Philadelphia tech boosters are making the most of Vanguard Group‘s Innovation Studio, the outpost at 2300 Chestnut St. where the Malvern-based investment giant hopes in time to base up to 100 tough-to-recruit software pros for projects, so they can skip the daily Paoli-Thorndale line to the suburbs.
“Vanguard’s decision to locate their Innovation Lab in Philadelphia is further evidence that our efforts to support an innovation ecosystem are having an impact,” Craig Carnaroli, a University of Pennsylvania executive vice president and an invited guest, told me after Vanguard opened the site Monday. He’s hoping proximity will lead to collaboration among Penn and Vanguard people.
Philadelphia Industrial Development Corp. chief John Grady reminded the crowd of city government’s role in helping Vanguard find a site. “We work with a lot of partners, none more thoughtful,” he told Technical.ly’s Roberto Torres. “This could be a game changer.”
In his remarks at the site’s debut, Vanguard chief executive Bill McNabb praised Center City as a place with “the ability to attract different types of people.” While he said he “loves” the Malvern area for his home and workplace, “there’s something about being a part of a very vibrant ecosystem” downtown. And “being right in the middle of what’s happening at Penn, Drexel, University City, and feeding off the vibrancy of the world would seem to make so much sense.”
Indeed, the opening of the 16,000-square-foot space marked Vanguard’s return to the city two decades after then-chief executive John Brennan closed Vanguard’s Center City sales office in a cost-cutting move. “We have a suburban culture,” he told me then. Many early Vanguard “crew” were women with families who drove in to work the phones part-time. Then, as Vanguard automated telecom and built its IT and sales staff, top officers took more interest in regional efforts like United Way and the Chamber of Commerce, reasoning that a healthy region made it easier to recruit top people.
That still didn’t make a Philly tech outpost inevitable. The city has not been a strong magnet for software giants. Google, IBM, and Oracle have all bought small Philadelphia software firms over the last decade, but none has expanded in town since those transactions. (Google consolidated to New York, Oracle to Conshohocken.)
Video consumers’ move from TV to online and mobile has forced Comcast Corp. to hire truckloads of engineers and make itself the locomotive for Philly software. Vanguard’s downtown move is, so far, more on the modest level of the satellite offices opened by iPipeline, Bentley Systems, and other suburban firms to help recruit recent grads. McNabb held out hope it could be more than that: “We’re going to be in a place to leapfrog many areas, if we do this right and work with our partners correctly.”
Moving on: Vanguard chief McNabb, 60, won’t be doing a lot more ribbon-cutting for the company. His board last week announced that chief investment officer Mortimer “Tim” Buckley, 48, will replace him in the top Vanguard job at the end of the year.
Was Buckley marked as CEO-to-be early? “Absolutely,” Burton Malkiel, a former Vanguard trustee, told me.
Buckley started at Vanguard as assistant to founder John C. Bogle, who recalls Buckley as “bright, attractive, well-spoken. He worked for me for three years. What greater training could there be?” he said, laughing.
Of course, Bogle added, “my other assistants, Jim Norris, Jeremy Duffield, they were top-drawer people.”
Norris, a St. Joseph’s and Wharton grad, now heads Vanguard’s foreign operations. Duffield ran Vanguard’s Australia business — the company’s most conspicuous foreign success — and has remained active in Australian finance since leaving Vanguard in 2010.
Vanguard’s deeper management bench — people whom Bogle hired remain in charge 20 years after he left — contrasts with the startup environment when he founded Vanguard in the mid-1970s. His previous employer, Wellington Management Co., grew for years with its “balanced” stock and bond fund — still a popular Vanguard product. But when markets crashed, the company’s small, conservative staff couldn’t decide what to do. So Bogle founded Vanguard around the then-bold idea of funds that were low-fee and indexed — and ended up hiring his old bosses as fund managers.
He wonders how well today’s investment executives, after years of rapid growth, would react to a latter-day calamity. You’d think Vanguard’s huge market-share gain since the 2008 financial crisis would show that his corporate heirs have learned flexibility and persistence. But Bogle counsels against taking even trillion-dollar successes for granted. As he’s fond of saying, even the biggest “trees don’t grow to the sky.”