September 26, 2013
To: Vanguard Veterans and Principals: Happy Birthday to Us!
September 24, 2013 marked the 39th anniversary of the birth of Vanguard, incorporated on September 24, 1974. We were tiny then, with only 28 crew members on board when we began operations in May 1975. The environment was difficult in those early days—we were suffering regular net cash outflows month after month. But we were all excited to be undertaking “The Vanguard Experiment” in a new model of mutual fund governance.
In this industry’s then-half-century of existence, the idea of a mutual mutual fund organization had never been tried before. Our formation was novel, contentious, and politicized, and in truth our continuing existence was in doubt. Few in the finance community noticed the new firm, and those who did belittled it.
But radical changes in finance were on the way. The creation of the world’s first index mutual fund (“Bogle’s Folly”) followed in short order, a direct result of our unique “at-cost” structure. Going “no-load” soon after and eliminating our entire broker-dealer distribution network was without precedent in the industry. The introduction of our novel defined-maturity bond fund strategy followed, changing almost overnight the bond fund landscape of the period. Other departures—less radical—followed in the years ahead.
It seems to me a long time ago when Vanguard began, but I still recall the trials and tribulations, the slings and the arrows, the successes and the profound disappointments, the hopes and fears that punctuated our nearly four-decade history. But it’s a treat to see that in recent weeks our astonishing acceptance in the marketplace continues to be celebrated in the media. I have attached just four recent examples:
- 1. Motley Fool “Father of the Index Fund,” commemorating Vanguard’s 39th anniversary and generously crediting Vanguard for “creating an entirely new way to invest.”
- 2. Philadelphia Inquirer exclusive on the human aspects of my long career, headlined “John Bogle’s Enduring Wisdom.”
- 3. Morningstar Rekenthaler Report describing your founder as one “who entered 2008 as the mutual fund industry’s leading figure, whose position, five years later is that much stronger . . . his legacy, never in much doubt has now been totally cemented.”
- 4. The Wall Street Journal, September 14-15, 2013 “What We Learned From the Financial Crisis,” emphasizing the importance of “character” in investing. For whatever it may be worth, I was highly complimented to have this major story conclude with a paragraph citing words from a speech I gave almost 15 years ago (!): “To earn the highest returns that are realistically possible, you should invest with simplicity. Rely on the ordinary virtues that intelligent investors have relied on for centuries: common sense, thrift, realistic expectations, patience, and perseverance. Call them ‘character.’ And in investing, over the long run, character will be rewarded.”
Please revel with me as we mark our 39th birthday and thank you all for your commitment to our long-standing mission of serving investors.
Jack