WEBVTT - Can an Outsider Fix the House that Bogle Built? 0:00:06.240 --> 0:00:07.000 Welcome Atrillian's. 0:00:07.000 --> 0:00:08.719 I'm Joel Webber and I'm Eric Blchernas. 0:00:11.080 --> 0:00:15.920 We talked about Blackrock last episode, huge player obviously in ETFs, 0:00:15.960 --> 0:00:19.200 and now they've made this foray into to crypto and 0:00:19.320 --> 0:00:25.360 specifically bitcoin. The other big asset manager is Vanguard, which 0:00:25.520 --> 0:00:28.880 will probably get nowhere near crypto ever. But what's even 0:00:28.920 --> 0:00:32.960 more significant is there there's a new CEO who happens 0:00:33.000 --> 0:00:34.839 don't come from Blackrock. Who is he? 0:00:35.200 --> 0:00:37.360 Yeah, this is It was a bit of a shock, 0:00:37.360 --> 0:00:39.960 although I will say on ETFIQ I said he was 0:00:40.000 --> 0:00:42.720 one of my possible candidates because I knew he was available. 0:00:43.000 --> 0:00:45.680 This is Salem Ramji, who was the head of all 0:00:45.720 --> 0:00:49.199 their global ETFs at Blackrock, so big wig he was. 0:00:49.640 --> 0:00:51.879 There was some shatter he might succeed Larry Fink at 0:00:51.880 --> 0:00:54.920 some point, but he just left. That was surprise, by 0:00:54.960 --> 0:00:57.440 the way, about six months ago, so he was available. 0:00:57.880 --> 0:00:59.880 I thought he might do something nonprofit and just sort 0:00:59.920 --> 0:01:02.360 of slowly go out of the scene. But when he 0:01:02.400 --> 0:01:04.880 got hired, I was like, Okay, it's it's a little shocker, 0:01:04.920 --> 0:01:10.040 but Vanguard is evolving all the time and this makes 0:01:10.040 --> 0:01:14.080 sense to me on a couple levels. I think Vanguard 0:01:14.160 --> 0:01:17.440 is they have new challenges. You know, get getting flows 0:01:17.440 --> 0:01:20.000 into ETFs isn't exactly a huge challenge for them, but 0:01:20.000 --> 0:01:22.720 they have some new challenges. Will go over. But also 0:01:23.000 --> 0:01:25.440 I think that Salim, you know, probably won them over. 0:01:25.480 --> 0:01:28.520 He's a true indexing advocate and he can run an 0:01:28.520 --> 0:01:31.240 ETF business, and Vanguard is very into ETFs these days. 0:01:31.600 --> 0:01:33.200 So if you when I started to think about it, 0:01:33.200 --> 0:01:34.760 it wasn't that big of a shake up. Plus he 0:01:34.840 --> 0:01:37.000 got a report to the board. He can't go crazy. 0:01:37.080 --> 0:01:39.480 But it is interesting because he was advocate for the 0:01:39.520 --> 0:01:42.480 Bitcoin ETF and that is there's a couple kinds of 0:01:42.480 --> 0:01:44.480 things he's done that I think we're probably pushing the 0:01:44.560 --> 0:01:47.360 would push the envelope there for sure. So it's going 0:01:47.440 --> 0:01:50.560 to be interesting. But you know, Vanguard is almost fifty 0:01:50.640 --> 0:01:53.880 years old, and my guess is that their culture he 0:01:53.920 --> 0:01:56.760 adapts to it more than he and you know, pushes 0:01:56.920 --> 0:01:58.960 a blackgron culture on Vanguard, that's my guess. 0:01:59.200 --> 0:02:01.880 Oh so you mean he becomes like part Bogel. 0:02:02.160 --> 0:02:05.240 Yeah, he gets absorbed by the cult more than he 0:02:05.360 --> 0:02:06.960 changes things too dramatically. 0:02:07.040 --> 0:02:09.680 Okay, well, we're gonna get into all of this with 0:02:10.040 --> 0:02:14.560 Sylla Brush, who covers asset management for Bloomberg News. Also 0:02:14.560 --> 0:02:17.560 worth mentioning if you want to hear Selim Ramji in 0:02:17.639 --> 0:02:20.440 his own words when he was at black Rock. We 0:02:20.480 --> 0:02:23.600 had him on the podcast in December of twenty twenty one. 0:02:24.200 --> 0:02:29.080 Go ahead and search for that in your feeds. This 0:02:29.200 --> 0:02:35.760 time on Trillions, Vanguard gets black rocked Silla, Welcome to Trillions. 0:02:35.800 --> 0:02:39.240 Great to be with you. Okay, just how significant is 0:02:39.280 --> 0:02:42.160 this leadership change because there has not been that many 0:02:42.200 --> 0:02:49.320 CEOs since Jack Bogel stepped down in ninety five ninety five, right, 0:02:49.400 --> 0:02:52.280 so this is a little bit of a legacy issue. 