Jack Bogle on Index Funds, Vanguard, and Investing Advice

I'm very happy to be here with Jack Bogle at the Bogle Research Center headquarters right here in his office in Valley Forge Pennsylvania and Jack. It's great to be able to sit down and spend another last time, we ran about an hour and 15 minutes. I think so. I probably won't try to keep you that long, but it's great to see you again and have the opportunity to talk to you about what's going on with Vanguard and your work. Well, there's a lot going on. It is a real pleasure to see you again and to congratulate you on the work you are doing for the investors that we were saying at lunch and we will start by giving you the opportunity to try to manage an ego that is difficult for all of us as human beings, well, it's not for me , but for everyone else, well, I don't think there's anyone in finance who has had as big or as beneficial an impact and impact on the world in history as the work that Vanguard has done and the work that Vanguard has done, I mean, if you want numbers, you know them better than anyone, but three and a half trillion dollars under management, the lowest fees by far in the category, a completely transparent data set. tools and solutions that really teach someone the principles of how to make money and how to think intelligently about

investing

.

Who else has achieved that on that scale in finance in history? Well, I guess I'd say not a lot of people, but for a while. One very clear reason is that most people in this business are trying to make money for themselves and not their shareholders, so they don't focus on giving the shareholder the best opportunity, and if you think about it deeply, you realize Realize that the most I the stock markets do not reflect the returns earned by investors by Investment America the country's corporations public corporations and make profits pay dividends reinvest profits in the business that is where value is created you access that value, access that value through investment then the question is that they have created marys corporations created this type of value which boils down to an investment in the United States and the answer is exactly what they earn, except then the question it's how it's distributed between Wall Street and The financial system and Main Street, the people who invest and the allocation to Wall Street is the goal of this business because everyone is on Wall Street and what we should be doing is working and what we've been doing here at Vanguard is to put the investor first and innovate for the investor and not for ourselves and try to keep costs as low as possible, which is as low as possible, has been the idea since the beginning of Vanguard because a company Mutual has neither a private owner nor a public owner, so we have no one to serve except the shareholder.

Can you think of an analogy in the business world or anywhere in life for the

index

fund and the way Vanguard approaches business for someone who's watching this and is very new to finance? Is there a food business or is there a leader or is there a concept inside or outside of the business that you think is a good analogy for Vanguard and the

index

fund? I don't think there really is and the reason is that capitalism is about creating capital for capitalists, if that's not too much capital in one sentence and by not creating, they know they have to provide value Adam Smith 1776, the only role of producer is to serve the consumer and in this business, your dollars and cents, the more one gets the less the other earns, yes, and in an innovative company you can create more and more value, you can reduce prices, but you are always making money, that is what capitalism is the incentive to get rich if you want and you know I'm doing well, but I don't own Vanguard.

I've never owned a Vanguard stock, but they paid me a good salary and what a decent salary and what a good bonus when I ran the place, so I'm not complaining, but I'm just not. I have and will never have that kind of wealth, but most people in this business have gotten it because they have charged their investors too much for what they are worth. Hmm, can you really make it very clear what the mutual structure is for Vanguard just by someone who doesn't understand, doesn't understand, it's a non-profit, it's a collective house, it's created, yeah, well, first let me contrast it with the typical mutual fund system and the typical mutual fund system is an entrepreneur. some guy at the beginning creates like a company creates a company that forms mutual

funds

and that company manages the mutual

funds

and gets paid for it and that's how any company starts anything, it doesn't matter what is conventional, the difference in the mutual fund The industry is when that little baby needs all the care of its parents when it grows up, it doesn't need the care anymore, but some of these funds are a hundred years old, which most of the other years are and they still have that parent taking care of them and taking away from them money. that's too long, you know the child matures, the child grows up, the child goes away on his own and the contribution of the avant-garde is essentially to recognize that and say, "okay, you own the company, the child, the incentives have been gone, you can do it quite easily, so, again, who is it?" you own the company you, as shareholders of our mutual funds, buy a mutual fund and you are essentially shareholders, owners of ira, yes, just to give you every step, now here is your fund, it is managed by Vanguard and you own Vanguard and Vanguard.

It also manages a lot of other funds and we allocate the cost between those funds, now there are probably a hundred and sixty-five of them, so the costs are allocated and depending on the funds' own costs, depending on competition, depending on equity , things like that, so some judgment involved, but we still run this place, you know, give or take twelve basis points, twelve, 101 percent and the average of the mutual funds specifically runs straight, unweighted average about a hundred and twelve, so we save you one percent a year, ninety percent, yeah, I need four. lowest percentage and what that equates to over long periods of time because I think the average of what the person who maybe sits with their accountant sees well is one point one 2% or its 0.12 percent that's nothing, It's not going to be a game-changer for me and my investment career.

