A Memo to Vanguard Veterans
Mike - Jul 09, 2014

 

July 9, 2014

To: My Fellow Vanguard Veterans and Principals

My 63rd Anniversary

Monday, July 9, 1951, was the first day of my long career in the mutual fund industry. I vividly remember walking into the Wellington Fund offices on 1420 Walnut Street in Philadelphia. I was a bit nervous (of course!) and wondered what the future had in store for this recent graduate of Princeton University’s Class of 1951.

I was wise to wonder! Little could I have imagined that I would remain with Wellington/ Vanguard for 63 years. Little could I have imagined what surprises and challenges, what successes and failures, what growth and what changes in Wellington lay before me during that long span. Much of what was to follow was due to the ethical values and financial wisdom of my great mentor and friend, Walter L. Morgan, who did his best to impart them to his heir-apparent.

Walter L. Morgan, Wellington Fund, and Vanguard

Walter Morgan was the founder and chief of Wellington Fund and Wellington Management Company, and (as I once wrote to him) he gave me his confidence when I had little confidence in myself. Then, Wellington employed maybe 75 people, and supervised $150 million of assets for the shareholders of its single mutual fund. (Tiny by today’s standards, but then one of this industry’s ten largest firms.)

You all probably know about how my career at Wellington ended (I was fired from my position as chief executive in January 1974), fortuitously opening the door to my creation of Vanguard only seven months later. It was, as they say, the opportunity of a lifetime—a chance to build something new and better for our mutual fund shareholders. The three pillars of our fledging firm were our unique mutual structure, the world’s first index mutual fund, and the unprecedented conversion to a distribution system without a sales force. These disruptive innovations reinforced my conviction that, after Ralph Waldo Emerson, “if you build a better mousetrap, the world will beat a path to your door.”

The World has Beaten a Path to Our Door

Well, as you know, that’s precisely what the world has done. (I’ll spare you the numbers on our assets, our growth, our market share, and the triumph of indexing. You all know them.) One day, I expect, I’ll revel in our rise to industry preeminence, and bask in the glow of our peerless name and reputation. But not now. I have much work yet to do, much more to accomplish.

I haven’t run this firm for many years. When I relinquished my responsibilities as chief executive, I well knew that I no longer had the power of the purse and the power over the persons—our crewmembers—who are largely responsible for, if not exactly what we do as a firm, how we go about doing it. And I salute once again our crewmembers, and especially our veterans, for continuing to maintain our human and ethical values that have been essential to our progress.

The Powers of Leadership

While I was well aware of what power I was relinquishing, I was equally aware of the two vital powers that remained: one is intellectual power, the other is moral power. Still strong, if perhaps diminished (your call on both!), I continue to use those powers to speak out for giving all mutual fund shareholders a better chance to accumulate wealth; for reform in an industry that has come to emphasize marketing over management; for the requirement that every firm that touches other people’s money be subject to high standards of fiduciary duty and trusteeship; and for institutional money managers to assume not only the rights of our collective ownership and putative control, but also the responsibility to play a role in the governance of our nation’s public corporations.

You may have noticed how few other financial leaders have spoken out on these issues. And you may also have noticed that the media and the public are now calling attention to them. That may help to explain why, without a scintilla of promotion on my part, so much recent attention in the press and on television and radio has been focused on my ideas and our firm’s values. My essay, “The Incredibly Shrinking Financial System,” in yesterday’s Wall Street Journal—its 125th anniversary edition—is just one recent example, if a singularly fine one.

The Bully Pulpit

I’m on vacation as I prepare this 63rd anniversary note, reading a marvelous book: Doris Kearns Goodwin’s The Bully Pulpit—Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism. I’ve been a great admirer of TR for as long as I can remember and have cited him often in my books and speech. I was once again struck by his role in American life during, and even after, his presidency. Here are a few excerpts that I underlined from The Bully Pulpit:

Roosevelt wondered about finding “whom he could trust to carry out his legacy of active moral leadership and progressive reform . . . [who would] make use of . . . the bully pulpit that had provided the key to [TR’s] success.” He understood that, “the vitality of democracy depends on popular knowledge of complex questions . . . [requiring of us] a better understanding of what it takes to summon the public to demand the actions necessary to bring our country [and, I would add, our financial system] closer to its ancient ideals.” That’s what TR’s bully pulpit, and my own bully pulpit, is all about.

