YouSaid · the spoken record

Eric Balchunas

lines on the record: 162
first: 2022-08-26
most recent: 2022-08-26
sittings or episodes: 1
sources: podcast

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“I had a line in the book that I removed, which is that Bogle has done more for. Average people To reform Wall Street than Bernie Sanders could ever dream of.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“That's all funds are all across the word. Look at the Fidelity Magellan. It's Apple. It's Amazon. It's the same stuff, man. It's just cheaper, right? This is all indexing is. It's not that different. It's just the same group of stocks for a lower fee, right? I think the problem that we're going to run into is Vanguard and BlackRock are going to own too much of corporate America. Right now, Vanguard owns about 8-9% of most stocks, BlackRock 7. So that's 15 between them. At this rate, they're probably going to own 30, 35% of stocks collectively because the rule is a fund no more than 10%, not a company. And so the rule's old. It was made back when fund complexes were one fund, not 30, 50. So I think Regulation is probably the only thing that can stop their growth at this point.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Most of us think Yeah, and Buffett recommends. I mean, Buffett is an active investor, but he recommends, unless you're going to do this all the day, all the time, just put it index fund. And you'll do better than almost all the pros anyway. That was his advice to people. And he actually was able to interview him for this book, and I asked him if his advice was the same, because index is getting bigger. And he said, yes, it's still by S&P. But then I said, well, do you think indexing is too big? He's like, no, it's possible it gets so big that it's a regulatory matter, but that's an issue for another day. So I do think that ultimately the reason The problem here with indexing isn't necessarily indexing because look, all you're doing is taking a basket of stocks and you're buying them.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Happens in Yeah, this is exactly how to debate somebody on this. If they start doing that, you just say, well, okay, well,”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“And the academics. Vogel really found heartbroken by the academics. He really thought he got the active people doing it, but he thought the academics were a little irresponsible on this front. I am convinced if you took all the people who've ever trashed Indexing or fear monger”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, basically three things everybody disagrees with Bogolon, pretty much ETFs. International investing Bogle says you don't need it. Almost everybody I talk to, even his friends said, I like a little international. And the third thing was Bogle's prediction for what will happen to the asset management industry. I couldn't find anybody to agree with this. In his last interview, six months before he passed away, he was the most prophetic I've seen him. And he said, there's going to be a mass mutualization of this industry because these companies, it's not going to be enough to lower fees. It's too late. They're just going to give away all their margin. It makes no sense. They're just going to what they're going to have to do at some point is just convert to our structure. And so the big asset managers, there'll be a mass mutualization and I couldn't find nobody to agree with that. So those are, so Bogle said a lot of things that even his closest friends and people who look up to him did not agree with.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“You never have to go to Vanguard to get index funds now. You can just buy them anywhere through the ETF. Even the most die-hard bogleheads and friends of Jack, Bert Malkiel. They're fans of ETS. Charlie Ellis.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Push pull, and it was never an easy relationship with him. And the chapter in the book that goes over this is Bogle and ETFs, it's complicated because it is complicated. Rick Ferry, who I interviewed also, who's a big Boglehead. He tried to tell Vogel many times. ETFs have really helped advance your cause. Super task made it very easy to get. And they're everywhere.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“But it wasn't. It would be like dot, dot, dot. And then he just would be like, but these things are marketing tools. They're for trading. We don't even know what people are. The index fund was his beautiful firstborn daughter. And the ETF's like the tattered up bad boy that she married, right? And so ETFs did a lot to advance indexing and now they're in the family. And he has to deal with them. And it was always this sort of like.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Trade them low cost like ours, they're fine, but then he couldn't just let that sting, he couldn't just let it go. He always said that.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“He was the CIO. And he was also very close with Bogle. You know, I think they had a very good relationship. Souder looked at Vanguard and thought about a massive crisis. What's going to happen? All these people are in index funds. And we're going to get all these calls. How are we going to deal with redemptions? And he thought if we could make the ETF a share class, people who wanted to come in and out of the fund, they could use that to trade. And that would buffer and protect the index fund investors. Bogle kind of saw ETF says they just want to get bigger. They want to distribute. And that's why he was against it. Souder's reason almost is more Bogle-like. Souder told me he told Bogle that later in life and Bogle kind of, I think it softened him because during my interviews with Bogle over, say, the last six years before he passed away, he got more and more soft on ETFs. The last interview in particular's what he'd say, say something like, well, look, I've always said as long as you buy the broad market ones and you don't.