I could also choose this one I believe in more, even if it has a percentage point higher in fees, but what is the consequence of those two funds performing the same for 25 or 50 years? The consequence of this is that the one that is indexed in a dollar will produce around $30 at 7% and the one that is not indexed you are paying 2% of the dollar that we create around $10 at 5%, that is the 7 - the 2, so that means you put in 100% of the capital, you've taken 100% of the risk and you've gotten 33% of the return and Tom, if that's okay with you, I have a bridge in some real estate and that can No, it's not It's a huge extrapolation to say that can cost a person who regularly saves hundreds of thousands of dollars over their lifetime.

Yeah, they would probably go with a number that I used, I think, in the Financial Analyst Journal, just taking this to the conclusion that a A typical investor who is retiring and who invests a certain amount of month and it grows with a salary that he knows, would have such maybe four hundred and fifty thousand dollars at the 5% level as a retirement plan and maybe six hundred and fifty thousand in the indexed plan, which is just the Math, it's debatable, there's no way around it. I call it after Justice Brandeis. The implacable rules of humble arithmetic.

You can't avoid the math cannibal. Although the industry has tried to reach its peaks, what I would like to do is listen to you. If I could give the simplest financial game plan, like a Vanguard index fund, for someone who is over 50, now, of course, each of us has all of these individual factors of the decisions we've made, but the average person over 50 years old, how simple, what are the 10 simplest? One minute solution or half hour solution to get Vanguard returns. I'll give you a simple solution, but the only thing we know about the average is that unlike Wobegon like Wobegon, you know there are a lot of people who are here and here. and here and the average is here, so in essence, no one is average, everyone is a little above average or a little less than average, you may have higher risk, you may have higher income requirements, You may have greater financial ambitions and be willing to do so. take risks to achieve them, but in all those cases, the lower the price you pay to own the stock market in the bond market, the better off you will be.

I have spoken of a general rule and I want to emphasize that it is a general rule. start thinking about your bond position being equal to your age, so that at 20 you have 80% bonds, that's a rule. I wouldn't do it on April 3 because 80% of stocks and I wouldn't think of telling someone to move their first investment to be 80% of stocks should be one hundred percent in stock, you know, for the first year. maybe they save a thousand dollars, that's a drop in the bucket compared to the value of their career and the value of the investments they ultimately will be. and in the same way I am at least at these interest rate levels.

Everyone gets into that in a second. I wouldn't dream of telling everyone who was 87 years old to say that with pride and enthusiasm for having 87 percent laws. I'm NOT mmm. -hmm about 50/50 mm-hm and a lot depends on your own requirements and this rule of thumb, first of all, is very important for people to think about and that is for almost all the investors that you will talk about. We're talking you also have social security and that has a capitalized value, what is the size of that set of assets that you would need to create the returns that you get on your monthly Social Security check, probably three hundred and fifty thousand dollars, so if you have seven hundred one thousand dollars and three hundred and fifty thousand in Social Security and you put one hundred percent of your stocks in that, so that's 350 in stocks, three fifty in this bond as an investment and you're 50/50, so keep that in mind if you have a pension. of a local government or a corporation that is not going to go bankrupt.

I quickly add that you should add that and what you're trying to do when you retire, which I will do someday. I think you're going to fail like this. I'm going to fail at that wouldn't be my first failure but when you do you'll want to ensure a monthly stream of income so don't look at the market just make sure your portfolio is generating income and will continue to generate income so you can get your Check the Social Security each month you set up your mutual fund to offset your index fund account for a monthly payment.

You can do it and you just want those payments to be stable and with respect to Social Security and the fund they will grow a little bit. Little by little, dividends are an extremely important part of this and you know, since the '30s, which was a terrible time in the early '30s in the Great Depression, when dividends were probably cut by 75%, just let me have a period of time not too long ago, well, the lands were almost cut, I think about 25%, and that was from 2008 to 2009, when in the financial crisis the banks had to eliminate their dividends, but it is a line like this with this increase, so I think it can be counted.

