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Speaker 1: This is mesters in Business with Very Results on Bloomberg

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Speaker 1: Radio this week on the podcast Hey guess what I

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Speaker 1: have an extra special guest. Uh. Eric Baucunus is someone

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Speaker 1: I've known from both the E t F industry and

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Speaker 1: Bloomberg for I don't know a decade or two, um,

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Speaker 1: and we hang out in a lot of the same circles. Uh.

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Speaker 1: There are few people in the world who know as

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Speaker 1: much about E t f's indexing vanguard, Jack Bogel. I

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Speaker 1: mean I could count him on one hand the number

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Speaker 1: of people who have his depth of knowledge in this space. Uh.

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Speaker 1: And that's why he's really a fascinating character. Uh. You

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Speaker 1: could tell when you listen to this conversation that it's

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Speaker 1: two guys who know each other just b s ing

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Speaker 1: and schmoozing. But I find those to be some of

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Speaker 1: the best conversations because there's no pretense, there's no marketing,

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Speaker 1: it's just people talking about things that genuinely interest them.

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Speaker 1: And when I basically don't get to half my questions

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Speaker 1: because we're just what about this? Tell me about that? Hey,

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Speaker 1: isn't this wrong? Or it just leads to all sorts

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Speaker 1: of fun and interesting places. I thought this was a

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Speaker 1: fascinating conversation, and I think you will also so if

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Speaker 1: you are remotely interested in passive investing E t FS indexing,

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Speaker 1: or Vanguard and Jack Bogel, you will find this to

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Speaker 1: be an absolutely fascinating conversation. With no further ado, my

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Speaker 1: interview of Eric Balcunis of Bloomberg Intelligence. He is the

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Speaker 1: senior E t F analyst for Bloomberg News. He is

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Speaker 1: also co host of E t F i Q on

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Speaker 1: Bloomberg Television, and he hosts a podcast called Trillions with

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Speaker 1: Joe Weber, editor in chief of Business Week. He is

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Speaker 1: the author of several books, most recently The Bogel Effect,

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Speaker 1: How John Bogel and Vanguard turned Wall Street inside out

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Speaker 1: and saved investors trillions. Eric balcun Is, Welcome to Masters

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Speaker 1: in Business. It is a pleasure to be here, Barry always.

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Speaker 1: It's like a home game for me. I just walk

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Speaker 1: like ten feet here right. I texted you and said,

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Speaker 1: come down to five. Time to start. Um. So, so

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Speaker 1: let's talk a little bit about the home field advantage

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Speaker 1: and your career. You've been reporting on finance pretty much

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Speaker 1: your entire career. What what led to an interest in

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Speaker 1: money and markets? Um? Well, I was in cooing to Rutgers,

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Speaker 1: and I was wrote for the school paper, and I

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Speaker 1: decided to major in journalism and communications because I liked it.

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Speaker 1: And but I was at the Cook College, which is

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Speaker 1: the Egg School, and in order to graduate from Cookie

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Speaker 1: had to have at least a minor that was related,

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Speaker 1: and I thought. I took an econ class and I

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Speaker 1: kind of liked it. So I minded an environmental economics

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Speaker 1: that got me through Cook because I was with a

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Speaker 1: bunch of biology people. Um. And so I immediately applied

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Speaker 1: to Bloomberg, but I got rejected job. Yeah no, no,

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Speaker 1: it wasn't I got rejected. I only got in my

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Speaker 1: third time. Um. I because obviously I'm like journalism, economics,

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Speaker 1: I'm in Rutgers. Bloomberg makes perfect sense, and they were hiring,

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Speaker 1: but I just wasn't qualified. Hard pass. Yeah, way did

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Speaker 1: you start? I went to the Institutional Investor magazine newsletter division.

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Speaker 1: Their their website is a regular in my morning reading list.

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Speaker 1: Yeah it's always solid. Yeah, I mean the name turned

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Speaker 1: me off comeing out of college. I was like, Institutional

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Speaker 1: Investor just sounds so boring, like who would ever read this?

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Speaker 1: But the money was pretty Tutions Yeah, institutions, which came

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Speaker 1: in handy later in my when I wrote my first book.

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Speaker 1: But I covered UM derivatives at first, and then I

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Speaker 1: covered mutual fund So I work for a news that

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Speaker 1: I called fund Action and did that for a little

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Speaker 1: while and then went UM. I met a guy named

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Speaker 1: Duff Ferguson at a line Bernston. He was the PR guy,

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Speaker 1: and I just thought, man, I want to go behind

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Speaker 1: the keyhole. And so I went and took a job

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Speaker 1: in PR because I kind of like this guy's whole deal.

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Speaker 1: And so I got a job in PR at um

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Speaker 1: a crisis communication firm named Abernathew McGregor, and got to

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Speaker 1: work with several clients. Uh, and you know, took them

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Speaker 1: to Bloomberg, took them to Reuters, took them to there,

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Speaker 1: and Uh, I came to Bloomberg. I was like, man,

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Speaker 1: this place is different, right, So I always had an

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Speaker 1: eye on Bloomberg for my early career and then UM

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Speaker 1: in nine ish No No Nine two, early two thousand,

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Speaker 1: I got headhunted. That's how good the economy was. You

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Speaker 1: could be twenty five and you'd get headhunted for like

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Speaker 1: all these jobs. And she comes and she goes I've

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Speaker 1: got two jobs that are really good. One is that

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Speaker 1: bear Sterns a lot of money doing PR, and the

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Speaker 1: other one is at Bloomberg. And I was like, that's

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Speaker 1: a easy choice. So I basically put all my chips

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Speaker 1: on Bloomberg a plum and interviewed here to have a

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Speaker 1: job in PR. Went through many interviews. It took a while,

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Speaker 1: but yeah, really, yeah, so I started here relations So

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Speaker 1: so first, the first question is if you weren't reject

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Speaker 1: by Bloomberg right out of the gate when you were

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Speaker 1: right out of school, might you have ended up at

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Speaker 1: bear Stearns? Was was Bloomberg the one? It's a great

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Speaker 1: point we chase the things that received from us, to

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Speaker 1: quote the Tao of Steve. But having had like I

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Speaker 1: had like three jobs, maybe four, I worked. I worked

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Speaker 1: at a third party marketer for about six months, where

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Speaker 1: you had to call pensions and try to pitch them

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Speaker 1: on hedge funds. It was really tough. All those jobs.

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Speaker 1: When I finally got to Bloomberg always helped me stay

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Speaker 1: here because I know what is out there, at least

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Speaker 1: to a degree. If this is my first job, I

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Speaker 1: may have had such a I don't know, curiosity. I

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Speaker 1: probably would have left. So maybe it's a blessing in disguise.

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Speaker 1: So you were covering derivatives in the nineties, but not

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Speaker 1: the two thousands leading up to the O eight or

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Speaker 1: nine crisis. No, I only covered them for a little while,

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Speaker 1: so I'm hardly an expert. You missed the fun that's right,

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Speaker 1: That's right, I covered them. When you're like that in

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Speaker 1: the nineties, who needs the idea? Was you just try

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Speaker 1: to call these traders and just get them to give

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Speaker 1: you information on why what went up and down in

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Speaker 1: the futures market. It was a really, I mean honestly,

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Speaker 1: very unglamorous, manual labor type job. Journalists need. Journalists need

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Speaker 1: to get a reason for everything. It can't you see

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Speaker 1: the market went up for the future? What happened? And

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Speaker 1: you need someone from that where when? Why? Ye? Just

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Speaker 1: what makes financial news coverage either really good or really bad?

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Speaker 1: Because some people must impose a narrative when it's sometimes

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Speaker 1: it's just random. That was my first thought two months

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Speaker 1: in my first job. I was like, I don't know

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Speaker 1: if there there's a reason for this. Maybe it went

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Speaker 1: up like I don't know half a point today, maybe

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Speaker 1: they just maybe there is no reason and there's no

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Speaker 1: clear reason, it's okay. Can we just say that? And

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Speaker 1: I know they hate that. You cannot say we don't

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Speaker 1: know or who knows? We I think we've talked about this.

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Speaker 1: My favorite thing in the world to do on TV

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Speaker 1: is they ask you a question, say I have no idea,

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Speaker 1: Well what what about? I don't know? Nobody does, but

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Speaker 1: I'm telling you the truth. I don't know. The rest

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Speaker 1: of them are lying to you when they answer, and

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Speaker 1: people hate that. I agree, I don't know is a

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Speaker 1: underrated phrase and mindset, whether it's religion, politics, sometimes you

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Speaker 1: don't know, and I think I don't know is a

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Speaker 1: very most Yeah, and most people can relate because a

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Speaker 1: few of us are experts in anything or know anything absolutely.

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Speaker 1: And so I'm a big fan of I don't know

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Speaker 1: in general. But it doesn't really play well in the media.

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Speaker 1: All right, So let's get serious. Now, you're the go

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Speaker 1: to reporter for E T F s and passive indexes. Well,

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Speaker 1: can I stop you? So some people do think of

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Speaker 1: me as a reporter, and I started my career that way,

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Speaker 1: but I'm in research. So what I do is I

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Speaker 1: write notes that aren't I don't report on something. I'm

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Speaker 1: more get our team gives takes on things. So your

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Speaker 1: title is technically senior E t F Analysis. But when

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Speaker 1: I think of everybody in the media who covers E

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Speaker 1: t F, Passive Investing, Vanguard, etcetera, black Rock, etcetera, you're

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Speaker 1: the first name that pops into. Oh you have a

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Speaker 1: question of you want to speak to a journalist in

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Speaker 1: the E T S space? Get ahold of Eric so

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Speaker 1: so so well, I would say, you know some of

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Speaker 1: these guys who work for ESPN who are like experts

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Speaker 1: in the n B A or I kind of model

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Speaker 1: myself and well, or they just get the latest news

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Speaker 1: like woes for the NBA or Adam Schefter I believe

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Speaker 1: that's his name, uh for NFL. I'm I'm that for

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Speaker 1: E T F S And so there is an element

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Speaker 1: of trying to get on top of the latest things.

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Speaker 1: But more so I just see research is having to

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Speaker 1: get out there more. I think if you're in research

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Speaker 1: you sort of need to put on a pundit hat

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Speaker 1: sometimes and have a reaction on Twitter quickly, because if

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Speaker 1: you wait and wait, then you're late to it. And

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Speaker 1: I think it's good to just be um at a

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Speaker 1: little punditry. So I would understand why you would think that.

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Speaker 1: Plus I was a journalist, so I have maybe some

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Speaker 1: vibes that are so let's call you the go to guy,

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Speaker 1: should call you the go to reporter. Um, how do

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Speaker 1: the expertise in E T F and passive investing come about?

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Speaker 1: Remember the fund action newsletter I wrote for so when

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Speaker 1: I was at Bloomberg PR around nine eleven, I had

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Speaker 1: a near miss and I moved back to South Jersey.

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Speaker 1: Uh defined near miss? Uh? Well, Um, I was supposed

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Speaker 1: to be in the top windows of the world that day. Really, Yeah,

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Speaker 1: there was a way. There are thousands I know stories

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Speaker 1: I've had. I know and I don't I'm not looking.

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Speaker 1: I sometimes people over indulge themselves in these stories. And um,

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Speaker 1: but fate did intervene. Um. But there is a badge

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Speaker 1: there was a conference up there Waters Technology, Um, with

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Speaker 1: your name on it. There's a badge with my name

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Speaker 1: on it that was at the top. Isn't that crazy?

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Speaker 1: What did the event start? Oh? It started it like

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Speaker 1: seven in the morning. Have been Yeah, there were three

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Speaker 1: people from this company who were there. Yeah, sad And

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Speaker 1: one of them is actually my friend from South Jersey

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Speaker 1: knows him. And they still have a U I think

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Speaker 1: a walk for him every year. It's you know, it

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Speaker 1: really hit home. But I also was looking to take

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Speaker 1: a step, like I was looking to change gears in life. Anyway,

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Speaker 1: I was about seven, So I moved back to South

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Speaker 1: Jersey and I transferred to the Princeton office of Bloomberg.

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Speaker 1: And when you do that, um, I still think I'm

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Speaker 1: the first person ever in the history of this company

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Speaker 1: to go from pr to data because that's all they

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Speaker 1: do in Princeton is data and engineering. But I was like, well,

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Speaker 1: I don't want to commute to New York every day

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Speaker 1: from South Jerseys all take a job here. So they

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Speaker 1: looked at my background and sad, why don't you go

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Speaker 1: work for funds data? So I got to work where

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Speaker 1: they make the terminal. It's like the Keebler elves. So

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Speaker 1: I've I've seen how the terminal is made, all where

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Speaker 1: all the data comes from. And they I basically had

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Speaker 1: to work on getting fund information from the prospectuses is

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Speaker 1: before technology was really that great, put them into fields

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Speaker 1: and then was annual press. Yes, and we we automated

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Speaker 1: it as we went. We're always looking to automate and

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Speaker 1: so when you pull up a Bloomberg and you type

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Speaker 1: in like the Fidelity Magellan Fund and then you type

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Speaker 1: d E S. All that information there is really what

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Speaker 1: we we did. And so I was doing that in

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Speaker 1: two thousand, two thousand, two thousand, two, three four, And

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Speaker 1: in two thousand six I got a hand at et

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Speaker 1: F there like you work on et F now, and

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Speaker 1: I was like, I had heard of him, but I,

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Speaker 1: you know, it was still and let me just jump in.

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Speaker 1: So the Spiders had been around at that point in time,

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Speaker 1: the SMP five Spiders by State Street, they had been

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Speaker 1: around a couple of decades, and other companies had moved

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Speaker 1: into the space. And I just was having this conversation

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Speaker 1: with some of the other day. They said, who you

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Speaker 1: who you're interviewing? Oh, Eric Beljunas, oh uh. And then

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Speaker 1: the question they asked was was Bloomberg late to E

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Speaker 1: T F. I'm like, I thought they were their pre

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Speaker 1: financial crisis. They were fairly. They weren't the first one,

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Speaker 1: but they certainly didn't lag. That's a great question. So

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Speaker 1: Bloomberg covers everything, and if a ticker is on the exchange,

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Speaker 1: it's on the terminal. So we had E T S

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Speaker 1: from day one. But did we care about them. Did

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Speaker 1: we put a lot of resources into them? Not really.

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Speaker 1: They were still small back then, and I think that's

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Speaker 1: maybe part of my legacy. If there is one, here

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Speaker 1: is too. I was in two thousand and six seven.

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Speaker 1: I was like, oh my god, I was like kicking

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Speaker 1: the tires on et F and I'm like, these things

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Speaker 1: are going to take over. They're too good, that to

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Speaker 1: value is too strong. So I just was like became

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Speaker 1: I'm like dove head first into E t F s

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Speaker 1: and I went to Index Universe conferences, started listening to

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Speaker 1: their podcast with your friend Dave Nadi Matt Hogan, and

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Speaker 1: I looked at some of the stuff they how they talked,

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Speaker 1: the data they looked at, and it was very inspirational.

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Speaker 1: I said, we have to cover things like index weighting methodology,

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Speaker 1: the criteria, the rebounding. There's all these A t S

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Speaker 1: specific fields we have to get on. So part of

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Speaker 1: what I did was to make the d S page

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Speaker 1: one for E t S that had all of fields

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Speaker 1: that were prevalent for E t F Because the time

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Speaker 1: they're putting ETFs into mutual funds and there you were

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Speaker 1: a driver. You yeah, you helped separate it. And that's

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Speaker 1: why people think of you as the e t F guy.

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Speaker 1: By the way, the folks you mentioned I group you

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Speaker 1: in with them, because when I befriended folks like David

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Speaker 1: not Eig, I had no idea that this was the

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Speaker 1: e t F MAFI and these were the people running,

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Speaker 1: you know, really driving the mind share and the perception

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Speaker 1: of e t f s, both in the industry and

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Speaker 1: amongst the investment community. And I'm like, oh, what do

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Speaker 1: you guys do? Kind of we're hanging out and having

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Speaker 1: some fun, and it's like, we've messed around with the

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Speaker 1: t F so that we own e t F so

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Speaker 1: we can hang with you not realizing oh no, no,

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Speaker 1: you don't understand who these got, Jim, and go down

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Speaker 1: the list of people. Um, these are the folks that

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Speaker 1: really drove the entire expansion of the E t F

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Speaker 1: industry quietly in the nineties, but as you mentioned in

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Speaker 1: the two thousands, it was just starting to ramp up.

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Speaker 1: So how did you drive this company into putting a

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Speaker 1: greater emphasis on e t f s and treating them

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Speaker 1: as distinct from mutual funds. Yeah. I tried all kinds

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Speaker 1: of ways, which is sort of I could relate to

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Speaker 1: Bogel trying to sell index funds in this seven these

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Speaker 1: and eighties when no one was really interested. UM. I

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Speaker 1: think everybody has these plates in their life where they're

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Speaker 1: trying to tell people about something and it just takes

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Speaker 1: a long time to break through. So I would get

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Speaker 1: I would I would basically use my communication skills. I

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Speaker 1: would talk to people internally. I would go to sales meetings.

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Speaker 1: I would present the chart I really like to show

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Speaker 1: was people think of E t f s at the

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Speaker 1: time of having say like two percent market share of

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Speaker 1: all funds. But I'm like, but they make up of

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Speaker 1: all equity trading. So I would show them the volume

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Speaker 1: and be like, and we're a service that does a

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Speaker 1: lot with trading. We should have of the equity programmers.

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Speaker 1: If you think about it. That people would nod their heads.

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Speaker 1: But I would never get the aguay programmers. But over

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Speaker 1: over time we made some headway. We started doing events,

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Speaker 1: and honestly, I I just really was like a one

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Speaker 1: man army for a little while. But then the assets

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Speaker 1: started to come in. UM, and then someone like at

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Speaker 1: a higher level would be told by somebody E t

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Speaker 1: f s are big and that would help a little

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Speaker 1: and Ultimately it was like a wave that just finally

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Speaker 1: broke and now we have a lot of resources into

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Speaker 1: et F s. But I also think that Bloomberg and

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Speaker 1: what I would tell people back in the days, we

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Speaker 1: might have been a little late to sort of E

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Speaker 1: t F I S or d S pages and give

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Speaker 1: you some functions. But it was always on the terminal.

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Speaker 1: But once you do that, that's just the frost thing

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Speaker 1: on the cake. You click on an e t F,

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Speaker 1: then you gotta look at the holdings, and then you

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Speaker 1: want to analyze one stock you click on that you

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Speaker 1: could just keep clicking on a terminal other services you had,

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Speaker 1: your clicking had to stop somewhere. So I'm like all

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Speaker 1: the stuff they did here in the eighties and nineties

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Speaker 1: to connect to the exchanges, to get all the stocks

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Speaker 1: and the bonds. We when the E t F came out,

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Speaker 1: all we had to do is put some like you know,

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Speaker 1: sort of frosting on the cake. Now your analysis could

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Speaker 1: go anywhere, and so the terminal and the infrastructure there

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Speaker 1: was really a huge tail wind for my efforts. So

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Speaker 1: so let me ask you a question that will tee

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Speaker 1: up the rest of our conversation. Um, you started in

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Speaker 1: the E T F space in the mid two thousand's,

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Speaker 1: and you know, following the financial crisis, they exploded. Imagine,

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Speaker 1: you know, just banging away at this for forty years

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Speaker 1: with some limited success, but mostly being looked at as

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Speaker 1: that Jack Bogel guy in Pennsylvania. What is this stuff?

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Speaker 1: He's well, he's just hitting his head against the wall.

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Speaker 1: That is just going nowhere? Could you could you picture

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Speaker 1: decades of this with just moderate at best acceptance to

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Speaker 1: the whole idea? Yeah, I mean this is part of

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Speaker 1: the story. I couldn't believe the numbers. Here's to two

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Speaker 1: examples of how long it took took Vanguard twenty five

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Speaker 1: years to get ten percent market share and funds. Nent

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Speaker 1: of Vanguard's assets came after Jack Bogel step down to CEO.

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Speaker 1: That's even it's amazing, right, So he built a foundation

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Speaker 1: largely an oblivion, right, but once it got built and

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Speaker 1: then it became the gradually then suddenly thing. But he

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Speaker 1: toiled around a long time, although he was a very loud,

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Speaker 1: prominent voice. But the assets really weren't there until I

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Speaker 1: would say the financial crisis two thousands when they really

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Speaker 1: kicked in. But up until then they had less than

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Speaker 1: a trillion, I believe, and uh, you know, they were

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Speaker 1: always out there. I remember when I covered for Fund

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Speaker 1: Action in the in the nineties and late nineties, I

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Speaker 1: would cover all the fund companies. I looked at Vanguard

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Speaker 1: is maybe the fourth or fifth company. I was like,

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Speaker 1: Fidelity got a cover, Fidelity t row like Mason, Vanguard

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Speaker 1: was like fourth or fifth. Now when I think of

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Speaker 1: the universe, it's like Vanguard black Rock and then you

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Speaker 1: can need binoculars to see somebody else that. That's amazing

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Speaker 1: and I appreciate the Hamingweight reference. That's always uh, that's

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Speaker 1: always really interesting. You wrote this very insightful and what

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Speaker 1: turned out to be influential column in Cold the Vanguard Effects.

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Speaker 1: Tell us what is the Vanguard effect? Yeah, so the

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Speaker 1: Vanguard effect is, you know, Vanguard comes out there a

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Speaker 1: mutually owned company, right, the investors, the funds on the company,

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Speaker 1: the investors on the funds. That is really the heart

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Speaker 1: of the matter here. Very different, more akin to an

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Speaker 1: insurance company than a typical COO or a nonprofit. It's

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Speaker 1: not they're not exactly those things, but it's something like that.

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Speaker 1: It's unique and this is part of the story. I

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Speaker 1: was so fascinated with was why would someone set up

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Speaker 1: a company where they deliberately turn over all the future

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Speaker 1: profits to the to the people. It just it makes

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Speaker 1: no sense. And so it's Marxists. It's crazy. And I

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Speaker 1: asked everybody intrew fifty people for this book. I asked

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Speaker 1: them all that question. How come nobody has copied the

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Speaker 1: Vanguard structure? And the answer was all the same. Well,

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Speaker 1: there's no incentive to no one. And as Jason Swike said,

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Speaker 1: no one goes to Wall Street to drive a Volvo.

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Speaker 1: And so can I tell you that is the most

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Speaker 1: one percent thing I've ever heard from you, because in

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Speaker 1: normal middle class households of Volvo is considered a higher

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Speaker 1: end called sure, but well I guess. But it's also

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Speaker 1: very accurate. But it's also Bogel worked hard. If you

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Speaker 1: are going to go to Wall Street and you were

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Speaker 1: going to put in those hours, I think most people

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Speaker 1: want a big payoff, So I'm really gonna put this

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Speaker 1: much of my sand intensity. It's and they got that

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Speaker 1: on the belly thing. It's just the way the story goes.

