YouSaid · the spoken record

John Bogle

lines on the record: 74
first: 2019-01-28
most recent: 2019-01-28
sittings or episodes: 1
sources: podcast

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“So said Mr. Morgan had become concerned about the growing trend towards speculative funds, the funds we were just describing. He recognized a serious threat to his conservative philosophy and his business, with its near total dependence on the balanced fund. I was too conservative, he told institutional investor magazine, and he's older, and I just feel bad about this. He says at age 66, he decided that it was time for new leadership and took a radical step. He called me into his office and told me that I would immediately take charge of Wellington management as his successor. I still remember his exact words. John, I want you to take charge and do whatever it takes to solve our problems.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“And now something happens here that's going to change the trajectory of his career. And the note I just wrote to myself is, again, human nature is when you're scared, you're likely to copy. And we saw this in the last decade, a little, I guess, a little longer by now with the great returns some people were getting in the real estate industry, let's say the middle 2000s. It's like, oh my God, if my idiot neighbor can make $100,000 just by buying a house and selling it next year, then of course I should be able to do it too. And so you see these people rush to all these, and that's what exacerbates the bubble because they're like, oh my God, I'm going to miss out. I'm going to like I'm doing something wrong. These people have something figured out that I don't, but we know that's just not true. So this happens to his boss, Mr. Morgan. And Mr. Morgan, he arrives at the wrong conclusion that he was actually too conservative.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“But reality finally returned to the marketplace and enterprise funds assets fell to 84% to less than one hundred fifty million, and the fund checked this out. And the fund suffered negative net cash flows in twenty two of the 25 years that followed. Soon thereafter, Enterprise had ceased to exist.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“This newcomer would report a dubious return of one hundred seventeen percent, built largely on the acquisition of previously privately owned stocks. Like, what's the underlying effect? Like, how did you do that? John does. So that's what he's describing to us here. He says, in the following year, Enterprise drew the largest annual cash flow in the previous history of the fund industry. So again, that marketing is very, very persuasive for humanity because what we just talked about, humans will always try usually to their detriment to make large amounts of money really fast for doing nothing. Okay, so it says from this marketing, the annual, they got the largest annual cash flow in the previous history of the fund for the entire industry, an unheard of $600 million. And this is in 1967, guys. The fund's asset grew to $950 million by the close of the next year.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Just over and over again, he's like, nope, stay the course, stay the course, don't do anything, don't interrupt your compounding and just focus on costs. It's really solid advice. But for some reason, really hard for us as a species to adhere to. Okay, so this is an example of the environment Vanguard grew out of. So they're talking about, he was just talking about, you know, these people that they're like flashing the pans, but they also references that the stock, the financial services industry is more of like a marketing industry than people would actually want to admit. So this is an example of who he has to fight with and why some of the capitalists fleeing from Wellington into more speculative funds and what the end result of that is. So this is one particular egregious example was the enterprise fund.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Market are a tale told by an idiot full of sound and fury that signify nothing. And he's going to harp on this point over and over again in this book that you have to eliminate the noise and just focus on the signal. If he is mathematically certain that if he lowers the costs, and I think they decrease their costs by the time he retired as CEO like 200 times and never increase them, that that will give you the best returns. That'll give your customers the best returns than anything else. So that's what he means by just stay the course. Don't do any, I mean, it's kind of, you are doing something if you're staying the course, but if you've already picked this, if you know what your theory is true, don't keep changing it. Don't listen to these machinations which never stop. He's talking about this. He realized this all the way back in 1965. But in this book, he goes through constantly. They called about the nifty 50 era. 1965, the go-go era that goes through the dot-com busts in the late 90s, early 20s.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“The way he deals with this, and I would argue this is his motto since he repeats it in this book probably a dozen times. In the challenges they lay ahead, I would need a guiding star and a motto that encapsulate encapsulates it. That motto was and still is stay the course. So before I read this book, or as I was reading it, I think. Let me grab it real quick”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Getting good returns, but they're playing it safe. They're very conservative because what's Warren Buffett's two rules of becoming wealthy, one, don't lose rule number one, don't lose money. Rule number two, follow rule number one. So they're trying to, instead of optimizing just for the highest returns, which they feel is more speculative in nature, they're keeping a balance. But what are humans? Humans will always forever love to make a lot of money really quickly for doing nothing. So this is happening in 1960s. I told you guys before, I read, I've read a lot of, I don't know, probably two dozen books on the history of like.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“The Gogo Air was in full swing and investors were abandoning conservative balanced funds such as Wellington and Droves drawn by the siren song of quick profits being earned by high flying aggressive stock funds. One way or another I would deal with these challenges for the rest of my long career. So what is he saying? Human nature is constant.