There are a lot of unforeseen circumstances, but there is a lot of cash on the balance sheets of American companies that suggests that the dividend is quite safe, yes, exactly, the payouts are low, they are probably the long-term payout is probably fifty-five sixty-five percent of profits and now they are paying perhaps 35 to 45 percent of profits. I want to go back to something you mentioned a minute or two ago about the importance of fees and really looking at what you're paying for that performance that American companies or corporations around the world are creating and then the fee that's the only interruption for you to get that return, would you then suggest that someone who is analyzing and evaluating a mutual fund to buy and there are sites and services like Morningstar and others that have all the ratings and reviews and tell you about the manager and everything else.

Would you say the best thing someone could do would be to eliminate all of those? factors and simply sort them by rate and those with the lowest rate. If you could do that without looking at anything else, you would obviously end up with a number of Vanguard funds because their fees average 0.12%, but is that a good thing is that there is a better methodology than what the average person uses to choose a mutual fund. I'm tempted to say and we will say that when we ask Morningstar, they say their sophisticated rating system works almost as well as simply rating funds by cost.

Wow, so they've entered the confessional. We've been happening for you for decade after decade. Who will be the next financial provider to enter the confessional? Well, the problem with that is that this industry is run by the managers, they are the ones who provide the capital to start the management company, there are the ones who sell to financial conglomerates andToday, as you know, we are among the 50 largest mutual fund groups, we have a mutual fund company that would be Vanguard, we started the company 42 years ago and Vanguard meant a leader in a new trend and we have failed as a leader for 42 years of success and we have yet to find our first follower.

Think about it, so eventually they'll have to do it. You know my name is real, I mean, right? We were talking earlier about Blackrock. Don't every fund company out there offer an index fund? Doesn't everyone follow you? Well, Blackrock has been able to tell. Specifically, the ETF exchange-traded fund business is basically Blackrock Vanguard on State Street and then completely disappears from the traditional index fund business, the kind I started in 1975 underwriting in 1976 is Vanguard. , you have eighty percent of that market loyalty fighting like ten and three or four other companies do the remaining 10%, so the women hide it, for example, Tea Rope, they have some index funds, they are very good, but they charge a quarter of 1% per year plus a quarter of 1%. compared to five hundred and seven percent, you could say they are overcharging the investor by 20 basis points and I would say that's one way to look at it because what it really says is that if it's all the same to you, we don't care. give your actively managed business and don't buy our index funds because they make more money, this is capitalism in action, as I said before, isn't there a company that is perhaps analogous, not perfectly, to the zero sum that you described for the finance? in a company like Costco, when I think of Costco, I think that's the closest thing I associate with Vanguard in business, sure, we use that Costco, my wife, you pay the flat annual subscription and everything else is discounted too, but Still, we are a public company that wants to make money and there is nothing wrong with that.

I'm just trying to get this through people's heads. There is nothing wrong with making the problem about the financial value of the business and costs are the reverse sides of the same coin when you go to Costco or anything else you can think of there is a value in your mind you buy a Mercedes Benz you get a lot of value from driving no, I don't know why anyone would get a lot of pleasure from that, but maybe it's pride, maybe they think that Mercedes-Benz is a new star somewhere in the sky. I don't know, but you can't directly associate cost with value, but in the mutual fund business that's how returns are divided between the market and the investor, so it's a difficult business to do without giving up your profits Costco won't give up yours mm-hmm that's the power of George Norris tarjay mm-hmm which is my last name to point to a couple of investment question principles Warren Buffett has at some point said that turns out to be true too with data from Motley Fool.

Warren Buffett has said that if he had never sold a stock since he was 11 years old, he would be much richer at Berkshire. Hathaway shareholders would be a It's much better that we analyze all the results of our investment in Motley Fool. If we had never recommended a sale, the overall net returns would be better, especially when you factor in capital gains taxes and the time, energy and emotion of trying to figure it out. When to sell something and buy something else, does that align with your thinking at Vanguard? Do you think the best thing someone could do if they were 25 and got their first Vanguard account in their 401k or an IRA if they just bought in and said, well, you know, I saw this interview and Jack said I should never sell, it doesn't matter.

Whatever happens in the world, keep adding money and never sell, is a good principle. I'm sure that's right and then you want to make sure you're in a broad based index fund and I would say in a traditional index fund you can buy a

vanguard

ETF exchange traded fund for the S&P 500. It's part of the same identical portfolio. , the 500 portfolio that we have here, which is majority owned. by traditional index fund holders and to a lesser extent maybe 20% owned by education ETFs, same product, more or less the same price and if you hold it it doesn't matter what you do so wait and I'll give you a little example, the underwriters' lawyer in our initial underwriting in 1976, one of the biggest failures in the history of Wall Street, the underwriting or the lawyer was a lawyer, not just the underwriting, sorry for the question, and the another day we had a 40th anniversary lunch and not many of them left, they don't seem to be as much parts as you know who and he said he bought a thousand shares he wanted this tragic little subscription, it was like 11 million dollars 11 million and what would they be?

