WEBVTT - Tim Buckley on Finding His Purpose With Vanguard 0:00:02.000 --> 0:00:07.120 This is Masters in Business with very Results on Bloomberg Radio. 0:00:08.560 --> 0:00:13.039 I am super excited about this week's Masters in Business 0:00:13.360 --> 0:00:18.320 Live with Vanguard Group CEO Tim Buckley. If you recall 0:00:18.480 --> 0:00:22.520 pre pandemic, we had started doing these live events. The 0:00:22.560 --> 0:00:25.959 first one was with Ray Dalio, and then we didn't 0:00:25.960 --> 0:00:29.920 one with Howard Marks, and then everything closed down and 0:00:29.960 --> 0:00:33.040 we kind of put it on hiatus. Well they're back. 0:00:33.120 --> 0:00:36.440 Masters in Business Live is back, and this one with 0:00:36.640 --> 0:00:41.560 the CEO of the Vanguard Group was really quite wonderful. 0:00:41.680 --> 0:00:44.920 It was at the big E T F Exchange conference 0:00:45.440 --> 0:00:49.159 in Miami that was held last weekend. I got to 0:00:49.240 --> 0:00:53.279 sit with Tim for about an hour uh and ran 0:00:53.360 --> 0:00:56.200 through about forty five minutes worth of questions, and we 0:00:56.240 --> 0:00:59.880 took some questions from the audience. If you remember about 0:01:00.120 --> 0:01:02.920 five years ago when it was announced that he was 0:01:02.920 --> 0:01:07.880 going to be CEO, we did ten questions with Tim Buckley, 0:01:07.920 --> 0:01:11.720 and I'll link to that in the description of the podcast. 0:01:12.360 --> 0:01:16.400 This completes my set. I have now interviewed all four 0:01:16.640 --> 0:01:21.000 Vanguard CEOs from Masters in Business Jack Bogel, Jack Brennan, 0:01:21.040 --> 0:01:26.000 Bill McNab and now Tim Buckley. Really quite a fascinating conversation. 0:01:26.040 --> 0:01:30.800 A Tour to Force with no further ado. My Masters 0:01:30.800 --> 0:01:37.240 in Business Live discussion with the Vanguard Group CEO Tim Buckley. 0:01:37.520 --> 0:01:40.160 So let's talk a little bit about what we have 0:01:40.240 --> 0:01:44.240 going on right now. You've been a Vanguard for over 0:01:44.440 --> 0:01:50.360 thirty years, you've been CEO for five years. How's it going. 0:01:51.880 --> 0:01:55.160 It's been a uh, it's been a learning time and 0:01:55.240 --> 0:01:58.320 it's been a growth time, is what I would what 0:01:58.360 --> 0:02:02.600 I would say, very it's been, you know, an incredible opportunity. 0:02:02.840 --> 0:02:07.160 If you think about what Vanguard's all about. UM, we 0:02:07.200 --> 0:02:09.280 sit there each and every day figuring out how do 0:02:09.320 --> 0:02:13.000 we help people retire, better, put their kids through college, um, 0:02:13.040 --> 0:02:16.240 afford that dream home. And they've been a I think 0:02:16.280 --> 0:02:18.840 everyone in the audience agree, it's been a it's been 0:02:18.880 --> 0:02:22.680 a tough few years for investors and that's the time 0:02:22.720 --> 0:02:24.960 to rally, and certainly for us, that has been a 0:02:25.000 --> 0:02:27.280 time to show up and answer the bell for our clients. 0:02:27.320 --> 0:02:30.280 And so it's it's been a rewarding time. It might 0:02:30.360 --> 0:02:32.560 seem odd to say that, but a really rewarding time. 0:02:33.000 --> 0:02:36.800 So let's talk a little bit about your unusual career path. 0:02:37.400 --> 0:02:42.359 You come out of Harvard undergraduate and you essentially get 0:02:42.440 --> 0:02:45.760 a job as like a gopher for Jack Bogel. You're 0:02:45.800 --> 0:02:50.640 his Yeah, well it's they it was Lackey to the Lackey. Um, 0:02:50.680 --> 0:02:53.360 it's really that he had already working for Jack, working 0:02:53.480 --> 0:02:56.000 for Jack's guy. Well, I was suppose you're working for him, 0:02:56.000 --> 0:02:57.800 but I really was working for Jim Norris, who was 0:02:57.880 --> 0:03:00.680 his his assistant. We worked together for Jack Bogel, I 0:03:00.680 --> 0:03:03.480 reported to Jack Bogel. Um. I found out later I 0:03:03.520 --> 0:03:07.600 had the title of chairman's intern. And uh, I found 0:03:07.639 --> 0:03:09.600 out I had that title because they weren't sure I 0:03:09.600 --> 0:03:11.320 was going to make it through the summer. So I 0:03:11.639 --> 0:03:13.840 come out of undergrad as chairman's intern. I thought that 0:03:13.880 --> 0:03:16.520 was my title for good. After the summer they changed. 