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Speaker 1: On Wall Street. You make a ton of money, usually

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Speaker 1: there's some fall, you know, where maybe you get into

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Speaker 1: fight with people like the Bill growth story I thought

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Speaker 1: was probably more traditional Wall Street story, the rise in

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Speaker 1: the fall. Right. Um, So it's unusual, though, to have

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Speaker 1: that much work ethic, that much drive and say, yeah,

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Speaker 1: I want all the investors to have the money. I mean,

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Speaker 1: they got paid well, but he was never going to

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Speaker 1: get Jeff Bezos rich or you know, the Johnson family

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Speaker 1: rich if he turned over the profits. That decision was

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Speaker 1: the biggest, I think the single biggest decision in the

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Speaker 1: in the last fifty years. Indexing is just the lucky

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Speaker 1: byproduct of that decision. If indexing was expensive, it wouldn't

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Speaker 1: really catch hold. And I think it was Vanguard's mutual

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Speaker 1: ownership structure that is the key ingredient, as well as

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Speaker 1: Bogel's unique structure. So most of my book is exploring

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Speaker 1: those two things. I think those two things were created

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Speaker 1: the explosion, and then when they were looking for something

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Speaker 1: to apply this to, indexing was out there and they said,

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Speaker 1: let's do that, and that I think in a weird way,

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Speaker 1: I think indexing got lucky that Vanguard and Vogel existence.

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Speaker 1: So so let me push back a little bit on that.

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Speaker 1: If Vanguard had this mute see, I think they're they're

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Speaker 1: very complementary the mutual ownership structure. Of course, handing glove

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Speaker 1: because hypothetically, in the alternative universe, Vanguard never gets into

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Speaker 1: passive and indexing and instead just does low cost active,

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Speaker 1: which would destroy though they'd get all the money, I

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Speaker 1: don't think, yes, they wouldn't, because if you look at

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Speaker 1: any study, the lowest cost active funds beat their benchmarks

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Speaker 1: way more, and Vanguard's active funds, relatively speaking the monks

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Speaker 1: amongst active funds, the lowest cost wins. But if you're

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Speaker 1: low cost active versus someone else doing low cost passive,

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Speaker 1: you're gonna lose. Yeah, over the fullness of time. Maybe

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Speaker 1: part of my theory on low cost passive, I don't

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Speaker 1: think it would have happened without Vanguard because it's just

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Speaker 1: it could be true, because it's possible, you know, because

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Speaker 1: the Wells Fargo Index fund, which was the second one

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Speaker 1: to ever come out in the early seventies, right, yes,

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Speaker 1: still charges forty four basis points and with a load,

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Speaker 1: and that's with vanguarded the picture, and and how much

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Speaker 1: has the Wells Fargo Index amassed and as nothing It's like, no,

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Speaker 1: it's very little. So that's why these two are so

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Speaker 1: here's successful low successful indexing not attracting assets, but it's

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Speaker 1: it's the low cost. This this whole thing that we're

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Speaker 1: experiencing with with what I call the Bogel effect. It's

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Speaker 1: it's low cost. That's the thing. I call it the

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Speaker 1: great cost migration. It is much more powerful than indexing.

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Speaker 1: Indexing is really just taking a group of thocks and

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Speaker 1: market cap waiting them right or and each index company

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Speaker 1: does in a different way. Like there is no like

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Speaker 1: is different from Vanguard is different. How about the Russell

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Speaker 1: one thousands of different than the sp five. SPID is

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Speaker 1: literally active. I mean, it's really because it's cheap. And

427
00:22:00,000 --> 00:22:01,920
Speaker 1: if you were to have let's say, indexing wasn't even

428
00:22:01,920 --> 00:22:03,720
Speaker 1: a concept. We don't even know what it is. If

429
00:22:03,720 --> 00:22:07,680
Speaker 1: you had made active mutual funds and got them down

430
00:22:07,760 --> 00:22:10,520
Speaker 1: to those low fees that Vanguards active funds currently are at,

431
00:22:11,119 --> 00:22:14,440
Speaker 1: they would utterly destroy They'd be the biggest active mutual

432
00:22:14,480 --> 00:22:17,359
Speaker 1: fund shops six times over. Sex my opinion, I just

433
00:22:17,440 --> 00:22:21,280
Speaker 1: feel like active is sold by performance, and if your

434
00:22:21,320 --> 00:22:24,679
Speaker 1: low costs, it will help your performance. But depending on

435
00:22:24,760 --> 00:22:27,600
Speaker 1: your model, there there are active funds that have great

436
00:22:27,680 --> 00:22:30,280
Speaker 1: years and then have terrible years, and if they were

437
00:22:30,320 --> 00:22:33,119
Speaker 1: low cost, I think you would have inflows and outflows

438
00:22:33,240 --> 00:22:36,320
Speaker 1: over time. Vanguards active funds would rise to the top

439
00:22:36,359 --> 00:22:39,200
Speaker 1: in the ten and twenty year but it would take

440
00:22:39,240 --> 00:22:41,200
Speaker 1: decades to get there, all right, It still would have

441
00:22:41,240 --> 00:22:42,960
Speaker 1: taken a while. It would have been the graduate. Then

442
00:22:43,000 --> 00:22:44,879
Speaker 1: suddenly it just would have all happened with active instead

443
00:22:44,880 --> 00:22:48,760
Speaker 1: of passive. It would have happened, though. I think cost,

444
00:22:48,960 --> 00:22:51,320
Speaker 1: I think is really what he pushed forward and what

445
00:22:51,560 --> 00:22:53,840
Speaker 1: is here to stay. So so the next thing is

446
00:22:53,880 --> 00:22:55,919
Speaker 1: such a you know, there are active funds that are

447
00:22:56,040 --> 00:23:00,400
Speaker 1: very very passive ish. There are a closet indext will

448
00:23:00,440 --> 00:23:03,199
Speaker 1: come back hold that there's gonna condex funds that are

449
00:23:03,200 --> 00:23:06,560
Speaker 1: pretty active. So index thing is a very nuanced conversation.

450
00:23:06,640 --> 00:23:09,399
Speaker 1: What isn't nuanced and what is the mother of all

451
00:23:09,480 --> 00:23:11,879
Speaker 1: trends is high costs of low cost alright, So so

452
00:23:12,119 --> 00:23:16,200
Speaker 1: let's put some flesh on those bones in And I

453
00:23:16,280 --> 00:23:18,480
Speaker 1: think I totally didn't even answer your question, but well,

454
00:23:18,520 --> 00:23:21,040
Speaker 1: I'll kay, I'm gonna pin you down. We got lots

455
00:23:21,080 --> 00:23:24,840
Speaker 1: of time to make you answer the questions you're on

456
00:23:25,200 --> 00:23:27,680
Speaker 1: you're on our Would you please direct the witness to

457
00:23:28,320 --> 00:23:31,320
Speaker 1: what you asked what the Vandguard effect was in dollars.

458
00:23:31,400 --> 00:23:35,359
Speaker 1: Let's talk about dolls. So that mutual ownership company that

459
00:23:35,480 --> 00:23:38,439
Speaker 1: he created, and once it got really popular and then

460
00:23:38,480 --> 00:23:41,520
Speaker 1: gradually then suddenly kicked in in two thousand eight and

461
00:23:41,600 --> 00:23:45,680
Speaker 1: they started getting trillions um. Once the trillions started kick in,

462
00:23:45,760 --> 00:23:47,720
Speaker 1: a couple of things happened, and you can start to

463
00:23:47,760 --> 00:23:50,440
Speaker 1: calculate the savings that Vanguard saved investors. If you take

464
00:23:50,480 --> 00:23:52,240
Speaker 1: the money they would have had and say a sixties

465
00:23:52,240 --> 00:23:55,000
Speaker 1: seventy basis point active fund versus a ten basis point

466
00:23:55,000 --> 00:23:57,480
Speaker 1: in X fund, and the turnover the trading cost is

467
00:23:57,520 --> 00:24:00,000
Speaker 1: like another one percent for active funds, and you don't

468
00:24:00,040 --> 00:24:02,960
Speaker 1: even see you add that up. You know, arguably it's

469
00:24:02,960 --> 00:24:06,199
Speaker 1: five to a trillion. Uh, there's ways it could be more.

470
00:24:06,320 --> 00:24:08,800
Speaker 1: Bogel wanted to reinvest the savings and that grows it more.

471
00:24:08,920 --> 00:24:11,159
Speaker 1: But let's say it's a lot of money. Now. The

472
00:24:11,240 --> 00:24:14,280
Speaker 1: Vanguard effect is everybody saying, oh, they're getting all these flows,

473
00:24:14,320 --> 00:24:18,000
Speaker 1: we're gonna have to copy their local feast to compete

474
00:24:18,119 --> 00:24:20,320
Speaker 1: they And so in my book, a lot of people

475
00:24:20,440 --> 00:24:23,520
Speaker 1: were like, nobody wanted to do this. Only Bogel wanted this.

476
00:24:24,119 --> 00:24:26,359
Speaker 1: Everybody else did it because they had to, and that

477
00:24:26,520 --> 00:24:29,119
Speaker 1: mattered to some people, but ultimately that's how everybody saw it,

478
00:24:29,440 --> 00:24:31,320
Speaker 1: and I agree, and that's the Vanguard effect. And that's

479
00:24:31,320 --> 00:24:33,840
Speaker 1: why I was so attracted this topic because as somebody

480
00:24:33,880 --> 00:24:36,160
Speaker 1: looks at the flows every day, I'm like, damn man,

481
00:24:36,359 --> 00:24:38,560
Speaker 1: every every year we look at the flows, and I'm like,

482
00:24:38,600 --> 00:24:41,840
Speaker 1: if you pull a thread on basically of this money,

483
00:24:42,760 --> 00:24:45,920
Speaker 1: you end up in nineteen seventy four and it's all

484
00:24:45,960 --> 00:24:48,200
Speaker 1: traced back to this guy in this decision to set

485
00:24:48,240 --> 00:24:51,320
Speaker 1: this company up like this. And that is interesting that

486
00:24:51,520 --> 00:24:55,080
Speaker 1: nobody copied Vanguard's mutual ownership structure, but it's the governing

487
00:24:55,480 --> 00:24:58,560
Speaker 1: force of the whole enchilada. Now basically people are they

488
00:24:58,640 --> 00:25:01,320
Speaker 1: have to copy it, even they don't structurally copy, if

489
00:25:01,359 --> 00:25:03,639
Speaker 1: they have to copy the products, which leads me to

490
00:25:04,160 --> 00:25:06,080
Speaker 1: a statement that Bogel made that blew my mind. I

491
00:25:06,280 --> 00:25:08,280
Speaker 1: didn't know he said this. I had known some of

492
00:25:08,320 --> 00:25:10,560
Speaker 1: his quotes, but not all of them. In one of

493
00:25:10,640 --> 00:25:13,040
Speaker 1: his books, Character Counts, where he goes over his speeches,

494
00:25:13,520 --> 00:25:17,400
Speaker 1: he's given the crew. He talks about how the crew

495
00:25:17,560 --> 00:25:22,159
Speaker 1: is what they called the employee. Uh. He talks about

496
00:25:22,960 --> 00:25:28,440
Speaker 1: Vanguard's mission will be will start, Vanguard's will know Vanguard's

497
00:25:28,480 --> 00:25:31,720
Speaker 1: mission is beginning to be successful when our market share eroads,

498
00:25:32,680 --> 00:25:37,200
Speaker 1: meaning everybody else has. And that's happened in specific spaces,

499
00:25:37,600 --> 00:25:40,359
Speaker 1: but not overall, not overall. So he I wrote a

500
00:25:40,440 --> 00:25:43,639
Speaker 1: note saying Bogel's dream on hold still despite passive revolution.

501
00:25:44,240 --> 00:25:46,960
Speaker 1: So so they at one point in time where the

502
00:25:47,119 --> 00:25:50,960
Speaker 1: number one funds in a lot of specific categories and

503
00:25:51,440 --> 00:25:54,879
Speaker 1: in many areas, that is no longer the case because

504
00:25:55,000 --> 00:25:57,960
Speaker 1: other companies as a loss leader and to be able

505
00:25:58,000 --> 00:26:00,200
Speaker 1: to market hey, where the number one in this have

506
00:26:00,560 --> 00:26:04,080
Speaker 1: either cut their fees below Vanguard running at a loss,

507
00:26:04,600 --> 00:26:07,720
Speaker 1: and so there's still two three four in everything and

508
00:26:07,960 --> 00:26:11,040
Speaker 1: much more asset's under management. But when you look at

509
00:26:11,119 --> 00:26:13,600
Speaker 1: the fun tables and look at specific things, it used

510
00:26:13,640 --> 00:26:16,760
Speaker 1: to be Vanguard Vanguard, Vanguard Vangard, and that's no longer

511
00:26:16,840 --> 00:26:20,080
Speaker 1: the case. Is that the market share loss Jack was

512
00:26:20,160 --> 00:26:23,080
Speaker 1: talking about, that's exactly he would he would have like,

513
00:26:23,240 --> 00:26:27,080
Speaker 1: that's what's so uh interesting about this guy is that's

514
00:26:27,119 --> 00:26:30,560
Speaker 1: a completely different trip to actually root for your market share?

515
00:26:30,600 --> 00:26:33,680
Speaker 1: Do road to think that that's that's like saying I

516
00:26:33,760 --> 00:26:37,480
Speaker 1: want to actually change the whole industry, the whole industry, um,

517
00:26:37,960 --> 00:26:41,280
Speaker 1: and it is happening. The problem is, overall, Vanguard still

518
00:26:41,359 --> 00:26:45,160
Speaker 1: leads and flows every year like clockwork black Rock. Typically

519
00:26:45,200 --> 00:26:47,240
Speaker 1: in a given year, Vanguard, let's say takes in ten,

520
00:26:47,680 --> 00:26:50,159
Speaker 1: black Rock will take in seven, and then you know,

521
00:26:50,520 --> 00:26:52,480
Speaker 1: go maybe three or two is the next one, and

522
00:26:52,520 --> 00:26:55,000
Speaker 1: then after that it's a fraction. Yeah, and then there

523
00:26:55,000 --> 00:26:57,520
Speaker 1: a lot of people see outflow. So net wise, you know,

524
00:26:57,760 --> 00:27:00,639
Speaker 1: Vanguard and black Rock are really can on Godzilla at

525
00:27:00,680 --> 00:27:02,879
Speaker 1: this point, and then there's just this huge gap. But

526
00:27:03,040 --> 00:27:05,920
Speaker 1: if Vanguards still takes in more than black Rock though,

527
00:27:05,920 --> 00:27:07,719
Speaker 1: and we know how big they are, so ultimately Vanguard

528
00:27:07,760 --> 00:27:10,720
Speaker 1: will pass black Rock. Eventual events con especially in a

529
00:27:10,720 --> 00:27:13,960
Speaker 1: bear market. Bear markets are where Vanguard's market share really

530
00:27:14,040 --> 00:27:17,240
Speaker 1: starts to grow because there's no asset appreciation. Asset growth

531
00:27:17,480 --> 00:27:20,080
Speaker 1: or market appreciation. Asset growth. The only thing that can

532
00:27:20,119 --> 00:27:23,520
Speaker 1: actually grow your assets or stop the asset losses flows.

533
00:27:24,040 --> 00:27:27,120
Speaker 1: So once flows are the only variable the market share

534
00:27:27,160 --> 00:27:29,840
Speaker 1: percentage that Vanguard has start to go, it doubles the

535
00:27:30,000 --> 00:27:32,920
Speaker 1: rate of growth. So bear markets are because I woul

536
00:27:32,920 --> 00:27:34,960
Speaker 1: always over the years here, oh just wait till a

537
00:27:35,000 --> 00:27:40,560
Speaker 1: bear market. That's when all this Vanguard stuff constant, like,

538
00:27:40,640 --> 00:27:43,240
Speaker 1: if you're active, you should root for fed liquidity forever,

539
00:27:43,760 --> 00:27:47,480
Speaker 1: market appreciative forever, and just live with your outflows because

540
00:27:47,520 --> 00:27:49,919
Speaker 1: the market appreciation will totally overwhelm that and you'll get

541
00:27:49,960 --> 00:27:52,520
Speaker 1: you'll still stay rich. A bear market is when you're

542
00:27:52,520 --> 00:27:57,200
Speaker 1: probably gonna really find um, You're gonna start to see

543
00:27:57,600 --> 00:28:00,280
Speaker 1: real erosion because you're gonna have the ass it's come

544
00:28:00,320 --> 00:28:03,360
Speaker 1: down from the market, the outflows, and there's still arguably

545
00:28:03,359 --> 00:28:05,440
Speaker 1: a couple of trillions stuck in there because of taxes.

546
00:28:06,119 --> 00:28:08,760
Speaker 1: So I would say a bear market in my opinion.

547
00:28:09,320 --> 00:28:11,040
Speaker 1: We have a phrase on the team is that bull

548
00:28:11,119 --> 00:28:13,639
Speaker 1: markets are good for passive. Bear markets are great. That

549
00:28:13,840 --> 00:28:16,159
Speaker 1: that makes a lot of sense. But Bill McNab, the

550
00:28:16,440 --> 00:28:22,160
Speaker 1: previous Vanguard CEO, told the fascinating story on that topic.

551
00:28:22,840 --> 00:28:25,840
Speaker 1: So what they do, what some of the senior management does,

552
00:28:26,040 --> 00:28:30,240
Speaker 1: is they call. They log into the call center to

553
00:28:30,359 --> 00:28:32,600
Speaker 1: see what clients are saying, to see how people are

554
00:28:32,640 --> 00:28:35,960
Speaker 1: dealing with it. And in O eight, McNab logs in

555
00:28:36,119 --> 00:28:40,560
Speaker 1: and he hears not just nervous clients, but nervous customer

556
00:28:40,600 --> 00:28:43,040
Speaker 1: service reps. No one knows middle of oh eight, no

557
00:28:43,120 --> 00:28:45,040
Speaker 1: one knows what the hell is gonna happen. Am I

558
00:28:45,080 --> 00:28:48,760
Speaker 1: gonna lose my job? And he came to realize, Hey,

559
00:28:49,120 --> 00:28:52,720
Speaker 1: our folks have to sound like they're comfortable, they're confident.

560
00:28:53,280 --> 00:28:57,360
Speaker 1: They can't reflect the fear from clients. So he does

561
00:28:57,360 --> 00:28:59,520
Speaker 1: an all hands on deck. It doesn't matter how low

562
00:28:59,600 --> 00:29:02,680
Speaker 1: the market goes. There will be no layoffs. Everybody's job

563
00:29:02,800 --> 00:29:05,000
Speaker 1: is secured and we're going to continue to pick up money.

564
00:29:05,640 --> 00:29:08,920
Speaker 1: In oh eight o nine. Are inflows are strong? You

565
00:29:09,040 --> 00:29:13,320
Speaker 1: guys just have to communicate that too to our clients.

566
00:29:13,800 --> 00:29:17,560
Speaker 1: And at that point forward it was a fire hose.

567
00:29:17,680 --> 00:29:20,440
Speaker 1: Everybody was getting. All the things that were being sold

568
00:29:20,840 --> 00:29:24,560
Speaker 1: was flowing straight to van. Eight was the year that

569
00:29:24,760 --> 00:29:27,800
Speaker 1: made Vanguard and ETFs um. It was one of those

570
00:29:27,880 --> 00:29:30,440
Speaker 1: years where a lot of active managers did worse than

571
00:29:30,480 --> 00:29:32,200
Speaker 1: the market, and so it was one of those Ah,

572
00:29:32,400 --> 00:29:35,760
Speaker 1: you couldn't even save me from the whole reason for existing.

573
00:29:36,040 --> 00:29:41,880
Speaker 1: So that was one the liquid peak to trough um

574
00:29:42,320 --> 00:29:45,760
Speaker 1: and in Vanguard astonishingly took in flows every month in

575
00:29:45,800 --> 00:29:48,680
Speaker 1: two thousand eight, which even in October, where we were

576
00:29:48,680 --> 00:29:51,280
Speaker 1: already weary of going down. In October two the market

577
00:29:51,320 --> 00:29:53,240
Speaker 1: was found seventeen percent in a month, and they took

578
00:29:53,280 --> 00:29:56,000
Speaker 1: in money. And that's when I really I look back

579
00:29:56,000 --> 00:29:57,680
Speaker 1: at this. This is I might have been starting to

580
00:29:57,680 --> 00:30:00,640
Speaker 1: look at this at two. That when I really got

581
00:30:00,720 --> 00:30:04,360
Speaker 1: on this whole notion that bear markets are actually going

582
00:30:04,400 --> 00:30:07,120
Speaker 1: to speed this thing up. And we've been bringing that

583
00:30:07,200 --> 00:30:09,880
Speaker 1: drum internally and we've been proven right so far. Uh

584
00:30:10,000 --> 00:30:13,640
Speaker 1: and this year is no exception. Um Vanguard is leading flows.

585
00:30:13,640 --> 00:30:16,120
Speaker 1: I think I I did a status. I forget the

586
00:30:16,160 --> 00:30:18,560
Speaker 1: exact flows. It's something like Vanguard's taken in I don't

587
00:30:18,560 --> 00:30:22,440
Speaker 1: know the rest of the industry combined is like negative

588
00:30:23,000 --> 00:30:27,200
Speaker 1: to fifty. It's it's almost as if people are selling

589
00:30:27,400 --> 00:30:30,640
Speaker 1: under other funds and sending the money to Vanguard. I

590
00:30:30,720 --> 00:30:35,800
Speaker 1: means coincidence. There's also this I see the Vanguard flows

591
00:30:35,920 --> 00:30:39,760
Speaker 1: are so good and persistent because and I asked Bogel,

592
00:30:39,920 --> 00:30:43,840
Speaker 1: why are why are Vanguard investors so disciplined? And he said,

593
00:30:43,880 --> 00:30:46,520
Speaker 1: because they had to find us. These are people who

594
00:30:46,680 --> 00:30:49,120
Speaker 1: who weren't stuck in it because they got a kickback

595
00:30:49,160 --> 00:30:51,719
Speaker 1: from a fund company through a broker. They found us,

596
00:30:51,720 --> 00:30:54,640
Speaker 1: and they're usually pretty with it. And I also think

597
00:30:54,720 --> 00:30:57,400
Speaker 1: this is and I point this on the book. Behavior

598
00:30:57,480 --> 00:31:00,080
Speaker 1: of Vanguard investors is off the charts good. But I

599
00:31:00,640 --> 00:31:04,840
Speaker 1: and I think advisors like you, who are are specialized

600
00:31:04,880 --> 00:31:07,160
Speaker 1: in behavior, I think your job is made a little

601
00:31:07,200 --> 00:31:10,400
Speaker 1: easier by just introducing a cheap index fund. I think

602
00:31:10,440 --> 00:31:13,000
Speaker 1: it's easier to behave when you have a cheap index

603
00:31:13,080 --> 00:31:15,840
Speaker 1: fund as a tool, because you're, like I called the

604
00:31:16,000 --> 00:31:17,960
Speaker 1: like a resignation. You're like, what am I gonna do?