The expectations. He did what he said, you know, we were sure we could make 250 million mm-hmm and then we had a good chance of reaching 200 million. It looks like there's 150 million in the stock market and if we get a little more strength, we'll get to 100 million and 50 million want to be Duck Soup and I know we could get 25 million on the check that comes in and that's 11.3 and that's why it's He felt bad about doing it, so he had earned a good fee, I guess, and So he bought a thousand shares at fifteen dollars, put in fifteen thousand and brought a statement to the meeting that is great, he has kept it ever since and he has paid all the taxes out of his own pocket, income taxes, and at first we had a few more. taxes on capital gains, but not many, and I don't think we paid capital gains distributions.

I don't sell anything for probably 10 years, 20 years, something like that and I'll ask you fifteen thousand dollars in 1976, what they have today. Okay, I'm going to say he has fifteen thousand dollars. I know you're supposed to ask the questions. I'll say he has one hundred and six thousand. Well, what a great assumption. I'm so damn wrong, of course. I'm far away, I'm not even close, not nine hundred thousand dollars, yeah, nine hundred three, let's edit that, edit your badge, I say nine hundred or so three, yeah, that's brilliant, best guest. I ever heard well. I remember reading about Shelby Davis.

I don't know if you knew Shelby Davis senior, they're a big donor to Princeton University, okay, yeah, okay, your alma mater in stock and yeah, he and he had started with fifty thousand and he came up with a principle that should never sell because the worst thing you can do is lose a big winner, yes saving yourself from losses is minus a hundred in the worst case and that is rare, but if you miss out on big winners in the long term and he he came back fifty thousand dollars and they made him twenty-four percent a year, of course, he used margin, but he died with nine hundred million dollars of that hefty forty-five years later, so I'm really sorry because I think it could have been a video exactly So. so close, what about the risk?

How is risk assessed? If we now say, Oh, put your money in, let it go, add to it over time, start with fifteen thousand, you will find yourself forty years later, you will have nine hundred thousand dollars. or something close to that, depending on how the overall market does over the next forty years, but what about the bigger risks? What risk could reasonably threaten that in the next forty years? Or are you telling your twenty-something grandchildren to follow this game plan? what I do for my grandchildren, you can change it when you get it, you really don't know how much money I put into it all these years and I always put it in a balanced index fund, sixty percent of the S&P 500 or the total stock market, I should say. and sixty percent of Singapore's total Baltic Sea, but last time we spoke you said that anyone watching could put all his money into that fund and make it their only safe investment in our lives.

Now it's conservative and it protects you against your emotions because when the market goes down a lot the stock market goes down a lot the bond market actually usually goes up a little bit under that circumstance, so we have investors who have behavioral problems and they panic. If your account drops 50%, an account like this will probably drop 32 or 3% so as not to be exposed to the worst, there is no doubt that the 100% stock portfolio will perform better in the long term. I mean, those are just the numbers, since stocks will return over the long term, not every 25 year period. but probably 3 out of 4 stocks will yield more than bonds, there will be the investment with the highest return because they have a higher risk.

What is risk? Let me tell you what it is not, it is not volatility. We use volatility to measure risk. Do you know if? the market goes up let me tell you when we go down 25% and you own the market that's what you do if you want to reduce volatility and a balanced fund you know maybe you go up or down 15% and if you want to get an extremely aggressive maybe goes up and down 40%, but it is symmetrical and quite symmetrical, so it is a way of measuring, but it is a short-term question; In the long run, the risk is that you can lose a lot of money if you start buying stocks in 1919, 1920 or 1918, you were paying fines in 1929 and then you lost 90% of your money in a stock portfolio and it took another 15 years to get back to equal or something like that, yeah, actually a little bit more than just sort of okay sort of 15 years to mid 40s and those kinds of risks are big risks and the risks that we can't measure there are risks that come from things like what is the probability that our society will collapse what is the probability that with all the undercurrents that are happening in American society between the haves and the have nots and he has the largest Serperior races and minorities , those gaps are very wide and I am deeply concerned that we could have real problems. and that's why I describe myself as so conservative that I'm a liberal.