0:03:16.600 --> 0:03:18.520 I found out, well that you made it. Oh, you 0:03:18.560 --> 0:03:20.680 have a job. You have a job. I didn't know 0:03:20.720 --> 0:03:22.680 what was going to happen if the intern part didn't 0:03:22.760 --> 0:03:27.240 work out. Um, but it's a uh finding finding Vanguard. 0:03:27.280 --> 0:03:30.840 I was. I was lucky to find Vanguard. Um. Why well, 0:03:31.840 --> 0:03:34.040 coming out of school and I look, I have a 0:03:34.240 --> 0:03:36.640 My oldest is a is a junior in school now, 0:03:36.720 --> 0:03:38.680 so I'm sure he'll face this. But I was the 0:03:39.000 --> 0:03:41.120 typical senior and I was a little lost coming out 0:03:41.160 --> 0:03:44.880 of school. Um, I'm the son of a heart surgeon, 0:03:45.680 --> 0:03:47.720 and uh I grew up with someone who had a 0:03:47.760 --> 0:03:49.880 ton of purpose in his life. I mean, very like 0:03:50.360 --> 0:03:52.520 saving lives on a daily basis. That gives you a 0:03:52.520 --> 0:03:56.760 little bit of purpose. And I was lost, and he Um, 0:03:56.840 --> 0:03:59.640 I wasn't gonna go into medicine. Look, I didn't have 0:04:00.160 --> 0:04:02.920 the steady hands for it. And uh I didn't have 0:04:02.960 --> 0:04:05.960 the stomach for hospitals. And I love business. I love 0:04:06.000 --> 0:04:07.840 the market, so I want to go that we better struggling, 0:04:07.840 --> 0:04:10.680 I was. I was trying to find a place with 0:04:10.720 --> 0:04:14.240 the same type of purpose and and I was thinking, 0:04:14.240 --> 0:04:16.000 maybe I need to go back into medicine. My father 0:04:16.040 --> 0:04:19.320 said to me at that time, save lives or help 0:04:19.360 --> 0:04:22.520 people live better lives. Anything else in your wasting your time? 0:04:23.760 --> 0:04:26.760 And no, no, but he said, you don't need to 0:04:26.800 --> 0:04:28.880 go into medicine for that. And then he actually suggests 0:04:28.880 --> 0:04:31.839 I go talk to this company, Vanguard. Really, that was 0:04:31.880 --> 0:04:34.320 your father suggest He said, hey, reach out to Vanguard, 0:04:34.360 --> 0:04:37.000 and and uh I was fortunate to come down and 0:04:37.120 --> 0:04:41.200 interview with Vanguard, and look, I love at first night. 0:04:41.320 --> 0:04:43.359 I mean, it was a company owned by its climate 0:04:43.400 --> 0:04:46.960 clients with a clear purpose, um, to really give them 0:04:47.000 --> 0:04:49.680 a fair shake and and provide them with a better future. 0:04:49.720 --> 0:04:53.280 And thirty two, late thirty two years later, here we sit. 0:04:53.680 --> 0:04:56.880 What was it like working for Jack Bogel right out 0:04:56.880 --> 0:05:00.159 of school? I mean that had to be a little well, you' lee, 0:05:00.560 --> 0:05:03.400 Vanguard wasn't the Vanguard we know today thirty years ago, 0:05:04.000 --> 0:05:06.760 but it had to be a little intimidating. Well maybe 0:05:06.760 --> 0:05:08.440 I should have said I was both lost and a 0:05:08.520 --> 0:05:11.640 little clueless. I mean, remember this is you're coming out 0:05:11.640 --> 0:05:14.720 of the super Internet. I mean, Vanguard's really no one 0:05:14.720 --> 0:05:17.640 knows who Vanguard is. Um, so my friends they thought 0:05:17.720 --> 0:05:21.839 Vanguard was an airline um, which the second yeah, a 0:05:21.880 --> 0:05:25.760 second guess would have been a healthcare company. Um. And 0:05:26.160 --> 0:05:27.720 you know I used to have to describe it as 0:05:27.880 --> 0:05:31.440 as uh the Pennsylvania version of our Boston competitor. So 0:05:31.640 --> 0:05:37.720 um and uh so people didn't know Vanguard wasn't the 0:05:37.839 --> 0:05:39.880 firm it is today. And then Jack Bogel, like he 0:05:40.080 --> 0:05:43.480 wasn't the household name. So I didn't show up intimidated. Um. 0:05:43.520 --> 0:05:46.479 I showed up curious. And you know what he's uh, 