The Century of Capital Group

“Ted manages 50 billion. I manage five billion. If our investment results are the same and our tenure at Capital Group's the same, our bonus is the same. Meaning we don't incentivize a money grab to manage as many assets as you can. You optimize it by allocating it to individuals in the way that best suits the portfolio and their style. You don't have to manage a lot of money to do well for yourself. You have to do well on the assets we ask you to manage.”— Mike Gitlin

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Leadership & Management · Business & Entrepreneurship · Psychology & Behavior

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Pay on results not AUM: eliminates asset-gathering perverse incentive

“The three options we had at the time were very simple: buy something, build it ourselves or partner. Buying something is hard in our culture. Integration of another entity into the Capital Group culture would be super disruptive. Building it ourselves, we have 3.2 trillion of client assets and 400 investment professionals focused on that and them. Taking some of them out to do something entirely different wouldn't be great for our existing clients. So it left us with partner.”— Mike Gitlin

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Strategy & Decision Making · Business & Entrepreneurship · Leadership & Management

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Buy or build risked culture; partner sacrificed economics for outcome

“In the '50s, Jonathan Bell Lovelace had a heart attack, survived, came back and said, 'We have to manage money differently. We can't have key person risk. What if I hadn't come back? What if I hadn't survived my heart attack? That wouldn't have been great for our clients. Let's think of doing this in a different way where there's no key person risk. And we have other folks also expressing their conviction in portfolios.' So the Capital system was born in 1958 coming out of that.”— Mike Gitlin

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Strategy & Decision Making · Leadership & Management · Operations & Execution

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Near-death experience drove distributed decision-making model

“You have to stay small when you're big. What the company has done over time with that, we do have one fixed income unit that manages about 625 billion. We have a solutions group that manages about 625 billion. In the equity group, we have three separate entities now. One of the reasons we did that was so that as assets continued to grow, the investment culture and communication stayed small. There's about 100 investment professionals in each of those three equity units. There is a Chinese wall.”— Mike Gitlin

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Operations & Execution · Strategy & Decision Making · Leadership & Management

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100-person cells with walls: scale without communication breakdown

“I interviewed Rob and I said, 'What's your competitive edge? What makes you different?' He said, 'Time.' One word, time. And he's measured on his eight-year result, first and foremost in his quantitative bonus, not his one-year result. What a massive advantage for you to be calm and build conviction and not have to be so reactive and selling at the whim of someone else's short sale, for example. You can invest in your long-term conviction.”— Mike Gitlin

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Strategy & Decision Making · Psychology & Behavior · Economics & Markets

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Eight-year measurement horizon creates behavioral edge

“When JBL founded the company, he said in 1931, 'When my grandkids, who didn't exist at the time, when my grandkids pass away, no one in the Lovelace family should own any bit of Capital Group stock.' There's very few founding families that would say that. His point was it should be owned by the people who are working at the company at the time who are driving the client outcomes. That is a very powerful statement to make nearly 100 years ago.”— Mike Gitlin

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Leadership & Management · Business & Entrepreneurship · Philosophy & Reasoning

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Founder designed against dynasty; ownership for operators only

“He kept the entity 100% owned by himself until it was profitable. He didn't want anyone else to share in any of the losses that would come in any calendar year. Only after, in the '50s, Capital Group became profitable, did he begin to sell little pieces to people at the company to share in the profitability as supposed to share in the losses.”— Mike Gitlin

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Business & Entrepreneurship · Leadership & Management · Economics & Markets

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Founder absorbed losses solo; shared profits only after breakeven

“No investor should want to be with a company where you're left with a single individual's 300th best idea. That's what happens. When you're a sole practitioner in a strategy and you're managing a lot of money and you're diversified, you could be left with someone's less high conviction parts of the portfolio, the bottom 25% of their conviction names. Why would you want those in a portfolio?”— Mike Gitlin

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Strategy & Decision Making · Operations & Execution · Leadership & Management

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Multi-manager avoids dilution: only high-conviction ideas survive

“How many committees report to management committee? How many committees report to the capital operating group? The number of committees that report to both of those oversight groups is down 50% in the last handful of years. Intentionally saying, 'You don't have to climb up the mountain and come to Capital Group Management Committee and have us bless something. We trust you. It's through empowerment, through structure and governance.' Come in semi-annually. Don't come in with 118 pages.”— Mike Gitlin

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Operations & Execution · Leadership & Management · Strategy & Decision Making

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Cut committees 50%; two-page check-ins replace 118-page approvals

“Someone works in a job in their 20s. They go to business school in their late 20s. They come for a summer associate program in business school. We make them a full-time offer. They join Capital Group at the age of 28. And they're an investor, because if you join as an analyst, you're managing money right away.”— Mike Gitlin

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Leadership & Management · Operations & Execution · Business & Entrepreneurship

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Six-month ramp: study history, meet teams, present portfolio

“The hurdle is high for a reason. You have to go through our strategic product development process. Is it good for the clients? Is it sustainable or is it a fad? Do we have the resources where we can add value relative to Benchmark and other active competitors over the time? You have to answer a lot of questions before you get there. It's the reason why we'll have 3.”— Mike Gitlin

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Strategy & Decision Making · Business & Entrepreneurship · Leadership & Management

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High launch bar creates fewer, better products; rejects fads

“Our technology team has done an incredible job building something called Capital Connect. We've also digitized all 94 years of our written physical library. Now, if someone wrote a report on ExxonMobil in 1957, it would be in the system. Structuring that data has been important. Capital Connect being that system that takes the whole history of Capital Group in 94 years and that proprietary information and makes it available to you in a usable format just makes you smarter.”— Mike Gitlin

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Technology & Engineering · Operations & Execution · Business & Entrepreneurship

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94 years of research digitized: knowledge compounds across generations

“I had an institutional client meeting in Asia last year. And I remember sitting down with a CIO and I said, 'Look, think of us as a constant and a sea of variables. We're focused on managing money the right way. We're not buying companies. We're not selling ourselves. We're hyper focused on managing money.' And he banged the table in this super positive way and said, 'Thank God.”— Mike Gitlin

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Strategy & Decision Making · Business & Entrepreneurship · Leadership & Management

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Stability is competitive edge when competitors chase scale via M&A

“Most people, if you give them time and you have the right intake process and the right mentoring process, most people make it, but not everybody. We don't have a standard of perfection where everybody makes it. You can recognize after five to 10 years, if someone's not able to generate differentiated investment outcomes, they won't survive at Capital Group forever, but we give them five plus years. It's not as if we try to make that determination after one or two years.”— Mike Gitlin

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Leadership & Management · Psychology & Behavior · Strategy & Decision Making

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Five-year runway before judgment; longer horizon improves hit rate

“We launched something called Career Hub. You can think of it as internal LinkedIn. With AI, not every single job at Capital Group today will be the same in three years, five years, 10 years. Instead of just acknowledging that as a truth, let's figure out how to make sure that we know what our associates want to do in their career, regardless if their job's going to change or not. Create your profile. Here's what I do today. Here are my skills and here's what I may want to do in the future.”— Mike Gitlin

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Leadership & Management · Technology & Engineering · Operations & Execution

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Internal talent marketplace anticipates AI-driven role evolution