I want to protect our society and therefore I want to protect those segments of society that have not been treated fairly as best we can and then there are the risks known as nuclear war diseases around the world plagues type of things religious uprisings the things that we know and we worry about today and so, as my colleague Secretary of Defense from Princeton, Donald Rumsfeld, says, those are the known unknowns and what about the unknown unknowns and of course since they exist We can't comment on that mmm about that, but none of those unknown unknowns or none of those big risks make you change your investment approach, I guess because the assumption is that if the market drops 90% in the Bogle family portfolios, then there will be so many other problems. in the world that probably won't be a solution for you to let your stock portfolios know, as a wise man once said, if there is a nuclear war, it won't matter much where you own stocks or bonds.

What's happening, society is happening, it's terrifying to think about and I think given the enormity of these kinds of risks that I've described about the unknown risk that we really don't know, we never know, we don't know what they are. It's a little scary, but you have to invest, as I've told people probably on TV or in interviews about this kind of thing. The only way to ensure that the value of your retirement plan is zero is to not invest a single cent and zero is guaranteed, so you have to put your money to work in extreme circumstances, you know that not even cash will help you, no It won't do any good if nuclear bombs start going off in the scary, fragile world we live in, so you can sit and worry about it every day and you know, in some ways, if you like to worry, it's good to worry, but you have to keep up your game, prepare for the future.

I hope those extreme risks don't come home again. I want to give you three one-liners that I've heard from investors in the last six months, six years since we started Motley Fool, throughout your life you'll hear lines like this and I'd like your quick reaction to each of them to be simply a great gaming machine and it will probably be raid too so i won't invest in the short term. The stock market is a casino that is correct in the long term. It is not a casino. It's the machine for compound interest and returns, which, as Einstein said, is the greatest miracle in financial history.

I tried to convince Daniel Kahneman, the Nobel laureate, that the market is more predictable in the long run and he actually I wasn't buying it right, you know, that's like everything else about all the Pens, the idea that what's totally unpredictable in the short term is more predictable in the long term, it's a little crazy if you think about it, but there's internal dynamics in the market that will prevail as long as the nature of our society prevails, that is, corporations that serve consumers. corporations that serve the government will make money and if they innovate, if they become more efficient, if they have a lot of entrepreneurial spirit on their side and if they are technologically welcome, well qualified, even leaders, they will do well, but there is always something this big if That persists and any investor who ignores that big problem is making a big mistake, you know, I think about it, but do I go into a hole and take my money anyway?

I'd be more worried about someone digging the grave and taking it away from me while I'm lying there. HeNext is when it comes to

investing

. I simply give my money to my friend Frank, who calls the big Wall Street bank his. I don't really know what they're doing, but ooh, such. a friendly person, I'm sure they are taking care of my finances for me. I mean, the vast majority of people don't want to deal with this topic, it's like dentistry for them and if they can outsource dentistry, they will be very happy. to do it and they turn to their friend from college or a friend of someone who works at a big company and has been trained to be very friendly to them and they will just hand them the money and say please don't do it.

Lose it, Frank and I trust you to look at the numbers. How's Frank doing? How is he doing with his other clients? Why is he operating him all the time? Because that's good for him and not for you. Basically, this is not a This is not a personal matter of finding a friend, as they say in Washington, you know Tom, if you want a friend in Washington, get a dog and you wouldn't do this with your dog and I don't think you should do it with Your Friend, these are generally honest people. I really don't realize that the more they trade, the more you trade, the less way you do it.

The activity is essentially the curse of Wall Street. If there's no activity on Wall Street, there's no money on Wall Street every day, all that um, 30 trillion dollars. of shares that are traded change hands, something like a person buying a person selling them does not create value, it is only value from A to B or from B to a and this the Wall Street system takes its part from the middle, so the game and the The casino appears again, you know, the croupier is from Wall Street as the croupier is from Las Vegas, what's his name, I think it's Las Vegas, he said, and you know that all the gamblers who bet read and all the gamblers who bet black or even, but they Don't split the winnings because there's the croupier and he has a rake and then he takes his off the table, so honey, Frank, buy him a drink once in a while, encourage him to Let him tell you the latest jokes that you would probably make if he was the broker, but thinking about investing is something long-term that does not involve any type of negotiation hmm.

I wanted to talk a little bit about leadership. I started Vanguard and I've been here at this organization for decades as an investor looking at the world. I look at and believe that there is data to show that founder-led companies in the public markets end up doing better than the market average, and in turn, they do better than the market average. You have Howard Schultz for Starbucks, you know, you have doors. at Microsoft all those Buffett and Berkshire years, so what do you think? Why have you stayed at Vanguard all these years? I mean, you set it up, the system you created is running and scaling, I probably don't know if it has a larger dimension than yours.