0:05:46.560 --> 0:05:49.120 I asked a ton of questions and he's a guy 0:05:49.200 --> 0:05:52.680 that look wanted to teach a lot, and if you 0:05:52.680 --> 0:05:56.560 were willing to listen, you'd learn a lot. So Bill 0:05:56.640 --> 0:06:01.359 McNab was the CEO during the Finance ancial crisis, and 0:06:01.440 --> 0:06:03.800 when I spoke with him, he talked about how that 0:06:04.320 --> 0:06:09.159 created both challenges and opportunities for Vanguard. You're the CEO 0:06:09.440 --> 0:06:14.200 during the pandemic, COVID lockdown. What sort of challenge couple 0:06:14.240 --> 0:06:18.480 of bear markets? We right, let's see uh inflation at 0:06:18.480 --> 0:06:21.640 a forty year high, tightest labor tas labor market of 0:06:21.680 --> 0:06:24.800 our lifetimes. But yeah, other than that's been easy, easy times. 0:06:24.880 --> 0:06:28.919 So so what sort of challenges and opportunities have the 0:06:28.960 --> 0:06:32.080 past five years presented? Yeah, I think there's one of 0:06:32.360 --> 0:06:34.919 a huge, a huge lesson for us, and it's brought 0:06:34.920 --> 0:06:38.600 out in our our leadership team, the great leaders You've 0:06:38.640 --> 0:06:42.360 got to embrace your reality. You can't be an optimist 0:06:42.560 --> 0:06:45.320 or a pestimist. You just have to embrace the facts 0:06:45.320 --> 0:06:48.799 in front of you, brutal as they may be. And 0:06:48.920 --> 0:06:51.160 that's what we learned throughout this and you have to 0:06:51.800 --> 0:06:55.520 plot the best path forward. And maybe if you human humor, 0:06:55.560 --> 0:06:57.440 maybe we'll go back to kind of the first time 0:06:57.680 --> 0:06:59.760 we talked, and you go back to that time, because 0:07:00.120 --> 0:07:03.480 Banguard had been gone through a decade of incredible success, 0:07:04.040 --> 0:07:07.120 great growth, and look, our fund performance had been top 0:07:07.200 --> 0:07:09.920 notch if you went back to that time, and there 0:07:10.000 --> 0:07:13.480 our net promoter scores were really high, UM cash flow 0:07:14.080 --> 0:07:17.960 outpacing the industry. So all signs were great. We had 0:07:17.960 --> 0:07:20.600 a wonderful opportunity in front of us. We looked at UM, 0:07:22.080 --> 0:07:24.880 we looked at a client success and we saw it 0:07:24.920 --> 0:07:27.400 as hey, it was defined by the funds they hold it, 0:07:27.480 --> 0:07:29.880 but also by the advice they got on those funds. 0:07:30.840 --> 0:07:33.800 And for forty years, like we've been hammering, hammering away 0:07:33.840 --> 0:07:35.720 at the fund side that we had lowered the costs 0:07:35.760 --> 0:07:40.040 of investing and we had improved the quality of those 0:07:40.080 --> 0:07:42.080 funds and you know, dary I say, we made a 0:07:42.240 --> 0:07:45.240 change in the industry. Well, we started to think that 0:07:45.320 --> 0:07:47.080 maybe we could actually do that on the advice side, 0:07:47.080 --> 0:07:48.800 maybe we could be the vanguard of advice. Because we 0:07:48.840 --> 0:07:52.160 had this this PAS group that Personal Advisor Services that 0:07:52.240 --> 0:07:55.440 had some early success. So we set and said, okay, 0:07:55.840 --> 0:07:58.360 like couldy build another engine of value engine one being 0:07:58.520 --> 0:08:01.680 funds and engine to being advice. And if we could 0:08:01.720 --> 0:08:05.240 do that, that would be wonderful. So right before doing that. 0:08:05.400 --> 0:08:07.800 Right after we talked, we looked at h we have 0:08:08.040 --> 0:08:11.200 like looking at our competitive position, do it constantly and 0:08:11.440 --> 0:08:14.600 we call it, hey, let's embrace the brutal facts. We 0:08:14.720 --> 0:08:18.840 looked at the foundation of our position and it wasn't 0:08:18.840 --> 0:08:22.480 as good as we thought of us. In fact, we're 0:08:22.520 --> 0:08:25.040 low cost leader, but at that time we weren't. If 0:08:25.040 --> 0:08:27.720 you looked at our e t F assets UM at 0:08:27.760 --> 0:08:29.960 that time, less than half of them were actually would 0:08:29.960 --> 0:08:32.800 have been considered lowest cost