A portrait of Jack Bogle, Vanguard’s founder:
As living legends go, Bogle is a modest fellow, or at least he tries to be. “Call me Jack” is his normal conversation starter. He’s old-fashioned, even for an 88-year-old — the kind of guy who has simple rules for living a good life, codified in the aphoristic style of one of his heroes, Benjamin Franklin. “To be called an 18th-century man is to me the ultimate accolade,” Bogle has said. …
This fall, Jack Bogle released an updated version of his primer, The Little Book of Common Sense Investing. First published a decade ago, it is one of 11 books he has written (the 12th, his own history of the company, is in the works) and according to the author has sold about 250,000 copies. In it, Bogle sets out his fundamental ideas on successful wealth accumulation for the average person: Invest in indexed mutual funds mixed between stocks and bonds, and hold onto them. Bogle is convinced — and he has done lots of research to support his case — that it’s almost impossible to beat the market over the long run, and that “average” returns combined with low management expenses and fees (which Bogle made sure were the core of Vanguard) are the best deal for investors.
“From almost the first day of Vanguard,” Bogle tells me in a recent interview, “I’ve seen so much of this industry and so many phony funds and so much money pouring in when your performance is hot and pouring out when your performance is cold. That’s not a very good way to make money. The first thing I demanded is that we were going to have funds with relative predictability.”
It has taken decades, but what was once called “Bogle’s Folly” — a so-called “passive” approach to investing that buys and holds a widely diversified basket of stocks representing a broad portion of the market as a whole, rather than one that tries to pick winners — has become certifiably trendy. We appear to be experiencing a rare outbreak of the contagion of common sense.
“In the last 10 years, investors have put around $2 trillion into index funds,” Bogle reports. Yes, that’s trillion. Other companies offer index funds, but Vanguard has long dominated the market. “Since January 2015,” Bogle adds, “Vanguard has taken in a cool $793 billion. The entire industry has taken in $815 billion. It’s amazing.” By the end of 2017, the house that Jack built was on track to have $5 trillion in assets under management.
Jack Bogle started Vanguard in difficult personal circumstances. He’d been fired from the top job at a money management firm called Wellington (the founder had handed him control when he was 38) by the very partners he’d invited to join the firm. Something of a sailing buff, he picked his new company’s name as a reference to the flagship of the famous Admiral Lord Nelson. Nautical touches have long been a staple of the company culture. Now, as he goes to work each day at the four-person outfit known as the Bogle Financial Markets Research Center, which Vanguard set up for him as consolation for adhering to the company policy of 70 as mandatory retirement age, the original little skiff of a company has grown into a giant money supertanker.
Bogle is in a peculiar situation so late in life. After he’d staked his career and reputation on an untested notion that was the financial world’s version of sailing against the wind, the wind reversed. Now he’s lionized as a financial sage, and the company he started has grown and prospered beyond anything he might have imagined when he reluctantly handed over control two decades ago. Yet he’s unable or unwilling to quell his contrarian nature and a strong moralistic streak, and he can’t help but question whether Vanguard is shipshape to weather its own phenomenal success.
I remember seeing Vanguard’s logo in my grandmother’s mail every month growing up. She was a long-time investor with Vanguard and believer in their index funds, and that faith—along with her and my grandfather’s frugality, social security, and school teacher’s pension—ensured they lived decently even to their deaths. Vanguard’s Jack Bogle-created culture of thrift, frugality, and modesty is a template for how corporations, and especially financial institutions, can be model corporate citizens.