable source to personal investors, financial planners, and, as his insistent phone makes clear, financial journalists. Since 1988 he has been quoted in the Wall Street Journal at least 150 times; during the week following the currency crisis his name will appear in 20 of the nation’s leading papers, including the Los Angeles Times, the Houston Chronicle, and the New York Times. October’s Fortune magazine devotes an entire spread to his advice.

The day’s calls from reporters follow a geographic progression from east to west. The first comes from New York, a Newsday columnist who wants to know which funds the currency crisis will hit hardest. Phillips hears him out, jots down the questions, and promises to call back with answers. Morningstar’s resources put virtually every fact on the industry at Phillips’s disposal. The company’s homegrown database holds three gigabytes of data, enough to fill a million manuscript pages. From a computer in his office, Phillips scans the industry for funds with a high stake in European investments.

By the time Phillips calls the reporter back, he has a good picture of the crisis’s impact on the industry, complete with statistics and fund names the reporter can mention in his column. He talks quickly, lending a childlike enthusiasm to the esoterica of finance. His bright red cheeks dimple and flush deeper when he strikes on a good metaphor; his eyes twinkle at his own jokes. Later in the day, another reporter asks Phillips to promise he will never cede his role as Morningstar’s main press contact. Double-talk and jargon are rampant in the fund industry and reporters find in Phillips someone who is clear and quotable. In the parlance of the quote hounds, he gives good phone.

Phillips’s ability to make the business of funds intelligible to a broad public has propelled Morningstar Mutual Funds on a quick climb to the top of financial publishing. Hired in the company’s infancy in 1985 by Morningstar founder Joe Mansueto, Phillips has nurtured the publication from an obscure newsletter into the top ranks of financial publishing. When he arrived, Morningstar published a semiannual survey of the fund industry. Today it offers 16 different publications, including its flagship Morningstar Mutual Funds (MMF), which appears twice monthly. Morningstar’s business has more than doubled each year since inception and this year sales will approach $11 million. Though that’s minuscule compared to media giants like Dow Jones and Reuters (annual sales $1.7 billion and $2.7 billion respectively), the company’s impact on the fund industry has been gargantuan.

In addition to his press coverage, Phillips’s charm and wit have made him something of a celebrity on the financial gab circuit. He is sought after as a speaker at virtually every large conference for personal investors and financial planners. He has appeared on the PBS financial news show Wall Street Week and was among the first guests on a new PBS financial show, Dollar Signs, slated for national distribution later this year. Phillips is 30 years old.

Joe Mansueto came up with the idea for a comprehensive survey of mutual funds after spending two years as an industry analyst at Harris Associates, a Chicago investment management company that once offered one of the country’s most respected funds, the Acorn Fund (it has since spun off). There he put his recently acquired University of Chicago MBA to work evaluating food industry stocks.

Mansueto left Harris with the idea of becoming a financial publisher. “I thought I would feel more comfortable in a small business environment,” he says without a trace of irony. Financial publishing appeared to him a “fundamentally good business,” meaning that if he did it well there was relatively slim chance of failure. He could set himself up as a publisher with little overhead, and charge the premium subscription fees–paid up front–that are common for financial newsletters.

He set off in 1984, with $70,000 of saved and borrowed money. It was enough to buy equipment and hire a couple of employees to help him gather and enter data. That was shortly after the first IBM personal computers became available. The machines then were no more powerful than an electronic pocket organizer today. Nevertheless, Mansueto, working out of his small apartment, programmed his personal computer to perform number crunching that a few years before could only be done on a mainframe. He gathered fundamental statistics on funds into the Morningstar Mutual Fund Source Book, a bound volume of computer printouts. It looked primitive, and by the standards Morningstar sets today, it was.