0:02:52.360 --> 0:02:54.680 I thanks the legacy issue. It's also, you know, the 0:02:54.720 --> 0:02:57.400 first CEO that they picked who's an outsider, and I 0:02:57.400 --> 0:03:00.760 think that's, you know, one of the rises about it. 0:03:00.800 --> 0:03:04.280 You know, every person who's led Vanguard has had a 0:03:04.320 --> 0:03:07.520 long tenure at Vanguard prior to being elevated to the CEO. 0:03:07.600 --> 0:03:11.560 So of course Bogel, the founder, and the following three CEOs, 0:03:11.840 --> 0:03:15.240 you know, worked with the man himself and spent quite 0:03:15.280 --> 0:03:17.040 a bit of time each of them at the firm. 0:03:17.160 --> 0:03:22.400 And so it's an interesting pick as an outsider coming 0:03:22.400 --> 0:03:26.160 into a firm which has a very strong I mean, 0:03:26.240 --> 0:03:28.079 I guess on some level, all cultures are unique, but 0:03:28.120 --> 0:03:30.920 a very strong and unique culture. And I think that's, 0:03:31.160 --> 0:03:33.360 you know, one of the things that caught people by surprise, 0:03:33.560 --> 0:03:35.840 maybe a touch less you know who they picked, but 0:03:36.000 --> 0:03:38.600 just that they picked somebody, you know, coming in describe 0:03:38.640 --> 0:03:42.160 the vanguard culture. So it's you know, I think they 0:03:42.480 --> 0:03:45.839 kind of talk about it almost as a mission, sort 0:03:45.880 --> 0:03:52.840 of a zeal about low cost index investing for the masses. 0:03:53.000 --> 0:03:58.320 That basically, you know, Jack Bogel took a product that 0:03:58.640 --> 0:04:02.120 you know, wasn't very postpopular in the seventies and an 0:04:02.160 --> 0:04:06.040 index fund and index fund, and you had a very 0:04:06.040 --> 0:04:08.720 strong furv and belief that it could be marketed and 0:04:08.760 --> 0:04:11.400 sold to the masses, and over time it would outperform 0:04:11.720 --> 0:04:15.240 and low costs would be a winner for investors across 0:04:15.560 --> 0:04:19.960 America and then later on essentially the world. And that 0:04:20.440 --> 0:04:24.719 really is the mission of the company. And it's not 0:04:24.920 --> 0:04:27.440 a for profit company. It has this almost sort of 0:04:27.520 --> 0:04:32.000 unique ownership structure, all kind of geared towards keeping costs low. 0:04:32.200 --> 0:04:36.240 Yeah, And let's go into that because the book I wrote, 0:04:36.240 --> 0:04:39.200 the Bogel Effect, the whole premise of the book was 0:04:39.240 --> 0:04:42.240 that the ownership structure to me was the primary thing 0:04:42.400 --> 0:04:45.800 driving everything you see, because every time money came in 0:04:45.800 --> 0:04:48.520 in the seventies and eighties, instead of spending the money 0:04:48.520 --> 0:04:52.240 on like sponsoring a sports stadium or paying executives more, 0:04:52.680 --> 0:04:57.240 the board was representing the investors and they were like, actually, 0:04:57.279 --> 0:05:00.240 I'd rather have the money for lower fees from me 0:05:00.279 --> 0:05:03.080 because I'm the investor. And so that's why the fees 0:05:03.080 --> 0:05:04.920 came down little by little. The first index film was 0:05:04.960 --> 0:05:07.960 like sixty, seventy basis points, but it went down, down, 0:05:07.960 --> 0:05:10.479 down until it got to like twenty ten in the nineties. 0:05:10.960 --> 0:05:13.880 That's when it took off. So to me, indexing wasn't 0:05:13.920 --> 0:05:17.560 really that grade of an invention. It was okay, it 0:05:17.600 --> 0:05:20.640 was cheapness that was sweeping the nation. So indexing kind 0:05:20.640 --> 0:05:22.719 of got lucky, I think, but they were kind of 0:05:22.720 --> 0:05:25.599 hand in glove, right, this idea of low cost and 0:05:25.640 --> 0:05:29.279 then you put an index fund on top of that. Boom. 0:05:29.360 --> 0:05:31.279 I mean, that's the big idea. But an index fund 0:05:31.279 --> 0:05:34.280 at seventy basis points, I don't really think is that 0:05:34.400 --> 0:05:35.840 grade of a concept. 