Mutual-funds giant Bogle on money, living well, and Madoff
Things have a way of coming full circle for Jack Bogle, founder of mutual-fund leader the Vanguard Group.
At the midpoint of his sophomore year at Princeton, he was struggling in economics with a D-plus average, which placed his scholarship in jeopardy.
The basis of his difficulty? The first edition of what would become the seminal college economics text written by Paul Samuelson.
Later, in search of a topic for his senior thesis, Bogle recalled, he read on "Page 116 of the December 1949 issue of Fortune magazine" a story about mutual funds titled "Big Money in Boston."
Inspired, Bogle proceeded to write about an industry that he said could be so much better. He argued that sales charges and expense ratios should be reduced and that funds should be run in the most honest, economical, and efficient way possible. Funds should be run for the benefit of shareholders and not managers, he wrote, and they should make no claim for superiority over market indexes.
Years later, that same Fortune would proclaim Bogle one of the four investment giants of the 20th century. And Samuelson, author of the legendary economics text, would write the foreword for Bogle's first book, Bogle on Mutual Funds.
Samuelson, the first American Nobel laureate in economics, was both a personal and professional proponent of Bogle. In 2005, Samuelson wrote Bogle a note: "Any small influence on you has been more than offset by what Vanguard has done for my six children and 15 grandchildren. May Darwin bless you!"
That same year, Samuelson delivered a speech that ranked Bogle's financial invention with the "wheel, wine and cheese, the alphabet, and Gutenberg printing: a mutual fund that never made Bogle rich but elevated the long-term returns of the mutual-fund owners. Something new under the sun."
On Monday, Bogle regaled a full house at the Bryn Mawr Film Institute with such anecdotes from his past while celebrating the release of his newest book, Don't Count on It!
At 81, Bogle was sharp as ever, displaying no evidence of having just been hospitalized for a touch of the flu. In fact, Bogle recently celebrated the 15th anniversary of his heart transplant yet shows no signs of slowing down or curtailing the messages he has espoused for decades. Why should he? So much of what he has said for years has come true.
Bogle's sense of serendipity extends to things he has preached for decades: ethics and giving value to clients.
He is the antithesis of Michael Douglas' character Gordon Gekko, who famously said that "greed is good" in the movie Wall Street. To the contrary, while extolling the virtues of entrepreneurship, Bogle is quick to point out: "No, greed is not good. Ambition is good." Bogle laments that college finance courses and business schools often assert that the only incentives that move the world are financial.
"Isn't living a worthy life an incentive?" he asked. "Isn't being a good member of the community an incentive?"
"I read a wonderful quote the other day," he added. "It said the great thing about money is that it will buy you all you want of anything in the world that is totally unimportant. It cannot buy you what is important."
The day of his Bryn Mawr presentation, New York magazine released a jailhouse interview with disgraced financier Bernie Madoff. "Everyone was greedy. I just went along. It's not an excuse," Madoff told writer Steve Fishman, adding that banks' and hedge funds' willingness to work with him - and collect their fees - despite obvious irregularities with his business had amounted to "complicity."
"Well, of course there was" complicity, Bogle said. "Why was there? I will give you one example. These fund managers who used Madoff did not do any due diligence at all, and they were paid over three to five years just for pointing their fingers to invest 'over there' $600 million. So of course they ignored all the warning signs. . . . Some of these guys I hope will go to jail."
Sprinkled into Bogle's remarks were a number of thoughts from a business giant looking at a life well-lived.
His mantra, "Press on, regardless," was adopted from the name of his uncle's boat. Bogle emphasized how important it is to follow that credo no matter how tough - or how easy - times may be.
And there was: "You deal with what is and not what might have been."
And: "Live life a little with blinders on. You have the task in front of you. Don't be disturbed by peripheral things around you. March to your own drummer, do your best, focus on the task at hand."
And perhaps the most Boglesque: "If you have a good impulse, do it."