Mansueto introduced his service through an ad in Barron’s, Dow-Jones’s financial weekly, for $130 a year. Six hundred people signed up for nearly $80,000 worth of subscriptions. He never looked back. Two years later, he sensed a demand for a more current and in-depth service. With $200,000 in cash, virtually everything Morningstar had earned to date, and another $200,000 borrowed from family, Mansueto launched Morningstar Mutual Funds. To staff the new venture, he ran the first of the employment ads that have become a regular feature in the local classifieds. Don Phillips answered the call. Shortly afterward he was running the publication, researching all the funds and writing a short, punchy summary of each. As the publication grew in scope and distribution, Phillips moved up to publisher, a role he now plays for several Morningstar publications. At last count, MMF employed 13 analysts, supported by a staff of nearly 100 data and copy editors, programmers, graphic artists, and marketers. Thirty thousand subscribers pay $395 per year for the biweekly.

Phillips grew up in Texas. He majored in English and economics at the University of Texas and joined Morningstar after receiving a master’s degree in English from the University of Chicago. For his thesis he wrote on Robert Coover’s short story “Beginnings.” He has a taste for colorful prose, from 19th-century Gothic novels to the amphetamine-induced science fiction of Philip K. Dick, whose books he collects. An unlikely wide range of references springs up when he talks or writes about mutual funds, anything from Adam Smith to the Addams Family. Speaking with a reporter who called to share notes on financial writing, Phillips invoked a quote from the 17th-century mathematician and philosopher Blaise Pascal. Sorry this letter is so long, Phillips quoted, but I didn’t have time to write it short. On another occasion the topic of Phillips’s thesis came up. When he learned that the reporter he was talking to knew and liked Coover’s writing, Phillips’s face lit up. God, he said, it’s so nice to find someone who can talk about this stuff. But eventually the talk returned to mutual funds.

Though he never had any formal training in finance, Phillips has always seen investing as important, and now he tends to approach it with a sense of mission. When he was 13 his father bought him $100 worth of the Templeton Growth Fund (historically one of the market’s top performers). “I felt, ‘Here I was, this little seventh-grader, with a paper route, and John Templeton, one of the greatest money managers of all time, is investing my money!’ It made me feel like I was connected to something bigger.”

Phillips says his father’s gift helped him realize how important a factor time is in investing. Though he started with a small amount of money, the son managed to add a little bit to it every year. “A lot of people don’t realize how accessible saving is to them. I found out when I saw my small incremental investments grow.” His savings helped him finish his degrees without debt (low fees at the University of Texas also helped). “My savings helped me get control over my life. . . . People talk about socially responsible investing. That’s good, but they should also be thinking that investing itself is socially responsible. It helps one become self-reliant. If you can take care of your financial needs, you’re empowered. People who have a lot of debt, but no savings, find that there are all kinds of decisions they cannot make. If I had a lot of college loans, or big consumer debt, I could have never accepted a job to work for Morningstar when it was starting up.”

Phillips tells the story of a trip across Texas he took recently with his mother. She had been divorced for ten years, during which time she didn’t work. Instead she lived on a small income generated by property she obtained in her divorce settlement. “She kept hinting, uncomfortably, that she needed some financial support,” Phillips says. “I helped her out by putting some money in some mutual funds for her. Yet she had never worked, and never invested. Her boyfriend persuaded her to take the money out and invest it in the restaurant owned by a friend of his. Though she knew little about that business, she agreed. The restaurant quickly went bust, and now all my mother has to show for it is a few used ovens.” If his mother had taken a more active interest in her finances, Phillips believes, she could have avoided the disaster. “Taking care of your own financial needs is not only the socially conscious thing to do, it’s the polite thing to do,” he says. Last year Phillips wrote an op-ed piece in the New York Times about investor illiteracy. In it he linked personal investment to the fate of the nation. “Investing, by its very nature, is a socially conscious act,” he wrote. “On a broad level, investing provides the capital that finances goods and services–the books that make our lives fuller, say. On a more personal level, the discipline of investing–rather than spending–insures that you are an economic benefit, rather than a burden, to society. Obviously, one individual’s investing won’t cure all our social ills; neither will one person’s recycling solve our ecological problems. But in both cases, the solutions start at home. That Americans will rally for a social cause like the environment but feel no remorse for their lack of savings demonstrates our investment illiteracy. Many Americans do not make the connection that spending to the limit, living beyond one’s means, has social consequences, reducing America’s competitiveness by cutting into funding for research and development, for example.”