0:05:36.279 --> 0:05:38.360 What was active then though probably well above. 0:05:38.440 --> 0:05:41.120 You're right. So my premise in the book is that 0:05:41.120 --> 0:05:44.000 indexing would have like maybe five to ten percent of 0:05:44.000 --> 0:05:46.400 the assets it has if it was seventy eighty basis points, 0:05:46.400 --> 0:05:50.039 because indexing would be okay, but it wouldn't be like 0:05:50.040 --> 0:05:52.120 crushing every active manager where you're like, oh my god, 0:05:52.160 --> 0:05:54.039 the evidence is so strong, I will put my money 0:05:54.040 --> 0:05:57.400 because but again, the low fees are really the thing. 0:05:57.440 --> 0:06:01.240 And it's interesting Salim I interviewed for the book, and 0:06:01.720 --> 0:06:04.440 I could tell he was a fan of Bogel. He had, 0:06:04.560 --> 0:06:07.200 he has his books. He's a very he's a student 0:06:07.240 --> 0:06:10.320 of the index. But he he kept trying to give 0:06:10.360 --> 0:06:13.440 credit to Wells Fargo, who technically invented the index fund. 0:06:13.920 --> 0:06:15.840 Bogel saw it and ran with it and came out 0:06:15.880 --> 0:06:19.840 with the second index fund. But Bogel always said he 0:06:19.880 --> 0:06:22.200 did it, but he always glorified his story. But my 0:06:22.279 --> 0:06:26.880 point is, I think Selim couldn't say that Bogel and 0:06:26.960 --> 0:06:29.040 Vanguard were the big deal because he's a black rock. 0:06:29.320 --> 0:06:31.480 So in his podcast and on arts, he would say 0:06:31.520 --> 0:06:34.800 Wells Fargo indexing, low friction, low cost, He's into all 0:06:34.839 --> 0:06:36.680 of he checked all the boxes, but he wouldn't save 0:06:36.760 --> 0:06:38.760 the V word. I think of black rock, you can't 0:06:38.760 --> 0:06:41.800 say the vword. Now he's at Vanguard and I think 0:06:41.800 --> 0:06:44.280 he'll go a little wild promoting this, and I think 0:06:44.279 --> 0:06:46.440 he'll be able to now be more full throated about 0:06:46.720 --> 0:06:49.039 how he feels about Bogel. And I thought I'd like 0:06:49.080 --> 0:06:50.960 to get your take on this, Sola that when he 0:06:51.000 --> 0:06:53.520 was in the interview, to go over an outsider, you 0:06:53.600 --> 0:06:56.120 have to win over their hearts. My guess is he 0:06:56.160 --> 0:06:59.640 went for three four interviews and it was this passion 0:06:59.720 --> 0:07:03.080 for indexing and low costs and access that won them 0:07:03.080 --> 0:07:05.000 over because they knew he had the experience, but did 0:07:05.000 --> 0:07:08.760 he have the did he have the cult DNA? And 0:07:08.800 --> 0:07:10.400 I think he showed he had that. 0:07:10.640 --> 0:07:12.200 Yeah, I think that's right. I mean I think he 0:07:12.480 --> 0:07:15.560 you know, one word that comes up a couple of 0:07:15.560 --> 0:07:18.640 words that come up pretty often when you know talking 0:07:18.640 --> 0:07:23.880 to people about Salem cerebral academic and very much sort 0:07:23.920 --> 0:07:27.560 of a strategy consultant. So I think, you know, kind 0:07:27.560 --> 0:07:29.320 of a student of the markets and a student of 0:07:29.360 --> 0:07:33.920 the industry. And prior to being at Blackrock, he was 0:07:34.360 --> 0:07:37.080 a partner at McKinsey for a long time where he 0:07:37.120 --> 0:07:39.440 also advised Blackrock, but you know, he was in the 0:07:39.480 --> 0:07:42.280 asset management and wealth management practice there and so I 0:07:42.320 --> 0:07:45.800 think I think that kind of a background, perhaps a 0:07:45.800 --> 0:07:48.520 little less on as a trader. You know, that's Wall 0:07:48.520 --> 0:07:51.200 Street trader. That's not his sort of sort of origin 0:07:51.280 --> 0:07:55.400 story formative years. It's very much a kind of you know, advisors, 0:07:55.400 --> 0:07:58.480 strategic consultant, academic if you will. You know, he's a 0:07:58.560 --> 0:08:02.200 lawyer by training. I can see that being, you know, 0:08:02.280 --> 0:08:05.480 more of the