A Personal Note of Thanks

As the days fly on, and as I age, I recognize that the time will come when I will no longer be able to engage in the mission that I have set for myself—to speak out for truth and integrity and character in the world of finance, striving to build a better world for investors—honest-to-God, down-to-earth human beings who deserve a fair shake. One’s strength to carry on does not—cannot—go on forever. The spirit is more willing than ever, but the flesh inevitably weakens.

For me, the human beings who have been part of my long career have been by far its most important aspect. Yes, as I have said, “I like human beings better than algorithms,” and judgment better than process. (Not that, at our size, we don’t require many algorithms and much process. Neither has ever been my strong point!) In its early years, Vanguard was young, beleaguered, and scorned. But by the mid-1980s, we developed the momentum that has continued ever since, built on those same three pillars of our founding.

Especially in those early years, when our success was not assured, I knew that among my highest priorities were the need to always be optimistic, to set the standard for commitment, to communicate openly, and, broadly put, to give our wonderful crew the strength to carry on. Turnabout is fair play, and today it is all of you on the crew who give me the strength to carry on. These have not been the easiest days for me, but I carry on because of your confidence, your respect, your admiration, and (as some of you have said) your love. How could such a life possibly be more rewarding?

A song that tells this very story provides a fine conclusion for this message:

Sometimes in our lives we all have pain, we all have sorrow

But if we are wise we know that there’s always tomorrow.

Lean on me when you’re not strong

And I’ll be your friend, I’ll help you carry on

For it won’t be long

Til I’m gonna need somebody to lean on.

Thanks for that strength. Thanks for being part of this fine firm. Thanks for everything.

Best, always

 

Jack


The Future of Investing
Mike - Jul 09, 2014

Jack was featured in The Wall Street Journal’s “The Future of Everything” special report celebrating the Journal’s 125th anniversary.

John C. Bogle on the Future of Investing


A Memo from John C. Bogle
Mike - Jun 26, 2014

To: Veterans and Principals

From: John C. Bogle

Date: June 26, 2014

 Recognition for Vanguard and Indexing

            The almost overwhelming success of Vanguard and index funds continues to draw attention, not only from investors (over $77 billion of net cash flow so far this year, 95% of which went into our low-cost index funds), but also from the media. Attached are four recent articles noting our success.

  1. “Bogle Is In The Vanguard Of Mutual Fund Investing,” Investor’s Business Daily, June 12, 2014. This nice profile highlights the triumph of indexing, and Vanguard’s rise to prominence over the last four decades.

 

  1. “Facing price wars and robots, wealth managers push advice,” Reuters, June 20, 2014. I recently participated in the Global Wealth Management Summit hosted by Reuters. This article stems from that summit, and focuses on the growing market for web-based financial advisory services, such as Vanguard’s Personal Advisor Services. Of course, the opening line tickled me: “Jack Bogle, the founder of Vanguard Group and the pioneer of low-cost index investing, has won.”

 

  1. “Vanguard’s Bogle expects shrinking Wall Street,” Reuters, June 17, 2014. This article about my thoughts on the future of the financial industry also came out of the Reuters event.

 

  1. “Philosophy Differs From Strategy,” RickFerri.com, June 16, 2014. Independent financial advisor Rick Ferri writes about how his investment philosophy is based on the realization that trying to beat the markets is “costly and counterproductive,” so his investment strategy relies on low-cost index funds.

With all of Vanguard’s success over our four decades of existence (we’ll celebrate our 40th anniversary on September 24, 2014), it remains critically important that keep our focus on what’s best for our clients. I’ve used this quotation from Shakespeare many times before, “Uneasy lies the head that wears a crown.”

Indeed, Vanguard’s rise to the pinnacle of the mutual fund industry places a fragile crown on our heads. We must continue to focus on our founding values of stewardship and trusteeship of the assets entrusted to us by our clients.

Enjoy your summer.

Best, always,

Jack


Bogle at the 2014 Reuters Wealth Management Summit
Mike - Jun 25, 2014

John Bogle speaks at the 2014 Reuters Wealth Management Summit.