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“The big issue there was the ETFs, and Gus Souter was the one who had the idea. I interviewed Gus for the book. Gus Souder told me that”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“And so you could see both sides to this story, but Bogle also, the way he was pushed out, I believe, and then they went and launched ETFs within 10 years of him saying no to ETFs. That was sort of a, I mean, he might have saw it as a slap in the face.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, the core of Vanguard is still very much Bogles' DNA. But on the outskirts, they're changing. They are pushing people into ETFs. You would have hated that. The wealth management, you know, I don't think you would have done that. He wouldn't have done ETFs. We know that. He probably wouldn't have expanded that much overseas as they are now. But one could make the argument, well, shouldn't these other places don't they need a little vanguarding?”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Watch this. But then you have to ask yourself, Bogle was sort of pushed out of Vanguard. That's what's interesting about Bogle. He was pushed out of Washington.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Because they see Vanguard going into wealth management, going into private equity, going into these places. And Bogle was more like enough. We don't need to be that big. When I met with him once, he was like, I can't believe we have $3 trillion. That is almost absurd. It's a ridiculous. Now they have double machines.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Overseas, smart beta international. He would take giant craps on all, like 80% of the funds that they serve. Because he kind of honed it on, you know, and I found that really interesting. And he'd be on campus doing it, especially ETS. That really pissed them off. Smart Beta, all of that. He just thought it was needless distraction. Why are you doing this? And he thought, why is Vanguard trying to get so big? But the other people who manage Vanguard, I thought they did a good job. So in the book, I try to thread the needle because there's a growing gap between the bogleheads and Vanguard.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Could happen, no. Nope. I agree the people who ran Vanguard after. I have a chapter called Bogle vs. Vanguard because he had, this is fascinating. He had problems with his own company and the PT.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“In many ways. And so I explore that in the book because, again, when I said, why hasn't anybody copied Vanguard structure? They said there's no economic incentive. And then I said, well, why did this guy do it? And everybody had the same answer. That's a good question. And so you have to kind of look at the character of the person and, you know, try to figure out what drove them. And so I tried to do my best to sort of lay all that out.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“He could never get out of that. Soaked it up. Yes. So he got enough was applied to the money, but maybe not the sort of adulation. And that's what drove him. And I tried to get at that because he wasn't a, even though I'm very complimentary of him here, he was a human being. He had flaws and he had needs. They just weren't. Exactly the prototype of somebody on Wall Street or running money, they were completely different.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Even though he had enough money and he was sort of immune to that greed for money. He couldn't ever get enough was adulation. That's why I almost think, like, usually, if you really would want adulation, you go into the media, entertainment, maybe you're a physician, you know, somebody who's good at getting thanks a lot. So I think we all have to fill some void. We're all holes in the middle. And I think. His was he wanted people to tell him how great he was. He wanted people to say he was important. And his son told me that when he would get stopped on the street, he never tired of hearing that. And the kids could never understand why he would sit there and talk to this ex-door man for 10 minutes.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the annuity business. Yeah, it was like the fire insurance business. And you read this guy's pamphlets, and he's like, the insurance companies are ripping off these firemen. Lower your fees. And you realize, man, you can read Bogle in there. So there is some genetic. There's some genetics involved as well. And I included that because Bogle loved his great-grandfather. He would read these speeches he gave and take a lot of inspiration from it. But yeah, I would say that, you know, that is definitely one of them. But I think the enough thing.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“He could not. It was right in his face constantly. And I think that gave him a jolt of life. You know, people who survive car crashes and airplane crashes. 9 11 have similar experiences of, and he had that almost probably like more daily than most people. So that was probably a big thing that helped him. Your point about not wanting the money, I do think he was almost miscast in this industry. I think. Well, wasn't his”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you were right. I think his heart was one of 10 things that made Bogle. And I have a chapter called Explaining Bogle Again, he's so unique. I'm like, what went in to produce this particular character? And his heart was one of the things I go into. And I think that idea that you're going to die any minute, any day, we're all, we can push that off as people normally.