El-Erian Leaves Harvard, Returns to Pimco

Mohamed El-Erian is moving back to Newport Beach. Here's my take on the news.

• This has got to be a serious blow to Harvard, where his work of rebuilding the management team in the wake of Jack Meyer's departure is only, by his own admission, part done. ("HMC is still in a transition phase," he wrote in his John Harvard letter three weeks ago.)
• Given that El-Erian was clearly making a long-term commitment when he moved to Boston, does this prove that that Harvard is genuinely bad at retaining talent?
• Or is El-Erian just fickle? His tenure at Harvard was short, but not as short as his tenure at Salomon Smith Barney. And he allowed himself to be nominated to be managing director of the IMF in 2004, as well.
• So, what were the real drivers of this move? El-Erian emphasizes wanting to be closer to his family in California, which has a certain amount of plausibility to it if only because he already took a pay cut to move to Harvard, which makes it less likely to be about the money.
• On the other hand, it could still be about the money and the power. The $40 billion that El-Erian was running at Harvard is a huge sum, to be sure, but it's dwarfed by Pimco's $700 billion. When he left Pimco, El-Erian was just one of a number of managing directors all jostling for position as Bill Gross's heir apparent. Now, he's being parachuted in as co-CEO and co-CIO, making him if anything senior to Gross, since he will have official managerial clout.
• In terms of El-Erian's Pimco career, then, leaving the company seems to have been the best thing he could have done: I doubt very much he would have been granted this position had he stayed. And I'm sure that his new job comes with extremely generous remuneration: El-Erian is now on his way to becoming dynastically wealthy.
• What's more, the international travel which took its toll on El-Erian when he was at Pimco the first time round won't be an issue now that he's definitively graduated from the emerging-markets universe and will be running everything.
• On the other hand, El-Erian's new job is definitely more constrained than the one he's leaving. He has to share his CIO title with Bill Gross, and share his CEO title with Bill Thompson. He also has to confine his investments to the narrow world of fixed income, rather than being able to invest in any asset class at all.
• And does anybody really believe in what Thompson is calling "a powerful and experienced leadership triangle" as an efficient way of running anything? Bill Gross is the billionaire founder of the company and I'm sure retains a de facto veto over all major decisions there, which means that there are essentially three people running the company at once. This is not exactly a time-tested recipe for success, no matter how friendly and collegial the three men are.

This decision by El-Erian, then, is likely to cause no little upheaval at both HMC and Pimco. Personally, I'm sad that we won't be able to find out how El-Erian's HMC performed over the long term, which was something I had much interest in. Pimco, by contrast, is enough of a supertanker that El-Erian's influence there will be almost impossible to ascertain. But I'm sure that Bill Gross, for one, is very happy to have his old lieutenant back on the west coast.