Interview with John Bogle in the Dallas Morning News

Dallas Morning News columnist Cheryl Hall recently interviewed Mr. Bogle about his Georgetown University speech. Following is her piece:

Vanguard founder questions money managers’ takes

When is enough, enough?That’s what John Bogle, the 78-year-old founder of Vanguard Group Inc. and pioneer of the index mutual fund, wants young people entering the business world to think about.

And if some of us older folks also would mull whether we’re contributing to or sapping from society, so much the better.

Last month, Mr. Bogle, who’s now president of Bogle Financial Markets Research Center in Malvern, Pa., addressed the MBA graduates at Georgetown University and began with an anecdote:

“At a party given by a billionaire on Shelter Island, the late Kurt Vonnegut informs his pal, the author Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel, Catch-22, over its whole history. Heller responds, ‘Yes, but I have something he will never have: Enough.’ ”

Mr. Bogle then asked the MBAers to let their consciences be their guides in a brave new financial world where money managers feast first.

“If you do enter this field, do so with your eyes wide open, recognizing that any endeavor that extracts value from its clients may, in times more troubled than these, find that it has been hoist by its own petard.”

An investment fund manager e-mailed me Mr. Bogle’s “Enough” commencement speech last week, saying he found it thought-provoking. I did, too, and called Mr. Bogle to discuss it.

“As Kurt once said, I was trying to poison their minds with a little humanity before they get positions in the world,” the mutual fund legend said.

I decided to spread the “poison” with salient points from his speech and our interview.

Money for nothing?

“This country is moving to a world where we’re no longer making anything,” Mr. Bogle says. “We’re merely trading pieces of paper, swapping stocks and bonds back and forth with one another, and paying our financial croupiers a veritable fortune.”

Want proof?

“If you made less than $140 million dollars last year, you didn’t make enough to rank among the 25 highest-paid hedge fund managers,” he points out.

Mr. Bogle doesn’t claim to be an average John Smith in personal wealth. But he says his accumulated net worth is “pretty much a joke” when compared to that.

“I have no problem with people making a lot of money if they’re making contributions to society. But the financial industry withdraws money that businesses earn before it is passed down to investors at the bottom of the food chain.”

Taking a chunk of investors’ returns

Mr. Bogle says index mutual funds such as Vanguard’s offer the least expensive way for individual investors to get into the investing game.

The finance sector – hedge funds, mutual funds, brokerages, money managers, investment bankers, banks and insurance companies – now generates far more profits than the combined profits of the U.S. energy and health care sectors, and almost three times as much as either manufacturing or information technology, he says.

In the past 25 years, that share has gone from about 6 percent of the earnings of the 500 giant corporations in the Standard & Poor’s 500 index to an all-time high of 27 percent last year.

Add in the earnings of the financial affiliates of giant manufacturers – “think General Electric Capital or the auto financing arms of General Motors and Ford” – and that share rises to about a third.

By Mr. Bogle’s calculations, hedge funds, mutual funds, financial advisers, investment bankers, lawyers and their likes siphoned about $500 billion from shareholder returns last year. “That sum is surely enough to seriously undermine the odds of our citizens who are accumulating savings for retirement.”

‘Opportunity of a lifetime’

“Enough” also depends on what’s being measured, he says.

“Our world already has quite enough guns, political platitudes, arrogance, disingenuousness, self-interest, snobbishness, superficiality, war and the certainty that God is on one side or the other.

“But it never has enough conscience, tolerance, idealism, justice, compassion, wisdom, humility, self-sacrifice for the greater good, integrity, courtesy, poetry, laughter, and generosity of substance and spirit.”

Mr. Bogle says the Georgetown MBAers embraced his words.

“I believe profoundly that this generation – whether they are getting out of high school, graduating from college or from business school – is passionately seeking ways to improve the world that we damn fools have left them.”

Then he adds wryly, “It’s the opportunity of a lifetime.”

He says he’s not trying to dictate but wants to inspire.

“I’m not King Solomon. I’m not telling them to believe what I believe,” he says. “I’m just a guy who’s been around a long time and has a strong idea that this is a great country that has lost its way.

“I’m saying: Think about your contribution to society. Be careful when you get into a business that extracts value. Broaden your idea about what’s enough.

“And for God’s sake, think about who you are.”