Like many successful entrepreneurs, Mansueto and Phillips had a good idea, great timing, and a little luck. In the mid-1980s America’s interest in mutual funds was taking off, creating in a short time perhaps the biggest shift of personal financial resources in American history.

A mutual fund is basically a pool of money gathered from individuals and invested by a professional money manager. In return for the manager’s services, the individuals pay a fee. Different funds appeal to different investors’ personalities and styles. One of the most popular types is the “money market” fund, which invests in very safe, short-term bonds and offers yields a little better than the typical bank savings account. For many investors a money market fund is the first step in mutual fund investing. Beyond that the variations are limitless. There are funds that invest only in federal-government bonds, in tax-free municipal bonds, in blue-chip stocks, in foreign stocks, in the stocks of small, risky companies in emerging industries, in stocks of gold-mining companies, biotechnology companies . . . Everyone, from the pinkie-ringed gambler to the old lady who socks money away in her mattress, can find a fund to like.

And over the last 15 years, a great many people have. The amount of money Americans invest in open-end mutual funds (there are two basic classes of funds, open- and closed-end, of which the former is by far the most popular) has increased 18.5 times, from roughly $42 billion in 1977 to $777 billion as of June 1992. Over the same period, the number of funds has grown more than sixfold, from 341 to 2,175. Add in closed-end funds and the total invested is $1.3 trillion in more than 3,400 funds. Dian Vujovich, a financial columnist and author of Straight Talk About Mutual Funds, points out that the total investment breaks down to $4,000 for every person in the United States. A quarter of the American population, some 60 million people, have money invested in some kind of mutual fund. That places funds way ahead of outright stock ownership. According to the New York Stock Exchange, 29 million Americans, or about one in nine, own stock in their own names.

Financial experts cite a number of reasons for the rush to mutual funds. The Investment Company Institute, a trade organization for mutual fund managers, attributes the growth chiefly to sustained worldwide economic growth. Though that may have appeared to be a good reason in the 1980s, the worldwide economic slowdown does not seem to have cramped the growth of mutual funds. Another explanation offered by the industry is the growth of individual retirement accounts and company savings plans. Statistics from Fidelity Investments, the nation’s largest family of mutual funds, show that of the $185 billion it manages, 40 percent is in retirement accounts. The continued strong bull market on Wall Street also makes mutual funds attractive. In the face of low bank and money market interest rates, people have entrusted their money more enthusiastically to more-speculative investments.

There are other reasons for the industry’s growth, though, that a professional association might not be keen on offering. Among them is a growing feeling among small investors that Wall Street is a game rigged to favor big players. Wild swings in the market have spooked investors who once would have selected stocks themselves or with the advice of a stockbroker. Professional money managers, armed with number-crunching computers and instantaneous access to information, have transformed the way the market game is played, creating an environment that leaves average investors feeling like fat groupers in a shark pool. Insider trading, brokerage house scandals, high sales commissions, and other discouraging factors have made mutual funds seem like a good alternative. Their great advantage over pure self-reliance, or even trading stocks and bonds with the help of a broker, has traditionally been that they offer a way for relatively small players in the markets to diversify their investments like the big boys do–to spread their investments over a large number of companies, thereby lessening the damage that one company’s failure can do to the portfolio. But in the 80s this advantage was joined by another almost equally compelling: a mutual fund gives its investors the services of a professional manager armed with all the latest tools of speculating and investing. If it’s now a market of sharks and groupers, mutual funds are the means by which a bunch of groupers can hire themselves a shark.