605
00:31:18,160 --> 00:31:20,320
Speaker 1: Hop onto some high flying who has a good year.

606
00:31:20,920 --> 00:31:25,600
Speaker 1: They're under performing, but at least they're expensive, right yeah. Uh.

607
00:31:25,760 --> 00:31:29,760
Speaker 1: And I think that that resignation is made behavior. And

608
00:31:29,840 --> 00:31:32,280
Speaker 1: there's all this stuff on psychology and behavior that seems

609
00:31:32,280 --> 00:31:34,680
Speaker 1: to be like written about, But I'm like, I try

610
00:31:34,720 --> 00:31:37,520
Speaker 1: to imagine, try writing all that stuff if all you

611
00:31:37,640 --> 00:31:40,160
Speaker 1: have is active mutual funds that charge one percent, it's

612
00:31:40,280 --> 00:31:42,720
Speaker 1: much harder. It's easier to reflect on behavior and how

613
00:31:42,760 --> 00:31:45,560
Speaker 1: important it is when you have a cheap index fund.

614
00:31:45,640 --> 00:31:49,720
Speaker 1: So I think Bogel's contribution to behavior was monumental just

615
00:31:49,880 --> 00:31:52,800
Speaker 1: by introducing the index fund. And also think Bogel was

616
00:31:52,840 --> 00:31:55,440
Speaker 1: interesting in that he wasn't really into the efficient market hypothesis.

617
00:31:55,480 --> 00:31:58,160
Speaker 1: He wasn't really an academic. A lot of what he did, though,

618
00:31:58,200 --> 00:32:00,959
Speaker 1: if impacted those worlds. I think but and people may

619
00:32:01,040 --> 00:32:03,320
Speaker 1: see him as like thinking that way, but he I

620
00:32:03,360 --> 00:32:06,000
Speaker 1: think he was just a very practical guy who kind

621
00:32:06,000 --> 00:32:08,640
Speaker 1: of just saw it makes no sense to charge all

622
00:32:08,680 --> 00:32:10,720
Speaker 1: this money because when stuff, when you start to compound,

623
00:32:11,160 --> 00:32:13,360
Speaker 1: much of that compounding then goes to the intermediary, not you.

624
00:32:14,120 --> 00:32:17,200
Speaker 1: So so it's interesting about the flows to Vanguard. My

625
00:32:17,480 --> 00:32:22,360
Speaker 1: partner Josh Brown calls this the relentless bid. And what

626
00:32:22,560 --> 00:32:25,720
Speaker 1: he means by that is everybody who has Vanguard in

627
00:32:25,720 --> 00:32:28,280
Speaker 1: their four oh one K, everybody goes Vanguard in their IRA.

628
00:32:29,000 --> 00:32:31,560
Speaker 1: Their accountant says, hey, it's time to make your contribution.

629
00:32:32,000 --> 00:32:35,320
Speaker 1: It goes to Vanguard twice a month or every other week,

630
00:32:35,400 --> 00:32:37,640
Speaker 1: depending on when you get paid. In Wall Street, it

631
00:32:37,680 --> 00:32:41,080
Speaker 1: seems to be twice a month. You know that there's

632
00:32:41,120 --> 00:32:43,440
Speaker 1: a percentage And and in my firm, I watched these

633
00:32:43,520 --> 00:32:46,920
Speaker 1: like fifty thousand now checks go out every month to

634
00:32:47,280 --> 00:32:50,640
Speaker 1: to the four one K company and a huge percentage

635
00:32:50,640 --> 00:32:53,440
Speaker 1: of that is captured by Vanguard. So even when the

636
00:32:53,840 --> 00:32:56,400
Speaker 1: tide goes out in the market, like the first half

637
00:32:56,440 --> 00:33:01,000
Speaker 1: of the year, you're still sending money to Vanguard automagically.

638
00:33:01,120 --> 00:33:05,200
Speaker 1: It just happens. The other thing is um An underrated

639
00:33:05,240 --> 00:33:10,640
Speaker 1: word is trust. Um, you look at Vogel and you

640
00:33:10,680 --> 00:33:13,360
Speaker 1: had a quote in my book about this, which is must.

641
00:33:13,480 --> 00:33:16,920
Speaker 1: You have used only quotes with curses for me, but

642
00:33:17,480 --> 00:33:21,400
Speaker 1: it was hard to avoid them. Man. But if I

643
00:33:21,520 --> 00:33:24,600
Speaker 1: think when you curse, you're saying your best stuff. That's

644
00:33:24,640 --> 00:33:26,960
Speaker 1: why you curse, because you're so into it. So it

645
00:33:27,080 --> 00:33:29,080
Speaker 1: happens to be your best points. When I listen back

646
00:33:29,120 --> 00:33:32,120
Speaker 1: to your audio, happened to contain curses, and I maybe

647
00:33:32,160 --> 00:33:34,880
Speaker 1: there's a correlation there, but it's it's good to know.

648
00:33:35,160 --> 00:33:38,240
Speaker 1: But you can take the ball and go home. Yeah.

649
00:33:38,520 --> 00:33:42,240
Speaker 1: It basically over time, Uh, it was really other people

650
00:33:42,280 --> 00:33:45,760
Speaker 1: shooting themselves in the foot active funds showing uh that

651
00:33:45,880 --> 00:33:49,760
Speaker 1: they you know, people's experience over time that added up

652
00:33:49,800 --> 00:33:52,080
Speaker 1: and then you see Vanguard over here and they just

653
00:33:52,200 --> 00:33:57,680
Speaker 1: look boy scout in Comparison's phrase, And so that thrust

654
00:33:57,760 --> 00:34:00,920
Speaker 1: it gets built over thirty forty years. Because people ask

655
00:34:00,960 --> 00:34:03,000
Speaker 1: me all the time, how can how isn't Vanguard's market

656
00:34:03,000 --> 00:34:06,080
Speaker 1: share roting when everybody has cheap index funds? Now, even

657
00:34:06,160 --> 00:34:09,359
Speaker 1: JP Morgan Goldman, who have armies of advisors, they could

658
00:34:09,360 --> 00:34:11,600
Speaker 1: just move them all in. And I'm like, well, you

659
00:34:11,680 --> 00:34:16,440
Speaker 1: have forty four years of trust built up, goodwill banked,

660
00:34:16,960 --> 00:34:19,360
Speaker 1: and the low cost. So it doesn't matter if somebody

661
00:34:19,520 --> 00:34:22,440
Speaker 1: zero and vanguards three basis points. It's not enough because

662
00:34:22,480 --> 00:34:24,640
Speaker 1: the trust and the branding is so strong and it

663
00:34:24,680 --> 00:34:26,400
Speaker 1: will be for a while. It could have wrote eventually,

664
00:34:26,840 --> 00:34:29,800
Speaker 1: but right now that trust is so underrated. It's not

665
00:34:29,920 --> 00:34:33,600
Speaker 1: just the fees. Nobody's ever accused Vanguard of being a

666
00:34:33,800 --> 00:34:39,120
Speaker 1: vampire squid jamming. It's funnel into the vein of money

667
00:34:39,200 --> 00:34:44,040
Speaker 1: flows as as we heard about UH some large companies

668
00:34:44,120 --> 00:34:47,480
Speaker 1: during the financial crisis, and there was no accounting scandal

669
00:34:47,520 --> 00:34:50,160
Speaker 1: at Vanguard. There was no I P O spinning, there

670
00:34:50,280 --> 00:34:52,719
Speaker 1: was no go down the list of all the scandals

671
00:34:52,800 --> 00:34:56,960
Speaker 1: the analysts scandals, scandal after scandal after the derivative scandal

672
00:34:57,040 --> 00:35:00,400
Speaker 1: within County got It was one after another after another,

673
00:35:00,440 --> 00:35:04,720
Speaker 1: and they're like, that's investors with a mutual fun overnight

674
00:35:04,840 --> 00:35:08,560
Speaker 1: trading scandal that Elliot Spitzer investigated. Here's the thing that

675
00:35:09,040 --> 00:35:11,880
Speaker 1: I feel for the rest of the world is that

676
00:35:12,400 --> 00:35:16,120
Speaker 1: the structure of a publicly traded asset manager is such

677
00:35:16,239 --> 00:35:19,960
Speaker 1: that you are you're you have to serve the shareholders

678
00:35:20,000 --> 00:35:22,880
Speaker 1: who want more money, and where where's the money going

679
00:35:22,920 --> 00:35:26,320
Speaker 1: to come from the investors or your clients, and that

680
00:35:26,520 --> 00:35:29,040
Speaker 1: is a vicious tension to live in. And and people

681
00:35:29,120 --> 00:35:31,239
Speaker 1: try their best. And some companies like you take a

682
00:35:31,280 --> 00:35:33,560
Speaker 1: black Rock, good people work there. They like to serve

683
00:35:33,640 --> 00:35:37,319
Speaker 1: their clients. I think they like what Bogel pushed onto them,

684
00:35:37,760 --> 00:35:39,640
Speaker 1: but they are still having to live with that in

685
00:35:39,680 --> 00:35:41,880
Speaker 1: her intention, and there's probably gonna be times where they

686
00:35:41,880 --> 00:35:44,399
Speaker 1: have to make a decision, well we should we should

687
00:35:44,440 --> 00:35:46,120
Speaker 1: try to get them into the higher costs one because

688
00:35:46,120 --> 00:35:49,040
Speaker 1: we have to meet our revenue goals. And this is

689
00:35:49,120 --> 00:35:52,359
Speaker 1: the sort of thing that Bogel would talk about any

690
00:35:52,440 --> 00:35:54,400
Speaker 1: time he had a chance, which is the two masters

691
00:35:55,080 --> 00:35:59,240
Speaker 1: that um speaking of masters in business, the two masters.

692
00:35:59,360 --> 00:36:02,000
Speaker 1: It's hard to of two masters. And his structure was

693
00:36:02,080 --> 00:36:04,120
Speaker 1: such that there was only one master, which was the

694
00:36:04,480 --> 00:36:06,800
Speaker 1: owner of the company, was the investors. So and I

695
00:36:06,880 --> 00:36:08,640
Speaker 1: know this story gets told all the time. People kind

696
00:36:08,640 --> 00:36:11,959
Speaker 1: of know it, but it again when you dive into

697
00:36:12,040 --> 00:36:15,439
Speaker 1: it and trace it. The amount of money this guy

698
00:36:15,840 --> 00:36:20,000
Speaker 1: commandeered and the idea that no one's copied it just

699
00:36:20,120 --> 00:36:22,640
Speaker 1: makes this such a fascinating story. I heard your interview

700
00:36:22,680 --> 00:36:25,960
Speaker 1: with Spencer Jacob and the Memestocks and you said you

701
00:36:26,040 --> 00:36:29,560
Speaker 1: couldn't make this fiction because you could never invent I

702
00:36:29,600 --> 00:36:31,799
Speaker 1: would say the same thing about Bob. You could never

703
00:36:31,960 --> 00:36:34,160
Speaker 1: dream this guy up in like the sixty. You just couldn't.

704
00:36:34,440 --> 00:36:37,040
Speaker 1: You couldn't dream this. Maybe possibly, but and I know

705
00:36:37,120 --> 00:36:40,200
Speaker 1: the story isn't that interesting. But if you again, the

706
00:36:40,239 --> 00:36:42,520
Speaker 1: more you think about it and ponder it, you're like, wow,

707
00:36:44,239 --> 00:36:46,040
Speaker 1: you know that's the the old joke. I don't know

708
00:36:46,080 --> 00:36:48,240
Speaker 1: who I'm stealing in the line from. But the difference

709
00:36:48,280 --> 00:36:51,920
Speaker 1: between fiction and nonfiction is fiction has to be plausible.

710
00:36:52,320 --> 00:36:55,759
Speaker 1: Nonfiction can be utterly insane because it's real. But you

711
00:36:55,960 --> 00:36:58,400
Speaker 1: tell some of these stuff. Listen the I I have

712
00:36:58,640 --> 00:37:02,000
Speaker 1: coming up, Bill, Bill Outer and Red Notice would have

713
00:37:02,160 --> 00:37:05,160
Speaker 1: will have broadcast, And that has to be a work

714
00:37:05,200 --> 00:37:07,960
Speaker 1: of nonfiction, because if it was fiction, you would look

715
00:37:07,960 --> 00:37:10,440
Speaker 1: in and say, this is just too ridiculous to have

716
00:37:10,600 --> 00:37:13,920
Speaker 1: ever occurred. It can't be real, and so the story

717
00:37:14,040 --> 00:37:16,840
Speaker 1: loses effect. But you find out that all the stuff happened,

718
00:37:16,880 --> 00:37:19,799
Speaker 1: it's it's insane. I totally agree with you. We'll talk

719
00:37:19,840 --> 00:37:23,560
Speaker 1: a little more bit more about Jack and how completely

720
00:37:24,719 --> 00:37:29,319
Speaker 1: contradictory his background is and how how interesting it is. Um.

721
00:37:29,680 --> 00:37:33,640
Speaker 1: The thing with the other E T F companies. You

722
00:37:33,880 --> 00:37:37,640
Speaker 1: what you're essentially saying is that there are fiduciaries and

723
00:37:37,760 --> 00:37:40,640
Speaker 1: then there are really fiduciaries. Is that what I'm hearing

724
00:37:40,680 --> 00:37:44,880
Speaker 1: from you. Yeah. Bogel wasn't necessarily against high cost or

725
00:37:44,920 --> 00:37:48,239
Speaker 1: active with a word. He focused it on with stewardship.

726
00:37:48,320 --> 00:37:51,080
Speaker 1: He thought there are good stewards and bad stewards, because

727
00:37:51,120 --> 00:37:54,040
Speaker 1: he says, if you're a small company asset manager, you

728
00:37:54,080 --> 00:37:56,560
Speaker 1: probably need to charge one percent because you gotta keep

729
00:37:56,560 --> 00:37:58,320
Speaker 1: the lights on. One percent of a million isn't a

730
00:37:58,360 --> 00:38:01,360
Speaker 1: lot of money. One percent on thirty billion is a

731
00:38:01,520 --> 00:38:04,400
Speaker 1: ton of money. And so what he thought was they

732
00:38:04,480 --> 00:38:07,240
Speaker 1: broke their stewardship by not sharing any of those economies

733
00:38:07,239 --> 00:38:10,680
Speaker 1: of scale. The dollar fees were enormous. So I think

734
00:38:11,000 --> 00:38:15,239
Speaker 1: that's ultimately where he was trying to separate what they

735
00:38:15,320 --> 00:38:18,200
Speaker 1: did from others, because again I found in a lot

736
00:38:18,200 --> 00:38:19,360
Speaker 1: of his books he was proud of some of the

737
00:38:19,400 --> 00:38:22,120
Speaker 1: active funds. So I thought stewardship was the main word.

738
00:38:22,120 --> 00:38:23,760
Speaker 1: And you can be active and be a good steward.

739
00:38:24,400 --> 00:38:26,880
Speaker 1: You could be even moderate costs and be a good steward.

740
00:38:26,880 --> 00:38:29,879
Speaker 1: I think the idea is, are you you know, sort

741
00:38:29,920 --> 00:38:34,880
Speaker 1: of totally abusing the relationship you have as the controller

742
00:38:34,920 --> 00:38:37,160
Speaker 1: of somebody's money. And I think that's where he really

743
00:38:37,200 --> 00:38:39,759
Speaker 1: had problems. And he wrote many books that are just

744
00:38:39,960 --> 00:38:43,800
Speaker 1: all one big rant, especially rant about the two eight crisis,

745
00:38:43,840 --> 00:38:45,520
Speaker 1: and he wrote a rant about two thousand one and

746
00:38:45,640 --> 00:38:47,800
Speaker 1: end Ron, and these books are where he just is

747
00:38:47,920 --> 00:38:52,759
Speaker 1: like he's unmarnished. In other books he's just a little softer.

748
00:38:52,960 --> 00:38:55,600
Speaker 1: But he found that that was what pissed him off

749
00:38:55,640 --> 00:38:59,200
Speaker 1: the most is when people broke their fiduciary and stewardship bonds,

750
00:38:59,719 --> 00:39:03,680
Speaker 1: not necessarily active or even high cost. It was about

751
00:39:04,360 --> 00:39:07,520
Speaker 1: is the high cost warranted um? And in the case

752
00:39:07,640 --> 00:39:10,879
Speaker 1: of asset managers, I think I have a chapter called

753
00:39:10,920 --> 00:39:13,840
Speaker 1: the Fall and Rise of Active because Active is evolving

754
00:39:13,880 --> 00:39:17,239
Speaker 1: in different ways, but the fall is a missed opportunity.

755
00:39:17,719 --> 00:39:20,359
Speaker 1: I think these companies in the eighties and nineties, when

756
00:39:20,400 --> 00:39:22,360
Speaker 1: they got enormous, they got into four one K plans

757
00:39:22,880 --> 00:39:27,080
Speaker 1: that se basis points, they charged even more um was

758
00:39:27,560 --> 00:39:31,080
Speaker 1: once you got ten thirty fifty billion dollars in that fund.

759
00:39:31,600 --> 00:39:33,520
Speaker 1: They never shared any of that, and I think it

760
00:39:33,600 --> 00:39:35,880
Speaker 1: was a missed opportunity. Had they shared a little bit

761
00:39:35,920 --> 00:39:37,520
Speaker 1: of it, they still would have made tons of money,

762
00:39:38,080 --> 00:39:40,600
Speaker 1: and they would have been able to bank goodwill, lower

763
00:39:40,680 --> 00:39:43,080
Speaker 1: the fees and increase their beat rates against the benchmark

764
00:39:43,080 --> 00:39:45,920
Speaker 1: because their fees are now lower. It was a missed opportunity.

765
00:39:45,960 --> 00:39:48,960
Speaker 1: And I find it interesting that they were so disrupted

766
00:39:49,000 --> 00:39:51,560
Speaker 1: when their whole job is to analyze companies and stocks

767
00:39:52,000 --> 00:39:54,120
Speaker 1: and try to figure out who's going to get disrupted

768
00:39:54,160 --> 00:39:56,799
Speaker 1: and why. And they've seen Amazon's come along in these

769
00:39:56,840 --> 00:39:59,160
Speaker 1: other industries, but they it's like they never applied it

770
00:39:59,200 --> 00:40:02,040
Speaker 1: to themselves. And I find that kind of interesting that

771
00:40:02,120 --> 00:40:06,360
Speaker 1: they were so disrupted and their students of disruption. Well, first,

772
00:40:06,800 --> 00:40:10,719
Speaker 1: very few people have an accurate self perception, and that

773
00:40:10,800 --> 00:40:15,560
Speaker 1: includes companies. But second, more important, how often do companies

774
00:40:16,440 --> 00:40:23,200
Speaker 1: cannibalize themselves, compete against themselves cut fees if competition does

775
00:40:23,360 --> 00:40:26,400
Speaker 1: enforce them, And so I can think of you know,

776
00:40:26,520 --> 00:40:29,759
Speaker 1: my favorite example is Apple. Remember the first Apple was

777
00:40:29,800 --> 00:40:32,240
Speaker 1: like a deck of cards. It was five hundred bucks.

778
00:40:32,520 --> 00:40:36,360
Speaker 1: The first the first iPod a thousand songs in your pocket,

779
00:40:36,440 --> 00:40:39,439
Speaker 1: A thousand songs laughable, and it was I think three.

780
00:40:40,280 --> 00:40:42,839
Speaker 1: It was big and heavy. So they come out next

781
00:40:42,920 --> 00:40:45,200
Speaker 1: year with another one. Now it's ten thousand songs. And

782
00:40:45,320 --> 00:40:48,239
Speaker 1: it's a hundred bucks less, and the next one is

783
00:40:48,360 --> 00:40:52,560
Speaker 1: forty thousand songs, and now it's one until eventually you

784
00:40:52,680 --> 00:40:56,680
Speaker 1: get the little i iPod touch. And the reason the

785
00:40:56,840 --> 00:41:01,880
Speaker 1: Apple story is so instructive is it's an outlier. People

786
00:41:02,000 --> 00:41:05,719
Speaker 1: don't cut cut costs unless they have to. People won't

787
00:41:05,840 --> 00:41:08,920
Speaker 1: cannibalize themselves and lets and then they said, oh, we're

788
00:41:08,920 --> 00:41:10,600
Speaker 1: gonna build that into our phone and give it away

789
00:41:10,680 --> 00:41:12,800
Speaker 1: for free. And you know, someone had to say, what

790
00:41:12,840 --> 00:41:15,440
Speaker 1: are you crazy. This is a billion dollar business. Well,

791
00:41:15,480 --> 00:41:17,160
Speaker 1: if we don't do it, someone else will, so we

792
00:41:17,360 --> 00:41:21,840
Speaker 1: have to Wall Street. Isn't that self reflective? Yeah, they

793
00:41:21,920 --> 00:41:24,840
Speaker 1: all love Steve Jobs and that mindset, but they didn't

794
00:41:24,880 --> 00:41:27,040
Speaker 1: apply it um And I have a section called the

795
00:41:27,080 --> 00:41:29,839
Speaker 1: Steve Jobs rule, which is, if you don't cannibalize yourself,

796
00:41:29,880 --> 00:41:32,880
Speaker 1: somebody else will. And I think you either have to

797
00:41:32,920 --> 00:41:36,480
Speaker 1: cannibalize yourself or create enormous value and keep just throwing

798
00:41:36,560 --> 00:41:39,600
Speaker 1: value and value and value to keep that price steady,

799
00:41:40,120 --> 00:41:42,279
Speaker 1: or do both then become the biggest company in the

800
00:41:42,320 --> 00:41:45,040
Speaker 1: world exactly. And so I do think there was there

801
00:41:45,120 --> 00:41:48,000
Speaker 1: are these outliers of people who are that hardcore. But

802
00:41:48,120 --> 00:41:49,960
Speaker 1: you're right, and again, this is what made the Vanguard

803
00:41:50,000 --> 00:41:52,640
Speaker 1: story interesting. And I also think what what made it

804
00:41:52,840 --> 00:41:55,799
Speaker 1: interesting was lowering fees in the seventies, eighties and even

805
00:41:55,840 --> 00:41:59,080
Speaker 1: the nineties. Nobody really cared, Like there wasn't a during

806
00:41:59,120 --> 00:42:02,799
Speaker 1: the bullmarket, you know, nobody cared. So he was doing

807
00:42:02,880 --> 00:42:06,400
Speaker 1: this at times when Wall Street was not. It was

808
00:42:07,440 --> 00:42:10,600
Speaker 1: decades before the world figured out this actually makes sense

809
00:42:11,200 --> 00:42:13,800
Speaker 1: and that vision is is pretty rare. And I have,

810
00:42:14,200 --> 00:42:16,640
Speaker 1: uh this sort of comparison in the book where I

811
00:42:16,880 --> 00:42:19,919
Speaker 1: look at and the movie Wall Street comes out, Gordon

812
00:42:19,920 --> 00:42:22,719
Speaker 1: Gecko is giving as greed as good speech Bogel's in

813
00:42:22,880 --> 00:42:25,640
Speaker 1: Valley Forge, given the Christmas you know speech to all

814
00:42:25,640 --> 00:42:29,239
Speaker 1: the employees, and the side by side of all these

815
00:42:29,320 --> 00:42:31,560
Speaker 1: young people watching Gordon Gecko wanting to go to Wall

816
00:42:31,560 --> 00:42:33,640
Speaker 1: Street and make a ton of money, and then Vanguard

817
00:42:33,719 --> 00:42:36,200
Speaker 1: Bogel is sitting there talking about like, oh, we shaved

818
00:42:36,239 --> 00:42:38,440
Speaker 1: one basis point off the fund this year, if we

819
00:42:38,560 --> 00:42:42,320
Speaker 1: keep doing good fiduciary and like in eighties seven, And

820
00:42:42,400 --> 00:42:45,000
Speaker 1: I'd say this in the book multiple times. Ay, if I,

821
00:42:45,120 --> 00:42:47,080
Speaker 1: if I was an active manager, I wouldn't shared economy

822
00:42:47,120 --> 00:42:48,879
Speaker 1: to scale. I would have bought the sport they did

823
00:42:49,080 --> 00:42:50,960
Speaker 1: I know, and so I. They did what most of

824
00:42:51,040 --> 00:42:53,440
Speaker 1: us would have done. Same thing. In the eighties. I

825
00:42:53,520 --> 00:42:56,080
Speaker 1: would have gone crazy in the eighties culture, I would

826
00:42:56,080 --> 00:43:00,080
Speaker 1: have just got carried away, so I and ferraris so

827
00:43:02,320 --> 00:43:04,719
Speaker 1: you know, in the nineties in the bullmarket, that was

828
00:43:04,800 --> 00:43:08,840
Speaker 1: a whole thing. It was Bogel is just weird. So

829
00:43:09,040 --> 00:43:11,799
Speaker 1: he's an outlier, and that's why the book is on him.