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so here's the problem, but the stability I had hoped for at Wellington would not last. By the time of my rocket-like ascent to the company's presidency in April 1965, the traditional mutual fund industry that I described in my Princeton thesis had changed. So it's really important to note, again, this is 1965. The index fund is not invented till 1974. So although they're conservative, I guess you would call value investors at the time, still most of their money is made on management fees. So it says I described the traditional mutual fund industry that I described in my Princeton thesis had changed and not for the better. The go-go era was in full swing, and that's not a name he created. You can Google go era. There's like all these different boom and bust cycles are given different names throughout history. So this is the one that's happening around in the 1960s.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Get into those numbers in a little bit. Okay, so he writes this whole thesis is like 120 pages. It's published. And then somebody else, he gets a job. Basically, his thesis leads to a job offer. It's this guy named Walter Morgan, who's also, he was an alumni Princeton. Okay, so I'm going to skip over this. As you can imagine, John goes to work. He takes his job extremely serious. There's a bunch of numbers here, which I think is going to be confusing if I pull them out without context. So this is the summary. By the time a decade had passed, I was viewed as the hair apparent to Mr. Morgan. I assumed that it would be at Wellington forever. Another recurring theme that the future is unpredictable, the world is much too complex, so he's like, I'd just be happy. He wasn't even thinking he'd ever have to be a founder, an entrepreneur.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“That wasted their resources. They were frugal. Doesn't mean they didn't spend money. Like think about Walt Disney. He'd spent a lot of money, but he'd make sure that all the money he was spending was increasing the quality of the product, not spending on just silly things. And then future growth, this is number two, future growth can be maximized by reducing sales charges and management fees. And he's got a great way to put this later in the book. It's something like performance comes and goes, but costs are forever. So what he's talking about number two, like your performance over a long time, like one of the wonders of the world is compound interest, right? But just like your returns compound over time, so do your cost. And so if you focus on just letting your returns compound, but then you eliminate your cost, you're going to, the delta, the difference between those two over a long term is going to be substantial.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Huge. So he's correct about that. At the time he's involved, it's $2 billion today, $21 trillion mutual fund colossus industry is among the nation's largest and most dominant financial sectors. And so I'm not going to read all of the conclusions from his thesis, but these are the two that I found most important, and you'll see that shape heavily the creation of the product. He's going to make 23 years into the future. So my thesis conclusions reached after an intense analysis of industry follow. Number one, investment companies should be operated in the most efficient, honest, and economical way possible. So what is he talking about there? Cost, frugality, something that runs throughout this book, something that runs throughout this entire thesis of Founders podcast. You're not going to find very many of these entrepreneurs who are able to build successful companies.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“We've benefited from the fact that this guy was completely stubborn about this one idea. And he spent up until he died a few weeks ago, what is that? 50 years just focused on this one single idea. Okay, so we're not there yet though. Let me go back into this moment in 1951. And it says that serendipitous moment would shape my entire career and my life. The fortune article was the springboard for my decision made on the spot to write my thesis on the history and future prospects of open-end investment companies. I threw myself into the task with intensity, spending a year and a half researching and writing the thesis. Meanwhile falling madly in love with my subject. I was convinced that this tiny two billion dollar mutual fund industry would become”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Fees. If we have 50 years of evidence that we actually are not adding value, that the people that are choosing to pay us exorbitant fees to manage their money are actually getting a worse return, a much worse return than if they just bought a broad index of the entire market. Why don't we switch to that product because it's better for the consumers? Well, what have we learned in 50-something episodes about human nature? Like that's they're going to guard what they're making money on their own interests. And so he got a hell of a lot. Like he got tons of flack. But this guy, like many of the other entrepreneurs that we've studied, is just extremely stubborn and bullheaded and just leaned into basically a giant fight. And I'll get to, you know, we're now, we're living.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“And so this is where he's first exposed to something. They're not even called mutual funds at the time. In this article, they're calling them open end fund. So now he's also going to realize that... Something I guess we should know better by now. But, well, let me just read this paragraph and then I'll tell you. In those ancient days, the term mutual fund had not yet come into general use. Perhaps because mutual funds with one notable exception are not mutual. In fact, in direct contradiction of the principal spell spelled out in the preamble to the investment company Act of 1940, they are organized, operated, and managed in the interest of the management companies that control them rather than placing the interest of their shareholders first. He's even on the board of one of these kind of tons of industries have these groups where they set rules and ethics and basic decorum. And what he realized is like, you guys aren't even reading the articles of organization, like why you exists in the first place. And when he started to introduce to say, hey, let's just cut our”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so we're going to get into, now we're going to go back in time and we're going to figure out, we're going to learn here where he gets the seed of the idea for Vanguard. So he's a junior in college at the time. And he's trying to figure out what he should write his thesis about. He said, late in my junior year, in one of my many appearances of good luck in my long life, I found myself in the library. I was leafing through an issue of Fortune magazine I began to read an article describing a business I knew nothing about, one that I had never even imagined. The headline read Big Money in Boston. I immediately realized that I had found the subject of my thesis.