in the industry. Our NPS 0:08:32.960 --> 0:08:36.040 scores are high, but they were declining UM because of 0:08:36.080 --> 0:08:40.640 an antiquated digital experience. We were losing market share in 0:08:40.640 --> 0:08:43.600 the critical retirement, the four one K business UM. Internationally, 0:08:43.640 --> 0:08:47.800 we were spread too thin. We're serving clients that institutional clients, 0:08:47.840 --> 0:08:49.880 and that weren't core to who we are. We're all 0:08:49.880 --> 0:08:52.960 about the individual investor. So looked at those said well, 0:08:52.960 --> 0:08:54.640 we've got to address those and we want to build 0:08:54.679 --> 0:08:59.280 this new engine of value with advice. Great awesome. That 0:08:59.320 --> 0:09:03.520 seemed like enough off and then COVID hit. We had 0:09:03.559 --> 0:09:06.240 a choice to make at that point, and the choice 0:09:06.440 --> 0:09:10.880 was do we just delay everything and play defense, or 0:09:11.360 --> 0:09:13.959 do we just add a pandemic to our list of 0:09:14.000 --> 0:09:17.199 brutal facts. We chose the ladder and said this is 0:09:17.280 --> 0:09:19.000 we have no idea how long this is going to 0:09:19.080 --> 0:09:21.679 go on, but we owe it to our clients to 0:09:22.320 --> 0:09:24.679 emerge from it stronger and better than when we went in. 0:09:25.240 --> 0:09:28.120 And we had we prioritize all our strategic plans. We 0:09:28.360 --> 0:09:30.160 had to figure out how to get them done while 0:09:30.200 --> 0:09:33.839 people were remote forces to make some tough choices and 0:09:34.200 --> 0:09:37.120 in that time and some big investments, whether we're building 0:09:37.160 --> 0:09:40.439 out our advice capabilities and building virtual teams to do it, 0:09:41.320 --> 0:09:45.439 were you know, tough choices. In our retirement business, we 0:09:45.520 --> 0:09:48.440 had to rebuild it soup to nuts and we partnered 0:09:48.480 --> 0:09:51.880 with Emphasis, but that meant went and worked for Emphasis, 0:09:51.960 --> 0:09:55.120 but it meant we could triple the resources um that 0:09:55.280 --> 0:09:59.120 we had, you know, focused on our retirement business. We 0:09:59.240 --> 0:10:02.599 looked in our our personal investor, our direct business and 0:10:02.640 --> 0:10:04.839 said we have to organize it differently, and we have 0:10:04.920 --> 0:10:10.199 to modernize that digital experience. And a tough decision overseas 0:10:11.120 --> 0:10:14.120 basically pulled back from ation. It was all institutional clients 0:10:14.400 --> 0:10:17.560 and we gave back up hundred billion in assets, which 0:10:17.880 --> 0:10:22.599 most people think it's crazy, Billow. They were all institutional 0:10:22.679 --> 0:10:25.880 separate accounts. That's that's not what we do here and 0:10:26.840 --> 0:10:29.760 gave it back to them, and that's not not where 0:10:29.840 --> 0:10:32.640 will excel. And it's just not what makes us take 0:10:32.720 --> 0:10:34.920 a little bit tangent here, Like we were managing money 0:10:34.960 --> 0:10:37.480 for people for basis point and a half and then 0:10:37.520 --> 0:10:41.160 they were going ahead and charging seventy basis points. That's 0:10:41.160 --> 0:10:43.120 not why we get out of bed, right. We want 0:10:43.160 --> 0:10:45.960 to see that an investor have a better return as 0:10:46.000 --> 0:10:49.000 a result. So maybe those tough choices and and uh, 0:10:49.400 --> 0:10:51.280 you know, five years later, we're sitting a lot better off. 0:10:51.640 --> 0:10:55.760 Whatever you identified as a structural fault line. How far 0:10:55.840 --> 0:10:58.679 along do you feel you are on the process of hey, 0:10:58.800 --> 0:11:00.840 we want to we're here, we want to end up there? 