830
00:43:11,840 --> 00:43:14,920
Speaker 1: But I make points to say that I would have

831
00:43:14,960 --> 00:43:16,640
Speaker 1: done the same thing as them. I don't. I don't

832
00:43:16,680 --> 00:43:18,200
Speaker 1: think I would have shared it. I would have thought, well,

833
00:43:18,239 --> 00:43:20,160
Speaker 1: we earned this money, let's spend it, let's buy hire

834
00:43:20,200 --> 00:43:23,160
Speaker 1: new people, give us our ourself raises. So so let's

835
00:43:23,360 --> 00:43:26,839
Speaker 1: let's imagine that you're you're working in Fidelity, or you're

836
00:43:26,920 --> 00:43:31,320
Speaker 1: working at Templeton, or you're working wherever, and in you

837
00:43:31,480 --> 00:43:34,480
Speaker 1: just had your best year in history, and you walk

838
00:43:34,560 --> 00:43:37,520
Speaker 1: in and say, I have a great idea, we should

839
00:43:37,600 --> 00:43:41,520
Speaker 1: cut our fees because think about how great that will

840
00:43:41,520 --> 00:43:44,920
Speaker 1: be for investors, how it will improve fun performance, and

841
00:43:45,000 --> 00:43:48,000
Speaker 1: how sticky clients will become. And you wouldn't have been

842
00:43:48,080 --> 00:43:50,000
Speaker 1: laughed at. They would have thrown you out of the

843
00:43:50,120 --> 00:43:52,600
Speaker 1: room and fired you. Isn't that crazy? And so you

844
00:43:52,719 --> 00:43:54,680
Speaker 1: have a guy who did nothing but that for forty

845
00:43:54,760 --> 00:43:58,200
Speaker 1: five years. But now you he changed the whole world.

846
00:43:58,239 --> 00:44:00,920
Speaker 1: I mean, he changed the whole investing world with that concept.

847
00:44:01,400 --> 00:44:04,400
Speaker 1: But you're right again. I and you know the twelve

848
00:44:04,600 --> 00:44:07,320
Speaker 1: one fee, which is to say, which is the marketing

849
00:44:07,400 --> 00:44:10,239
Speaker 1: fee for mutual funds. It's to say, like, hey, look

850
00:44:10,400 --> 00:44:14,279
Speaker 1: we we have We're gonna take your money and we're

851
00:44:14,320 --> 00:44:17,440
Speaker 1: gonna go spend it on marketing. That way we get bigger,

852
00:44:17,600 --> 00:44:19,560
Speaker 1: so we can share economies to scale with you and

853
00:44:19,680 --> 00:44:22,440
Speaker 1: lower the fee. Well, they forgot the second part, and

854
00:44:23,360 --> 00:44:25,840
Speaker 1: Bogel was all about the second part constantly, And so

855
00:44:26,520 --> 00:44:29,640
Speaker 1: I try to tell people there is a great business

856
00:44:29,760 --> 00:44:32,239
Speaker 1: case study in this story. And I also tell my

857
00:44:32,320 --> 00:44:36,640
Speaker 1: Crypto friends, you guys should read this heavily. Bogel was

858
00:44:36,719 --> 00:44:40,319
Speaker 1: more defined. They're all about saving fees. Yeah, that's the thing.

859
00:44:40,400 --> 00:44:44,720
Speaker 1: Like Crypto almost sells themselves as Vanguard, but they're really

860
00:44:45,239 --> 00:44:47,840
Speaker 1: old school Wall Street. And I'm like, you need to

861
00:44:47,920 --> 00:44:50,520
Speaker 1: get more Vanguard in your life because all we see

862
00:44:50,600 --> 00:44:53,560
Speaker 1: is these billionaires hiring movie stars to do commercials. And

863
00:44:53,680 --> 00:44:56,800
Speaker 1: I'm like, and you sell yourselves though, is populous? And

864
00:44:56,840 --> 00:44:59,360
Speaker 1: for the people read this story. This guy was the

865
00:44:59,440 --> 00:45:03,200
Speaker 1: real deal. I him the o G of DeFi absolutely so.

866
00:45:03,480 --> 00:45:06,800
Speaker 1: So let's talk a little bit about Bogel. Boggle. Everybody

867
00:45:06,840 --> 00:45:09,719
Speaker 1: gets his name wrong, Jack Bogel. I know, I've had

868
00:45:09,760 --> 00:45:14,000
Speaker 1: people internally called the Boggle effect, and that's yeah, that's

869
00:45:14,040 --> 00:45:16,480
Speaker 1: where I knew man Um. Some people know about him,

870
00:45:16,520 --> 00:45:18,880
Speaker 1: but some people don't know about him inside the bubble.

871
00:45:19,040 --> 00:45:23,000
Speaker 1: So so let's start with Jack Bogel's early career. He

872
00:45:23,200 --> 00:45:26,560
Speaker 1: writes a senior thesis. It went to Princeton undergrad he

873
00:45:26,640 --> 00:45:30,879
Speaker 1: did that. That thesis seemed to have sealed his fate. Yeah,

874
00:45:30,960 --> 00:45:33,560
Speaker 1: it did. It was a thesis about, you know, how um,

875
00:45:33,880 --> 00:45:36,200
Speaker 1: the asset management industry should be better stewards. It was

876
00:45:36,280 --> 00:45:41,360
Speaker 1: just basically return it was. It was very much again

877
00:45:41,440 --> 00:45:44,319
Speaker 1: the seed was planted quickside. Note. I interviewed Michael Lewis

878
00:45:44,400 --> 00:45:46,880
Speaker 1: for this book, and when I told him that, he

879
00:45:47,040 --> 00:45:51,040
Speaker 1: said he keeps a file of Princeton thesis that have

880
00:45:51,280 --> 00:45:53,360
Speaker 1: changed the world, Like the Adam bomb was a Princeton

881
00:45:53,800 --> 00:45:55,919
Speaker 1: teach for America. He's like, I'm gonna have to add

882
00:45:55,920 --> 00:45:57,680
Speaker 1: this to my file. May maybe he'll have a book

883
00:45:57,680 --> 00:45:58,799
Speaker 1: on it one day. But I thought it was kind

884
00:45:58,800 --> 00:46:01,680
Speaker 1: of cool. Um. But yeah, Also the Prince and thesis

885
00:46:01,760 --> 00:46:03,760
Speaker 1: is interesting because when he was searching for an idea,

886
00:46:04,280 --> 00:46:06,279
Speaker 1: went to the library, didn't know what he's gonna write about,

887
00:46:06,680 --> 00:46:10,720
Speaker 1: and just found um Fortune magazine randomly random mumbles across

888
00:46:10,760 --> 00:46:13,319
Speaker 1: the magazine and on the cover it didn't even say

889
00:46:13,400 --> 00:46:15,120
Speaker 1: mutual funds. You had to like open it and it

890
00:46:15,200 --> 00:46:17,320
Speaker 1: was like big money in Boston or something, and it

891
00:46:17,400 --> 00:46:20,320
Speaker 1: was about mutual funds, all right about this? So I

892
00:46:20,360 --> 00:46:23,239
Speaker 1: actually went and looked at magazines that were also from

893
00:46:23,280 --> 00:46:26,040
Speaker 1: December nine that we're probably laying around the library. Time

894
00:46:26,120 --> 00:46:30,160
Speaker 1: magazine cover Conrad Hilton, so I tell I told the

895
00:46:30,239 --> 00:46:33,760
Speaker 1: hotel industry dodged a huge bullet there. Man. Uh So anyway,

896
00:46:33,800 --> 00:46:36,200
Speaker 1: he that's there was a lot of serendipity in bogel

897
00:46:36,239 --> 00:46:39,480
Speaker 1: story that again reminded me of that Meme stock interview

898
00:46:39,520 --> 00:46:41,480
Speaker 1: you did. There was a lot of things that had

899
00:46:41,560 --> 00:46:44,399
Speaker 1: to come together to prove that that meme uh sort

900
00:46:44,440 --> 00:46:46,759
Speaker 1: of moment, and there were a lot of things that

901
00:46:46,800 --> 00:46:49,320
Speaker 1: came together that were serendipitous. I would say that thesis

902
00:46:49,480 --> 00:46:53,120
Speaker 1: was the first one. So so Bogel eventually gets a

903
00:46:53,200 --> 00:46:55,960
Speaker 1: job at the Wellington Fund, which had been around. I

904
00:46:56,000 --> 00:46:58,680
Speaker 1: don't remember if they were the earliest mutual funds or

905
00:46:58,760 --> 00:47:01,720
Speaker 1: one of their there was like there's like ten funds

906
00:47:01,800 --> 00:47:04,040
Speaker 1: that came out in the twenties. But they went through

907
00:47:04,080 --> 00:47:06,520
Speaker 1: the twenty nine crash and survived and the Yeah, and

908
00:47:06,680 --> 00:47:09,200
Speaker 1: they actually was a balance fund that UM pat It

909
00:47:09,280 --> 00:47:11,560
Speaker 1: buffered a lot of the downfall because it was a

910
00:47:11,600 --> 00:47:15,040
Speaker 1: conservative dos and buttons. So so what was he doing

911
00:47:15,120 --> 00:47:20,720
Speaker 1: at Wellington and how long did that last join Wellington?

912
00:47:20,800 --> 00:47:23,960
Speaker 1: I want to say early, like early sixties, maybe even

913
00:47:24,040 --> 00:47:26,839
Speaker 1: the late fifties. Uh no, abuse sixties because he wrote

914
00:47:26,880 --> 00:47:29,520
Speaker 1: the thesis. Uh anyway, he's in at Wellington the sixties,

915
00:47:29,680 --> 00:47:32,600
Speaker 1: will say UM. And then the guy who ran Wellington

916
00:47:33,000 --> 00:47:35,600
Speaker 1: UM was like I'm out of here. I want you

917
00:47:35,680 --> 00:47:37,880
Speaker 1: to take over the company. Bogel was I think, I

918
00:47:37,920 --> 00:47:40,440
Speaker 1: want to say thirty five, pretty young, and they had

919
00:47:40,480 --> 00:47:42,520
Speaker 1: a problem. They were losing money because the sixties were

920
00:47:42,560 --> 00:47:44,359
Speaker 1: like a great It was like the last decade where

921
00:47:44,400 --> 00:47:45,880
Speaker 1: all the all the people taking your money were like

922
00:47:46,120 --> 00:47:49,320
Speaker 1: Cathy Wood and stuff except of their day, and Wellington

923
00:47:49,440 --> 00:47:51,160
Speaker 1: was like boring. It was like the value investors, how

924
00:47:51,200 --> 00:47:53,600
Speaker 1: we make fun of them? And uh so they're like

925
00:47:54,280 --> 00:47:58,080
Speaker 1: Bogel was like, I was selling bagels, nutricious bagels. Everybody

926
00:47:58,120 --> 00:48:00,800
Speaker 1: wanted donuts, so I figured, I gotta start selling donuts,

927
00:48:00,800 --> 00:48:03,000
Speaker 1: so we're gonna be out of business. So he teamed

928
00:48:03,080 --> 00:48:05,760
Speaker 1: up with a high flying growth manager, which is interesting

929
00:48:05,880 --> 00:48:08,880
Speaker 1: because it was the fourth or fifth one on the list. Um.

930
00:48:09,480 --> 00:48:11,840
Speaker 1: This company wasn't very well known, but they had a

931
00:48:11,920 --> 00:48:14,800
Speaker 1: fund called the I V. S fund Um. But the

932
00:48:14,920 --> 00:48:18,759
Speaker 1: first choice he had was Franklin and Capitol Group, and

933
00:48:18,960 --> 00:48:21,680
Speaker 1: they didn't say yet, they said they declined. Now, I,

934
00:48:21,840 --> 00:48:24,799
Speaker 1: theorized in the book, had one of those in acquisition.

935
00:48:24,840 --> 00:48:26,960
Speaker 1: In other words, he their private company. He offered to

936
00:48:27,080 --> 00:48:30,000
Speaker 1: buy them and fold them into Wellington and they said thanks,

937
00:48:30,040 --> 00:48:32,600
Speaker 1: but no thanks. Yes, they did not want any part

938
00:48:32,640 --> 00:48:36,800
Speaker 1: of merging or any acquisitions with him or Wellingtons. He

939
00:48:36,880 --> 00:48:40,319
Speaker 1: finally gets this growth manager down fifth, fourth or fifth

940
00:48:40,400 --> 00:48:42,760
Speaker 1: on the list, and it goes well for a while.

941
00:48:42,880 --> 00:48:45,200
Speaker 1: You know, they've got the boring stuff and the arc

942
00:48:45,280 --> 00:48:49,800
Speaker 1: stuff and uh, but then the basically the stock market

943
00:48:49,840 --> 00:48:52,359
Speaker 1: goes into a bear market. Sixty six is the peak

944
00:48:52,440 --> 00:48:59,320
Speaker 1: following the post war around by the way, parallel to

945
00:48:59,360 --> 00:49:04,280
Speaker 1: oh wait or not about of fifty and right before

946
00:49:04,400 --> 00:49:07,800
Speaker 1: that the people who were at Wellington UM changed the

947
00:49:07,880 --> 00:49:11,400
Speaker 1: Wellington Fund. His new partners changed the Wellington Fund to

948
00:49:11,480 --> 00:49:15,480
Speaker 1: be much more equity oriented at the exact work, exact

949
00:49:15,560 --> 00:49:17,840
Speaker 1: wrong time, and even Bogel had a memo saying, we

950
00:49:18,080 --> 00:49:19,880
Speaker 1: can't do this, and he's like, no, this is the

951
00:49:20,000 --> 00:49:23,120
Speaker 1: right way to trust me. Anyway, So they're growth funds

952
00:49:23,560 --> 00:49:25,440
Speaker 1: fall off a cliff. They go down worse than the market.

953
00:49:25,719 --> 00:49:28,080
Speaker 1: But the Wellington Fund goes down the same as the market,

954
00:49:28,160 --> 00:49:31,600
Speaker 1: the same thirty It doesn't buffer at all. And I

955
00:49:31,800 --> 00:49:33,640
Speaker 1: think this was probably had to be one of the

956
00:49:33,680 --> 00:49:37,480
Speaker 1: most pivotal life moments of Bogel to feel he betrayed himself,

957
00:49:37,920 --> 00:49:41,160
Speaker 1: he betrayed his mentor, he sold him. He sold it

958
00:49:41,239 --> 00:49:44,560
Speaker 1: all out and these guys had voting control the board

959
00:49:45,160 --> 00:49:49,279
Speaker 1: and they got into massive fights. The clashes were historically bad.

960
00:49:49,400 --> 00:49:52,520
Speaker 1: They were you know, basically piste off at each other, uh,

961
00:49:52,680 --> 00:49:55,680
Speaker 1: you know, blaming each other. And they fired him, even

962
00:49:55,719 --> 00:49:58,920
Speaker 1: though he later in life he's always like, I was

963
00:49:58,960 --> 00:50:01,560
Speaker 1: the victim. But stories are he wasn't a picnic to

964
00:50:01,640 --> 00:50:03,600
Speaker 1: deal with. He's a big pain in the Yeah, he's

965
00:50:03,600 --> 00:50:06,640
Speaker 1: a pain in the butt. So anyway, UM, long story short,

966
00:50:07,080 --> 00:50:09,320
Speaker 1: he realized there's a loophole. Instead of being fired and

967
00:50:09,440 --> 00:50:11,840
Speaker 1: going away, he's like, I'm actually the owner or the

968
00:50:11,920 --> 00:50:14,759
Speaker 1: chairman of the funds themselves, and so that gave him

969
00:50:14,840 --> 00:50:16,960
Speaker 1: some leverage to sort of dig in and fight them,

970
00:50:17,480 --> 00:50:19,719
Speaker 1: and they had to come up with a resolution and

971
00:50:20,080 --> 00:50:22,400
Speaker 1: that the board would agree with. And so one of

972
00:50:22,440 --> 00:50:24,560
Speaker 1: the ways he was able to keep a job there

973
00:50:25,080 --> 00:50:27,279
Speaker 1: was He's like, I'll do the back office work and

974
00:50:27,480 --> 00:50:30,600
Speaker 1: I'll set this company up mutually owned. That way, it

975
00:50:30,640 --> 00:50:33,080
Speaker 1: doesn't look like I'm doing some cash grab here, and

976
00:50:33,239 --> 00:50:35,480
Speaker 1: all eleven people on the fund boards agreed with that.

977
00:50:35,680 --> 00:50:38,120
Speaker 1: So the mutual ownership structure, I'm not sure it would

978
00:50:38,120 --> 00:50:40,920
Speaker 1: have been born ever, if it wasn't for this necessity

979
00:50:41,520 --> 00:50:45,239
Speaker 1: to sort of uh satisfy different groups of people at

980
00:50:45,280 --> 00:50:47,520
Speaker 1: a time when everybody was piste off and and upset

981
00:50:47,600 --> 00:50:50,960
Speaker 1: and figure out how to do something. So this really awful,

982
00:50:51,640 --> 00:50:57,160
Speaker 1: crazy situation that was just nasty ironically produced this amazing

983
00:50:57,640 --> 00:50:59,960
Speaker 1: sort of unique structure. It was almost like a freak accident.

984
00:51:00,480 --> 00:51:03,680
Speaker 1: So that was the first half of the freak accident.

985
00:51:03,960 --> 00:51:09,120
Speaker 1: His contract says he cannot manage a fund, and so

986
00:51:09,320 --> 00:51:13,000
Speaker 1: he comes up with this very clever back door. That's

987
00:51:13,080 --> 00:51:18,640
Speaker 1: the according to the Bogel Effect book, that very cleverly says, Hey,

988
00:51:18,760 --> 00:51:21,719
Speaker 1: you guys said I can't manage a funds, but there

989
00:51:21,760 --> 00:51:25,239
Speaker 1: are these indexes that are unmanaged funds, and we want

990
00:51:25,280 --> 00:51:28,920
Speaker 1: to put an unmanaged fund in the separate entity. Tell us.

991
00:51:29,200 --> 00:51:32,280
Speaker 1: So that's the other freak accident. Tell us what happened

992
00:51:32,360 --> 00:51:36,560
Speaker 1: from there? Yeah, that the the idea that an index

993
00:51:36,600 --> 00:51:39,600
Speaker 1: fund wouldn't be quote managed and wouldn't violate his agreement

994
00:51:39,920 --> 00:51:42,880
Speaker 1: with his former partners or current partners that we're not

995
00:51:43,000 --> 00:51:47,320
Speaker 1: talking was also a lucky break. And indexing was starting

996
00:51:47,400 --> 00:51:49,680
Speaker 1: to become a thing. People were writing about it in

997
00:51:49,680 --> 00:51:52,879
Speaker 1: the academic journals. It it was a thing in academia,

998
00:51:52,960 --> 00:51:55,359
Speaker 1: but not on Wall Street. Not a mutual fund. Wells

999
00:51:55,400 --> 00:51:57,880
Speaker 1: Fargo had tried one, but it was eaten work, and

1000
00:51:58,040 --> 00:52:00,600
Speaker 1: because of the glass tigle, they couldn't do mutual funds.

1001
00:52:00,600 --> 00:52:03,080
Speaker 1: There was a lot of things that made it um.

1002
00:52:03,320 --> 00:52:05,480
Speaker 1: It was you know, Steve Johns wasn't the only one

1003
00:52:05,560 --> 00:52:09,320
Speaker 1: in a garage thinking about PCs. Okay, something was in

1004
00:52:09,360 --> 00:52:12,200
Speaker 1: the air. So Bogel read a journal piece by Paul

1005
00:52:12,680 --> 00:52:15,359
Speaker 1: Samuelson that basically was like, can someone please just put

1006
00:52:15,440 --> 00:52:17,279
Speaker 1: in the next fund out so we can have something

1007
00:52:17,320 --> 00:52:20,040
Speaker 1: to benchmark these gun slingers against because he had. Again,

1008
00:52:20,080 --> 00:52:22,000
Speaker 1: people are starting to come up with this notion that

1009
00:52:22,120 --> 00:52:25,080
Speaker 1: active me wasn't that great back then. So let me

1010
00:52:25,160 --> 00:52:27,520
Speaker 1: just let me interrupt your second because some of the

1011
00:52:27,560 --> 00:52:29,560
Speaker 1: audience is a little younger and they're gonna find this

1012
00:52:29,680 --> 00:52:33,920
Speaker 1: hard to believe. In the sixties, seventies, even eighties, if

1013
00:52:34,000 --> 00:52:37,120
Speaker 1: you wanted to know how your fund was doing day

1014
00:52:37,160 --> 00:52:39,960
Speaker 1: to day, week to week, month to month, quarter a quarter,

1015
00:52:40,200 --> 00:52:44,040
Speaker 1: year to date, that information was not a click away.

