Vale Jack Bogle: a reminder of values and capitalism

Given the recent passing of investment legend Jack Bogle, I thought I’d share some notes I’ve taken from his work over the years.

Bogle founded the Vanguard Group but, much more importantly, invented the ‘index fund’ – a way for everyday low key investors (like myself) to invest in the stock market as a whole versus trying to pick individual stocks.

“I rank this Bogle invention along with the invention of the wheel,” said Nobel Prize winner Paul Samuelson, “the alphabet, Gutenberg printing, and wine and cheese: a mutual fund that never made Bogle rich, but elevated the long-term returns of the mutual-fund owners – something new under the Sun.”

But, indeed, Bogle was rich. As the world’s largest mutual fund Vanguard now manages trillions of dollars, and his personal net worth was estimated in the hundreds of millions.

While some may see Bogle, or even this kind of wealth, as an example of greed and excess – the values we mis-attribute to capitalism – it’s quite clear this was not the case. To even read any of Bogle’s speeches, listen to any of his interviews, or open any of his books, reveals a man so eager to talk about the good values associated capitalism. He excoriated high finance and poor morals, preaching good character and trust matched with every day common sense and applying sound judgement.

“My career has been a monument,” he wrote in Enough: True Measures of Money, Business, and Life, “not to brilliance or complexity, but to common sense and simplicity.”[1]

Bogle said his ‘wealth, power and fame’ didn’t represent success but represented “the fruits of success”, acknowledging his impeccable achievements would “never would have happened without good luck, remarkable mentors, and fortuitous timing.”

In a 2006 lecture to West Point Military Academy, he recorded how capitalism had strayed:

“… not just in degree but in kind, from its proud traditional roots, a system that served us, admittedly imperfectly but with remarkable effectiveness, for the better part of the past two centuries – a free enterprise system based on open markets and private ownership, and on trusting and being trusted.”

How the definition of ‘entrepreneur’ had come to be improperly associated:

“In today’s grandiose era of capitalism, the word entrepreneur has come to be commonly associated with those who are motivated to create new enterprises largely by the desire for personal wealth or even greed. But in fact entrepreneur simply means “one who undertakes an enterprise,” a person who founds and directs an organization. At its best, entrepreneurship entails something far more important than mere money.[2]

And how society had come “to measure the wrong bottom line: form over substance, prestige over virtue, money over achievement, charisma over character, the ephemeral over the enduring, even mammon over God.”

He echoed the Scottish philosopher Adam Smith’s observation that “Managers of other people’s money [rarely] watch over it with the same anxious vigilance with which… they watch over their own.”[3]

And he noted with dismay the “the triumph of managers’ capitalism over owners’ capitalism in corporate America”:

“While the nation struggles with its finances, too many members of our financial community wallow in the gross excesses of modern life, often in ostentatious mansions, yachts and private jets made possible largely by a soaring stock mart that seems totally unconcerned about the risks that abound today – terrorism, war, risky investments, staggering amounts of borrowed money in our private sector and public sector alike, and many more.”

Ultimately, Bogle placed perhaps his highest premium on trust, noting how essential it was for a decent society. He quoted at length, for example, and multiple times, Henry Kaufman’s observation that:

“…trust is the cornerstone of most relationships in life. Financial institutions and markets must rest on a foundation of trust as well… unfettered financial entrepreneurship can become excessive and damaging as well – leading to serious abuses and the trampling of the basic laws and morals of the financial system. Such abuses weaken a nation’s financial structure and undermine public confidence in the financial community… only by improving the balance between entrepreneurial innovation and more traditional values can we improve the ratio of benefits to costs in our economic system…[4]

He used Woodrow Wilson to remind us that it was everyday people, not big grandiose plays, that moved humanity forward:

The treasury of America does not lie in the brains of the small body of men now in control of the great enterprises… it depends upon the inventions, upon the originations, upon the ambitions of unknown men and women. Every country is renewed out of the ranks of the unknown, not out of the ranks of the already famous and powerful in control.[5]

Lastly, despite all of this wandering capitalism and departed values, he finished with ‘a calling’ for the next generation, or for those of us anywhere who might dare to set things right:

“My generation has left America with much to be set right; you have the opportunity of a lifetime to fix what has been broken. Hold high your idealism and your values. Remembers always that even one person can make a difference. And do your part to begin the world anew.”

Picture source: Investor’s Champion.

References

[1] Jack Bogle, Enough: True Measures of Money, Business, and Life, John Wiley & Sons, Hoboken, 2009, Page 71.

[2] Ibid, Page 199.

[3] Page 129.

[4] Pages 68-69.

[5] Page 220.

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