Whether you expected it or not, of course, so what drives you to be 87 years old? My grandfather went to work every day until he was 94 years old and what makes you come to work every day. Well, I love helping shareholders. I really do. I have news from them. literally every day to the point where if I haven't gotten a good shareholder, let everyone know and I'll say Emily Inc., you can check the inbox and they'll keep it going and our team here keeps me going. I spend a lot of time with them. and spend an hour with each one, one on one, with each Excellence Award winner.

I probably did three anniversaries last week. I go and to celebrate the 35th anniversary, for example, I happen to be a woman and they have the entire staff there, so talking to a lot of people and trying to make sure that this legacy of the type of company we want to have is based on those Quaker values, efficiency of service, economy, patience, well, not so much patience, patience, they are not for me, so it is you continue the mission with your son and you know that you could not run the company or not do it like them, but you're still the father of the company, you're still the founder of the company that you mentioned, so you keep that spirit alive and try to use what's left of you for a lot of what's left of your life might be a bit more of a formulation. happy to help the people you've been helping all these years and you know I'm not going to starve, you know?

I have not filled a good capital and I would be ashamed to tell you how it was that we have enough to coin the phrase for the name of one of my books and we do not need more things and my wife is not here. not a spender at all, we're agonizing over having a pretty big charitable budget and agonizing over where it all goes right now, so we choose to donate a lot of money and a lot to myself and we love doing that. too, so it's been good in every way and you know that a name and reputation are something you can't take with you, but you certainly can't take the doremi too, since my brother-in-law died before me. he was about a year younger, he said if you can't, he made a lot of money in this business by selling his company a couple of times, an investment advisory company, he said you can't take it with you, I'm not going, but he went anyway .

What do you think of the succession here? You know, I know there will be over the next 50 years, maybe there will be an effort to get D mutual to look at the company or the mutual. I think of Albert Barnes, the Barnes Museum at Pennsylvania State, and you wouldn't have thought that. that his confidence could be penetrated, but it was like this: how are things organized and with the greatest possibilities of playing to develop his vision well? I think he actually speaks for himself. Shareholders know how well they have been cared for. They understand more and more what we mean by a mutual company, they certainly know what we mean by low cost and if you had mutual eyes you would have to pay them something and it would be complex, it would be contrary to the system and all our concerns about protecting it, there has never been a more successful company in this business than ours in terms of total money generated, the only difference is that it is generated for our mutual fund shareholders and not for public shareholders, our glamorous financier, an old mutual fund management or anything for the style. so the money goes to the right place it's there without it Smith was the main role of the manager is sharing he used to serve the shareholder we all know that and it's a great business strategy you know it's scary to think about a billion dollars one day think about That when we got here we used to have a party every billion dollars at the beginning and I would give a speech I don't know if I could really make you party every day well still 240 because I'm counting names of companies.

I mean, I might as well be clear about this and you know, my voice is a little bit. I can't really do that, probably every day. Hello, I would try, but I think the perpetuation of this system has been like this. If successful, it would be almost inconceivable for anyone to recommend it be changed and inconceivable for shareholders to vote in favor. You know, we can't arbitrarily do what these shareholders or, for that matter, our owners, so I think. It's not good, it's not very likely to happen and I don't want to think about turning over in my grave, it does or just saying, "Make sure and bury me face up so that when I come out, it goes to the right." address I have a couple of crazy ideas and thoughts for you and I want to hear what you think about them, one of them is the last time we spoke, you talked about the index fund being a truly disruptive and innovative creation, I too now look into the technological trends, you know all the conversations about autonomous cars with artificial intelligence that take us wherever we want, Vanguard is really the organization and you are the person who created the first robot, a robotic expression of investing in a world where it is possible that your 19 a one year old grandson can have all their money managed by technology, they just enter their basic data questions that they need answered and then a car, a financial car, drives all their financial decisions in the future through algorithms, personalization and automation, well You know, I think they put a blanket of complexity over a system of great simplicity.

