How time in Navy, Vietnam shaped a budding billionaire’s life
Stars and Stripes July 23, 2015
Three years in the Navy during the Vietnam War was a good investment of time for billionaire Bill Gross.
Known as the “bond king” who founded the trillion-dollar global money management firm PIMCO, Gross cites his naval experience as the most formative time of his life — despite enduring some of his most humiliating failures and biggest blunders while serving from 1966 to 1969.
Gross said one particularly nerve-racking experience at sea was a “seminal moment” that shaped the way he did business for decades after serving.
“We were in the middle of the Pacific coming home from Vietnam,” Gross, 71, recalled recently in a telephone interview from his office in Newport Beach, Calif., where he now serves as portfolio manager at Janus Capital.
Gross was serving aboard the USS Diachenko, a 306-foot amphibious transport ship with a crew of about 120 sailors. Around 2 a.m., while standing the “midwatch,” he detected a large freighter heading straight toward their vessel.
As protocol required, he rang up the ship’s captain to inform him of the situation. The skipper, Lt. Cmdr. Sam Steed, whom Gross described as an “old salt in his 60s,” simply told his chief engineer to call later. After 10 minutes, Gross called again, reiterating to the captain in naval terms “contact constant bearing, decreasing range,” which meant the two ships were on a collision course.
Gross recalled how Steed finally left his quarters: “He staggers up in his skivvies, plops into the chair and grunts, ‘I’ve got the deck. I’ve got the con,’” meaning the skipper was at the helm in command of the ship.
It appeared to Gross that the two vessels were definitely going to collide, but since no orders were given to change course, Gross kept silent, figuring Steed knew what he was doing.
“He did nothing, and I did nothing. And it passed like 20 yards to the stern, about as close as you can get. And just as it’s passing, the captain wakes up and says, ‘What the F was that?’ It became apparent that he was asleep the whole time. … It was one of the most incredible things I’ve ever seen. We almost got sliced in half in the middle of the Pacific.”
Gross said he and the captain were “scared to death” and knew they would have been court-martialed if the ships had collided.
Though Gross calls the episode “the big mistake” of his life, he also views it as a significant learning moment. Junior officers bear responsibility for notifying superiors of exactly what’s going on — even if the superior is a gruff old salt who commands in his skivvies.
That experience, Gross said, taught him to speak up and to always communicate clearly, crisply, directly, immediately.
“That became the hallmark of how I did things,” he said.
For 35 years, Gross said that communication style worked well for him at PIMCO, where as chief investment officer, he was essentially the captain of the ship. “To say what I thought, to make sure everyone understood me … We didn’t have any collisions, put it that way. We had lots of smooth sailing.”
But he said that style is now viewed as too blunt and abrasive by a new generation of young adults “raised to be soft and gentle, congenial and collegial.”
Gross left PIMCO in September 2014. According to a report in the New York Times, top executives grew tired of his leadership and management style, and Gross decided to exit the company he founded. In January 2015, Fortune magazine quoted Gross saying he was fired.
And just as it’s passing, the captain wakes up and says, ‘What the F was that?’ Bill Gross Not all smooth sailingAfter graduating from Duke University in May 1966, the 22-year-old psychology major had five months of free time before entering the Navy. With $200 to his name, Gross hopped a freight train from Durham, N.C., to Las Vegas to play blackjack. He had read a book about beating the odds and decided to try his luck at the game. In a few months, playing seven days a week, 16 hours a day, the soon-to-be Navy officer had amassed $10,000.
It sounds great, Gross said, but it worked out to be about $5 an hour. Gambling, he realized, was not so great in terms of return on investment. However, the principles he learned on beating the odds convinced Gross that his life’s work would take him into the investment world.
But first, he had an obligation to fulfill.
To honor the memory of a fraternity brother who joined the Marines and was killed in Vietnam six months after graduating from Duke, Gross decided he would join the military, too. The possibility of getting drafted also played into his decision to volunteer. In his senior year, Gross said another fraternity brother decided to become a Navy pilot. So Gross followed his friend’s lead, though he had never had a desire to fly.
By October 1966, Gross was in Pensacola, Fla., beginning an intense 12-week officer candidate school, which he likened to boot camp hell, with screaming, in-your-face drill instructors. One Marine drill sergeant bluntly told him that he’d never make it through flight school.
“He yelled at me in my face saying I’d never fly jets, that blimps were more my style,” Gross recalled.
It hurt, he said, but turned out to be the truth.
“I’m a conceptual person not a detail person,” Gross said. “The drill sergeant told me, ‘A conceptual pilot is a dead pilot.’ I think he was right. I just wasn’t comfortable in the air.”
Gross dropped out of Naval Flight School at Saufley Field in Pensacola in April 1967, after four months in the program.
“It was very humbling. I’d never been so scared in my life,” he recalled. “I remember going before the admiral, and he said ‘Son, we’ve spent $500,000 on you already. If you think you’re going to a plush assignment somewhere in the Mediterranean you’ve got another thing coming. I’m sending you to Vietnam on an amphibious ship and making you ultimately the chief engineer.’ I saluted and said, ‘Yes sir.’”
He said ‘Son, we’ve spent $500,000 on you already. If you think you’re going to a plush assignment somewhere in the Mediterranean you’ve got another thing coming.’ Bill Gross ‘The shock of responsibility’Gross, sent to Philadelphia for a crash course on damage control, chuckled at the thought of becoming a damage control officer — the first step in becoming a chief engineer. The five weeks of training, geared toward those who washed out of other programs, was barely long enough to scratch the surface on the subject, he said.