“The Philosopher of Finance”
Mike - Jun 12, 2014

 

Jack has done numerous interviews on NPR, and has found public radio to be an ideal platform for conveying Vanguard’s values to both our clients and the general investing public. His most recent interview, by David Freudberg, host of the Humankind series, was titled “The Philosopher of Finance” and consists of two half-hour segments. In the interview, Jack and David discuss topics regarding human values, as well as issues that are of vital importance for long-term investment success.

The interview will be released as a free podcast today. Instructions on how to access the podcast are below.  I hope you’ll enjoy this discussion of our values and the keys to ensuring a secure retirement.

There are two ways you can hear this program:

1. The public radio producer will be making “The Philosopher of Finance” available for free download at their podcast

Humankind on Public Radio starting at noon on Thursday, June 12, 2014. (Those who subscribe to the podcast will then be able to hear a new episode of Humankind each week at no charge.) The podcast can be accessed here: http://tinyurl.com/HumankindPodcast

2. Those who wish to purchase a CD copy may place an order here:

http://www.humanmedia.org/catalog/program.php?products_id=368


Bogle on CNBC–Cash on the Sidelines???
Mike - Jun 11, 2014


A Memo to Principals and Veterans
Mike - May 22, 2014

 

May 20, 2014

 To Vanguard Principals and Veterans:

             As you all must know by now, I regard recognition of Vanguard in The Economist as among the highest possible accolades. This cover story in the issue of May 3, 2014, entitled “Death of the Fund Manager” is one more testimonial to all the good we do here at Vanguard.

             Attached are: (1) the opening editorial, “Cheap is Cheerful,” and (2) the main story, “Briefing: Fund Management. Will Invest for Food.” (Both pieces are informative and insightful. Too bad that the headlines fail to suggest that.)

             Despite the accolades for index (“tracker” in the UK) funds, the authors seem unaware of the impact that indexing has already had on Vanguard and the fund industry. Ever irrepressible, I wrote a letter to the editor presenting the data. It’s probably too late and long to be published, but I’m sure you’ll enjoy it (Attachment 3).

             We’ve come such a long way since we began in 1974. Thank you for all your help in making it happen.

 Jack


A Memo from John C. Bogle
Mike - May 02, 2014

To: Veterans and Principals

From: John C. Bogle

Date: May 1, 2014

 

A Remarkable Salute from Investors and CNBC

            As many of you have already reported to me, CNBC has ranked me among the top ten people who have had “the most profound impact on business and finance” over the past quarter-century. (CNBC has just begun its second quarter-century.) In this context, I’m sending along two attachments.

1.      “Index Mutual Fund Pioneer.” The CNBC profile of my long career is remarkably insightful, particularly in its recognition of the role of “Bogle’s evangelism.” They also identify the often-unrecognized link between Vanguard’s truly mutual structure and that first index fund.

However you may feel about the culture of stock market television, I’m actually deeply touched by being placed high (#9) on the CNBC list of “25 transformative leaders, icons, and rebels of the past quarter-century.”

NOTE: I’ve also included a link to the CNBC video on my career. It’s just three minutes in length, but professionally done and power-packed.

2.      “The List: CNBC First 25.” Who are these other icons? Here’s the list, led (deservedly, I think) by #1 Steve Jobs and #2 Bill Gates. Interestingly, Warren Buffett (#6) and I (#9) are the only people from the field of investment management (also, in a limited way, Carl Icahn, #17) on this influential list, which includes at least eight leaders from abroad.

One of our crew members called an amusing point to my attention. I’m sandwiched between #8 Mark Zuckerberg (net worth, $28.5 billion) and #10 Larry Ellison (net worth, $48 billion). Last time I looked, I’m well below average (to say the least!) relative to these successful fellows.

*           *            *

            Our organization structure and our index strategy represent the solid core of the reputation we have earned and the trust we have established with investors . . . and with the world. How good it feels to be recognized on the CNBC list of these 25 men and women who have been “the rebels, icons, and leaders in the vanguard (yes!) of that change,” from yesteryear’s era of business and finance to today’s.

Enjoy!  Always,

Jack


New Speech Added
Mike - Apr 30, 2014

Mr. Bogle spoke at the Community Forum Distinguished Lecture Series at the Bryn Mawr Presbyterian Church on April 28, 2014. Please enjoy the speech!

Financial Reform: Investment Standards and Ethical Values


Bogle on CNBC
Mike - Apr 29, 2014