You know, the big wealth improvement Robo Advisors are not doing all this trading as if they are giving you a decent asset allocation and one of their claims is: "I've never seen exactly how it works, but how to be very efficient from the tax standpoint. You know you get a capital gain here, you need a capital loss there and that's probably something related to that, but I can't imagine it's that big and sure the initial experience is setting up an asset allocation not. I think that's okay, I shouldn't say that, I'll say this, some people really need some people really need their hand held and you don't understand that at Robbo everyone needs a little help and asset allocation, but you I can figure it out, It's not very complicated, but I mean,

vanguard

in 15 years I'll be able to write down my information and even though my life may change, just navigate my life based on the questions I'm answering on the first day of every year, well , there are not many changes in your life.

You know, when you get older, you should probably own more bonds and fewer stocks. That's the age rule we've talked about, but the fine tuning of this is identification. you need a robot to tell you whether it's going to be 60% in the stock or 61.3 or sixty seven point eight or seventy it's just silly you know you should probably be 60 or 70 or maybe 60 or 65 or 70 and stick to that more Maybe you know you don't mean if you think you know how to cut it by ten percentage points, let's say from 70% of the stock to 62, you think you can do it when the market reaches a peak and then come back in when the market reaches the midpoint.

A lot of mistakes were made, just crazy, well, I guess what I'm really trying to say is: do you think technology is going to displace? I mean, in some ways, Vanguard has three and a half billion dollars under management across 16,000 employees at any given time. another company that in financial services that had three and a half billion under management would have many more employees than that because of the systems they created, hasn't a Quaker system been created, a Quaker, of such efficiency that it could be applied to the financial sector? financial

advice

and planning with tools that make it increasingly easier for someone to do this as if they were at an ATM instead of sitting in a chair with someone.

We do Robo here and it's by far the biggest, let's call it Robo, I guess in the industry it's like 35 to 40 billion dollars and the wealth and upgrade fronts are probably 10 billion between them, so here we have a natural market for people who need that service or think they need it and it's a little bit more expensive because we have a representative that you can call you have a name that you can know and that you can talk to and if people are using it a lot . I just don't know enough about what's going on there right now, but you can do it here if you want.

A lot of people think they need it, but on the other hand, a couple of years ago I was doing an informal poll among the bosses at Bogle. About 225 of them come here each fall and listen to me for a painfully long time. Not for me, I love doing it and you're a wonderful group of people and I said how many of you have? Advisors raise their hands. No one, not one, mm-hmm, why give up that 1%? mm-hmm, what about private markets indexing? that would be possible, that would be a really legitimate accounting thing, but basically finding a way to raise capital through capitalization and private companies and allowing people to own that, well, there's really nothing, I mean, I guess you could sort of do it. of index. that, but I don't know how you get the private market shares, I mean Kohlberg Kravis, he's not going to give them to you and I guess Roberts, I don't think he's around anymore, but you know you won't be able to do it. access is private, so you can't buy, you know your 5% of that particular private placement, so I'm not sure how good all that is, anyway, you know how private is going on in good times, There is a lot of influence in that system and right now with interest rates at these levels where they have been for quite a few years it makes it very cheap to borrow and leverage from a private company and it looks like it will last a very long time, it is so easy when times are good, when times are bad.

Bad as Texas utilities, you know, it's fifty-five billion dollars. I think privatization failed. Everyone lost their money. There is no easy way. This is a tough business, so the best way to win is to own everything and hold onto it through Warren Buffett's favorite. holding period and Warren Buffett, as you know, puts his money where his mouth is and has his trust for his wife ninety percent invested in the S&P fog bank that protects the S&P 500 index alone, what do you think What can be done to get more women to invest around the world?

When you look at most investment companies, when you look at the demographics of thebrokerage accounts, I mean, the first thing you see is that women are actually outperforming men because, for a variety of reasons, the data seems to suggest that they are trading quite a bit. less that's exactly right and it's that maybe they don't have that big of an ego and they think they can make a better decision next time or I think it's a matter of women in general getting up to speed with the idea of ​​investing because they are the breadwinner of the family. it has always traditionally been the husband that has now changed radically and here at Vanguard I think about 50% of our team members and 50% of the managers and 50% of the next level or women, so the distinction is disappearing and I think that's good, what about children in investing?

Did your children grow up with you giving them investment principles and did they save a little? Well, what I do is I do it for them. No, I'm not getting into that. which you know, I put money away to educate them and then of course I was making enough money to educate them later so that everyone has a Vanguard balance index fund and a trust and how much is in it, and I'm basically the guy from a father who was much more concerned about them observing what I actually did than what I said and both kids are in the investment business and at least one of my daughters is totally informed about it, she's always the treasurer of her school or whatever be. she is doing it she is a very active young woman well not so young she should be 60 this year what does that mean?