USS Diachenko (APD-123) underway, location unknown, circa 1966-67. U.S. NavyThe Diachenko was in dry dock in Bremerton, Wash., when the “scared 23-year-old kid,” as Gross referred to himself, reported for duty in June 1967. The young ensign would later realize that joining the ship in dry dock was a good way to learn the ropes of Navy life and to get integrated into the ship’s command system before it set sail for the Philippines four months later.
Gross was “like a fish out of water,” said Dennis Devitt, who was the ship’s chief engineer. “He was a very bright fellow … but you could tell he wasn’t destined to be in the Navy as a career officer,” he said by telephone from his Lakewood, Calif., home, where he is a retired lawyer. “He just didn’t seem enthusiastic about being in the engineering department. He didn’t choose to be on the Diachenko in the surface Navy. He was there because he didn’t make it through the air program.”
Having grown up in Navy communities with a father who was a naval supply officer, Devitt said he had an advantage because of all the Navy exposure he had, including cruises aboard Navy ships as a teen. That wasn’t the case for Gross, whom Devitt noted was at a further disadvantage because he didn’t get the full complement of engineering training that other officers received.
By the time the ship hit the water to sail, Gross had been a commissioned officer for almost a year and no experience at sea.
Gross recalled being on the open seas heading to the Philippines as the junior officer on the deck with Devitt, who had command.
Devitt left the area, Gross recalled, announcing “‘Mr. Gross has the deck. Mr. Gross has the con.’ I didn’t know anything about taking the deck, taking the con, not even about giving a command, right rudder or anything. ... It was just the shock of responsibility. I had 110, 120 people. Their lives were now my responsibility.”
Though Devitt said he didn’t remember the episode, he said he must have had some faith in Gross, because he never would have left the bridge while serving as the senior watch officer without ensuring the person taking charge was properly qualified.
From damage control officer, Gross eventually became chief engineer. He took no comfort when the executive officer took him aside for a pep talk, saying, “Whatever you do here will be the forerunner for the rest of your life.”
Gross cringed, knowing his mechanical aptitude was minimal, and his knowledge of the ship’s innards — the boilers and machinery — was virtually nonexistent. “I wasn’t meant to be a chief engineer, but the necessities of war meant I would be,” he said. “I did the best I could.”
That Gross went on to make a name for himself is gratifying to Devitt, who said that a hospital in his area has a huge portrait in honor of Gross and his wife, Sue, for their generous donations. “I’m happy for his success. When I see that portrait, I’m thinking, ‘Bill used to work for me. I taught him everything he knows.’”
Transporting SEALSWhile Gross served on the Diachenko, the ship made four 60-day deployments to Vietnam from Subic Bay in the Philippines, where it received repairs and supplies while in port.
Gross was among a handful of officers who would captain one of four smaller boats attached to the Diachenko. The 30-foot boats were used primarily for surveying purposes to assess the depth of water at the mouth of rivers or at spots leading to possible beach landing sites along the coast of Vietnam.
The USS Diachenko enters San Diego harbor after completing her second tour in Vietnam in April 1967. U.S. NavyThe boats also carried SEALS who would roll off and swim to land for combat operations. Typically, the SEALS would return to the waiting boat six to eight hours later for a lift back to the mother ship patrolling about 10 miles offshore.
On his first SEAL-transport mission, Gross was stunned at what unfolded when 15 SEALS went ashore shortly after leaving his boat. An innocuous-looking group of Vietnamese was on the beach. The presence of women made it very deceptive, Gross said. “At least I never expected there to be hostile action with women on the beach. … As it turned out they were not peaceful villagers at all. They were Viet Cong.”
Gross said he watched from 100 yards offshore as one woman took off her broad-rimmed manila hat and placed it over her heart, which the SEALS informed him later was the signal to attack. When the grenade she had hidden in the hat exploded, all hell broke loose.
With only a handgun, Gross couldn’t do much. He radioed the skipper of the Diachenko to keep him apprised of the situation and made sure his boat did not run aground as he waited for the SEALS to return, which they did about an hour later.
Though he said he was nervous on his first SEAL transport, he initially thought it would be a “relatively safe type of mission.” That it wasn’t made him all the more jittery for the other dozen or so SEAL-transport missions. “I was nervous all the time. I’d hear a sound and duck and get down.”
Gross said he saw hostile action three times while transporting SEALS. For him, those were like the terrifying battle scenes out of the movie “Apocalypse Now,” only he was on a boat with no mounted guns.
Gross is conflicted about his naval involvement off the coast of Vietnam.
On the one hand, he stressed how proud he is of his three years of military service. His time in the Navy, having to take responsibility even when he felt unqualified to do so, prepared him well for his work as an investment manager, he said. And the lessons he learned on always speaking up and maintaining clear channels of communication were vitally important in his civilian career.
“If I hadn’t gone in and did what I did [in the Navy], none of this here [in his investment world] would have happened,” he said.
On the other hand, Gross expressed guilt by association for those killed in the firefights he witnessed. He never pulled the trigger and never went ashore in combat, but he transported others who did.
“I wish … it had gone differently,” he said in a halting whisper of a voice. “I wish ... I wish ....” Gross started and stopped several times as if searching for the right words, as if weighing whether he should say what he was thinking.
“I wish we hadn’t gone there in the first place.”