1016
00:52:44,840 --> 00:52:46,799
Speaker 1: Most of the time it didn't exist. You waited till

1017
00:52:46,840 --> 00:52:50,160
Speaker 1: the end of the year to get an annual update,

1018
00:52:50,280 --> 00:52:52,719
Speaker 1: and if you were a mutual fund holder you would

1019
00:52:52,719 --> 00:52:55,360
Speaker 1: get some sort of quarterly update, but most of the

1020
00:52:55,480 --> 00:52:58,440
Speaker 1: time you had no idea how well these funds were doing.

1021
00:52:59,239 --> 00:53:01,640
Speaker 1: This is a great point and Michael Kittsis, who is

1022
00:53:01,840 --> 00:53:04,200
Speaker 1: a great writer about the advisor world, once wrote a

1023
00:53:04,360 --> 00:53:07,640
Speaker 1: blog post called um the Internet killed the active fund star,

1024
00:53:08,440 --> 00:53:10,640
Speaker 1: and it was all about how once information started to

1025
00:53:10,640 --> 00:53:13,440
Speaker 1: spread quickly, it was over because you could quickly compare.

1026
00:53:13,880 --> 00:53:16,279
Speaker 1: Back then, you couldn't do that, and it was it

1027
00:53:16,400 --> 00:53:18,920
Speaker 1: helped active I think back in the day by the

1028
00:53:19,200 --> 00:53:23,960
Speaker 1: displaying their expensive, underperforming funds. How could that hurt them?

1029
00:53:24,640 --> 00:53:27,000
Speaker 1: I sent that article to Bogel and an email and

1030
00:53:27,080 --> 00:53:28,239
Speaker 1: I was like, hey, what do you think of this

1031
00:53:28,360 --> 00:53:33,120
Speaker 1: internet theory? He writes back like two pages and he's like, well,

1032
00:53:33,560 --> 00:53:35,120
Speaker 1: it helped a little, but I'd like to think I

1033
00:53:35,200 --> 00:53:37,200
Speaker 1: had something to do with it. And he proceeds to

1034
00:53:37,320 --> 00:53:40,360
Speaker 1: write like all the things that went into creating the

1035
00:53:40,360 --> 00:53:42,279
Speaker 1: passive revolution, and he did, and he said, you know,

1036
00:53:42,400 --> 00:53:45,719
Speaker 1: internet helped at the end, but the foundation had to

1037
00:53:45,760 --> 00:53:48,560
Speaker 1: be there. But anyway, UM, back to your story. So

1038
00:53:49,080 --> 00:53:51,520
Speaker 1: Bogel says, I will take this guy up on his

1039
00:53:51,640 --> 00:53:53,520
Speaker 1: offer and do an innex fund. And it's not doesn

1040
00:53:53,600 --> 00:53:56,239
Speaker 1: nothing managed, so I can hopefully squeeze it by the board.

1041
00:53:56,360 --> 00:53:59,000
Speaker 1: He even knew he was like sort of right near

1042
00:53:59,080 --> 00:54:02,040
Speaker 1: the line because he was way over the line. But

1043
00:54:02,280 --> 00:54:06,040
Speaker 1: but he they bought it. Yeah, he might even said

1044
00:54:06,080 --> 00:54:09,600
Speaker 1: they actually bought it. So his his uh Jan Twardowski,

1045
00:54:09,640 --> 00:54:12,560
Speaker 1: which who was his first PM of that fund, had

1046
00:54:12,600 --> 00:54:15,839
Speaker 1: to call himself a portfolio administrator. Yeah. So they went

1047
00:54:15,880 --> 00:54:19,200
Speaker 1: through the whole thing of like, we're not managing money here. Yeah,

1048
00:54:19,280 --> 00:54:23,040
Speaker 1: So that necessity was also a lucky break. There were

1049
00:54:23,160 --> 00:54:25,239
Speaker 1: many of these as we just went over. That makes

1050
00:54:25,280 --> 00:54:29,400
Speaker 1: you think there was some universal force ushering this along somehow,

1051
00:54:29,480 --> 00:54:32,040
Speaker 1: because if any of these things doesn't happen, this probably

1052
00:54:32,080 --> 00:54:34,440
Speaker 1: doesn't happen the way that we see it. So but

1053
00:54:34,640 --> 00:54:37,359
Speaker 1: long story short, Um, they come with the indext Fund. Uh,

1054
00:54:37,480 --> 00:54:40,000
Speaker 1: they launched it. Nobody cares. Uh, it doesn't sell it

1055
00:54:40,120 --> 00:54:43,080
Speaker 1: well because it's this is an underrated point of Vogel story.

1056
00:54:44,200 --> 00:54:47,520
Speaker 1: The Index Fund ultimately would not pay brokers, so he

1057
00:54:47,600 --> 00:54:50,560
Speaker 1: had to. It was it's like making a movie outside

1058
00:54:50,600 --> 00:54:54,160
Speaker 1: of all the distribution systems the theaters, Netflix and you,

1059
00:54:54,360 --> 00:54:56,160
Speaker 1: and you're gonna people have to come to your backyard

1060
00:54:56,239 --> 00:54:59,600
Speaker 1: to watch it. It's so he made something that you

1061
00:54:59,719 --> 00:55:02,359
Speaker 1: had to leave the entire system and go to them

1062
00:55:02,440 --> 00:55:05,839
Speaker 1: to buy. And that was really ballsy. I mean, it's

1063
00:55:05,880 --> 00:55:08,160
Speaker 1: a guy with like five kids at the time and

1064
00:55:08,280 --> 00:55:10,200
Speaker 1: trying to raise a family. I mean a couple of

1065
00:55:10,200 --> 00:55:12,560
Speaker 1: time eatings for a hard transplant at the same time. Yeah,

1066
00:55:12,600 --> 00:55:14,040
Speaker 1: I'm like a couple of times in the book, I'm like,

1067
00:55:14,480 --> 00:55:16,440
Speaker 1: you know, I have a bad heart, I'm raising a family.

1068
00:55:16,640 --> 00:55:18,239
Speaker 1: I might just go to the big company and take

1069
00:55:18,320 --> 00:55:20,680
Speaker 1: the pay day and just like, not worry about this,

1070
00:55:20,920 --> 00:55:25,240
Speaker 1: but to do these moves and to purposely delay the success.

1071
00:55:25,760 --> 00:55:27,839
Speaker 1: I give him a lot of credit. This is the long,

1072
00:55:28,040 --> 00:55:29,920
Speaker 1: hard walk that a lot of people just don't have

1073
00:55:30,040 --> 00:55:32,440
Speaker 1: the courage to take. But he did it over and over.

1074
00:55:32,640 --> 00:55:35,840
Speaker 1: So so let's talk about I was only half joking

1075
00:55:35,880 --> 00:55:39,479
Speaker 1: about the heart transplant. However, in the book you talk

1076
00:55:39,560 --> 00:55:43,200
Speaker 1: about it gave him a certain life is short lived

1077
00:55:43,239 --> 00:55:45,960
Speaker 1: every day like it's your last, and don't go for

1078
00:55:46,040 --> 00:55:50,480
Speaker 1: the money grab impact the universe? How significant were his

1079
00:55:50,719 --> 00:55:54,600
Speaker 1: health issues and eventually he gets a life saving heart transplant.

1080
00:55:54,760 --> 00:55:56,680
Speaker 1: Used to joking and say, hey, over the heart of

1081
00:55:56,719 --> 00:56:00,480
Speaker 1: this of a twenty year old, really twenty eight year old?

1082
00:56:00,520 --> 00:56:05,240
Speaker 1: I think how significant was the fact that his life

1083
00:56:05,280 --> 00:56:08,680
Speaker 1: expectancy for the least for the first was it fifty

1084
00:56:08,880 --> 00:56:12,520
Speaker 1: sixty years? Was he could drop dead tomorrow? And almost

1085
00:56:12,680 --> 00:56:14,759
Speaker 1: did several times? Oh yeah, His wife took him to

1086
00:56:14,800 --> 00:56:17,160
Speaker 1: the hospital all the time. It was a whole recurring thing.

1087
00:56:17,640 --> 00:56:22,320
Speaker 1: He brought a defibrillator. Did I say that right? Play squash?

1088
00:56:22,960 --> 00:56:24,520
Speaker 1: So he told them whoever he's playing with, if I

1089
00:56:24,600 --> 00:56:27,720
Speaker 1: fall over, just you know, but these on my shocked

1090
00:56:27,800 --> 00:56:30,600
Speaker 1: me back. So people like people were hesitant to play

1091
00:56:30,600 --> 00:56:33,319
Speaker 1: squash with him, but I would think that it would

1092
00:56:33,400 --> 00:56:35,920
Speaker 1: encourage him to let other people if you're winning too much,

1093
00:56:36,000 --> 00:56:40,440
Speaker 1: It's like I couldn't forget out of the package. Yeah, Uh,

1094
00:56:40,960 --> 00:56:43,239
Speaker 1: you're right. I think his heart was one of ten

1095
00:56:43,440 --> 00:56:46,120
Speaker 1: things that made Bogel. And I have a chapter called

1096
00:56:46,160 --> 00:56:49,360
Speaker 1: Explaining Bogel, because again, he's so unique. I'm like, what

1097
00:56:49,520 --> 00:56:52,759
Speaker 1: went into produce this particular character, And his heart was

1098
00:56:52,880 --> 00:56:54,879
Speaker 1: one of the things I go into And I think

1099
00:56:54,920 --> 00:56:57,440
Speaker 1: that idea that you're going to die any minute, any day,

1100
00:56:57,880 --> 00:57:00,440
Speaker 1: we're all we can push that off as people normally.

1101
00:57:00,640 --> 00:57:02,520
Speaker 1: He couldn't. He could not. It was all It was

1102
00:57:02,640 --> 00:57:04,560
Speaker 1: right in his face constantly. And I think that gave

1103
00:57:04,640 --> 00:57:07,160
Speaker 1: him a jolt of life. Um. You know, people who

1104
00:57:07,239 --> 00:57:11,279
Speaker 1: survived car crashes and airplane crashes or nine eleven have

1105
00:57:11,400 --> 00:57:14,120
Speaker 1: similar experiences of and he had that almost probably like

1106
00:57:14,239 --> 00:57:17,880
Speaker 1: more daily than most people. Uh So that was probably

1107
00:57:17,960 --> 00:57:20,440
Speaker 1: a big thing that helped him. Your point about not

1108
00:57:20,640 --> 00:57:23,440
Speaker 1: wanting the money, Um, I do think he was almost

1109
00:57:23,480 --> 00:57:26,200
Speaker 1: miscast in this industry. I think he wrote a book

1110
00:57:26,200 --> 00:57:28,000
Speaker 1: called Enough about how you don't need that much money,

1111
00:57:28,080 --> 00:57:31,480
Speaker 1: YadA YadA, um, And I think he almost would have

1112
00:57:31,520 --> 00:57:33,320
Speaker 1: made a better He would have been better in a

1113
00:57:33,360 --> 00:57:36,360
Speaker 1: different industry. I think he was almost miscast. I also

1114
00:57:36,440 --> 00:57:39,280
Speaker 1: think he was miscast in time. I think he was

1115
00:57:39,320 --> 00:57:42,360
Speaker 1: meant for the eighteenth century. Well, it wasn't. His grandfather

1116
00:57:43,400 --> 00:57:45,920
Speaker 1: did something very similar with insurance, if I remember your

1117
00:57:45,920 --> 00:57:49,120
Speaker 1: book correctly. Yeah, he had a great grandfather who was

1118
00:57:49,480 --> 00:57:54,320
Speaker 1: basically a gad flyer or uh what would you call that,

1119
00:57:54,400 --> 00:57:57,280
Speaker 1: like the jack of the annuity. Yeah, it was like

1120
00:57:57,360 --> 00:58:01,080
Speaker 1: the fire insurance business. And you read this guy's pamphlets

1121
00:58:01,200 --> 00:58:03,880
Speaker 1: and he's like, the insurance companies are ripping off these firemen,

1122
00:58:04,200 --> 00:58:06,920
Speaker 1: lower your fees, and and you realize, man, this you

1123
00:58:07,000 --> 00:58:09,120
Speaker 1: can you can read Bogel in there. So there is

1124
00:58:09,160 --> 00:58:12,080
Speaker 1: set There's some genetics involved as well. And I included

1125
00:58:12,120 --> 00:58:15,280
Speaker 1: that because Bogel loved his great grandfather, he would read

1126
00:58:15,480 --> 00:58:18,880
Speaker 1: these speeches he gave and take a lot of inspiration

1127
00:58:18,960 --> 00:58:20,760
Speaker 1: from it. But yeah, I would I would say that,

1128
00:58:21,040 --> 00:58:22,600
Speaker 1: you know, that is definitely one of them. But I

1129
00:58:22,680 --> 00:58:27,080
Speaker 1: think the enough thing, even though he had enough money

1130
00:58:27,160 --> 00:58:29,240
Speaker 1: and he wasn't um, he was sort of immune to

1131
00:58:29,360 --> 00:58:32,440
Speaker 1: that greed for money, what he couldn't ever get enough

1132
00:58:32,520 --> 00:58:37,120
Speaker 1: was adulation. That's why. I almost think like usually if

1133
00:58:37,160 --> 00:58:40,800
Speaker 1: you really wish one adulation, you go into the media entertainment. Um,

1134
00:58:41,040 --> 00:58:43,440
Speaker 1: maybe you're a physician, you know, somebody who's like good

1135
00:58:43,480 --> 00:58:46,560
Speaker 1: at getting thanks a lot. So I think he he

1136
00:58:46,800 --> 00:58:49,520
Speaker 1: was we all have to fill some void, like we're

1137
00:58:49,560 --> 00:58:52,160
Speaker 1: all you know, holes in the middle. And I think

1138
00:58:52,880 --> 00:58:55,760
Speaker 1: his was he wanted, you know, people to tell him

1139
00:58:55,800 --> 00:58:57,560
Speaker 1: how great he was. He wanted people to say he

1140
00:58:57,640 --> 00:59:00,600
Speaker 1: was important. And his son, you know, told me that

1141
00:59:00,800 --> 00:59:02,880
Speaker 1: when he would get stopped on the street. He never

1142
00:59:03,000 --> 00:59:05,240
Speaker 1: tired of hearing that. And the kids could never understand

1143
00:59:05,680 --> 00:59:07,440
Speaker 1: why he would sit there and talk to this X

1144
00:59:07,520 --> 00:59:11,720
Speaker 1: doormanaged and men, Yeah, and um, you made my retirement possible,

1145
00:59:11,760 --> 00:59:13,520
Speaker 1: you helped me pay from You could never get that

1146
00:59:14,160 --> 00:59:17,160
Speaker 1: just endless and he choked it up. Yes, so he could.

1147
00:59:17,320 --> 00:59:19,800
Speaker 1: So he gotta hit enough was applied to the money,

1148
00:59:19,920 --> 00:59:22,200
Speaker 1: but maybe not the sort of adulation and that that's

1149
00:59:22,440 --> 00:59:24,000
Speaker 1: that's what drove him. And I tried to get at

1150
00:59:24,040 --> 00:59:27,320
Speaker 1: that because he wasn't a even though I'm very complimentary

1151
00:59:27,320 --> 00:59:28,760
Speaker 1: of him here, he was a human being. He had

1152
00:59:28,840 --> 00:59:31,760
Speaker 1: flaws and he had needs. They just weren't exactly this

1153
00:59:32,480 --> 00:59:35,680
Speaker 1: the prototype of somebody on Wall Street or running money,

1154
00:59:35,680 --> 00:59:39,160
Speaker 1: they were completely different, uh in many ways. And so I,

1155
00:59:39,440 --> 00:59:41,920
Speaker 1: you know, explore that in the book because again when

1156
00:59:41,960 --> 00:59:45,160
Speaker 1: I said, why hasn't anybody copied Vanguard structure? There so

1157
00:59:45,240 --> 00:59:48,160
Speaker 1: there's no economic consentive And then I said, well, why

1158
00:59:48,200 --> 00:59:50,640
Speaker 1: did this guy do it? And everybody had the same answer.

1159
00:59:50,920 --> 00:59:53,400
Speaker 1: That's a good question. And so you have to kind

1160
00:59:53,440 --> 00:59:56,360
Speaker 1: of look at the character of the person um and

1161
00:59:56,600 --> 00:59:59,040
Speaker 1: you know, try to figure out what what drove them.

1162
00:59:59,120 --> 01:00:01,360
Speaker 1: And so I tried to do my best to sort

1163
01:00:01,400 --> 01:00:03,960
Speaker 1: of lay all that out. So, so here's the key

1164
01:00:04,400 --> 01:00:09,360
Speaker 1: Jack Bogel question with Vanguard today following this rally off

1165
01:00:09,400 --> 01:00:13,280
Speaker 1: the lows in June two um making up more than

1166
01:00:13,400 --> 01:00:16,440
Speaker 1: half of the first half of the year's crash. And

1167
01:00:16,720 --> 01:00:19,560
Speaker 1: and that means the Vanguard is what seven and a

1168
01:00:19,600 --> 01:00:21,680
Speaker 1: half eight trillion dollars. I don't even know where they

1169
01:00:21,720 --> 01:00:23,720
Speaker 1: are these days, but they were eight point three at

1170
01:00:23,760 --> 01:00:25,840
Speaker 1: this sort of top. I think the probably seven point

1171
01:00:25,920 --> 01:00:29,000
Speaker 1: five today something like that. So sola between seven and

1172
01:00:29,000 --> 01:00:33,120
Speaker 1: a half eight trillion dollars? Would that? Could that have

1173
01:00:33,280 --> 01:00:38,360
Speaker 1: ever happened without Jack Bogel and and his philosophy? No,

1174
01:00:39,240 --> 01:00:42,600
Speaker 1: just just happen. No, I agree the people who ran

1175
01:00:42,720 --> 01:00:45,920
Speaker 1: Vanguard after. I have a chapter called Bogel versus Vanguard

1176
01:00:45,960 --> 01:00:48,960
Speaker 1: because he had that's is fascinating. He had problems with

1177
01:00:49,040 --> 01:00:53,880
Speaker 1: his own company and the the tfs overseas. He would

1178
01:00:53,920 --> 01:00:58,120
Speaker 1: take giant craps on all like of the funds that

1179
01:00:58,200 --> 01:01:01,040
Speaker 1: they served because he kind have honed it on, you know,

1180
01:01:01,480 --> 01:01:03,200
Speaker 1: and I found that really interesting. And he'd be on

1181
01:01:03,360 --> 01:01:06,040
Speaker 1: campus doing it, especially ets that really pissed them off,

1182
01:01:06,480 --> 01:01:08,280
Speaker 1: Smart Beta, all of that. He just thought it was

1183
01:01:08,360 --> 01:01:11,000
Speaker 1: needless distraction. Why are you doing this? And he thought,

1184
01:01:11,120 --> 01:01:13,240
Speaker 1: why is Vangard trying to get so big? But the

1185
01:01:13,360 --> 01:01:15,280
Speaker 1: other people who manage Vanguard, I thought they did a

1186
01:01:15,320 --> 01:01:17,640
Speaker 1: good job. Um. So in the book, I try to

1187
01:01:17,720 --> 01:01:20,760
Speaker 1: thread the needle because there's a growing gap between the

1188
01:01:20,840 --> 01:01:24,160
Speaker 1: Bogel heads and Vanguard because they see Vanguard going into

1189
01:01:24,200 --> 01:01:27,480
Speaker 1: wealth management, going into private equity, going into these places.

1190
01:01:27,560 --> 01:01:30,920
Speaker 1: And Bogel was more like, enough, we don't need to

1191
01:01:30,960 --> 01:01:32,400
Speaker 1: be that big. When I met with him once, he

1192
01:01:32,520 --> 01:01:35,880
Speaker 1: was like, I can't believe we have three trillion dollars

1193
01:01:36,040 --> 01:01:39,760
Speaker 1: like that is that is almost absurd. It's it's a ridiculous.

1194
01:01:40,280 --> 01:01:43,360
Speaker 1: Now they have Bill McNab says home my beer Jack,

1195
01:01:45,440 --> 01:01:47,880
Speaker 1: So watch this, But then you have to ask yourself.

1196
01:01:48,000 --> 01:01:50,920
Speaker 1: You know, Bogel was sort of pushed out of Vanguard.

1197
01:01:51,440 --> 01:01:53,240
Speaker 1: That's what's interesting about Bogel. He was pushed out of

1198
01:01:53,720 --> 01:01:56,080
Speaker 1: but but not off the campus. He was pushed out

1199
01:01:56,120 --> 01:02:00,800
Speaker 1: of the executive site into a chair airman. You're the

1200
01:02:00,920 --> 01:02:05,680
Speaker 1: gray hair, you're the driving philosophy. Now I have an

1201
01:02:05,800 --> 01:02:08,640
Speaker 1: E T F meaning and a private equity meaning for

1202
01:02:08,760 --> 01:02:13,880
Speaker 1: a four one case. But please tell everybody about our philosophy. Yeah.

1203
01:02:13,920 --> 01:02:15,680
Speaker 1: I mean, the core of Vanguard is still very much

1204
01:02:15,680 --> 01:02:19,400
Speaker 1: Bogel's dna um, But on the outskirts, they're changing. They

1205
01:02:19,400 --> 01:02:21,080
Speaker 1: are pushing people into E T F s. He would

1206
01:02:21,080 --> 01:02:23,480
Speaker 1: have hated that. Um, the wealth management, you know, I

1207
01:02:23,520 --> 01:02:24,880
Speaker 1: don't think he would have done that. He wouldn't have

1208
01:02:24,880 --> 01:02:27,120
Speaker 1: done E T S. We know that. I probably wouldn't

1209
01:02:27,120 --> 01:02:29,600
Speaker 1: have expanded that much overseas as they are now. But

1210
01:02:29,920 --> 01:02:33,080
Speaker 1: one could make the argument, well shouldn't these other places,

1211
01:02:33,880 --> 01:02:37,240
Speaker 1: don't they need a little vanguarding. Yeah? Absolutely, And so

1212
01:02:37,360 --> 01:02:39,280
Speaker 1: there's you could see both sides of this story. But

1213
01:02:39,400 --> 01:02:43,120
Speaker 1: Bogel also the way he was pushed out, I believe,

1214
01:02:43,320 --> 01:02:44,920
Speaker 1: And then they went and launched E T f S.

1215
01:02:44,960 --> 01:02:46,800
Speaker 1: Like within ten years of him saying no to E

1216
01:02:46,880 --> 01:02:49,000
Speaker 1: T F S. That was sort of a I mean

1217
01:02:49,080 --> 01:02:50,560
Speaker 1: he might have saw it as a slap in the face.

1218
01:02:51,400 --> 01:02:55,480
Speaker 1: Um that the book you you describe his gentle easing

1219
01:02:55,560 --> 01:02:59,720
Speaker 1: out is while he's in the hospital dying, right, didn't didn't? Um?