I don't want to get into it, but I've never said that we're going to talk about lessons now, maybe I should have sometimes. I wonder, but it's more osmosis. Can we close with a story that maybe comes to mind from a customer, a Vanguard customer that is memorable to you, maybe a story from a great Vanguard employee that comes to mind and then a story? your memory of your time here that stands out so three three short stories from a client who has been delighted. I don't know if you've ever come across the concept of conscious capitalism or heard that term, but the idea is that you really have to be transparent and serve all the stakeholders in your organization.

If it becomes unbalanced and one gets a much better lead than the others, things will wobble and that structure will start to fall, you will lose the integrity of your organization, so in a consciously capitalist way, can you tell the story of a big client? , the story of a great employee, a story from your experience? Well, I have so many that I don't know where to start, let me try the client I was with. correspondence over the years when the airline pilot who had retired and I said look, keep reinvesting your money, put a lot of money into a lot of time to add to it if you can and don't look, that's the only rule I want you to follow because if you take a look, never open a 401k statement until you retire, you better have a cardiologist waiting because you're going to walk into a dead situation, you might even have a heart attack, you'll have so much money, so he retired. and he wrote to me about ten years later and said dear sir.

Bogle I peaked and you were right and thank you and thank you, sure, yeah, employee story when you probably saw a good example of that at noon when a young man who worked for me, Jim Norris, so I mean they were men. young people who worked for me. for six years and now he runs our international operation and I was always in detail and I'll tell you this funny story about Jim, which I think even tells that he used to wear this really horrible looking suit to work and you know, he's nice. nubby and the coat was boxy down here, maybe double-breasted, it's the worst looking thing you've ever seen and I don't want to get into that, but one day I called him into the office late and I said, Jim, we live in In a very unfair world we are judged by how we look and Jim was also judged by what we wear and it is a very unfair world.

I know, but I think it's very important that you dress well when you're here every day and I want you to do that. get rid of that damn suit and he said, well, if I have a meeting with a client that day or any kind of meeting with my crewmates, I wouldn't wear that suit and I said no, Jim, you don't understand. Never wear that suit, get rid of the suit. I don't know if you, I mean, I'm sure you know, and he now he spends all day wearing a scarf and he was very stylish, his dress, his collar or whatever.

Joe's is concerned about st university. Joseph's College here and the st. Joseph's University, I guess it is, and those were the president of the university and they got paid money there in the cafeteria, so in the kitchen, thank you, yeah, and the third one was a story of my own, my favorite story, it was funny , emerged. In this video they did what they did with me on Saturday night and it shows these three BOGO guys. I had a twin brother and 2e and we were frolicking in Bay Head, New Jersey, and we looked really young, you know, Bermuda shorts and all that kind of stuff. slippers and you know, we didn't have those funny things that kids wear today with the conversation song, those kind of things on their feet, you know what they're called flip flops, flip flops, those rocks, pretty, pretty, they say, and they also it's an image. of the three taken there and my older brother was 37 and my twin brother and I were 35 and I was always the youngest looking at one of the group so I look very very young in that photo and it happens that that's the exact age.

I was when mr. Morgan called me into his office and said, Jack, I want you to take over the company and I want you to do whatever it takes to solve the problems we're facing and I immediately thought, boy, you sure picked the right guy to do that. confident in myself too confident maybe and I did it right I thought about doing one and after a long series of unusual events, including my dismissal, Vanguard came about, so that's the kind of memorable turn in my life at 35 years old. I could give you another one that's after I had the heart transplant, you're pretty shaky those first few minutes when you come out of the anesthesia and my doctor said to me, do you remember the first thing my surgeon said?

Do you remember the first thing you said when he saw me and me? He said no, he didn't remember saying anything, he said, you said, bring me a notebook and a piece of paper, which really relates to your love of Alexander Hamilton, yeah, and his use of the written word, you use the written word, you address everything. type of problems. and challenges and trying to teach and persuade and influence, and you've been doing it in this room and in this company for 65 years, 65 years, it's amazing that a 55-year-old can do all that when he's 65 years old. that's your heart that's not your heart I started 10 years before he was born well and he will continue for another 50 years after you're gone when that happens well I'm not going there won't be any disappearance other than Bogle Center research at Vanguard.

I'm confident in that because of the ideals you were also presenting to the company, but won't they have to change the name? I don't see why they would do that. How about Alexander Hamilton Jack? research I would like to thank you very much

jack

thanks something fun to talk to you about