0:11:02.000 --> 0:11:04.080 Are you halfway there? Most of the way there? How 0:11:04.200 --> 0:11:06.400 how do you think? And we talked about just getting started, 0:11:06.559 --> 0:11:08.040 but you know, it's one of those things that as 0:11:08.040 --> 0:11:09.559 a leader you don't think about like, well, here's the 0:11:09.559 --> 0:11:11.840 finish line and then I'm done. It's how far can 0:11:11.880 --> 0:11:14.439 you push it and get the next team ready to 0:11:14.559 --> 0:11:18.240 take over and continue that journey? Um. But for us, 0:11:18.360 --> 0:11:20.640 you know, we we measure our success in different ways. 0:11:20.679 --> 0:11:22.760 We measure our success by how are our funds doing 0:11:23.040 --> 0:11:25.440 and we look back long term performance and right now 0:11:25.520 --> 0:11:27.960 you look back over ten years and our active funds, 0:11:28.760 --> 0:11:32.680 and we're out performing their competitive group averages sixty eight 0:11:32.760 --> 0:11:35.439 percent or out performing their their benchmarks. If you look 0:11:35.480 --> 0:11:39.360 at that et F Low Cost Leadership space, UM, there's 0:11:39.640 --> 0:11:42.040 six percent of our assets would now be considered lowest costs. 0:11:42.080 --> 0:11:44.360 So we can actually have that low cost title back 0:11:44.880 --> 0:11:48.000 if you will, UM, if you if you kind of 0:11:48.040 --> 0:11:52.480 continue on to that advice journey that we had for us, 0:11:52.559 --> 0:11:54.240 it was just thankful the last time we talked to 0:11:54.240 --> 0:11:57.080 me about eighty billion advised assets that sits at about 0:11:57.120 --> 0:12:01.080 three out of seven point two trillion at seven point 0:12:01.120 --> 0:12:05.360 two trillion, but it's growing it fifteen a year UM. 0:12:05.520 --> 0:12:08.000 And they're they're six hundred fifty thousand clients that at 0:12:08.040 --> 0:12:11.320 the bottom of the market last year and we're still 0:12:11.440 --> 0:12:14.400 right on target with their goals. And for advice for 0:12:14.559 --> 0:12:17.240 us too, is also a matter of you think about advisors, 0:12:17.559 --> 0:12:20.079 how are we using model portfolios to make their result 0:12:20.200 --> 0:12:23.319 results better? Um? Are we making sure that they have 0:12:23.480 --> 0:12:26.240 the right products from Vanguard to actually comple what they do? 0:12:26.400 --> 0:12:28.719 The right practices being in the advice business ourselves. We 0:12:28.760 --> 0:12:33.040 can help improve their practices, justify the advice that they give, UM, 0:12:33.200 --> 0:12:36.400 justify the fee, and you know, just simple things like hey, 0:12:36.559 --> 0:12:38.679 the value of tax loss harvesting. How do you make 0:12:38.760 --> 0:12:41.560 that that apparent to people? UM, something that for us 0:12:41.760 --> 0:12:45.600 save our clients about three million or four months that alone, 0:12:46.280 --> 0:12:48.559 and our digital experience. You asked about that that one. 0:12:48.600 --> 0:12:50.160 I can tell you how far along we are in 0:12:51.040 --> 0:12:54.199 modernizing that we're about seventy the way and doing that 0:12:54.360 --> 0:12:58.160 and so great change. So so you mentioned the pandemic 0:12:58.320 --> 0:13:02.520 was a little bit of the challenge. Everybody is working 0:13:02.640 --> 0:13:06.079 remote for a long time. How do you maintain corporate 0:13:06.160 --> 0:13:11.040 culture with twenty thousand, eighteen thousand employees when the vast 0:13:11.120 --> 0:13:13.880 majority of them are not coming into the office. I 0:13:13.920 --> 0:13:15.960 think it's a it's tough for every company out there, 0:13:16.240 --> 0:13:18.560 UM when you've hired thousands of people who have never 0:13:18.720 --> 0:13:21.719 set foot on a campus and you often model the 0:13:21.800 --> 0:13:24.800 behavior and the culture UM. And so the first thing 0:13:24.880 --> 0:13:26.880 for us is it's it's how it's in the leaders 0:13:26.920 --> 0:13:30.520 that you you actually select, and that's so crucial for us. 0:13:30.559 --> 0:13:32.760 So in our screening, you get aught interview questions. We're 0:13:32.760 --> 0:13:35.280 trying to figure out are you purpose driven? Like are 0:13:35.360 --> 0:13:37.960 you actually someone who's gonna be purpose driven? But then 0:13:38.040 --> 0:13:40.240 we have something that I learned from one of my 0:13:40.360 --> 0:13:44.199 mentors that you've talked with, Jack Brennan