1220
01:03:00,080 --> 01:03:03,720
Speaker 1: What was it? Jack? Who? Who was the Brennan? Jack

1221
01:03:03,760 --> 01:03:08,320
Speaker 1: Brennan before Bill McNabb. Jack was his protegee. They were

1222
01:03:08,520 --> 01:03:12,120
Speaker 1: very tight. And the board says, hey, Jack, Bogel's in

1223
01:03:12,160 --> 01:03:14,960
Speaker 1: the hospital waiting for a hard he's dying. I just

1224
01:03:15,040 --> 01:03:17,800
Speaker 1: wanted to see him yesterday. It doesn't look like this

1225
01:03:17,880 --> 01:03:21,960
Speaker 1: guy is gonna make it. Someone has to run the farm. Yeah,

1226
01:03:22,480 --> 01:03:27,280
Speaker 1: and what happened, Well, Brennan was again I think he

1227
01:03:27,400 --> 01:03:31,520
Speaker 1: was a great CEO, fabulous, fabulous steward. The big issue

1228
01:03:31,560 --> 01:03:33,320
Speaker 1: there was the E T F S and Gus Souder

1229
01:03:33,440 --> 01:03:35,120
Speaker 1: was the one who had the idea. Interviewed Gus for

1230
01:03:35,160 --> 01:03:38,760
Speaker 1: the book. Gus Souder told me that was the chief

1231
01:03:40,240 --> 01:03:43,920
Speaker 1: and he was also very close with Bogel. Um, you know,

1232
01:03:44,280 --> 01:03:48,120
Speaker 1: I think they had a very good relationship. Souder looked

1233
01:03:48,160 --> 01:03:51,280
Speaker 1: at Vanguard and thought about a massive crisis. What's going

1234
01:03:51,320 --> 01:03:53,480
Speaker 1: to happen. All these people are index funds, and we're

1235
01:03:53,520 --> 01:03:54,840
Speaker 1: gonna get all these calls. How are we going to

1236
01:03:54,960 --> 01:03:57,640
Speaker 1: deal with redemptions? And he thought if we could make

1237
01:03:57,720 --> 01:04:01,400
Speaker 1: the e t F a sheriff last people who wanted

1238
01:04:01,400 --> 01:04:03,120
Speaker 1: to come in out of the fund, we could. They

1239
01:04:03,120 --> 01:04:05,960
Speaker 1: could use that to trade and that would buffer and

1240
01:04:06,080 --> 01:04:09,960
Speaker 1: protect the index fund investors. Bogel kind of saw et

1241
01:04:10,080 --> 01:04:11,400
Speaker 1: F s ays, they just want to get bigger, they

1242
01:04:11,400 --> 01:04:13,280
Speaker 1: want to distribute, and that's why he was against it.

1243
01:04:13,360 --> 01:04:16,720
Speaker 1: Sounder's reason almost is more Bogel, like Souder told me,

1244
01:04:16,760 --> 01:04:19,800
Speaker 1: he told Bogel that later in life, and Bogel kind

1245
01:04:19,880 --> 01:04:22,160
Speaker 1: of I think it softened him because during my interviews

1246
01:04:22,240 --> 01:04:24,960
Speaker 1: with Bogel over say, the last six years before he

1247
01:04:25,040 --> 01:04:28,240
Speaker 1: passed away, he got more and more soft on et

1248
01:04:28,400 --> 01:04:31,960
Speaker 1: F s um he would the last interview in particular,

1249
01:04:32,960 --> 01:04:35,840
Speaker 1: here's what he'd say say, something like, well, look, I've

1250
01:04:35,840 --> 01:04:37,600
Speaker 1: always said, as long as you buy the broad market

1251
01:04:37,680 --> 01:04:40,240
Speaker 1: ones and you don't trade them low cost like hours,

1252
01:04:41,000 --> 01:04:43,520
Speaker 1: they're fine. But then he couldn't just let that stay.

1253
01:04:43,560 --> 01:04:46,240
Speaker 1: He couldn't just let it go like he always said that.

1254
01:04:46,480 --> 01:04:48,840
Speaker 1: That was what he always said. But it wasn't that

1255
01:04:48,920 --> 01:04:50,480
Speaker 1: they would be like dot dot dot, and then he

1256
01:04:50,600 --> 01:04:53,520
Speaker 1: just would be like, but these things are marketing tools

1257
01:04:53,560 --> 01:04:55,520
Speaker 1: there for trading. We don't even know what people are doing,

1258
01:04:56,200 --> 01:04:58,160
Speaker 1: you know. I don't like them, and so he was

1259
01:04:58,360 --> 01:05:01,439
Speaker 1: always wrestling with them. I like my metaphor. I uses

1260
01:05:01,520 --> 01:05:05,760
Speaker 1: that the index fund was his beautiful firstborn daughter and

1261
01:05:05,840 --> 01:05:07,280
Speaker 1: the E t f s like the tatted up bad

1262
01:05:07,360 --> 01:05:10,720
Speaker 1: boy that she married, right, and so E t f

1263
01:05:10,840 --> 01:05:12,920
Speaker 1: s did a lot to advance indexing and there and

1264
01:05:13,000 --> 01:05:14,880
Speaker 1: now they're in the family and he has to deal

1265
01:05:14,920 --> 01:05:16,440
Speaker 1: with them. And it was always this sort of like

1266
01:05:17,160 --> 01:05:20,240
Speaker 1: push pull and it was never an easy relationship with him.

1267
01:05:20,640 --> 01:05:23,200
Speaker 1: And it's I the chapter in the book that goes

1268
01:05:23,280 --> 01:05:26,880
Speaker 1: over this is Bogel and ETFs. It's complicated because it

1269
01:05:27,000 --> 01:05:29,400
Speaker 1: is complicated. I'm Rick Ferry, who I interviewed also, who's

1270
01:05:30,000 --> 01:05:33,360
Speaker 1: big Bogel head. He tried to tell Bogel many times.

1271
01:05:33,440 --> 01:05:38,720
Speaker 1: ETFs have really helped advance your cause, and they made

1272
01:05:38,720 --> 01:05:41,920
Speaker 1: it very easy to get everywhere. You never have to

1273
01:05:41,960 --> 01:05:43,960
Speaker 1: go to Vanguard to get index funds. Now you can

1274
01:05:44,000 --> 01:05:46,640
Speaker 1: just buy them anywhere through the E t F So

1275
01:05:46,960 --> 01:05:51,000
Speaker 1: it you know, even the most diehard Bogol heads and

1276
01:05:51,040 --> 01:05:56,200
Speaker 1: friends of Jack Bert Malkiel, their fans of TS. Yeah.

1277
01:05:56,440 --> 01:06:01,120
Speaker 1: Basically three things. Everybody disagree with Bogo on pretty much

1278
01:06:01,240 --> 01:06:04,840
Speaker 1: E T F S international investing. Bogel says, you don't

1279
01:06:04,840 --> 01:06:06,560
Speaker 1: need it. Almost everybody I've talked to, even his friends,

1280
01:06:06,560 --> 01:06:09,120
Speaker 1: said I like a little international. And the third thing

1281
01:06:09,240 --> 01:06:11,920
Speaker 1: was Bogel's prediction for what will happen to the asset

1282
01:06:11,960 --> 01:06:14,120
Speaker 1: management industry. I couldn't find anybody to agree with this.

1283
01:06:14,480 --> 01:06:16,640
Speaker 1: In his last interview six months before he passed away,

1284
01:06:16,880 --> 01:06:19,560
Speaker 1: he was the most prophetic I've seen him, and he said,

1285
01:06:19,920 --> 01:06:22,360
Speaker 1: there's gonna be a mass mutualization of this industry because

1286
01:06:22,720 --> 01:06:25,120
Speaker 1: these companies, it's not gonna be enough to lower fees.

1287
01:06:25,200 --> 01:06:27,439
Speaker 1: It's too late. They're just gonna give away all their margins.

1288
01:06:27,480 --> 01:06:30,000
Speaker 1: It makes no sense. They're just gonna that they're gonna

1289
01:06:30,040 --> 01:06:31,800
Speaker 1: have to do at some point is just convert to

1290
01:06:31,920 --> 01:06:35,400
Speaker 1: our structure. And so the big asset managers will be

1291
01:06:35,480 --> 01:06:38,240
Speaker 1: a mass mutualization. And no, I couldn't find nobody to

1292
01:06:38,280 --> 01:06:41,040
Speaker 1: agree with that. So those are so Bogol said a

1293
01:06:41,080 --> 01:06:44,040
Speaker 1: lot of things that even his closest friends and people

1294
01:06:44,080 --> 01:06:46,440
Speaker 1: who look up to him did not agree with huh

1295
01:06:46,680 --> 01:06:50,240
Speaker 1: quite quite fascinating. So let's start out with my my

1296
01:06:50,480 --> 01:06:56,440
Speaker 1: favorite discussion on indexing. Indexing has been called un American,

1297
01:06:56,680 --> 01:07:02,000
Speaker 1: anti competitive, Marxist, communist, It will ruin the economy, it

1298
01:07:02,120 --> 01:07:06,080
Speaker 1: will crash the market. It turns out to be none

1299
01:07:06,160 --> 01:07:09,680
Speaker 1: of those things. Why so much hate for something that

1300
01:07:09,840 --> 01:07:16,240
Speaker 1: has saved investors trillions in fees? Well, that's why the

1301
01:07:16,360 --> 01:07:18,720
Speaker 1: answer is in the question. I asked the question that

1302
01:07:18,800 --> 01:07:23,360
Speaker 1: weigh on purpose because this has come primarily from the

1303
01:07:23,480 --> 01:07:28,720
Speaker 1: active community and the academics they've hired. Bogel really found

1304
01:07:28,880 --> 01:07:32,560
Speaker 1: he heartbroken by the academics. He really thought he got

1305
01:07:32,640 --> 01:07:34,760
Speaker 1: the active people doing it, but he thought the academics

1306
01:07:34,800 --> 01:07:37,760
Speaker 1: were a little irresponsible on this front. I am convinced

1307
01:07:37,840 --> 01:07:40,600
Speaker 1: if you took all the people who have ever trashed

1308
01:07:41,360 --> 01:07:43,840
Speaker 1: UH indexing or fear mongering and looked at therefore, in

1309
01:07:43,920 --> 01:07:46,080
Speaker 1: one case, it's got to be low cost inext monk

1310
01:07:46,320 --> 01:07:48,560
Speaker 1: because they're smart, they're not done. And by the way,

1311
01:07:48,640 --> 01:07:51,080
Speaker 1: the next time one of these things happens in a debate,

1312
01:07:51,720 --> 01:07:54,840
Speaker 1: I'm gonna steal that and say what's in your four

1313
01:07:54,840 --> 01:07:58,120
Speaker 1: oh one K? Yeah, this is exactly how to debate.

1314
01:07:58,200 --> 01:08:01,440
Speaker 1: Somebody on this. If they start doing that, just say, well, okay,

1315
01:08:01,480 --> 01:08:03,840
Speaker 1: well how do you invest? Yeah, because if you're not

1316
01:08:03,960 --> 01:08:08,000
Speaker 1: willing to like that, Warren Buffett is an advocate, I mean,

1317
01:08:08,640 --> 01:08:11,640
Speaker 1: and and I think most most of us think Warren

1318
01:08:11,800 --> 01:08:17,840
Speaker 1: is an honest steward of active investor. Yeah, and Buffett recommends,

1319
01:08:17,880 --> 01:08:20,320
Speaker 1: I mean, Buffett is an active investor, but he recommends,

1320
01:08:20,479 --> 01:08:22,800
Speaker 1: if unless you're going to do this all the day,

1321
01:08:22,960 --> 01:08:24,880
Speaker 1: all the time, just put it index fund. You'll be

1322
01:08:25,160 --> 01:08:27,639
Speaker 1: and you'll do better than almost all the pros. Anyway,

1323
01:08:28,040 --> 01:08:30,519
Speaker 1: that was his advice to people, and I he actually

1324
01:08:31,360 --> 01:08:33,120
Speaker 1: I was able to interview him for this book, and

1325
01:08:33,160 --> 01:08:35,439
Speaker 1: I asked him if his advice was the same because

1326
01:08:35,479 --> 01:08:37,360
Speaker 1: index is getting bigger, and he said, yes, it's still

1327
01:08:37,400 --> 01:08:39,960
Speaker 1: by SMP. But then I said, well, do you think

1328
01:08:40,000 --> 01:08:42,479
Speaker 1: the nexting is too big or and he's like, no,

1329
01:08:43,160 --> 01:08:45,800
Speaker 1: it's possible it gets so big that it's a regulatory matter,

1330
01:08:45,880 --> 01:08:48,000
Speaker 1: but that's an issue for another day. So I do

1331
01:08:48,120 --> 01:08:52,599
Speaker 1: think that ultimately the reason the problem here with indexing

1332
01:08:52,760 --> 01:08:55,880
Speaker 1: isn't necessarily indexing, because look, all you're doing is taking

1333
01:08:55,920 --> 01:08:58,920
Speaker 1: a basket of stocks and you're buying them. It's all

1334
01:08:59,040 --> 01:09:01,639
Speaker 1: funds are all cross the board. Look at the Philly Magellan.

1335
01:09:01,760 --> 01:09:04,080
Speaker 1: It's Apple, it's Amazon. It's the same stuff, man, it's

1336
01:09:04,120 --> 01:09:07,080
Speaker 1: just cheaper. Right. This is all indexing is. It's not

1337
01:09:07,280 --> 01:09:09,760
Speaker 1: that different. It's just the same group of stocks for

1338
01:09:09,840 --> 01:09:12,360
Speaker 1: a lower fee. Right. I think the problem that we're

1339
01:09:12,400 --> 01:09:15,120
Speaker 1: going to have run into is Vanguard and black Rock

1340
01:09:15,240 --> 01:09:18,360
Speaker 1: are going to own too much of corporate America. Right now,

1341
01:09:18,600 --> 01:09:22,439
Speaker 1: Vanguard owns about eight nine of most stocks, black Rocks seven,

1342
01:09:23,080 --> 01:09:26,200
Speaker 1: so it's fifteen between them. At this rate, they're probably

1343
01:09:26,240 --> 01:09:31,600
Speaker 1: gonna own thirty of stocks collectively because the rule is

1344
01:09:31,640 --> 01:09:34,320
Speaker 1: a fund can own no more than ten percent, not

1345
01:09:34,479 --> 01:09:36,800
Speaker 1: a company, and the rules old. It was made back

1346
01:09:36,840 --> 01:09:40,880
Speaker 1: when fun complexes one fund, not thirty fifty. So I

1347
01:09:41,000 --> 01:09:45,479
Speaker 1: think there might Regulation is probably the only thing that

1348
01:09:45,560 --> 01:09:48,000
Speaker 1: can stop their growth at this point, and I think

1349
01:09:48,040 --> 01:09:50,280
Speaker 1: it will probably be an issue of Bernie Sanders tweeted

1350
01:09:50,280 --> 01:09:53,759
Speaker 1: about it, although I don't think I actually put Bernie

1351
01:09:53,800 --> 01:09:57,080
Speaker 1: in his place, because he said the most the most ignorant,

1352
01:09:57,479 --> 01:09:59,519
Speaker 1: I mean, on either side of the aisle. I don't

1353
01:09:59,560 --> 01:10:05,720
Speaker 1: remember a politician misunderstanding. Hey, Bernie, not for nothing, but

1354
01:10:05,880 --> 01:10:09,560
Speaker 1: all your supporters are giant winners because of Ania. I have.

1355
01:10:09,720 --> 01:10:11,240
Speaker 1: I had a line in the book that I removed,

1356
01:10:11,320 --> 01:10:16,400
Speaker 1: which is that Bogel has done more for average people

1357
01:10:17,360 --> 01:10:19,680
Speaker 1: and to reform Wall Street than Bernie Sanders could ever

1358
01:10:19,800 --> 01:10:22,439
Speaker 1: dream of. Then he doesn't put bills that that fail.

1359
01:10:23,360 --> 01:10:25,920
Speaker 1: Um yeah, I mean he's he talks a big game,

1360
01:10:25,960 --> 01:10:28,719
Speaker 1: but he doesn't get much done. Um. I'm surprised Bernie

1361
01:10:28,840 --> 01:10:31,160
Speaker 1: isn't more in touch with that. That's why I was

1362
01:10:31,520 --> 01:10:38,000
Speaker 1: very polite in the post. Began Bernie, Bernie, Bernie, come

1363
01:10:38,080 --> 01:10:44,200
Speaker 1: on you. If anybody should understand mutualization and communal ownership,

1364
01:10:45,080 --> 01:10:47,800
Speaker 1: it's a socialist like you shouldn't you get that? But

1365
01:10:48,600 --> 01:10:50,840
Speaker 1: but but real quick, I think what we're gonna find

1366
01:10:51,000 --> 01:10:53,680
Speaker 1: is passive is going to continue to grow. Right, it's

1367
01:10:53,680 --> 01:10:55,599
Speaker 1: going to be the core of most people's portfolios because

1368
01:10:55,640 --> 01:10:57,880
Speaker 1: it's just too too good of a deal. So let

1369
01:10:57,920 --> 01:11:00,560
Speaker 1: me push back on what's gonna happen. Let me just

1370
01:11:00,680 --> 01:11:02,760
Speaker 1: get me finishing. But and this is a chapter I have.

1371
01:11:03,240 --> 01:11:05,679
Speaker 1: What's gonna happen is Active won't die. It's just gonna

1372
01:11:05,720 --> 01:11:08,120
Speaker 1: get crazier. So what's gonna happen is the core of

1373
01:11:08,160 --> 01:11:11,400
Speaker 1: a portfolio will be low cost passive vanilla. Check that box.

1374
01:11:12,560 --> 01:11:16,720
Speaker 1: Then people are going to decorate that with arc um

1375
01:11:17,400 --> 01:11:20,000
Speaker 1: call options. They're gonna play that, you know, trade. They

1376
01:11:20,080 --> 01:11:23,840
Speaker 1: might use bitcoin or crypto basically like hot sauce on

1377
01:11:23,920 --> 01:11:26,720
Speaker 1: otherwise dull meal to sort of distract them. And I

1378
01:11:26,840 --> 01:11:30,599
Speaker 1: think active is going to get ironically way more active

1379
01:11:30,840 --> 01:11:33,960
Speaker 1: because of passive, and I think that maybe that's okay.

1380
01:11:34,040 --> 01:11:37,080
Speaker 1: So I think that's ultimately where we'll stand, and those

1381
01:11:37,160 --> 01:11:41,920
Speaker 1: active funds will shine enough consistently to make it that

1382
01:11:42,080 --> 01:11:44,559
Speaker 1: it's never fully passive. There will always be somebody who's

1383
01:11:44,560 --> 01:11:46,559
Speaker 1: gonna figure it out for a little while, and they'll

1384
01:11:46,560 --> 01:11:48,960
Speaker 1: be used, probably to complement passive. But I do not

1385
01:11:49,080 --> 01:11:52,519
Speaker 1: see a reversal where an eight basis point growth manager

1386
01:11:52,600 --> 01:11:55,880
Speaker 1: from a legacy active shop replaces Vanguard. So that's why

1387
01:11:55,960 --> 01:11:58,160
Speaker 1: when people freak out about Cathy Wood and they're like,

1388
01:11:58,880 --> 01:12:02,400
Speaker 1: how can she have money dollars? I'm like, dude, you're

1389
01:12:02,479 --> 01:12:05,479
Speaker 1: hitting her from a fundamental stockpicker point of view. Your

1390
01:12:05,520 --> 01:12:08,160
Speaker 1: competition is an arc it's Vanguard, Dude, You're fighting the

1391
01:12:08,240 --> 01:12:11,639
Speaker 1: wrong enemy. She's competing with like lottery tickets and crypto

1392
01:12:11,840 --> 01:12:14,040
Speaker 1: and stuff that would go on the outside of your portfolio.

1393
01:12:14,040 --> 01:12:16,000
Speaker 1: And I say, if you have vanguard in the core.

1394
01:12:16,640 --> 01:12:18,880
Speaker 1: You want a little wild and crazy. You want somebody

1395
01:12:18,920 --> 01:12:21,960
Speaker 1: who's dreaming five years in the future. Just in case

1396
01:12:22,080 --> 01:12:24,639
Speaker 1: they're right. You don't want to miss out. She's the ornament,

1397
01:12:24,800 --> 01:12:28,000
Speaker 1: not the Christmas Tree. I totally exactly. And I think

1398
01:12:28,479 --> 01:12:31,439
Speaker 1: Kathy has been a kind of negative on index funds,

1399
01:12:31,479 --> 01:12:34,600
Speaker 1: and I've I've told her privately in public, like I

1400
01:12:34,680 --> 01:12:36,559
Speaker 1: really think you should team up. I think you should

1401
01:12:36,600 --> 01:12:40,880
Speaker 1: be explaining that the cake you because she should a

1402
01:12:41,960 --> 01:12:44,920
Speaker 1: She's like, well, people, index funds are misallocation to capital.

1403
01:12:45,000 --> 01:12:49,080
Speaker 1: They're just putting money randomly. But I'm like, honestly, you can't.

1404
01:12:49,280 --> 01:12:52,960
Speaker 1: I can't. I would not bank my kids college education

1405
01:12:53,040 --> 01:12:55,880
Speaker 1: money on our high growth manager. I just wouldn't do it.

1406
01:12:56,000 --> 01:13:00,479
Speaker 1: So but I do. I can understand the idea of

1407
01:13:00,520 --> 01:13:02,320
Speaker 1: a little fomo. I don't want to miss out on

1408
01:13:02,479 --> 01:13:06,439
Speaker 1: something like a crypto bitcoin arc, you know, some of

1409
01:13:06,479 --> 01:13:09,120
Speaker 1: these high flying growth thocks, because it's like a call

1410
01:13:09,200 --> 01:13:12,040
Speaker 1: option on the future. And I think those are why

1411
01:13:12,200 --> 01:13:15,639
Speaker 1: those funds not only sell, but if with this bare

1412
01:13:15,720 --> 01:13:18,519
Speaker 1: market they haven't really seen the autum, but think by

1413
01:13:18,600 --> 01:13:21,599
Speaker 1: withstanding that they may be down six but they're still

1414
01:13:21,600 --> 01:13:24,280
Speaker 1: seeing in Yeah, they're still seeing in flows or no outflows,

1415
01:13:24,600 --> 01:13:26,640
Speaker 1: and so I try to explain to them that the

1416
01:13:26,760 --> 01:13:29,760
Speaker 1: Vanguard effect is actually that. And so that's why this

1417
01:13:29,880 --> 01:13:33,920
Speaker 1: book again, it's not just index funds Bogel. The Bogel

1418
01:13:33,920 --> 01:13:37,400
Speaker 1: effect is the way it's impacting active it's impacting the

1419
01:13:37,439 --> 01:13:41,439
Speaker 1: wealth management industry, it's impacting trading, it's impacting behavior. That's

1420
01:13:41,479 --> 01:13:44,040
Speaker 1: how powerful this is. It's not just a mutual fund story.