mold or model that if Vanguard were 0:08:05.520 --> 0:08:07.800 to pick somebody, that would be kind of the person 0:08:07.920 --> 0:08:10.400 that they would consider. So yeah, I mean, I think 0:08:10.400 --> 0:08:13.440 he really is a student in the markets. Lots of 0:08:13.440 --> 0:08:15.480 people are, but I think I think that is a 0:08:15.720 --> 0:08:18.040 kind of a personality that you know, that's how a 0:08:18.040 --> 0:08:18.960 lot of people describe them. 0:08:20.080 --> 0:08:25.040 Okay, so you have this outsider from Blackrock now entering Vanguard, 0:08:25.160 --> 0:08:30.920 where the culture has been relatively unique. They've had some 0:08:31.120 --> 0:08:34.520 old ways of doing things. The ETF even has been 0:08:34.559 --> 0:08:37.440 a thing that I think has been a source of 0:08:37.480 --> 0:08:42.120 friction internally. Bogul, as we know, didn't love the ETF, 0:08:42.200 --> 0:08:44.679 and yet that increasingly looks like a bigger share of 0:08:44.679 --> 0:08:47.240 their business. What do we expect from the new guy? 0:08:48.240 --> 0:08:49.800 I mean, I think you know the real question is 0:08:49.840 --> 0:08:52.800 continuity and change. Right, the culture is so strong that 0:08:53.240 --> 0:08:55.679 there's like an entire you know, millions of people who 0:08:55.720 --> 0:08:58.000 are investors, who are you know, bocal heads, and they've 0:08:58.000 --> 0:09:00.200 bought into this philosophy and it has been good for 0:09:00.240 --> 0:09:02.839 them and they don't want to see that just die away. 0:09:03.440 --> 0:09:08.200 So being true to that while also finding areas for growth, 0:09:08.520 --> 0:09:12.000 right like that is the challenge. As Eric said, you know, 0:09:12.360 --> 0:09:15.400 ETFs and indexing has really taken off, maybe took off 0:09:15.480 --> 0:09:17.679 the trajectory of it took off more in the last 0:09:17.760 --> 0:09:20.320 ten to twenty years than maybe in the prior twenty years, 0:09:20.960 --> 0:09:24.439 but nonetheless is taken off. There's a question of how 0:09:24.559 --> 0:09:26.680 much more can it grow. There's a lot of talk 0:09:26.800 --> 0:09:30.480 now about whether active management or more active selections of 0:09:30.679 --> 0:09:34.800 funds because rates are higher now the task of investing, 0:09:34.800 --> 0:09:37.760 maybe there are more opportunities for active managerement. Part of 0:09:37.800 --> 0:09:41.800 this is all marketing and spin, but there is a 0:09:41.800 --> 0:09:46.320 lot of discussion about that being more growth there than 0:09:46.600 --> 0:09:49.000 just basically put it in a fond and forget about 0:09:49.000 --> 0:09:51.480 it and you'll be fine. And so I think for 0:09:51.600 --> 0:09:53.880 Vanguard and the question is are there areas that they 0:09:53.920 --> 0:09:57.560 can find and try to exploit And they've been trying 0:09:57.600 --> 0:10:00.760 to do this and advised you to account. They've been 0:10:00.800 --> 0:10:04.200 getting into it more international, they've tried and fits and 0:10:04.240 --> 0:10:08.920 starts and not been terribly successful. And then you know, 0:10:09.160 --> 0:10:11.440 not necessarily an area for growth, but it kind of 0:10:11.760 --> 0:10:14.880 goes across everything is the technology of the firm, and 0:10:14.960 --> 0:10:17.360 I think, you know, there are a lot of criticisms 0:10:17.400 --> 0:10:21.119 of its ease of use, whether it's technologically as sophisticated 0:10:21.160 --> 0:10:23.520 as other firms. So there are lots of areas in 0:10:23.880 --> 0:10:27.640 the firm that are sort of growth potentials, and I 0:10:27.640 --> 0:10:29.920 think that the challenge, obviously is to realize them and 0:10:30.360 --> 0:10:32.679 to actually grow. And I think that's part of the 0:10:32.720 --> 0:10:35.000 mission well, that somebody with the little McKinsey blood would 0:10:35.040 --> 0:10:36.200 have some appeal. I think then. 0:10:43.400 --> 0:10:45.560 Two things on this. First of all, this idea of 0:10:45.600 --> 0:10:48.840 growth in general a Bogel would hate. But he hated 0:10:48.880 --> 0:10:50.680 it when John Brennan did it. He hated it when 0:10:50.760 --> 0:10:54.160 McNabb did it. I remember going to interview him the 0:10:54.160 --> 0:10:56.760 first time and he goes, can you believe we have 0:10:56.880 --> 0:11:00.880 four trillion in assets? That's obscene? And he goes and 0:11:00.920 --> 0:11:03.760 because he loved he had this frame picture of his 0:11:03.840 --> 0:11:07.240 book Enough and underneath he had Trump's book Never Enough. 