Don Phillips offers still another reason for the popularity of mutual funds: consumerism. “The mutual fund industry takes saving, something our generation of Americans has been pretty bad at in recent years, and dresses it as the one thing we have a real genius for: spending,” says Phillips. “The one thing our generation needs to do more is save, and funds make it easy to do so. Unlike stocks, mutual funds are sold in flat dollar amounts. . . . Investors get statements each month which show their account balances, and they get brand names.” These days many funds are marketed in much the same way as resorts and cars are, with ads touting good “performance” and with slick brochures showing active, attractive young models enjoying the good life. The Fidelity group, parent of 156 funds, recently launched Worth, a handsome magazine that presents sophisticated financial advice in a layout and prose style resembling a popular life-style magazine. Ads for Italian clothes are sandwiched in between those for mutual fund families. The effect is something like a GQ for money. Selected Funds, a Chicago-based group of funds, runs ads in Gourmet and on WFMT, offering its services for people who’d rather invest money than time. It’s practically an invitation to buy on impulse.

The competition among funds for investor dollars is intense, and too often funds appear or even claim to be something they are not. Funds that purport to insulate investors from risk may in fact be highly speculative, achieving their “stable” interest rates, for example, by incurring currency risk abroad. During the European financial crisis, some investors learned that their high interest rates were offset by the declining dollar values of the French and British bonds held by their funds. (Interestingly enough, Don Phillips warned this might happen in a commentary he wrote in June 1991, 15 months before the crisis.)

Most funds, of course, are represented and sold honestly, but with thousands of choices available, each striving to present itself in the best possible light, the market can be daunting, and reliable, objective information on it hard to come by. Below the level of advertising and promotion, the industry tends to communicate in a dry financial terminology aimed more at MBAs than average investors. Phrases used to describe funds–high cap, low cap, strategic income, relative value equity–can leave a lay investor dumbfounded.

That’s where Morningstar comes in.

The traditional sources of information on funds are retail stockbrokers, who typically claim their recommendations are based on the work of the research departments of their firms. Relying on brokers’ advice, though, can prove counterproductive. They only sell “load” funds, which charge investors an up-front fee (the load) out of which the brokers earn their commissions. Brokers also tend to favor funds managed by their own brokerage houses, which severely limits an investor’s choices. For these reasons and others, much of the growth in the mutual fund industry has been among the no-load funds that are marketed directly to consumers. And Morningstar has become the consumers’ report on the industry, providing an independent, objective guide that describes and rates the performance of some 2,500 funds.

There was information on funds available before Morningstar came along, but it was scattered and comparatively superficial. One can learn a great deal about funds from the periodic reports and prospectuses they are required to publish, but to get those publications one must request them individually or already own the funds. Consumer investment magazines like Money have long recommended and profiled funds, but only sketchily as part of periodic surveys of top performing funds. Probably the best one-stop source for information was the Guide to No-Load Mutual Funds, published by an investor-run organization, the American Association of Individual Investors (AAII), but it does not cover load funds, appears only annually, is less detailed and less comprehensive than Morningstar, and until recently did not have an independent data base against which to measure funds’ claims about their performance and risk levels. In October of 1991 Kiplinger’s Personal Finance magazine rated the AAII’s guide as the best low-cost guide for average investors, but in doing so it put MMF in a class by itself. AAII’s publications now reflect revisions inspired by Morningstar.

