A new book about John Bogle

The Wall Street Journal.
A New Bogle Book
Good afternoon.

A new book by a Bloomberg ETF reporter, Eric Balchunas, seeks to size up the late Jack Bogle, founder of Vanguard Group, as a historic figure.In The Bogle Effect: How John Bogle and Vanguard Turned Wall Street Inside Out and Saved Investors Trillions, Mr. Balchunas concludes — correctly, I think — that Mr. Bogle’s “success wasn’t in playing the game well but rather in changing the game for the better.”

As I’ve argued, Mr. Bogle didn’t just invent the index mutual fund; he also invented total return as a practical objective.By offering the entire stock market in a dirt-cheap package without commissions, he made it possible for any investor to earn the full return of stocks — including the reinvestment of dividend income — for the first time.For Jack Bogle, lowering costs was more than a mission; it was a fiery crusade.

Johann Thorn Prikker, “Casting out the Moneychangers from the Temple” (stained glass, ca. 1912), Wikimedia CommonsBut the revolution that he started in 1974 took decades to hit home. It took more than 10 years for Vanguard’s first index fund to reach a paltry $500 million in total assets. The costs of investing have fallen something like 90% since Mr. Bogle started bashing his competitors. In the 1990s, mutual funds’ expenses commonly exceeded 1.5% annually — before brokerage costs.

It’s easy to forget how hard and how long he had to fight before he forced the financial industry to start giving investors a fair shake.Twenty years after he introduced them, index mutual funds finally hit 2% of total market share
Barclays Global Investors, “25 Years of Indexing” (1998), p. 7. 

What drove and sustained Mr. Bogle during this decadeslong drive? Why did he never give up preaching the virtues of indexing and the virtues of low cost, even when no one seemed to be listening?

Mr. Balchunas’s book does a nice job of bringing Mr. Bogle to life from many angles. (Disclosure: I’m quoted in it several times.)

I knew Jack Bogle well, and I think his ferocious drive came from three forces:He wanted to right what was wrong. Jack’s father, William Yates Bogle Jr., who had been an executive at American Can Co., fell on hard times during the Great Depression and became an alcoholic.That trauma and turmoil “toughened me up,” Jack Bogle told me years ago. It also fired him up to try to fix whatever was broken.He wanted revenge. In 1974, fund firm Wellington Management Co. fired Mr. Bogle as president. (In 1999, Vanguard itself forced him to resign from the firm’s board.)

Being pushed out gave Mr. Bogle the freedom to blaze his own trail — and a righteous sense of rage that never let him rest. He knew he could die any day. Mr. Bogle had congenital coronary disease. He suffered at least seven near-fatal heart attacks, received several pacemakers and a heart transplant, and survived a life-threatening bacterial infection. He called me more than once from his hospital bed.

When I first met him in 1993, his eyes were yellow, his face was harrowed with wrinkles and his hands were as gnarled as driftwood — although his mind was sharp and his voice boomed.I remember thinking, “This guy might not live six more months.” He died in 2019 at age 89.

In 2007, I asked Mr. Bogle what it had been like living with the specter of death hanging over him every day.He replied:
     I didn’t think about it. I just got on with what needed to be done. Even as a little boy, I had determination and focus. If there was a job to be done, then that is what I would think about, going through life with blinders on. You can look ahead, but you have no peripheral vision.
     That focus is an unbelievable asset when you’re confronted with a life-threatening disease, and it was also terrific for a kid who was determined to succeed in business.
     The awful thing is, it was easy. It’s amazing how easy life becomes when you realize that your job is not to deal with what might have been but with what is. It’s all about attitude….
     How could I complain? When you have a narrow escape, the operative word is not “narrow,” it’s “escape”!

We need more people like him.

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