before, a former 0:13:44.280 --> 0:13:48.839 chairman CEO UM, and he always established this early on 0:13:48.960 --> 0:13:53.640 in the culture that it would be client, crew, self, 0:13:53.840 --> 0:13:56.760 always in that order. And a lot of companies will 0:13:56.800 --> 0:13:59.280 say that like, it will put the client first, but 0:14:00.280 --> 0:14:02.600 we don't have another choice like our client's own us. 0:14:02.640 --> 0:14:05.679 We don't have anyone else to serve. And then during 0:14:05.720 --> 0:14:08.000 the pandemic and being cleared, us like, yeah, but the 0:14:08.040 --> 0:14:09.720 only way we can mess that up is if people 0:14:09.760 --> 0:14:13.040 start putting themselves itselves in front of the client. And 0:14:13.160 --> 0:14:14.880 so the leaders there we have to say, okay, we 0:14:14.960 --> 0:14:17.559 have to enforce it. It's always the client first. And 0:14:17.640 --> 0:14:20.880 as a leader, then that means that you have to 0:14:20.920 --> 0:14:23.920 take care of the crew before yourself. So we emphasize 0:14:23.960 --> 0:14:26.560 that wholy that leaders are going to actually make sure 0:14:26.640 --> 0:14:29.640 that crew know that they care more about their success 0:14:30.000 --> 0:14:33.440 than their own. So for me, it's it's more important 0:14:33.440 --> 0:14:37.400 to see my team's success than Tim Buckley's success. And 0:14:37.480 --> 0:14:39.760 it's amazing how that helps build a team if you're 0:14:39.800 --> 0:14:42.880 true behind it, and it builds the collaboration on that team, 0:14:43.440 --> 0:14:45.560 and then down the road is somewhere where you put yourself. 0:14:45.640 --> 0:14:47.640 But that is a cord to our culture. We're able 0:14:47.680 --> 0:14:49.640 to do it in a virtual world. But now that 0:14:49.720 --> 0:14:53.040 people are basically back for three days a week, it's 0:14:53.040 --> 0:14:56.440 a lot easier to reinforce it um and people to 0:14:56.520 --> 0:14:59.360 see it when they're actually face to face. So back 0:14:59.440 --> 0:15:03.640 three days a week, um home optional two days a week. 0:15:04.280 --> 0:15:07.800 How does that structure change what you expect people to 0:15:07.920 --> 0:15:10.000 do when they actually come to the office. And so 0:15:10.040 --> 0:15:11.560 I'm sure a lot of people have been through this 0:15:11.640 --> 0:15:13.280 where they come into the office, and we had it 0:15:13.360 --> 0:15:15.560 at first when people came into the office and they 0:15:15.600 --> 0:15:18.000 were on teams when they're in the office. So what 0:15:18.080 --> 0:15:21.000 we're finding we're finally like, okay, there, they come into 0:15:21.040 --> 0:15:22.680 the office, they say hello to each other, they sit 0:15:22.680 --> 0:15:24.960 down their desk, and they go on video all day long. Well, 0:15:25.000 --> 0:15:28.400 that defeats the purpose of actually those serendipitous moments you're 0:15:28.400 --> 0:15:30.520 bumping into each other, trading ideas, you're sitting in a 0:15:30.600 --> 0:15:33.240 conference room, you're talking to each other, building on everyone's points. 0:15:33.520 --> 0:15:36.160 If you're on teams, she said, why is that, Well, 0:15:36.200 --> 0:15:38.920 it was because not everyone was coming in and you 0:15:39.000 --> 0:15:41.000 still had some people at home and some people or 0:15:41.040 --> 0:15:43.120 you didn't want to travel from building and building. We 0:15:43.160 --> 0:15:44.960 have a nice campus and not everyone wanted to travel, 0:15:45.440 --> 0:15:47.720 and we just said no, Actually, when you're here, like first, 0:15:47.760 --> 0:15:50.280 everyone's got to be here, and then secondly, when you're here, 0:15:50.640 --> 0:15:53.080 we expect you'd actually interact with each other, not on teams. 