John W. Rogers Jr., who runs Ariel Capital Management, Inc., a Chicago-based fund management company that oversees $1.6 billion in assets, was an early subscriber to Morningstar. In describing his enthusiasm for the publication, Rogers, like many fund managers given a chance to talk on the subject, borders on rhapsody. “What Phillips and Morningstar have done from the outset,” he says, “is provide readers with everything they need to know about a particular fund on a single page. It’s an innovation which in itself is great, but they’ve also done it in a superbly thoughtful and easy to understand way.” While individual investors use MMF to weigh the performance of the funds they own, or might buy, for Rogers it offers a quick way, and the only way, for him to measure the portfolios he manages against those of his top competitors. “Another thing about Phillips,” Rogers says, “is that he is very responsive to customer requests. Not only can you get him personally on the phone–how many publishers will talk to you directly?–but he will actually incorporate your suggestions into the publication. He makes Morningstar very customer oriented, something companies must be in the 1990s. At least the ones I think will lead.” Rogers is not the only person at Ariel who is impressed. He says when his analysts deal with Morningstar they come back so dazzled by the company that he worries sometimes about staffers jumping ship.

Another fan of Morningstar is Donald Yacktman, who built a reputation as one of the country’s top money managers while managing the fund called Selected American Shares, flagship of a fund group run by Chicago-based Kemper Financial. Yacktman started his own fund last year. “Morningstar may be the only publication that reflects what I’m doing with my fund,” Yacktman says, “because the analysts followed me before and know my record. Because Morningstar looks so closely at the funds, it is really the only publication that provides anything like a complete picture. It really is a class apart.”

The service Morningstar is compared to most often is Value Line, which provides in-depth information on individual stocks. Value Line has offered its service for 25 years, and it, like Morningstar, has built a reputation on concise, independent analysis. But Value Line never offered a similar service for mutual funds–perhaps, Phillips thinks, because it manages its own fund and does not want to taint its credibility. Phillips says customers regularly suggest that Morningstar use its expertise to lead a fund, but he says he’ll never do it. “One thing you can’t buy is credibility, and we have to do everything we can to keep ours. It’s really our chief asset.”

Greg Morgan, a Texas-based financial planner, describes Phillips as the number-one consumer advocate in the fund industry. Morgan manages money for a select class of high-income individuals, those with annual salaries of $250,000 or more. He answered one of the first ads for a Morningstar subscription and has used nearly all the company’s publications since. He now uses Morningstar Mutual Funds OnDisc, a CD-ROM edition that offers an expanded version of the company’s data base for use with computers. Morgan uses it for high-tech comparison shopping. “Morningstar is the only service that lets me measure fund performance against other investments, like Treasury bills,” Morgan says, referring to the U.S. government’s short-term bonds, whose interest rate is a favorite standard of performance for money managers. “The services of other reporting companies are too tied to the funds to make them credible. Morningstar’s strength is that it makes its own classification of funds based on their actual holdings.” Lipper Analytical Services, the main fund-rating service before Morningstar came along, is not as useful, according to Morgan, because it allows funds to categorize themselves. If a fund claims to be a “growth and income” fund, meaning it invests mostly in well- established companies whose stocks pay good dividends, Lipper groups it with other funds that claim the same. But Morgan says that fund managers, who like to perform at the top of their categories, are often tempted to place themselves in categories they compare well in. When Morningstar came out with more objective data, it became clear how many funds were misrepresenting themselves, something the other services never picked up. Morningstar does for funds more or less what Consumer Reports does in rating cars. Even if Ford says the Escort GT is a high performance car, it will get reviewed with the economy subcompacts. “Morningstar has always taken the high moral ground in approaching what they do, and from my perspective they are above reproach,” says Morgan. “Because Morningstar is willing to take issue with the funds, Phillips has become the best received and respected spokesman for the investor in the business.”

The bit of luck involved in Morningstar’s success story concerns the audience, which Mansueto misjudged originally. At the outset his idea was to produce a relatively expensive publication for people like himself–individual investors sophisticated enough to understand that a stiff subscription price can easily be offset by one important bit of investment information. As it’s turned out, though, such individual subscribers constitute only about a quarter of Morningstar’s subscription base; for every one of them there are two financial planners like Texan Greg Morgan–a huge market that Mansueto and Phillips had not anticipated when they began. Tapping into the needs of a whole profession was like hitting gold while mining for copper. “We had no idea that this huge body of financial planners was out there,” Phillips says, “but there they were, many making investment decisions for the kinds of people we thought would be Morningstar customers. Like individual investors, financial planners have much more to worry about than stock picks. They must concern themselves with estate law, educational planning, the psychology of their clients. Funds appeal to them for the same reasons they do to the general public–instant diversification, professional management–but they need to provide their clients with good information on their picks. A large number of people see MMF for the first time when the financial planners send them a page of it.”