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Play squash. So whoever he's playing with if I fall over, just put these on my chest. Shock me back. People were hesitant to play squash with them.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, yeah, his wife took him to the hospital all the time. It was a whole recurring thing. He brought a defibrillator. Did I say that right? Yeah.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I'm like a couple times in the book, I'm like, you know, I have a bad heart. I'm raising a family. I might just go to the big company and take the payday and just like not worry about this. But to do these moves and to purposely delay the success, I give him a lot of credit. This is the long, hard walk that a lot of people just don't have the courage to take, but he did it over and over.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“And that was really ballsy. I mean, this is a guy with like five kids at the time and trying to raise a family. I mean, a couple times.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. So that necessity was also a lucky break. There were many of these, as we just went over, that makes you think there was some Universal force ushering this along somehow. Because if any of these things doesn't happen, this probably doesn't happen the way that we see it. But long story short, they come with the index fund. They launch it. Nobody cares. It doesn't sell it well because this is an underrated point of vogel story. The index fund ultimately would not pay brokers. So he had to, it's like making a movie outside of all the distribution systems, the theaters, Netflix. And people have to come to your backyard to watch it. And so he made something that you had to leave the entire system and go to them to buy.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“He might have even said they actually bought it. So Jan Tordowski, which was his first PM of that fun, had to call himself a portfolio administrator. Not a manager. Yeah, so they went through the whole thing of like, we're not managing money here. The whole charade.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“But the foundation had to be there. But anyway, back to your story. So Bogle says, I will take this guy up on his offer and do an index fund. And it doesn't have to be managed. So I can hopefully squeeze him by the board. He even knew he was sort of. Right near the line because later in a”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it helped a little, but I'd like to think I had something to do with it. And he proceeds to write all the things that went into creating the passive revolution. And he said, you know, internet helped at the end.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Expensive I sent that article to Bogle in an email, and I was like, hey, what do you think of this internet theory? He writes back like two pages, and he's like,”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a great point, and Michael Kitsis, who is a great writer about the advisor world, once wrote a blog post called The internet killed the active fun star. And it was all about how once information started to spread quickly, it was over because you could quickly compare. Back then, you couldn't do that. And it helped active, I think, back in the day. Not displaying their”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“But Wells Fargo had tried one, but it was equally. And because of the Glass-Steagall, they couldn't do mutual funds. There was a lot of things that made it, it was, you know, Steve Jobs wasn't the only one in a garage thinking about PCs, okay? Right. Something was in the air. So Bogle read a journal piece by Paul Samuelson that basically was like, can someone please just put an index fund out so we can have something to benchmark these gunslingers against? Because he had, again, people were starting to come up with this notion that ActiveMay wasn't that great back then. Let me just.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the idea that an index fund wouldn't be, quote, managed and wouldn't violate his agreement with his former partners or current partners that were not talking was also a lucky break. And indexing was starting to become a thing. People were writing about it in the academic journals. It was a thing.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“That way it doesn't look like I'm doing some cash grab here and all 11 people on the fun boards agreed with that. So the mutual ownership structure, I'm not sure it would have been born ever if it wasn't for this necessity to sort of satisfy different groups of people at a time when everybody was pissed off and upset and figuring out how to do something. So this really awful crazy situation that was just nasty ironically produced this amazing sort of unique structure. It was almost like a freak accident.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“In the yeah, he's a pain in the butt. So, anyway, long story short, he realized there's a loophole. Instead of being fired and going away, he's like, I'm actually the owner or the chairman of the funds themselves. And so that gave him some leverage to sort of dig in and fight them. And they had to come up with a resolution and that the board would agree with. And so one of the ways he was able to keep a job there was he's like,”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“At the exact wrong moment. At the exact wrong time. And even Bogle had a memo saying we can't do this. And he's like, no, this is the right way. Trust me. Anyway, so their growth funds fall off a cliff. They go down worse in the market. But the Wellington fund goes down the same as the market, the same 35%. It doesn't buffer at all. And I think this was probably had to be one of the most pivotal life moments of Bogle to feel he betrayed himself. He betrayed his mentor. He sold him all out. And these guys had voting control aboard. And they got into massive fights. The clashes were historically bad. They were, you know, basically pissed off at each other, blaming each other, and they fired him, even though later in life, he's always like, I was the victim. But stories are he wasn't a picnic to deal with.