With Ariel's 20th anniversary just a year away, founder John Rogers talked to reporter Mike Kennedy about the firm's early years, Mr. Rogers' involvement in community and political affairs and a host of other subjects. They talked in Ariel's new offices on the 29th floor of the Aon Center, the third-tallest building in Chicago.
Q What are you most proud of at Ariel?
A I think I'm proudest of the team that we've built here ... that we've created an environment that would attract talented people and most importantly keep talented people. I think what's helped to make that happen is the fact that everyone here is an owner.
Q If you could do one thing differently, what would it be?
A Early on there were times I ran across very, very talented investment professionals and because I never dreamed we would be able to get to the size and scale that we are today, I sort of let them slip through our fingers. I wasn't that sure we could afford them. Two people in particular I feel as I think back, "We could probably have recruited them here if I'd been a little more aggressive and a little more visionary in my thinking."
Q Why have you and Ariel donated to political campaigns?
A I think it's partly because it's a Chicago tradition. There is a history and tradition here in Chicago where the major corporations are involved in community service and involved with the local political leadership.
As we've built our business, we've sort of used that as a model. And I think the reason is that people in Chicago have a sense that we're all in this together here. We're trying to help each other as best we can - help make this a stronger city, make it a better city.
I grew up when my parents were very involved in the civil rights movement. My grandfather was very involved in the civil rights movement. And the idea of being involved politically - to support activist candidates that are out to try to make a difference, to enhance the lives of people that are not as fortunate as you are - is part of the tradition and it's part of the commitment I feel to giving back.
Q You were the captain of the 1980 Princeton varsity basketball team (graduating that year with a degree in economics). How have you used that experience at Ariel?
A The main thing was I had a chance to play for Hall of Fame basketball coach Pete Carrill, who was an extraordinary teacher. He was especially good at teaching the importance of teamwork and helping your teammates - even off the court. I try to create an environment here that's based on a team effort. It has been sort of a passion of mine.
Q When you started Ariel, you were just 24 (having been a stockbroker at William Blair & Co. following college). Could a talented money management professional do the same thing now?
A I think if you have a unique, creative idea, sure you can go out and start a company. I also think there are more pockets of capital to help smaller companies get started than ever.
Q What are your most vivid memories of your early days?
A Coming to the office and hoping there was a piece of mail or a phone message. There was nothing to do because you had no clients and no money to manage and no one to talk to. The vivid memories are of coming back to a very quiet, empty office...And that of course leads into the first big memory. We'd been in business for 18 months or so and the city (the Municipal Employees of Chicago pension fund) decided to give us $1 million to manage. It gave us a feeling that maybe there's a shot here.
Q What are your best and worst stock purchases?
A We bought a company called DeVry Inc., which has educational schools. It was a company that had been around for a long time (that was) finally going public, and no one got the story. No one understood. We knew the management team. We understood why the story made sense and so we ended up being the biggest investor on the public offering. It wasn't a hot offering. It just sort of sat there and afterwards we bought, we steadily bought more. And eventually people started to realize that Dennis Keller and Ron Taylor, the people who managed that business, were terrific. It ended up being a company that made a huge amount of money for us.
The one I feel worst about is Golden Books Family Entertainment, the largest publisher of children's books. It should be a very good business. They have a great brand name. They have great distribution. But they had a management that was trying to do too many things at once - making too many promises to too many people - and they had very inefficient manufacturing and distribution. So we found out way too late that, in effect, it was costing them more to manufacture and distribute the product than the revenues being produced from the sales of books. It went bankrupt eventually.
Q Are you trying to get to a point where Ariel is a major money manager?
A We do feel that part of our mission is to grow the organization because that's the way to attract and retain good people. One way to grow responsibly is by using subadvisers to manage any added mutual fund products. That's a nice way to grow your assets without having to grow your investment team. That allows us to focus on being the best small- and midcap value shop.
Q What is the importance of being a civic-minded money manager?
A As one of the few companies that has in its mission statement the importance of community service, it goes without saying that we feel an even deeper commitment than ever to making sure we are giving back in a meaningful way to help others that have not been as fortunate as we have, and to strengthen this country in any way that we can.