1421
01:13:44,120 --> 01:13:46,360
Speaker 1: That that was what also made the book exciting. So

1422
01:13:46,600 --> 01:13:50,520
Speaker 1: so let's come back to you know, if if Vanguard

1423
01:13:50,600 --> 01:13:53,360
Speaker 1: did an active low cost they would have been a

1424
01:13:53,479 --> 01:13:57,240
Speaker 1: successful here's the pushback to that. First, you buy an

1425
01:13:57,280 --> 01:13:59,800
Speaker 1: index funds or you make your own index. Of course,

1426
01:13:59,840 --> 01:14:05,840
Speaker 1: you almost nothing to create the portfolio, meaning here's what

1427
01:14:05,920 --> 01:14:09,160
Speaker 1: you're gonna own, and you don't need a staff of forty,

1428
01:14:09,200 --> 01:14:11,160
Speaker 1: you don't need a research team, you don't have to

1429
01:14:11,280 --> 01:14:14,839
Speaker 1: buy outside wall st research, you don't have these massive

1430
01:14:14,920 --> 01:14:18,479
Speaker 1: trading costs. Inherently the fact that it's an index. And

1431
01:14:18,520 --> 01:14:22,880
Speaker 1: whether it's the Vanguard Total Market or the SPI, you're

1432
01:14:22,920 --> 01:14:25,439
Speaker 1: living in a world where Vanguard has low cost active funds,

1433
01:14:25,800 --> 01:14:30,680
Speaker 1: but somebody has invented indexing. Okay, my my thing was

1434
01:14:30,840 --> 01:14:34,479
Speaker 1: indexing isn't a concept. Okay, I just pretend, just pretend

1435
01:14:34,520 --> 01:14:37,960
Speaker 1: it doesn't exist. Oh so low cost indext low cost

1436
01:14:38,000 --> 01:14:41,080
Speaker 1: active versus expensive active, Well you would agree with that,

1437
01:14:41,240 --> 01:14:43,240
Speaker 1: of course you can't disagree with that. But here's the thing.

1438
01:14:43,280 --> 01:14:46,240
Speaker 1: But but but low cost active versus low cost passive.

1439
01:14:46,600 --> 01:14:49,400
Speaker 1: But there's an inherent advantage to pass. Here's the problem

1440
01:14:49,479 --> 01:14:52,000
Speaker 1: with your premise. Though. Indexing never would have gotten low

1441
01:14:52,080 --> 01:14:55,080
Speaker 1: cost if Vanguard didn't do it. I promise you I

1442
01:14:55,439 --> 01:14:57,320
Speaker 1: think you're right about that. No, I'm not disagreeing with

1443
01:14:57,400 --> 01:14:59,040
Speaker 1: because I think they would have come out with indexing.

1444
01:14:59,120 --> 01:15:00,920
Speaker 1: But you know these firms like, oh we'll charge eight,

1445
01:15:01,200 --> 01:15:04,560
Speaker 1: we'll charge even if fifty, I still think you're not

1446
01:15:04,640 --> 01:15:07,800
Speaker 1: powerful enough to overwhelm. It's because it's under ten that

1447
01:15:07,880 --> 01:15:10,280
Speaker 1: it becomes. That's what. So what did the State Street

1448
01:15:10,360 --> 01:15:12,840
Speaker 1: Spiders s p Y come out? What was the feast

1449
01:15:13,840 --> 01:15:16,559
Speaker 1: for asking this? Because this is one of the data

1450
01:15:16,640 --> 01:15:18,599
Speaker 1: points that drove me to write this book as well.

1451
01:15:19,520 --> 01:15:22,800
Speaker 1: SPY came out at twenty basis points, so that's still cheap.

1452
01:15:23,320 --> 01:15:26,519
Speaker 1: But this why did it pick twenty basis points? I

1453
01:15:26,520 --> 01:15:29,160
Speaker 1: actually interviewed Steve Bloom, who from am X who put

1454
01:15:29,200 --> 01:15:31,719
Speaker 1: out Spy with Nate most because that's what the Vanguard

1455
01:15:31,800 --> 01:15:35,920
Speaker 1: five index fund was. So think about that. And Vogel

1456
01:15:36,000 --> 01:15:39,919
Speaker 1: hated ETFs, but the dude had a profound positive influence

1457
01:15:40,000 --> 01:15:43,800
Speaker 1: on the because it started dirt cheap. I think Spy

1458
01:15:43,880 --> 01:15:46,880
Speaker 1: would have been one percent if there's no Vanguard. I

1459
01:15:46,920 --> 01:15:48,800
Speaker 1: think et s probably would have been invented to but

1460
01:15:48,880 --> 01:15:50,880
Speaker 1: they would have been one percent, and it would not

1461
01:15:50,880 --> 01:15:52,920
Speaker 1: have been twenty and ten basis points as they are now.

1462
01:15:53,120 --> 01:15:59,799
Speaker 1: So here's the crazy market efficiency question. There are index

1463
01:16:00,080 --> 01:16:03,040
Speaker 1: E t F some mutual funds that charge a hundred

1464
01:16:03,120 --> 01:16:05,320
Speaker 1: fifty and two hundred basis points and they still have

1465
01:16:05,960 --> 01:16:09,400
Speaker 1: tens of millions, not billions, but tens, maybe even hundreds

1466
01:16:09,439 --> 01:16:12,920
Speaker 1: of millions in assets. How do these things still exist?

1467
01:16:13,000 --> 01:16:16,080
Speaker 1: They probably have loads. They probably are bribing somebody to

1468
01:16:16,160 --> 01:16:19,040
Speaker 1: put somebody in there. Oh, there's no doubt that that's it.

1469
01:16:19,120 --> 01:16:22,000
Speaker 1: I mean, that's the answer. Souch, no natural reason for that.

1470
01:16:22,120 --> 01:16:25,000
Speaker 1: I mean, look, um, we have a phrase we use

1471
01:16:25,040 --> 01:16:28,640
Speaker 1: in the team called the Cabernet lane. There's still a

1472
01:16:28,720 --> 01:16:32,200
Speaker 1: huge market out there for wining and dining advisors. Um,

1473
01:16:32,520 --> 01:16:36,679
Speaker 1: your friends and your golf buddies. People still will hook

1474
01:16:36,720 --> 01:16:38,320
Speaker 1: you up. I'll buy your index fund. I know it's

1475
01:16:38,360 --> 01:16:40,840
Speaker 1: sixty basis points, but it's my friend. There is still

1476
01:16:40,920 --> 01:16:42,680
Speaker 1: a lot of that going on and not and that

1477
01:16:42,720 --> 01:16:46,000
Speaker 1: happens in every business. But there's still a decent Cabernet

1478
01:16:47,479 --> 01:16:50,360
Speaker 1: lane in asset management. But that can only happen on

1479
01:16:50,439 --> 01:16:54,599
Speaker 1: the brokered side. I so we're let me get self,

1480
01:16:55,160 --> 01:16:57,960
Speaker 1: let me insert myself a little further into the conversation.

1481
01:16:58,360 --> 01:17:00,800
Speaker 1: So at my shop, we're in r i A. We're

1482
01:17:00,840 --> 01:17:03,680
Speaker 1: a fiduciary. If I'm looking at an index fund and

1483
01:17:03,720 --> 01:17:06,920
Speaker 1: there's a sixty basis point because somebody version because someone

1484
01:17:07,000 --> 01:17:09,519
Speaker 1: took me out to dinner, and there's a Vanguard five

1485
01:17:09,600 --> 01:17:14,839
Speaker 1: basis point, I don't believe I can legally on behalf

1486
01:17:14,920 --> 01:17:18,120
Speaker 1: of my clients by the sixty bit fund as if

1487
01:17:18,320 --> 01:17:21,880
Speaker 1: as an advisor, we have to buy the five bit fund. Now,

1488
01:17:21,960 --> 01:17:25,120
Speaker 1: if you're a brokerage house, if you're and you follow

1489
01:17:25,960 --> 01:17:28,080
Speaker 1: what what's the And there's some dual people who do

1490
01:17:28,200 --> 01:17:30,200
Speaker 1: who try to do both, but you can't. It's either you,

1491
01:17:30,960 --> 01:17:33,640
Speaker 1: we said fiduciers in the fiducia. Either you are a

1492
01:17:33,760 --> 01:17:37,360
Speaker 1: legitimate fiducier where the best interesting client dominates or you

1493
01:17:37,520 --> 01:17:40,080
Speaker 1: are a broker, and really it's the old it's the

1494
01:17:40,120 --> 01:17:45,280
Speaker 1: old Louis B. Mayor um joke, which I'll skip the

1495
01:17:45,320 --> 01:17:48,479
Speaker 1: dirty part and just say, hey, we've already decided that

1496
01:17:48,680 --> 01:17:51,720
Speaker 1: now we're just debating price. I think my point of

1497
01:17:51,760 --> 01:17:54,960
Speaker 1: the cabernetlane was even beyond that index fund example, into

1498
01:17:55,080 --> 01:17:57,880
Speaker 1: e t f s, where you know, you just get

1499
01:17:57,920 --> 01:17:59,640
Speaker 1: to know somebody they sell you on the narrative of

1500
01:17:59,680 --> 01:18:02,120
Speaker 1: this worry and maybe they decided to put some money

1501
01:18:02,120 --> 01:18:04,439
Speaker 1: into your dividend fund. That might be you know, thirty

1502
01:18:04,520 --> 01:18:06,800
Speaker 1: fifty basis points more than a Vanguard one. But you

1503
01:18:06,840 --> 01:18:09,960
Speaker 1: could say to yourself, well, this strategy is better. But

1504
01:18:10,080 --> 01:18:11,719
Speaker 1: in your case of the index fund, you're right, there'd

1505
01:18:11,720 --> 01:18:14,360
Speaker 1: be no fiduciary reason to go to the sixties. So,

1506
01:18:14,800 --> 01:18:16,800
Speaker 1: like I said, it's probably all loads or sort of

1507
01:18:16,880 --> 01:18:19,960
Speaker 1: captive assets somehow that that makes a whole lot of sense.

1508
01:18:20,120 --> 01:18:23,360
Speaker 1: But by the way, some people are like, no, I

1509
01:18:23,479 --> 01:18:26,599
Speaker 1: think somebody would come out and just put zero feet

1510
01:18:26,600 --> 01:18:27,960
Speaker 1: you know how like Robin Hood came out, will do

1511
01:18:28,040 --> 01:18:29,680
Speaker 1: free trading, like somebody would have come out like just

1512
01:18:29,800 --> 01:18:33,160
Speaker 1: all like, but are they the problem with that premise

1513
01:18:33,360 --> 01:18:36,040
Speaker 1: of like somebody who isn't Bogel in a for profit

1514
01:18:36,080 --> 01:18:39,240
Speaker 1: asset manager to do this as a loss leader is

1515
01:18:39,400 --> 01:18:43,479
Speaker 1: ultimately they would have that that the curtain would would

1516
01:18:43,479 --> 01:18:44,880
Speaker 1: have come up at some point and you would have

1517
01:18:44,920 --> 01:18:47,200
Speaker 1: figured out, oh my god, here's how they're screwing me

1518
01:18:47,320 --> 01:18:50,599
Speaker 1: over here. In other words, if you put something out

1519
01:18:50,640 --> 01:18:53,759
Speaker 1: there for that cheap, you're you're you're almost gonna always

1520
01:18:53,800 --> 01:18:56,840
Speaker 1: look to make money somewhere else. That's would make Vanguard unique.

1521
01:18:56,880 --> 01:18:59,599
Speaker 1: There is no curtain to pull. It's just that cheap

1522
01:18:59,640 --> 01:19:02,240
Speaker 1: because it's that cheap, because that's their business model. That's

1523
01:19:02,240 --> 01:19:04,639
Speaker 1: their business model. So I do think maybe somebody would

1524
01:19:04,640 --> 01:19:07,719
Speaker 1: have come out gimmicky style and done, oh free index funds,

1525
01:19:07,720 --> 01:19:09,280
Speaker 1: But I think ultimately people would have been like, oh,

1526
01:19:09,320 --> 01:19:10,960
Speaker 1: you're just trying to upsell me on this, or your

1527
01:19:11,120 --> 01:19:13,720
Speaker 1: pay for order flow, or you're taking money monment money

1528
01:19:13,760 --> 01:19:16,639
Speaker 1: and getting more interest on it somewhere else. There would

1529
01:19:16,640 --> 01:19:18,479
Speaker 1: have been something that would have soured people, and it

1530
01:19:18,520 --> 01:19:21,320
Speaker 1: would have then gotten a bad name. Low cost is

1531
01:19:21,880 --> 01:19:24,519
Speaker 1: a good has a good reputation because it was done

1532
01:19:24,560 --> 01:19:27,800
Speaker 1: the hard way. And so we go back to when

1533
01:19:27,800 --> 01:19:30,599
Speaker 1: Spy was twenty and Vanguard was twenty What people don't

1534
01:19:30,600 --> 01:19:33,719
Speaker 1: realize is that Vanguard started at forty six basis points.

1535
01:19:34,360 --> 01:19:36,360
Speaker 1: They came down like one or two a year, so

1536
01:19:36,520 --> 01:19:39,240
Speaker 1: it wasn't until the nineties they were even twenty and

1537
01:19:39,360 --> 01:19:41,920
Speaker 1: then in the last decade now they're three four across

1538
01:19:41,960 --> 01:19:45,479
Speaker 1: the board pretty much. That's when people went gaga for them.

1539
01:19:45,520 --> 01:19:47,519
Speaker 1: They didn't really sweep the nation until they got to ten.

1540
01:19:48,640 --> 01:19:51,760
Speaker 1: So you and I the quote you used that. I

1541
01:19:51,880 --> 01:19:55,640
Speaker 1: think the other factor was the financial crisis was the

1542
01:19:55,800 --> 01:19:58,880
Speaker 1: last straw for a lot of main street investors. So

1543
01:19:59,040 --> 01:20:00,960
Speaker 1: we we had the animal scandal, we the I p

1544
01:20:01,080 --> 01:20:03,200
Speaker 1: O scandal, we have the mutual fund scandal, on and

1545
01:20:03,320 --> 01:20:05,799
Speaker 1: on and on and on, not even talking about Bernie

1546
01:20:05,880 --> 01:20:08,439
Speaker 1: made Off, and the financial crisis was you know what,

1547
01:20:08,960 --> 01:20:11,680
Speaker 1: I'm done with this game. I'm just gonna give my

1548
01:20:11,880 --> 01:20:15,200
Speaker 1: money to Vanguard and let it run and I'll check

1549
01:20:15,320 --> 01:20:18,360
Speaker 1: my portfolio once a year. That was the sea change

1550
01:20:18,520 --> 01:20:22,080
Speaker 1: from If you remember in the nineties, you couldn't walk

1551
01:20:22,160 --> 01:20:24,560
Speaker 1: into a bar or a restaurant without CNBC being on

1552
01:20:24,640 --> 01:20:29,280
Speaker 1: the TV. Everybody, every barbecue, every dinner party, every conversation

1553
01:20:29,400 --> 01:20:33,960
Speaker 1: was about stocks. For a while, investing in the market

1554
01:20:34,160 --> 01:20:38,000
Speaker 1: was America's pastime, and the two thousand's kind of cured

1555
01:20:38,160 --> 01:20:40,920
Speaker 1: us of that, at least until the pandemic. This is

1556
01:20:40,960 --> 01:20:44,639
Speaker 1: why I think books written on behavior in psychology need

1557
01:20:44,720 --> 01:20:47,719
Speaker 1: to give vanguards index funds and Bogel way more credit

1558
01:20:47,760 --> 01:20:49,800
Speaker 1: than they do. They don't even mention them really, But

1559
01:20:49,880 --> 01:20:53,519
Speaker 1: I'm like, try try behaving in a two thousand and

1560
01:20:53,560 --> 01:20:56,040
Speaker 1: eight without this as an option. Well, think about it.

1561
01:20:56,080 --> 01:20:59,120
Speaker 1: If you're buying an active fund versus an index, you're

1562
01:20:59,160 --> 01:21:01,439
Speaker 1: buying it. There's a little bit of ego involved. I'm

1563
01:21:01,479 --> 01:21:03,600
Speaker 1: looking to outperform. There's a little bit of fomo and

1564
01:21:03,760 --> 01:21:07,080
Speaker 1: greed there. Passive is just I want to own everything

1565
01:21:07,120 --> 01:21:10,000
Speaker 1: and let lead. I'm investing in the world, and as

1566
01:21:10,080 --> 01:21:15,160
Speaker 1: planet Earth does better economically anyway, I'll participate in it,

1567
01:21:15,200 --> 01:21:18,479
Speaker 1: in stocks, bonds, real estate, whatever. It's a very different

1568
01:21:18,560 --> 01:21:22,040
Speaker 1: headspace then I believe I have the ability to either

1569
01:21:22,280 --> 01:21:27,320
Speaker 1: pick the guy that's going to outperform or pick the

1570
01:21:27,400 --> 01:21:30,600
Speaker 1: guy that picks the guys that outperformed. Also, you know,

1571
01:21:30,920 --> 01:21:33,479
Speaker 1: uh there, I have a chapter on looking at all

1572
01:21:33,520 --> 01:21:36,320
Speaker 1: the ways Bogel had to sort of explain that indexing

1573
01:21:36,479 --> 01:21:38,960
Speaker 1: wasn't quote average because he had to sort of sell

1574
01:21:39,000 --> 01:21:42,720
Speaker 1: a concept that's Unamerican. It is average is not. We're America, right,

1575
01:21:42,760 --> 01:21:45,439
Speaker 1: we want number one, yeah, top gun whatever. Like you know,

1576
01:21:45,560 --> 01:21:48,679
Speaker 1: indexing seems like middle of the road and almost like Marxist,

1577
01:21:48,760 --> 01:21:50,840
Speaker 1: as you said, so I think one of the ways

1578
01:21:50,880 --> 01:21:53,280
Speaker 1: he did that was to look at the long term

1579
01:21:53,360 --> 01:21:57,439
Speaker 1: compounding effect of indexing, but also just explain that, you know,

1580
01:21:57,640 --> 01:22:00,360
Speaker 1: what are we doing here. We're investing in companies that

1581
01:22:00,520 --> 01:22:03,040
Speaker 1: everybody goes through work every day, creates value. There's cash

1582
01:22:03,120 --> 01:22:06,200
Speaker 1: flow there, there's dividends. That's what you're buying, right, and

1583
01:22:06,400 --> 01:22:10,560
Speaker 1: over the decades that investment returns pretty stable. It's the

1584
01:22:10,560 --> 01:22:14,160
Speaker 1: speculative return that can be a smoke screen, but that's

1585
01:22:14,200 --> 01:22:17,000
Speaker 1: just you know, people making the pe go up a

1586
01:22:17,080 --> 01:22:19,560
Speaker 1: lot and then there's a crash and then up. But

1587
01:22:19,760 --> 01:22:22,960
Speaker 1: investment returns have been pretty stable throughout the decades, and

1588
01:22:23,040 --> 01:22:25,000
Speaker 1: he just tried to get people to understand that that's

1589
01:22:25,000 --> 01:22:27,160
Speaker 1: all we're doing here, and also the idea of the

1590
01:22:27,240 --> 01:22:29,280
Speaker 1: zero sum game. I think some people think of the

1591
01:22:29,280 --> 01:22:31,840
Speaker 1: stock market like they don't really view it as people

1592
01:22:31,840 --> 01:22:36,080
Speaker 1: in a circle trading. It's not. Once you view yes,

1593
01:22:36,160 --> 01:22:38,760
Speaker 1: once you view it as a table, you realize, oh yeah,

1594
01:22:39,120 --> 01:22:41,280
Speaker 1: half the people will win, but after costs only like

1595
01:22:41,360 --> 01:22:43,880
Speaker 1: two winners, you know, you start to really latch onto this.

1596
01:22:45,960 --> 01:22:49,880
Speaker 1: But this was part of the challenge of what Bogel had.

1597
01:22:49,920 --> 01:22:51,479
Speaker 1: That's why I took a long time. I think also

1598
01:22:51,640 --> 01:22:53,599
Speaker 1: was that he had to really explain some of these

1599
01:22:53,640 --> 01:22:57,920
Speaker 1: concepts and also again show compounding. Compounding is such a

1600
01:22:58,040 --> 01:23:01,800
Speaker 1: powerful concept, and if you pounded seven versus five and

1601
01:23:01,880 --> 01:23:05,040
Speaker 1: fifty years, the gap is enormous. And I think some

1602
01:23:05,200 --> 01:23:09,320
Speaker 1: people don't look at a percent where bibs as a

1603
01:23:09,400 --> 01:23:11,920
Speaker 1: big deal because they also write. They don't write checks

1604
01:23:13,240 --> 01:23:17,240
Speaker 1: out of their assets when the markets, who cares about

1605
01:23:17,240 --> 01:23:19,960
Speaker 1: ten or twenty gas? It's irrelevant? All right? Last question

1606
01:23:20,040 --> 01:23:23,439
Speaker 1: before we get to our favorites, which circles back to

1607
01:23:23,720 --> 01:23:27,200
Speaker 1: what with Jack Bogel and e t F and mutual funds.

1608
01:23:27,560 --> 01:23:30,679
Speaker 1: When we look at e t F today, they're super efficient,

1609
01:23:30,800 --> 01:23:34,599
Speaker 1: they're super cost effective, and and perhaps most important of all,

1610
01:23:35,720 --> 01:23:41,400
Speaker 1: the tax advantages of an e t F vastly just

1611
01:23:41,600 --> 01:23:45,840
Speaker 1: destroy mutual funds. So the question is if if the

1612
01:23:46,040 --> 01:23:50,720
Speaker 1: mutual fund was introduced as a new product today, would

1613
01:23:50,800 --> 01:23:54,640
Speaker 1: that pass sec muster versus the dominant et F with

1614
01:23:54,720 --> 01:23:59,479
Speaker 1: its tax efficiency. Good question um, I assume if it

1615
01:23:59,600 --> 01:24:02,160
Speaker 1: just check the regulatory boxes, that could come out. But

1616
01:24:02,280 --> 01:24:04,519
Speaker 1: I just we have this product. And by the way,

1617
01:24:04,600 --> 01:24:07,960
Speaker 1: if somebody sells, I would the tax problem goes to

1618
01:24:08,040 --> 01:24:11,120
Speaker 1: the other shareholders who didn't sell. Yeah, that's the thing.

1619
01:24:11,479 --> 01:24:13,759
Speaker 1: I almost feel like ETFs are the way it should

1620
01:24:13,760 --> 01:24:16,639
Speaker 1: be done. You sell, you pay mutual funds where you're

1621
01:24:16,640 --> 01:24:18,360
Speaker 1: sitting there as a good soldier, by the way, and

1622
01:24:18,439 --> 01:24:21,920
Speaker 1: you get a tax bill because somebody else sold. It's

1623
01:24:22,280 --> 01:24:24,479
Speaker 1: I almost feel bad for mutual funds. This is just

1624
01:24:24,640 --> 01:24:27,960
Speaker 1: a bad break because it's not it's just not fair.