0:11:07.880 --> 0:11:11.520 He goes isn't this great? So he was like he 0:11:11.640 --> 0:11:13.480 was all about enough. He didn't think we should grow 0:11:13.520 --> 0:11:15.840 at all because he thought we're going to lose track 0:11:15.920 --> 0:11:18.760 of the hearts and souls of the actual customers and 0:11:18.760 --> 0:11:21.040 they're all going to be numbers. Thus, I think they're 0:11:21.080 --> 0:11:22.800 well beyond that now they have like eight point three 0:11:22.880 --> 0:11:25.359 triol and they have double what when he was upset. 0:11:25.679 --> 0:11:29.000 So I do think within the current vanguard CEOs, he 0:11:29.080 --> 0:11:32.920 fits perfectly. To me, he's like a Buckley. It's Bogel 0:11:33.000 --> 0:11:36.320 that's so different and will always be the anomaly in physics. 0:11:36.800 --> 0:11:38.959 Everyone else, to me is a more normal and he's 0:11:39.080 --> 0:11:41.880 very reserved. He's not going to say anything. Stupid. Bogel 0:11:41.880 --> 0:11:43.640 would just drop bombs right and left. And he was 0:11:43.640 --> 0:11:46.079 a pr person's nightmare, but in a fun way, in 0:11:46.120 --> 0:11:48.079 a good way. And at the time, I think to 0:11:48.160 --> 0:11:51.240 break through the industry at that time, and because you're 0:11:51.280 --> 0:11:53.600 not distributing, you have no distribution fees, so you have 0:11:53.640 --> 0:11:55.520 to get everybody to come to you. You have to 0:11:55.559 --> 0:11:58.559 be pretty maverick, pretty maverick. Everyone else is more of 0:11:58.600 --> 0:12:01.640 a caretaker, but they they're all trained in like MBA 0:12:02.080 --> 0:12:04.160 to grow, like what else. He supposed to do. They're 0:12:04.160 --> 0:12:05.480 supposed to go to do a new firm. Ago, let's 0:12:05.480 --> 0:12:09.240 actually retract. So everybody's you know, been trained to grow. 0:12:09.559 --> 0:12:11.880 I think the point you brought up was interesting about 0:12:11.880 --> 0:12:15.280 the advisory business. So I don't think he has to 0:12:15.320 --> 0:12:17.280 do much with ETFs. I think the fish are jumping 0:12:17.280 --> 0:12:20.040 in the boat. They're at this point you could probably 0:12:20.040 --> 0:12:21.880 say don't invest with us, and the money would still 0:12:21.920 --> 0:12:24.920 come in. They taken nine hundred million dollars a day 0:12:24.920 --> 0:12:27.360 for the past decade. Their ETFs this year have taken 0:12:27.360 --> 0:12:29.160 in thirty six percent of all flows. This had a 0:12:29.160 --> 0:12:33.960 six hundred shores. It's fine. Advisory is interesting. So most 0:12:34.000 --> 0:12:37.240 of the people in the wealth management business are Vanguard 0:12:37.320 --> 0:12:40.360 fund investors who got old. That's why they launched it. 0:12:40.760 --> 0:12:42.720 But this got three hundred billion. But the fees are 0:12:42.720 --> 0:12:46.440 real low droll. They're like point two five and below, 0:12:46.520 --> 0:12:48.040 So if you have a lot of money, you can 0:12:48.080 --> 0:12:50.480 get to for point five or point ten per Most 0:12:50.480 --> 0:12:54.120 advisors are one percent. So this is dramatically cheaper, and 0:12:54.200 --> 0:12:57.120 I think Salim could make that one of his legacies. 