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Very similar And right before that, the people who were at Wellington changed the Wellington, his new partners, changed the Wellington fund to be much more equity-oriented.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, they did not want any part of merging or any acquisitions with him or Wellington. He finally gets this growth manager down fourth or fifth on the list. And it goes well for a while. They've got the boring stuff and the arc stuff. But then basically the stock market goes into a bear market.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I was selling bagels, nutritious bagels. Everybody wanted donuts. So I figured I got to start selling donuts, or we're going to be out of business. So he teamed up with a high-flying growth manager, which is interesting because it was the fourth or fifth one on the list. This company wasn't very well known, but they had a fund called the IVES fund. But the first choice he had was Franklin and Capital Group. And they didn't say yet. They said they declined. Now, I theorize in the book had one of those says this is an equity.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Join Wellington. I want to say early 60s, maybe even the late 50s. No, 60s because you wrote the thesis. Anyway, he's in the Wellington in the 60s, we'll say. And then the guy who ran Wellington was like, I'm out of here. I want you to take over the company. Bogle was, I think, I want to say 35, pretty young. And they had a problem, they were losing money because the 60s were like a great, it was like the last decade where all the people taking the money were like Kathy Wood and stuff. Except of their day. And Wellington was like boring. It was like the value investors how we make fun of them. And so they're like, Boga was like,”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“And on the cover, it didn't even say mutual funds. You had to open it, and it was big money in Boston or something. And it was about mutual funds. They're like, oh, right about this. So I actually went and looked at magazines that were also from December 1949 that were probably laying around the library. Time magazine cover Conrad Hilton. So the hotel industry dodged a huge bullet there, man. So, anyway, that's there was a lot of serendipity in Bogle's story that, again, reminded me of that meme stock interview you did. There was a lot of things that had to come together to proceed that meme sort of moment. And there were a lot of things that came together that were serendipitous. I would say that thesis was the first one.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it was very much, again, the seed was planted. Quick side note, I interviewed Michael Lewis for this book. And when I told him that, he said he keeps a file of Princeton thesis that have changed the world. Like the atom bomb was a Princeton thesis Cheach for America. So he's like, I'm going to have to add this to my file. Maybe he'll have a book on it one day, but I thought that was kind of cool. But yeah, also the Princeton thesis is interesting because when he was searching for an idea, he went to the library, didn't know what he was going to write about, and just found Fortune magazine”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Did Yeah, it did. It was a thesis about how the asset management industry should be better stewards. It was just basically.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Know I've had people internally call it the boggle effect, and that's where I do. The Yeah, that's where I knew, man. Some people know about him, but some people don't know about him, even inside the bubble.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's the thing. Like, crypto almost sells themselves as Vanguard. But they're really old school Wall Street. And I'm like, you need to get more Vanguard in your life because all we see is these billionaires hiring movie stars to do commercials. And I'm like, and you sell yourselves, though, as populist and for the people, read this story. This guy was the real deal. I call him the OG of DeFi.”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“It's to say, like, hey, look, we have, we're going to take your money and we're going to go spend it on marketing. That way we get bigger so we can share economies of scale with you and lower the fee. Well, they forgot the second part. And Bogle was all about the second part constantly. And so I try to tell people there is a great business case study in this story. And I also tell my crypto friends, you guys should read this heavily. Bogle was more DeFi”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Room and fired you. Isn't that crazy? And so you have a guy who did nothing but that for 45 years, but now he changed the whole world. I mean, he changed the whole investing world with that concept. But you're right. Again, and, you know, the 12B1 fee, which is to say, which is...”
2022-08-26 · Masters in Business · Eric Balchunas on the Vanguard Effect · IDENTIFIED FROM THE TRANSCRIPT · source