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“This was not an idea hidden. There are many people writing about it. They just didn't take that actually idea and do something about it. That's what made John so unique. And I think the earliest I've saw somewhere in the 1950s, it was realizing, hey, if you're actually analyzing the returns compared to just if you took the market returns and you compare that to the fund, the active managed fund managers, they're actually getting results worse than the market.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Refutable fact. The only way for the hundred million families whom the Vanguard took the leadership role in bringing down the cost of investing. Ultimately becoming the world's lowest cost provider of mutual funds, in other words, Vanguard was successful because they put their customers' needs before their own. And on the very next page, this is the explicit secret Vanguard was built on. The concept that fund managers could not add value to their client's wealth once considered nearly heretical is now broadly accepted. Remember the mutual fund industry was invented somewhere in the 1920s, 1924s is the year that I've seen all the way from 1924, it took 50 years for them to basically to realize this fundamental truth that fund managers actually don't add value to their clients' wealth. Now, this was also, as we'll get into it in a minute.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“The decades that followed, the name Vanguard, along with its unique structure and an unprecedented strategy built around the creation of the world's first index mutual fund, so the company started as Vanguard, the product he created, the invention I would say is the world's first index mutual fund, would unquestionably change the nature of the mutual fund industry as we then knew it, call it creative destruction, call it disruptive innovation, call it luck. For surely, the passage of time would have eventually awakened the investment world to this fundamental truth. And this is what he built his entire company on. Before costs are deducted, the returns earned by investors as a group precisely equal the returns of the market itself. After those costs, therefore, investors earn lower than market returns. He means actively managed. The inrefutable fact,”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Four decades later, it is clear that John was on to something. If he had amended his dire prediction to say you will destroy this industry as we know it today, we could credit him with almost perfect foresight. Then again, nobody in nineteen seventy four really could have predicted that an upstart firm founded at the bottom of a vicious bear market would overcome all odds and not merely survive, but ultimately dominate the mutual fund industry. So what I particularly loved about reading this book is it spends a lot of time in his thoughts going back from when he was in Princeton in the 1950s all the way up to when he started Vanguard. He was in his mid to late 30s at the time. So that places it somewhere in the 1970s, mid-1970s. And so now today, I think it's widely known by a lot of people, you know, index funds are massive.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“Is you want to put customers' needs first? How dare you? And so as we can imagine, and we've seen in other podcasts, whenever you have a new idea, you're going to get a lot of pushback, especially from the people that make money that are making money doing it the current way. So he talks about that, hey, I want to meet with you. John's like, okay, well, you can just meet with me tomorrow at the airport. And we're going to pick right up to the point. He says, after a few pleasantries, he got right to his point. I understand that you're planning to create a new mutual fund complex that will actually be mutual owned by the fund shareholders. Yes, I responded. I hope to build such a firm. To put it mildly, John was not amused. I still remember his exact words. If you create a mutual structure, in other terms, you'll put the customer's needs before our own, he said sternly, you will destroy this industry more than”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“That idea has spread like a meme, maybe even a religious sect. It is the index revolution, and vanguard has been its clear leader. For as long as I can remember, I've used the phrase stay the course to urge investors to invest for the long term and not be diverted by the daily sound and fury of the stock market. In this book, as you'll see, stay the course also has been my motto in building vanguard, holding fast to a long term business strategy and overcoming both adversaries and adversities, none of which were able to halt or rise. Okay, so that is from the introduction of the book that I want to talk to you about. The book is titled Stay the Course, The Story of Vanguard and the Index Revolution by John Bogle.”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source
“This book tells the story of how my career began, how was abruptly cut short, and what followed once I resumed that career. It is a story of creativity and innovation, of victory and defeat, of laughter and tears, of pure coincidence and sheer luck, of commitment to high values, of determination, of stubbornness, and of cussedness, all in the name of serving investors, small as well as large, simply by giving thrifty human beings their fair share of whatever returns the financial markets bestow to our investments. It is also the story of a revolution. No, there are no Molotov cocktail throwing radicals involved. Just one man with a truly financial world changing idea called the Index Mutual Fund”
2019-01-28 · Founders · #57 John Bogle: Stay the Course: The Story of Vanguard and the Index Revolution · IDENTIFIED FROM THE TRANSCRIPT · source