0:12:57.160 --> 0:12:59.800 Tim Buckley even called the wealth management engine number two. 0:13:00.640 --> 0:13:03.319 I think he'd be good at that. And may basically 0:13:03.400 --> 0:13:07.880 taking their advisory service externally. The only thing with that 0:13:08.200 --> 0:13:10.840 is once you become an advisor and your full service 0:13:11.280 --> 0:13:12.920 and you have all different types of people who want 0:13:12.920 --> 0:13:15.760 different things. They're going to request private equity, they might 0:13:15.760 --> 0:13:19.199 request crypto, they might request options like it's going to 0:13:19.240 --> 0:13:22.800 take you into some Unboglian areas. But again, Vanguard's past 0:13:22.840 --> 0:13:25.920 that because remember Bogel got pissed off at every CEO, 0:13:26.200 --> 0:13:30.679 especially his successor. I mean there was like twenty five 0:13:30.760 --> 0:13:34.240 years of him dropping bombs on management from his research office. 0:13:34.240 --> 0:13:36.360 So he would drop the same bombs on Salim. I 0:13:36.360 --> 0:13:38.360 don't see anything that different there. 0:13:39.120 --> 0:13:42.040 Maybe in some ways this is like a perfect job 0:13:42.120 --> 0:13:45.319 because you don't have to deal with the maverick still 0:13:45.320 --> 0:13:48.559 throwing bombs or ever having a direct connection to him 0:13:48.559 --> 0:13:50.440 other than you know, probably through the industry. 0:13:50.640 --> 0:13:52.520 That's true. And you know it's funny is that he'll 0:13:52.520 --> 0:13:54.560 have to answer to the board. But I think the 0:13:54.600 --> 0:13:57.960 board is probably going to be more like him. Again, 0:13:58.000 --> 0:14:01.600 the board kicked out Bogel in ninety five. How about that? 0:14:01.679 --> 0:14:04.040 How about you start this company and you're so crotchety 0:14:04.120 --> 0:14:06.720 and like annoying that the board's like you got to go. 0:14:07.360 --> 0:14:10.280 So I just find that That's why I wrote the book. 0:14:10.280 --> 0:14:14.440 I'm like, this guy is wild anyway. The other thing, 0:14:14.640 --> 0:14:17.400 the technology, I think that relates to customer service. That's 0:14:17.440 --> 0:14:20.040 another thing Vanguard needs a lot of help with. Did 0:14:20.080 --> 0:14:22.760 you look at that at all? Because I know I 0:14:22.800 --> 0:14:25.760 looked at their Yelp reviews are bad. Bogle Heads forums. 0:14:25.760 --> 0:14:28.440 They're even these bugle heads they love Bogel They're like, 0:14:28.480 --> 0:14:30.560 I don't like Vanguard. I was at the Bugleheads convention. 0:14:30.680 --> 0:14:34.000 I met somebody who's like, I am in low cost 0:14:34.160 --> 0:14:37.480 Vanguard funds but on Fidelities platform. Yeah, so well, what 0:14:37.600 --> 0:14:38.440 do you think he's going to do? 0:14:38.640 --> 0:14:41.800 That would just irk him to know end that you're 0:14:41.880 --> 0:14:44.120 using it, that would be in traueving Guard funds. 0:14:44.200 --> 0:14:45.680 He would his head would explode. 0:14:46.480 --> 0:14:50.520 It's also worth mentioning Blackrock known for its technology, which 0:14:50.560 --> 0:14:53.320 is a software called Aladdin. So yeah, how do you 0:14:53.360 --> 0:14:55.760 think don't go about wrestling with this technology question? 0:14:55.800 --> 0:14:57.400 So I think it's really it goes down to the 0:14:57.480 --> 0:15:00.000 question of what how do they want to change the company. 0:15:00.080 --> 0:15:01.560 If they want to change it, right, like, if they 0:15:01.760 --> 0:15:04.840 really go full force into an advisory business, they're going 0:15:04.920 --> 0:15:08.560 to have to really up their game on technology. It 0:15:08.600 --> 0:15:12.400 also brings them into a new kind of competition with 0:15:12.520 --> 0:15:15.520 the Schwabs and the Fidelities of the world, companies that 0:15:15.640 --> 0:15:19.840 have branches in major cities and smaller cities across America. 0:15:20.120 --> 0:15:22.480 That's not something Vanguard has. And it is a kind 0:15:22.520 --> 0:15:25.080 of a connection that a lot of clients like to 0:15:25.120 --> 0:15:27.200 have that you know, you can walk into a branch 0:15:27.400 --> 0:15:29.920 and talk to your advisor. Vanguard doesn't have that, and 0:15:29.960 --> 0:15:32.080 it's entirely by phone, and unless you have a lot 0:15:32.080 --> 0:15:35.400 of money, you're basically put into kind of like a 0:15:35.520 --> 0:15:37.800 bucket of advisors and you kind of call or email 0:15:37.800 --> 0:15:41.000 and you get like whoever responds. That's not, you know, 0:15:41.080 --> 0:15:43.960 always the case, but it's not like having one personal connection. 