Many individuals who invest for themselves use Morningstar’s service in public libraries, according to Phillips. Indeed libraries constitute one of the largest subscription bases for MMF, which is often the most used financial reference in a library’s collection. One librarian from southern Illinois wrote Phillips recently to describe a long battle he had convincing his superiors to spend the $395 needed for a subscription. He prevailed and now felt vindicated because MMF had become the single most used publication in the library. At the public library in suburban Vernon Hills, the reference librarian reports that on evenings and weekends MMF is in constant use. In Houston, library patrons waged a one-year campaign to get a subscription.

As Morningstar became more sophisticated in presenting and analyzing data, and the size of its professional audience became clear, Phillips and Mansueto feared they might be shooting over the heads of the largest population of fund investors: those still on the upward slope of the learning curve. So in September Morningstar introduced a monthly newsletter that leans in their direction. Called The 5-Star Investor, it aims at educating the public by drawing on the experience of the Morningstar staff in educating itself. The newsletter is designed to be a user-friendly primer, offering tips on shopping for funds and building a portfolio. It also rates and offers summary information on the top 500 mutual funds. Its price, $65 a year, is also friendlier than that of its more substantial cousin. After only three months of publication, it already had enlisted 12,000 subscribers. Virtually all of them, Phillips says, are the kind of individual investors MMF was initially meant for.

Though Phillips works in the heart of the financial district, just blocks from the Midwest Stock Exchange and the Chicago Board of Trade, he seems a world removed from it. When a friend asked him recently to suggest a restaurant near the Board where they could meet for lunch, Phillips could not name a single one. In a town where floor traders and retail brokers make deals, tell war stories, and sit out slow days in the area’s always crowded coffee shops, Phillips’s culinary ignorance is a true sign he works in a different loop.

He walks to work from Dearborn Park with his wife, Anne, who works at the Federal Reserve across from the Continental Bank Building. They share the vocabulary of finance, mixing a review of the morning’s economic news with updates on their 18-month-old son, James.

Phillips’s office has a Spartan, just-moved-in look. Besides his phone and computer, the only departure from the room’s white walls is a narrow shelf of business books and a framed poster of an Edward Hopper painting Phillips brought from home. The halls and offices outside look even less settled. Morningstar is an odd bird among financial businesses, one that doesn’t dwell on the image of success–or, perhaps, hasn’t yet had time to. The plastic smell of newly installed polyester-lined room dividers mixes with the slightly burnt aroma of computer diodes at work. Boxes of unpacked computers line the walls awaiting new employees. Except for a few prints and paintings purchased under a new arts acquisition program, there’s nothing to distract employees from the business of data gathering. Like information-age Rumpelstiltskins, they spin raw data into reams of analysis, working phones, faxes, and keyboards without interruption.

A pause in the pace and the workers might never catch up. Together they generate 16 different products, each covering a huge variety of investments. They must update Morningstar Mutual Funds every other week, revising perhaps half a million different statistics, all of which must be tracked down, checked, and checked again. In addition they generate a written analysis of 125 funds for each issue, based on the numbers they gather and on regular interviews with the fund managers.

The employees, like Phillips himself, are relative newcomers to the field of finance. “When we first started out,” Phillips remembers, “we were looking for people with some familiarity with mutual funds. We thought we could teach them to analyze and write. We were wrong. People without analytical minds just could not be converted into analysts.” After a brief experience hiring employees with business degrees, Morningstar started aggressively recruiting recent liberal arts graduates. The applicants best suited for the work turn out to be from disciplines that call for a lot of writing: English, history, philosophy, and so on. Applicants are asked to produce writing samples (a good cover letter will do) and transcripts, both of which are rigorously checked for authenticity.