0:15:53.800 --> 0:15:56.280 And you know you you want to see that that 0:15:56.440 --> 0:15:58.680 teams usage drop in the middle of the week and 0:15:58.760 --> 0:16:00.760 go up on the tail n This because Monday and 0:16:00.760 --> 0:16:02.920 Friday or the virtual days. So we actually had to 0:16:03.080 --> 0:16:05.800 establish that norm that people have gotten so used to 0:16:05.960 --> 0:16:08.320 using teams all the time in the middle of the week, 0:16:08.360 --> 0:16:10.520 we had to move people away from it. So let's 0:16:10.600 --> 0:16:13.800 stick with the leadership theme and you come to the 0:16:13.920 --> 0:16:18.040 CEO row with a unique leadership background. You used to 0:16:18.160 --> 0:16:21.480 describe yourself as c I O square you were Chief 0:16:21.520 --> 0:16:28.320 Investment Officer and chief information officer, an unusual combination, and 0:16:28.440 --> 0:16:31.200 then to be elevated and CEO. How does that background 0:16:31.760 --> 0:16:36.480 affect how you think about the role of chief executive officer. Yeah, 0:16:36.480 --> 0:16:39.920 I think for every CEO you need perspective and I 0:16:39.960 --> 0:16:44.240 think both the CIO jobs gave me incredible perspective. The 0:16:44.360 --> 0:16:47.160 first one would have been back in if you think 0:16:47.200 --> 0:16:49.640 about I became c I O right at the tail 0:16:49.720 --> 0:16:51.400 end of the Internet. Craze I was on the web 0:16:51.440 --> 0:16:54.800 and then took over his uh Chief Information Officer, and 0:16:54.880 --> 0:16:58.280 that was a time of incredible hype. Right the Internet 0:16:58.360 --> 0:17:00.160 is going to change the world, Oh my gosh, will 0:17:00.240 --> 0:17:03.720 change how we actually consume you know, video, how we game, 0:17:03.960 --> 0:17:06.440 how we do business, and everyone is talking about that. 0:17:08.000 --> 0:17:10.960 You remember that well, and then it didn't happen right 0:17:11.000 --> 0:17:14.439 away and everyone ended up disappointed. We know what happened 0:17:14.440 --> 0:17:17.520 over the long run, it reminded you know, back then 0:17:17.600 --> 0:17:19.920 we we used to talk about something that I've tried 0:17:20.000 --> 0:17:22.800 to bring back for people, which is that that Gardner 0:17:22.920 --> 0:17:25.960 hype cycle, if you remember it, and that Gardner hype 0:17:25.960 --> 0:17:28.960 cycle is something where whenever there's a disruptive technology and 0:17:29.000 --> 0:17:31.280 it comes in, there's a lot, there's a lot of 0:17:31.400 --> 0:17:36.200 hype and high expectations. So unrealistic expectations followed by something 0:17:36.280 --> 0:17:40.400 doesn't happen, you have disillusionment. You have the troth of disillusionment, 0:17:40.960 --> 0:17:44.320 and people give up on it. But the true change 0:17:44.400 --> 0:17:47.600 comes when hey, you know what those loyal to that 0:17:47.720 --> 0:17:51.120 technological change figure out over not one, two, but three 0:17:51.400 --> 0:17:54.480 five years how to drive change and how to leverage it. 0:17:55.440 --> 0:17:57.800 And that's been true through time. It was true whether 0:17:57.960 --> 0:18:00.800 it's with the internet. You can plout it with mapping 0:18:00.840 --> 0:18:04.240 the genome with E v S, and it's true in 0:18:04.359 --> 0:18:06.760 investments or you have to look at a change. And 0:18:07.160 --> 0:18:10.800 you know, people talk today about okay, a private equity, 0:18:10.880 --> 0:18:13.639 some magic elixir, if I can just get private equity 0:18:13.680 --> 0:18:16.159 into my client's portfolios. It's it's not true. I mean 0:18:16.720 --> 0:18:20.280 private equity there is greater return dispersion, but the returns 0:18:20.280 --> 0:18:22.520 on private equity or often below the S and P 0:18:22.600 --> 0:18:25.240 five hunter on average. So you've got to do your work. 0:18:25.920 --> 0:18:27.440 You've got to see through and say, okay, well that 0:18:27.520 --> 0:18:29.040 means that I need to keep fees low and I 0:18:29.119 --> 0:18:31.680 have to get with the right GPS, etcetera. And so 0:18:31.800 --> 0:18:33.879 you can drive you can figure out where's that long 0:18:34.000 --> 0:18:38.280 term change going. So those two jobs give you a perspective. 