0:15:44.560 --> 0:15:46.800 And so I think they kind of have to decide, 0:15:47.040 --> 0:15:49.640 you know, if they really want to expand greatly into 0:15:49.680 --> 0:15:52.560 that and if they need to change the business model 0:15:52.600 --> 0:15:55.720 at all, and then you know, the company does become 0:15:56.240 --> 0:16:01.160 more and considerably different than what it is today. Comparison 0:16:01.280 --> 0:16:04.080 is also different. Blackrock is not a you know, people 0:16:04.120 --> 0:16:07.960 don't have personal individuals don't have personal black Rock accounts. 0:16:08.000 --> 0:16:11.160 You're holding Iyeshirt's ad Fidelity or ad a broker unless 0:16:11.160 --> 0:16:14.400 you're like a foundation or a large institutional investor, and 0:16:14.440 --> 0:16:17.280 that's you know, these companies, while they do many things 0:16:17.320 --> 0:16:19.480 that are the same, they also do they also very 0:16:19.480 --> 0:16:22.360 important differences between like how they sell stuff, who they 0:16:22.400 --> 0:16:25.840 sell it, the lineup of products, the advisory business. So 0:16:26.520 --> 0:16:30.400 you know, I think that kind of institutional business is 0:16:30.720 --> 0:16:34.440 very much core to Blackrock. It's not as core to 0:16:34.600 --> 0:16:37.360 Vanguard except on the four oh one k accounts. 0:16:37.720 --> 0:16:40.920 So Eric, if you're Vanguard and you have this existing 0:16:40.960 --> 0:16:43.560 portfolio and here comes new guy, what do you think 0:16:43.800 --> 0:16:48.080 the product offerings could be, How could they change? What 0:16:48.160 --> 0:16:48.840 could they look like? 0:16:49.400 --> 0:16:52.240 Yeah, I think there'll be incremental changes. Vanguard launches very 0:16:52.240 --> 0:16:54.560 few products, maybe one or two a year. They're very picky. 0:16:54.680 --> 0:16:57.960 I could see that doubling. Maybe it just depends on 0:16:58.000 --> 0:17:00.400 what his focus is. When I interviewed for the book, 0:17:00.400 --> 0:17:01.920 one of the quotes he said to me was, you 0:17:01.920 --> 0:17:04.160 know our traffic light system where we give red lights 0:17:04.640 --> 0:17:08.440 to like leverage. Blackrock tried to implement a system and 0:17:08.480 --> 0:17:11.320 call all of those I think ETI's because he didn't 0:17:11.359 --> 0:17:15.080 want ETF to be contaminated by the crazy stuff. And 0:17:15.119 --> 0:17:18.640 that's something that Bogel and Vanguard and Salim all would 0:17:18.640 --> 0:17:19.080 agree on. 0:17:19.160 --> 0:17:20.240 And there's money there too. 0:17:20.440 --> 0:17:23.240 Yeah, that leveraged Like, there's so much stuff that they 0:17:23.280 --> 0:17:24.400 would consider a distraction. 0:17:25.640 --> 0:17:28.440 You know file Bogo is rolling over. 0:17:28.640 --> 0:17:31.240 Yeah, but this is a everybody would be on the 0:17:31.240 --> 0:17:33.800 same page here, whether it's the successor is Bogle or Salim, 0:17:33.840 --> 0:17:38.040 which is leveraged inverse, things that roll, commodities, futures, that 0:17:38.040 --> 0:17:40.760 stuff should not be part of any account. So the 0:17:40.840 --> 0:17:43.720 question is things like gold right single gold. Yeah, you 0:17:43.720 --> 0:17:46.080 can buy a gold ETF on Vanguard's platform, but you 0:17:46.080 --> 0:17:48.160 can't buy a bitcoin ETF. Well maybe the lad bitcoin 0:17:48.440 --> 0:17:51.920 it's only long only. Then there's things like black Rock 0:17:52.000 --> 0:17:55.199 has a Fallen Angels bond ETF. Well, Vanguard has the 0:17:55.240 --> 0:17:58.040 next level up, but they don't go one level down 0:17:58.080 --> 0:18:00.440 to the niche of just double b's. Maybe there'll be 0:18:00.440 --> 0:18:03.600 a Vanguard double B. Vanguard has a market neutral mutual fund, 0:18:04.119 --> 0:18:06.679 maybe they launch something like that, which'd be interesting in 0:18:06.720 --> 0:18:10.959 an ETF format. The active equity the Vanguard active equity 0:18:11.080 --> 0:18:13.399 mutual funds have a lot of money, but they're seeing outflows. 