The Idea of a lifetime
In a business culture that increasingly celebrates anything new - paradigms, economies, technologies - Jack Bogle has been carting around the same old notions for decades.
In 1974, after he was fired as president of Wellington Management Co., Bogle, then 45, founded Vanguard Group on a powerfully simple idea: The best money management is inexpensive money management.
For a long time, his was a solitary voice. Cost consciousness didn’t appeal either to fund managers or to investors who searched for the next hot stock picker. Nevertheless, Bogle didn’t waver in his devotion to this basic principle. He structured Vanguard as one of the first mutual fund companies to be owned by its fund shareholders and not by a separate group of investors. He launched the first stock index fund, charging below-average management fees - then slashed those fees even further. Vanguard grew slowly and eventually flourished. Unlisted in Institutional Investor’s 1982 ranking of the 300 largest U.S. money managers, Vanguard placed 14th this year.
When he wasn’t undercutting industry fees, he was undercutting the industry. A stylish writer, a dramatic public speaker and a man who knows how to court the press, Bogle became the self-styled conscience of the mutual fund business, lambasting its high expense ratios and its hyping of short-term performance. By 1993 Vanguard was the second-largest U.S. mutual fund company, in large part because of its giant indexing business. Institutional, then retail, investors began to embrace the notion of inexpensive passive investing, as the popular press started to write about such formerly academic notions as “efficient markets” and “reversion to the mean.”
Once considered eccentric, Bogle’s ideas are now championed as the basis of sensible long-term investing. Perhaps not surprisingly, then, McGraw-Hill is launching its new Great Ideas in Finance series with a compilation of speeches delivered by Bogle over the past 25 years. John Bogle on Investing: The First 50 Years also features an important, if obscure, historical document: Bogle’s Princeton University thesis, “The Economic Role of the Investment Company,” which delved into the appropriate structure for mutual fund companies.
Throughout the tome, Bogle displays a highly refined understanding of how investing theory and practice intersect, and these speeches are a wonderful general introduction to the basics of investment, for both laymen and professionals. They can also be amusing - Bogle feels free to take shots at the high and mighty of the financial world.
A 1998 speech, “The Death Rattle of Indexing,” takes its name from a 1993 Morgan Stanley & Co. research report whose author opined, “I Hear the Death Rattle of Indexing.” Bogle, who always peppers his remarks with hard numbers, points out that the Standard & Poor’s 500
Fortunately, Jack Bogle’s life is even more inspiring than his ideas. And his speeches, which occasionally veer from investing theory to personal recollections, give a glimpse into the remarkable stamina that has driven his success.
Afflicted with a genetic heart condition, Bogle suffered his first heart attack at 30 and seemed destined for a short, miserable life. Barely able to climb stairs, lugging around a portable defibrillator to revive himself if he collapsed in the street - which he did a few times - Bogle just kept working. He recovered his health a few years ago, at 66, following a heart transplant.
Although Bogle does not probe too deeply into his own psyche, he suggests that deep religious faith
Vanguard has already erected a bronze statue of Bogle on its corporate campus in Valley Forge, Pennsylvania, but its founder’s legacy will extend beyond his own firm. If that Bogle lobster boat still exists, some benefactor should put it in glass and stick it in front of an important financial building - perhaps the New York Stock Exchange. After all, it inspired an extraordinary man. And in some strange way, it changed the world of finance.