0:18:38.359 --> 0:18:40.840 So okay, avoid that hype and how do you see 0:18:40.880 --> 0:18:42.920 through the long term change that you want that you 0:18:43.040 --> 0:18:46.520 think should you should drive home? Um, they're probably different 0:18:46.600 --> 0:18:49.000 in how you embrace change, and I see the world's 0:18:49.040 --> 0:18:53.360 always changing, right, So that's the dangerous thing. Like how 0:18:53.440 --> 0:18:56.880 people code, where you host, where you host something, all 0:18:56.920 --> 0:18:59.679 of those things those have you know, how applications talk 0:18:59.720 --> 0:19:03.159 to each those have totally totally changed since I was 0:19:03.240 --> 0:19:07.359 c I O. And um, but if you think in investments, 0:19:07.720 --> 0:19:09.960 certain things like there are more rules in there, like 0:19:10.720 --> 0:19:13.560 that proven investment philosophy of diversification. That's not going to 0:19:13.720 --> 0:19:16.040 change overnight, So you have to be more careful in 0:19:16.080 --> 0:19:18.399 the investment world. And both of those give me a 0:19:18.440 --> 0:19:22.520 balance of CEO. So Vanguard now has a hardcore tech 0:19:22.600 --> 0:19:26.760 geek as CEO. How has that affected the company? How 0:19:26.800 --> 0:19:31.520 has that affected how you approach the use of technology 0:19:31.840 --> 0:19:35.360 in the world of investment. Yeah, like, thanks for calling 0:19:35.359 --> 0:19:37.680 me a tech geek. I'll think that as a compliment. Um, 0:19:38.040 --> 0:19:43.160 that's how it's meant. Yeah. Um, for us, it's technology 0:19:43.240 --> 0:19:45.679 is the embodiment of our service. We're we've always been 0:19:45.720 --> 0:19:47.560 a virtual company. Just used to be through the mail 0:19:47.680 --> 0:19:51.000 and wanting hutter number when I joined. So, um it's 0:19:51.000 --> 0:19:53.639 always been that way for us. So it needs to 0:19:53.640 --> 0:19:56.560 be a necessary area of investment. And I mentioned this. 0:19:57.000 --> 0:19:59.200 When you lead with technology What can happen to you 0:19:59.320 --> 0:20:01.640 is you can if you don't continually make the investment, 0:20:01.680 --> 0:20:04.800 you fall behind because it gets so costly to address 0:20:04.840 --> 0:20:07.479 your legacy. It becomes an albatross your kind of your 0:20:07.560 --> 0:20:11.639 legacy applications. They become a burden and they slow you 0:20:11.760 --> 0:20:13.119 down and they slow down what you can do for 0:20:13.160 --> 0:20:16.920 your clients. We we made the choice of you know what, 0:20:17.080 --> 0:20:20.160 we're going to eliminate that legacy. And a few years 0:20:20.200 --> 0:20:23.240 ago we said on whether you're investing directly with your dress, 0:20:23.240 --> 0:20:26.480 investing through an advisor, whether you're investing through retirement plan. 0:20:26.920 --> 0:20:30.479 The platforms that we deal with our service infrastructure, our 0:20:30.560 --> 0:20:36.199 investment infrastructure cloud native. So we've rebuilt, we're about seventy 0:20:36.240 --> 0:20:38.200 four percent of the way through of rebuilding all our 0:20:38.200 --> 0:20:41.480 applications to be cloud native. Now that sounds cool, Like 0:20:41.600 --> 0:20:45.280 what does he give you? It builds up your your resiliency, 0:20:45.359 --> 0:20:48.439 but your speed. And I'll give you an example. Um, 0:20:48.760 --> 0:20:50.600 maybe the team won't love that, I'll use this one. 0:20:50.680 --> 0:20:54.240 But we we launched a mobile app last year, right 0:20:54.359 --> 0:20:57.480 and um it was it fell flat on its face. 0:20:57.960 --> 0:21:00.560 The mobile app like it was panned. Our science hated 0:21:00.600 --> 0:21:03.320 the mobile app and in the past when you did that, 0:21:03.520 --> 0:21:04.960 well you had to live with it, like you have 0:21:05.040 --> 0:21:08.000 to wait for nine months to fix the problem. But 0:21:08.160 --> 0:21:11.160 because it was built cloud native, that meant you could 0:21:11.200 --> 0:21:13.800 make changes to it. You can make the changes every 0:21:13.840 --> 0:21:17.120 two three days. And so we did two hundred releases 0:21:17.160 --> 0:21:21.880 to it in nine months and that app has gone 0:21:21.920 --> 0:21:25.960