0:18:13.440 --> 0:18:16.280 That's one area of Vanguard is like having problems just 0:18:16.280 --> 0:18:19.000 like every other active equity mutual fund manager. But if 0:18:19.000 --> 0:18:21.359 they came into the ETF world, people are buying active 0:18:21.359 --> 0:18:24.560 equity ETFs, and they're buying them if they're cheap. So 0:18:24.560 --> 0:18:28.399 they're already cheap. So if they launched like a Wellington 0:18:28.480 --> 0:18:31.160 Wins or a variety of their active if it made 0:18:31.200 --> 0:18:34.280 them available in the ETF format, I think they would sell. 0:18:34.400 --> 0:18:36.399 But again the question is how much is he going 0:18:36.440 --> 0:18:38.400 to convince the board we need to sell more versus 0:18:38.640 --> 0:18:42.080 we're fine work on this other stuff. But I could 0:18:42.119 --> 0:18:45.600 see some tiny incremental changes on the product line, but 0:18:45.640 --> 0:18:48.920 I don't see them say launching you know, a double 0:18:49.040 --> 0:18:52.119 leveraged high old bond ETF or anything like that. May Yeah, No, 0:18:52.160 --> 0:18:55.040 they're not going to go. He's not gonna get that 0:18:55.160 --> 0:18:59.359 just won't happen. Again, this is obviously describing kind of 0:18:59.720 --> 0:19:03.800 new versions of vanilla basically, Yeah. 0:19:03.680 --> 0:19:06.760 A lot of those products. Also, like in the Blackrock comparison, 0:19:06.800 --> 0:19:08.920 a lot of their products that are sort of these 0:19:09.320 --> 0:19:12.680 precision or specific parts of the market are geared towards 0:19:13.160 --> 0:19:16.080 very active traders, if not institutional traders. Like sometimes there's 0:19:16.119 --> 0:19:18.639 a misconception that ETFs are traded mostly by retail and 0:19:18.680 --> 0:19:22.160 they go in and out ETFs, Blackrock and a bunch 0:19:22.160 --> 0:19:25.720 of other large firms are become a tool for various 0:19:25.720 --> 0:19:28.560 sophisticated institutional portfolio managers to go in and out of 0:19:28.560 --> 0:19:30.639 the market, and like, that's one of the reasons that 0:19:30.640 --> 0:19:34.520 Blackrock has many more and many more specific funds. 0:19:42.359 --> 0:19:46.000 Vanguard traditionally only made funds that you bought and hold ETFs, 0:19:46.480 --> 0:19:50.359 so their turnover the trading of the ETFs relative to 0:19:50.400 --> 0:19:53.720 the assets was tiny, and Bogel actually loved that. He 0:19:53.840 --> 0:19:56.160 was like, hey, at least ours are ETFs are traded 0:19:56.160 --> 0:19:58.280 that much. That was the one thing saving grace he 0:19:58.320 --> 0:20:00.840 could take, even though he didn't like ETFs. Black rocks 0:20:00.880 --> 0:20:02.920 trade more, and then something that pro sharees they trade 0:20:02.920 --> 0:20:06.080 a ton, But some Vanguard ETFs is starting to trade more. 0:20:06.280 --> 0:20:09.439 Vu is in the top twenty most traded ETFs consistently, 0:20:10.040 --> 0:20:14.280 and if Voo starts to get more volume will at 0:20:14.280 --> 0:20:16.120 some point it's going to start to peel away investors 0:20:16.160 --> 0:20:19.480 from spy because it is three times cheaper. It's three 0:20:19.520 --> 0:20:23.720 base points versus nine. So it's interesting if Salim's black 0:20:23.800 --> 0:20:26.160 rocky in mind, which would be like, we should go 0:20:26.240 --> 0:20:28.639 after the trading crowd because it's going to help us 0:20:28.680 --> 0:20:31.359 get more assets from spy. That would be what he 0:20:31.400 --> 0:20:33.960 thinks as an IVV manager, But will he think that 0:20:34.040 --> 0:20:37.720 as a VU manager? That's going to be interesting because 0:20:38.000 --> 0:20:40.399 you could argue that if you get more volume, the 0:20:40.400 --> 0:20:42.359