“We’re value shoppers,” says Phillips. “We can get a very bright–top of the class–liberal arts major for the same price other businesses pay for a C+ business student.” Though Phillips and his colleagues talk about failed employees, in fact there have been few. Since Morningstar started, only two employees have ever been asked to leave, Phillips says, and there has been virtually no turnover among the rest.

Succeeding requires mastery of a highly specialized field. Nevertheless, Morningstar has no formal employee training. “We’ve been too busy growing to put together a structured program,” says John Rekenthaler, an early recruit who is now editor of MMF and has taken over the responsibility of breaking in new employees. “Instead, we start them with background reading, and ask them to sit in as other analysts interview fund managers. We try to get them writing pretty quickly and have their work reviewed by a more experienced analyst. Eventually analysts are expected to cover 10 to 15 funds per issue, and understand why they have performed the way they have. They must look at past performance and consider it in context of how the fund is currently positioned. After that, they can set a range for future expectations.”

Morningstar also gives employees a reason to take a personal stake in the fund industry. The company’s pension plan matches employees one to one on any amount they wish to donate from their salaries. The money can be divided into eight mutual funds, picked by the management, in any proportion the employee wishes. (The funds are: Lindner Dividend, Fidelity Disciplined Equity, Janus Venture, Gabelli Asset, Gabelli Growth, T. Rowe Price New Income, Vanguard Money Market, and Vanguard World-International.) Since the plan was instituted, Phillips says he’s noticed the workers have become more committed to their jobs.

Committed they certainly are. The average Morningstar employee is under 30. Only a handful are older. But despite their youth and evident satisfaction with the company, the employees are a strangely silent lot. Compared to other offices so heavy with youth–an advertising agency, public relations office, or some of the trading firms on LaSalle Street–Morningstar is devoid of playfulness. There are no cartoons on the bulletin boards, no goofy calendars on workers’ desks, no water coolers to congregate around. The day of the European currency crisis was also the day following a sold-out U-2 concert in Tinley Park. Phillips heard a large contingent from Morningstar was there, but there was no sign of it in the office, except for one analyst whom Phillips passed in the hall and asked directly about the show. Disappointing, the analyst said, excusing himself to crunch more numbers.

Four years ago, Phillips and Rekenthaler participated in a fantasy baseball league. The two would talk throughout the day about their strategies for building their teams, recruiting and trading players. Batting and pitching averages were memorized. They studied box scores like votaries, looking for hot prospects and good clutch hitters. Phillips finished at the top of the league one year and Rekenthaler the next, demonstrating their facility with numbers. They both dropped out when their work responsibilities exploded. Now when they catch each other in the hall, they talk with the same enthusiasm about share prices, money managers who have changed jobs, and funds’ long-term prospects.

When Joe Mansueto hired Don Phillips he saw in him a man who could take his idea for a financial information service and bring it to a wider public; someone who could take a sound business plan and ignite it with passion. The choice seems to have been a perfect one. In Phillips he may have found an alter ego, albeit a more gregarious one. Phillips is for him the kind of spokesman Thomas Huxley was for Charles Darwin, a translator and enthusiast of a formidable idea. Interestingly enough, both Phillips and Mansueto are students of the Apple Computer Corporation, and of how supersalesman Steven Jobs brought his partner Steve Wozniak’s idea of personal computing to the general public. Mansueto himself rarely talks to the press or Morningstar’s loyal public. Not because it makes him uncomfortable, he says, but because Phillips is so good at it. In person, Mansueto, a tall, fair man, tenders a gracious reserve. He talks with the peaceful, studied confidence of someone who knows for himself the answer to all the Zen koans, but like a Zen master can’t quite describe them. His company’s name comes from the last line of Thoreau’s Walden, “The sun is but a morning star.” His office, occupied by only himself and a computer, is simple even compared to Phillips’s. Mansueto says his role at Morningstar is to think strategically of the big picture. At a recent conference Morningstar sponsored for 500 financial planners, Mansueto’s company was praised by speaker after speaker, the superstars of the fund industry. Nevertheless he gingerly avoided the limelight, preferring instead to walk the hotel halls listening for clues on where to take the company next.

Mansueto also saw in Phillips the model of a Morningstar subscriber, an intelligent lay investor with a keen interest in where his money was going. Phillips, for his part, sees the publication as the investment world’s democratizer. He talks about it the way Mortimer Adler talks about the Great Books or Ross Perot about economics in his half-hour TV lessons: virtually anyone with an interest can understand this material; misconceptions are easily corrected; people have a right to the information. “Too much market analysis runs on the Jean Dixon syndrome,” says Phillips, “which trumpets successes and ignores failures. Elaine Garzarelli [a stock analyst who appears frequently on financial news shows and was featured on the cover of the November issue of Fortune] got famous as the “analyst who predicted the crash,’ because she announced in the fall of ’87 that investors should have strong cash positions and be out of their stocks. Well, she was right then. But if you look at the fund she set up to capitalize on her fame, you’ll notice that it has consistently underperformed the market. We show investors the whole record of a fund’s performance, thereby helping them make informed decisions.”

Morningstar has several new products recently out or on the boards, including a publication rating Japanese stocks and a project that will syndicate Morningstar’s data to newspapers nationwide. To all of this Phillips brings the same earnest sense of mission. “Though we deal a lot in numbers,” he says, “they show a world unfolding, revealing in significant ways what is happening to people, mostly very intelligent, important people, showing how assets move in and out. It’s high drama, and serious drama. The stakes for the players are high. We help people see the situation and find their comfort level in a world of infinite choices.”

By four o’clock the phone calls have begun to taper off. The currency markets are long closed and reporters seem finally to have caught their breath. Even the west coast papers are approaching their deadlines. Phillips shows some signs of wear and his patter about the crisis has started to sound a bit rote.

A visitor relieves him. A money manager, I’ll call him Williams, has traveled from Florida to meet Phillips in the Morningstar offices. More and more fund managers are making the pilgrimage to Chicago to meet the folks at Morningstar. For them it’s a chance to see who’s shaking up the industry, and for Phillips it’s an opportunity to put a face to the numbers he’s seen crunched over the years. Williams heads a firm that manages portfolios for other fund companies. He enters Morningstar’s conference room buoyantly, then pauses as if to look for the rest of the objects that might fill the space. The most notable thing in the room at the moment is Williams’s gold watch, which he checks frequently and nervously, worried perhaps that he’s taking up too much of his host’s time.

The money manager makes it clear at the outset that he is a fan of Morningstar, and that he has no complaints whatsoever about the way the analysts have evaluated him. He also stresses that he doesn’t want to seem like he’s come to plead his case or sell his investment approach. Phillips shakes his head as if to say “don’t worry,” putting the manager at ease. Williams offers his history. He had an idea for a fund that would grow slowly but appreciably over time, aimed at investors’ retirement portfolios. He explains why he thought it would work, and in the process displays an impressive knowledge of business cycles, tax policy, and the stock market. More impressive still is his memory of the fate of the market at any given time. He seems able to link long-past and largely forgotten events in the news to the movement of individual stocks. He’s a market raconteur and he grabs his host’s attention. Phillips’s demeanor changes. He lightens up and laughs. The two swap stories on funds and managers, telling of blowhards, geniuses, promises kept and broken. They share philosophies and offer respects to the industry’s heroes. Passions on both sides run deep. For the day, at least, Phillips has thrown off the role of translator to the masses. Like a school music teacher playing a weekend gig with pros, he’s jamming.

Art accompanying story in printed newspaper (not available in this archive): photos/Mike Tappin.