1625
01:24:28,120 --> 01:24:30,559
Speaker 1: It's a legacy that they're stuck with from the government.

1626
01:24:30,640 --> 01:24:33,080
Speaker 1: Almost should like. I'm surprised the i c I hasn't

1627
01:24:33,080 --> 01:24:35,120
Speaker 1: lobbied the government to remove that and put them on

1628
01:24:35,160 --> 01:24:36,760
Speaker 1: a level playing field with the ets, because they might

1629
01:24:36,800 --> 01:24:39,160
Speaker 1: do a little better. But I also think mutual funds generally,

1630
01:24:39,560 --> 01:24:41,280
Speaker 1: you know a lot of their costs or internalize e.

1631
01:24:41,360 --> 01:24:43,160
Speaker 1: T F externalized a lot of costs. You know, you

1632
01:24:43,240 --> 01:24:44,920
Speaker 1: trade on your own, you bought on your own, your

1633
01:24:44,920 --> 01:24:46,880
Speaker 1: tax bills on your own, and people like that. It's

1634
01:24:46,960 --> 01:24:49,280
Speaker 1: much more of a fair deal. I think people think so.

1635
01:24:49,400 --> 01:24:52,360
Speaker 1: I think mutual funds there's possible some spaces it might

1636
01:24:52,439 --> 01:24:56,080
Speaker 1: make sense. Um, maybe some less liquid spaces. An active

1637
01:24:56,160 --> 01:24:59,040
Speaker 1: mutual funds still has some value fixed income they do

1638
01:24:59,160 --> 01:25:02,479
Speaker 1: pretty well. UM. But I think overall, if a mutual

1639
01:25:02,479 --> 01:25:04,479
Speaker 1: fund came out today, I think it would be something

1640
01:25:04,520 --> 01:25:07,920
Speaker 1: akin to like a compact disc coming out today, Like

1641
01:25:08,000 --> 01:25:10,160
Speaker 1: if you invented CDs right now and said, oh, take

1642
01:25:10,240 --> 01:25:12,880
Speaker 1: this disc, go stick it into your computer or your

1643
01:25:12,920 --> 01:25:15,080
Speaker 1: TV and watch this movie and be like why would

1644
01:25:15,080 --> 01:25:18,320
Speaker 1: I do that? So I do think. Look, every industry

1645
01:25:18,439 --> 01:25:20,840
Speaker 1: is evolving, you know. I compare the e t F

1646
01:25:20,920 --> 01:25:23,439
Speaker 1: and the Index fund to the MP three, just like music,

1647
01:25:23,520 --> 01:25:27,160
Speaker 1: the MP three really changed that industry. Uber completely revolutionized

1648
01:25:27,200 --> 01:25:29,559
Speaker 1: the taxi industry, and some of these industries are caught

1649
01:25:29,560 --> 01:25:32,479
Speaker 1: a little flat footed. There's nothing this is I this story.

1650
01:25:32,560 --> 01:25:34,800
Speaker 1: I think it's not just the mutual funds. It's it's

1651
01:25:34,800 --> 01:25:37,840
Speaker 1: a business story. It's a story about disruption, um and

1652
01:25:38,040 --> 01:25:40,679
Speaker 1: I think if you're and also it's a story about patients.

1653
01:25:40,720 --> 01:25:43,720
Speaker 1: One of the people interviews was Brad Kutzi Yama of

1654
01:25:43,800 --> 01:25:45,960
Speaker 1: I X the Flash Boys guy, and it was like

1655
01:25:46,200 --> 01:25:48,960
Speaker 1: when I told him it took Vanguard twenty five years

1656
01:25:48,960 --> 01:25:50,600
Speaker 1: to get the tempercent market share. He's like, you just

1657
01:25:50,680 --> 01:25:53,720
Speaker 1: made my day, because he's also sort of an out

1658
01:25:53,760 --> 01:25:55,400
Speaker 1: of out, writing, out of the shop guy. So I

1659
01:25:55,720 --> 01:25:59,080
Speaker 1: concept try to tell people this book, whether you're crypto

1660
01:25:59,240 --> 01:26:01,560
Speaker 1: or you're building a business. I think a lot of

1661
01:26:01,640 --> 01:26:03,920
Speaker 1: people can learn from some of these guys, some of

1662
01:26:04,080 --> 01:26:06,599
Speaker 1: what this guy did, how he did it, and maybe

1663
01:26:06,680 --> 01:26:09,240
Speaker 1: find some comfort and how long it took and then

1664
01:26:09,320 --> 01:26:14,240
Speaker 1: when it finally kicked in, how much change it actually forced. Alright,

1665
01:26:14,280 --> 01:26:16,599
Speaker 1: so let's jump to our favorite questions that we ask

1666
01:26:16,680 --> 01:26:19,800
Speaker 1: all of our guests, starting with, Hey, what's been keeping

1667
01:26:19,960 --> 01:26:24,240
Speaker 1: entertained during the pandemic? Give us your favorite Netflix and

1668
01:26:24,280 --> 01:26:29,120
Speaker 1: Amazon Prime podcast? Whatever? Um? I mean my I have

1669
01:26:29,240 --> 01:26:32,040
Speaker 1: an eleven year old son, so we've really enjoyed Stranger things.

1670
01:26:32,439 --> 01:26:35,040
Speaker 1: That's probably an obvious answer. Another thing we do is

1671
01:26:35,280 --> 01:26:38,519
Speaker 1: I I'll go to Google. He likes scary kind of stuff, right,

1672
01:26:38,560 --> 01:26:41,800
Speaker 1: so I'll go PG thirteen scary, and we'll just go

1673
01:26:41,960 --> 01:26:43,559
Speaker 1: through these movies I never heard of, Like right now

1674
01:26:43,640 --> 01:26:47,000
Speaker 1: we're watching Escape Room and Escape Room too, and he

1675
01:26:47,200 --> 01:26:48,880
Speaker 1: loves them and they're good enough for me that I

1676
01:26:48,960 --> 01:26:51,519
Speaker 1: can like, you know, when he was young, he would

1677
01:26:51,520 --> 01:26:53,040
Speaker 1: want to watch Pixar movies, and they're like a little

1678
01:26:53,080 --> 01:26:56,519
Speaker 1: dull for an adult. But I don't know, I'm not.

1679
01:26:56,960 --> 01:26:59,880
Speaker 1: I wasn't. I mean, Cars is okay, but like now

1680
01:27:00,080 --> 01:27:02,800
Speaker 1: that he's you know, we both I think equally enjoy

1681
01:27:02,880 --> 01:27:05,479
Speaker 1: stranger things some of these movies that we some are

1682
01:27:05,520 --> 01:27:07,880
Speaker 1: better than others. But that's sort of where I've been.

1683
01:27:08,520 --> 01:27:10,679
Speaker 1: I'm probably a bad person to ask. I did see

1684
01:27:10,720 --> 01:27:14,360
Speaker 1: The Thirteen Lives on Amazon Prime, about the cave rescue

1685
01:27:14,400 --> 01:27:17,240
Speaker 1: in Thailand, Ron Howard movie that came out fairly real.

1686
01:27:17,560 --> 01:27:20,760
Speaker 1: It was pretty good. Colin Farrell's in it. I he's

1687
01:27:20,800 --> 01:27:24,080
Speaker 1: so underrated. Everything he's in is pretty good. So sometimes

1688
01:27:24,120 --> 01:27:25,960
Speaker 1: I'll do that. I'll take actor like Colin Farrell or

1689
01:27:26,000 --> 01:27:28,320
Speaker 1: Bill Pullman, like somebody you don't really think about, and

1690
01:27:28,360 --> 01:27:31,599
Speaker 1: I'll just put their name into Amazon Prime and I'll

1691
01:27:31,640 --> 01:27:33,439
Speaker 1: just start going through some of their work that I

1692
01:27:33,520 --> 01:27:35,400
Speaker 1: haven't heard of. Because if you just go to Amazon

1693
01:27:35,439 --> 01:27:38,920
Speaker 1: Primary Netflix now, you end up scrolling forever. So you

1694
01:27:39,080 --> 01:27:40,880
Speaker 1: need a search term, and so a lot of times

1695
01:27:41,040 --> 01:27:44,240
Speaker 1: go to Google and put in PG thirteen scary or

1696
01:27:44,360 --> 01:27:46,400
Speaker 1: something specific. What I really want them to have is

1697
01:27:46,439 --> 01:27:50,200
Speaker 1: in Netflix. I want the rotten Tomatoes people to team

1698
01:27:50,280 --> 01:27:53,439
Speaker 1: up with Netflix, so I can go, Okay, I want

1699
01:27:53,560 --> 01:27:59,040
Speaker 1: a thriller that's ninety plus critic seventy audience, where I

1700
01:27:59,080 --> 01:28:02,519
Speaker 1: want a comedy that's fifty critic ninety audience. And I

1701
01:28:02,600 --> 01:28:05,479
Speaker 1: want to set these parameters so I can totally pinpoint

1702
01:28:05,560 --> 01:28:08,120
Speaker 1: what I want. I cannot believe that hasn't happened yet. Netflix,

1703
01:28:08,240 --> 01:28:11,680
Speaker 1: go by, go buy Rotten Tomatoes so Eric and I

1704
01:28:11,800 --> 01:28:15,760
Speaker 1: can find better films. Second question, tell us about your

1705
01:28:15,800 --> 01:28:19,720
Speaker 1: mentors who helped to shape your career. Mmm. I mean

1706
01:28:19,760 --> 01:28:21,479
Speaker 1: I never had one real mentor. I guess you know.

1707
01:28:22,040 --> 01:28:25,320
Speaker 1: Indext the institutional investor. Tom Lamont ran the show there

1708
01:28:25,320 --> 01:28:27,200
Speaker 1: and he was sort of this gruff old editor guy

1709
01:28:27,280 --> 01:28:30,679
Speaker 1: and he was really about fact checking, checking everything thirteen

1710
01:28:30,720 --> 01:28:33,200
Speaker 1: times and it hurt. But that was a good lesson.

1711
01:28:33,560 --> 01:28:37,240
Speaker 1: By the way, I have yet to interview a journalist who,

1712
01:28:37,400 --> 01:28:41,160
Speaker 1: on the mentor question pretty much the exact. He was

1713
01:28:41,200 --> 01:28:45,160
Speaker 1: old school as a gruff no bs guy, and you know,

1714
01:28:45,400 --> 01:28:47,720
Speaker 1: and now I realize how useful it was. I've heard

1715
01:28:47,760 --> 01:28:50,679
Speaker 1: also over and over the first meeting at that company,

1716
01:28:51,080 --> 01:28:54,320
Speaker 1: Tom Lamont is sitting there, and remember Aldamato was senator

1717
01:28:54,360 --> 01:28:57,920
Speaker 1: at the time. Yeah, he's like, listen, you gotta get

1718
01:28:57,960 --> 01:28:59,800
Speaker 1: to work early. You gotta get there before the gate

1719
01:28:59,840 --> 01:29:01,640
Speaker 1: key papers in the secretary show up. That's what they

1720
01:29:01,680 --> 01:29:03,600
Speaker 1: called him back. Their assistance is the word. Now He's like,

1721
01:29:04,000 --> 01:29:06,559
Speaker 1: you get there at seven am. You call Alda Motto.

1722
01:29:06,720 --> 01:29:10,519
Speaker 1: You're gonna hear themato a thirty. You're gonna hear Alda

1723
01:29:10,560 --> 01:29:13,120
Speaker 1: Motto's office. How can I help you? Oh yeah, sure whatever. Click.

1724
01:29:13,600 --> 01:29:16,120
Speaker 1: So he he also had this like just you know,

1725
01:29:16,280 --> 01:29:18,040
Speaker 1: use the phone, pick up the phone, call the people

1726
01:29:18,120 --> 01:29:20,320
Speaker 1: go to the thing um. And I thought that was

1727
01:29:21,280 --> 01:29:23,880
Speaker 1: he was a good mentor mine. I'll say my dad

1728
01:29:23,920 --> 01:29:26,479
Speaker 1: as well. My dad was a highway or is a

1729
01:29:26,600 --> 01:29:29,080
Speaker 1: where he retired, but he would go around and try

1730
01:29:29,160 --> 01:29:32,560
Speaker 1: to get contracts to pave highways. So he'd go to

1731
01:29:32,600 --> 01:29:35,559
Speaker 1: like the New Jersey Transportation and I saw him present

1732
01:29:35,600 --> 01:29:38,320
Speaker 1: a couple of times, and it was I liked his style.

1733
01:29:38,720 --> 01:29:43,120
Speaker 1: He would present on like hot mix boring topic right,

1734
01:29:43,200 --> 01:29:47,519
Speaker 1: like like mutual funds, but he would have them rolling

1735
01:29:47,600 --> 01:29:49,560
Speaker 1: like he would. He would he'd have a little a

1736
01:29:49,640 --> 01:29:51,320
Speaker 1: little dry jokes here and there. You can tell he

1737
01:29:51,640 --> 01:29:55,400
Speaker 1: curated this and sick. This doesn't have to suck. And

1738
01:29:55,520 --> 01:29:57,479
Speaker 1: that's and that's what I thought with David Matt and

1739
01:29:57,560 --> 01:30:00,479
Speaker 1: my first inside ETF conference, This doesn't have to suck.

1740
01:30:00,560 --> 01:30:02,040
Speaker 1: These guys had a lot of fun up there with

1741
01:30:02,120 --> 01:30:04,200
Speaker 1: your power point, and I find that with you guys,

1742
01:30:04,479 --> 01:30:07,120
Speaker 1: this stuff can actually be fun, interesting, and I really

1743
01:30:07,200 --> 01:30:09,320
Speaker 1: try to apply that to my world. It doesn't have

1744
01:30:09,520 --> 01:30:11,639
Speaker 1: to be boring and stayed and just the dull lets

1745
01:30:11,680 --> 01:30:14,519
Speaker 1: fall asleep. So I think i'd say those two people

1746
01:30:15,120 --> 01:30:19,320
Speaker 1: the idea coming out of COVID of doing a conference

1747
01:30:19,840 --> 01:30:23,320
Speaker 1: in a hotel room. Conference ends or or haven't been

1748
01:30:23,360 --> 01:30:26,679
Speaker 1: the Javit sensor. It's why we tied up future Proof

1749
01:30:26,960 --> 01:30:30,280
Speaker 1: on the beach in California. Like I've been locked in

1750
01:30:30,360 --> 01:30:32,240
Speaker 1: the house for two years. I don't want to sit

1751
01:30:32,360 --> 01:30:35,320
Speaker 1: in a hotel room. Let me out in the sunshine.

1752
01:30:35,400 --> 01:30:38,400
Speaker 1: So yeah, absolutely, the idea that anything that might be

1753
01:30:38,439 --> 01:30:40,840
Speaker 1: a little dry, you gotta make punch it up and

1754
01:30:40,920 --> 01:30:44,760
Speaker 1: make it interesting. Yeah, and especially the younger generation, zero

1755
01:30:44,880 --> 01:30:48,439
Speaker 1: tolerance for tolerance for bullet points on a power Yetta,

1756
01:30:48,760 --> 01:30:51,760
Speaker 1: show me a picture that's funny and then explain to me,

1757
01:30:51,880 --> 01:30:55,320
Speaker 1: you know the data behind it, Like that's the it's

1758
01:30:55,960 --> 01:30:58,920
Speaker 1: it's our team really pays attention to this. We think

1759
01:30:58,960 --> 01:31:00,840
Speaker 1: it's very important. The wise, you're going to just fade

1760
01:31:00,880 --> 01:31:04,880
Speaker 1: into oblivion, You're just gonna torture people. Everybody's favorite question,

1761
01:31:05,040 --> 01:31:07,080
Speaker 1: what are some of your favorite books? And what are

1762
01:31:07,120 --> 01:31:11,360
Speaker 1: you reading right now? Um? For some reason, the book

1763
01:31:11,600 --> 01:31:13,040
Speaker 1: keeps going to mynd read it twice now. Is Bob

1764
01:31:13,120 --> 01:31:16,840
Speaker 1: Dylan's Chronicles? Really? Yeah? He only wrote one book. But

1765
01:31:17,160 --> 01:31:19,400
Speaker 1: I got into Bob Dylan late, but I really got

1766
01:31:19,479 --> 01:31:21,479
Speaker 1: into him and I find him it's fascinating, still alive

1767
01:31:21,640 --> 01:31:24,280
Speaker 1: to my mom to see him, can't understand where he's saying, singing,

1768
01:31:24,280 --> 01:31:28,280
Speaker 1: But but you realize this guy influenced the Beatles, the Beatles,

1769
01:31:28,520 --> 01:31:31,280
Speaker 1: the Beatles. I want to hold your hand. If it

1770
01:31:31,320 --> 01:31:34,320
Speaker 1: wasn't for Bob Dylan, Jimmy Hendricks worshiped. I mean, this

1771
01:31:34,560 --> 01:31:37,880
Speaker 1: dude is like a walking Smithsonian Institute, right, So I

1772
01:31:38,000 --> 01:31:40,479
Speaker 1: was like, I gotta read his book. His book is

1773
01:31:40,520 --> 01:31:44,080
Speaker 1: fascinating because it's he writes about his childhood up until

1774
01:31:44,200 --> 01:31:47,160
Speaker 1: nineteen sixty three and six sixty three. He's sort of

1775
01:31:47,240 --> 01:31:50,400
Speaker 1: just like sleeping on couches in Manhattan, but he's starting

1776
01:31:50,439 --> 01:31:53,040
Speaker 1: to read books on people's shelves and he's starting to

1777
01:31:53,120 --> 01:31:56,640
Speaker 1: go into art exhibits, and he's taking the books and

1778
01:31:56,720 --> 01:32:00,040
Speaker 1: the art, and then he's taking his Woody Guthrie of

1779
01:32:00,479 --> 01:32:03,360
Speaker 1: and he's merging it all together, and and the you

1780
01:32:03,479 --> 01:32:06,840
Speaker 1: really get an idea for how creativity happens in his books.

1781
01:32:07,160 --> 01:32:09,120
Speaker 1: And then when sixty three happens he has the big album,

1782
01:32:09,920 --> 01:32:13,680
Speaker 1: the book stops and then it starts again in when

1783
01:32:13,720 --> 01:32:16,040
Speaker 1: he's in a slump and he tries to figure out

1784
01:32:16,160 --> 01:32:18,599
Speaker 1: like he's lost, and it goes and how he found

1785
01:32:18,720 --> 01:32:22,280
Speaker 1: his groove again and his inspiration. So I find that

1786
01:32:22,360 --> 01:32:24,560
Speaker 1: to be so Bob Dylan. None of the book is

1787
01:32:24,600 --> 01:32:28,479
Speaker 1: about his popularity, the big albums he wrote, nothing. It's

1788
01:32:28,520 --> 01:32:33,120
Speaker 1: all about finding the spark, finding the creativity, putting together

1789
01:32:33,240 --> 01:32:37,120
Speaker 1: different things together in a stew and how to do that.

1790
01:32:37,360 --> 01:32:39,720
Speaker 1: And for anybody who writes or does anything creative, it's

1791
01:32:39,760 --> 01:32:42,800
Speaker 1: a It's just a fascinating read. And clearly this guy

1792
01:32:42,960 --> 01:32:46,920
Speaker 1: was ahead of his time and a very interesting figure.

1793
01:32:47,040 --> 01:32:50,720
Speaker 1: So I would recommend that to anybody. Um chronicles, Yeah,

1794
01:32:50,760 --> 01:32:52,400
Speaker 1: and I'm a gen extra. I wasn't. I didn't grow

1795
01:32:52,439 --> 01:32:54,960
Speaker 1: up with Bob Dylan, but I I can't sometimes I

1796
01:32:55,040 --> 01:32:58,280
Speaker 1: can't believe how good his like his albums are when

1797
01:32:58,320 --> 01:33:01,360
Speaker 1: he wrote when he was twenty one two, I'm like

1798
01:33:01,600 --> 01:33:04,600
Speaker 1: his way beyond his years. It's really it's interesting. Is

1799
01:33:05,040 --> 01:33:09,280
Speaker 1: Scorre Stacy did a documentary called um No Direction Home

1800
01:33:09,960 --> 01:33:12,960
Speaker 1: that's also very good. Give us one more books? So

1801
01:33:13,160 --> 01:33:19,200
Speaker 1: chronicles by Bob Dylan. Um, let's see. Uh oh there's another.

1802
01:33:19,520 --> 01:33:21,400
Speaker 1: You want a music one or a different one, doesn't

1803
01:33:21,400 --> 01:33:24,880
Speaker 1: matter whatever you read. Um. I just got this book

1804
01:33:25,080 --> 01:33:27,920
Speaker 1: that Hunter Horsley of bit Wise recommended to me. I

1805
01:33:28,000 --> 01:33:29,400
Speaker 1: got it because I sent it to my dad. I

1806
01:33:29,479 --> 01:33:32,439
Speaker 1: do my dad would love this. It's Winston Churchill, and

1807
01:33:32,560 --> 01:33:35,879
Speaker 1: it's a book of all his takes on different figures.

1808
01:33:36,680 --> 01:33:40,599
Speaker 1: So it's like all his notes and writings on all

1809
01:33:40,680 --> 01:33:44,799
Speaker 1: these different figures in history, f Dr Charlie, Chaplin, Hitler,

1810
01:33:45,600 --> 01:33:48,160
Speaker 1: and I find Churchill kind of fascinating. My dad's really

1811
01:33:48,200 --> 01:33:50,160
Speaker 1: in love with him. So I sent my dad the book.

1812
01:33:50,200 --> 01:33:52,400
Speaker 1: I got the book, and so now I'm reading that.

1813
01:33:53,240 --> 01:33:56,080
Speaker 1: Churchill is also interesting because he wrote what's the name

1814
01:33:56,120 --> 01:34:00,240
Speaker 1: of the book, Winston Great Contemporaries. Oh, what an interest thing.

1815
01:34:01,120 --> 01:34:03,920
Speaker 1: My dad, who's read almost everything about him and by him,

1816
01:34:04,000 --> 01:34:07,439
Speaker 1: never heard of it. If anybody's a fan of Churchill

1817
01:34:07,479 --> 01:34:09,839
Speaker 1: at all, I took its way. This is a five

1818
01:34:10,080 --> 01:34:14,559
Speaker 1: part Winston Churchill reflects on FDR Hitler Kipling Book three

1819
01:34:14,640 --> 01:34:17,800
Speaker 1: of five. How many of these books are there? Um,

1820
01:34:18,160 --> 01:34:19,920
Speaker 1: I'm not sure. I just download the one. There might

1821
01:34:19,960 --> 01:34:21,439
Speaker 1: be three sections, and I think it's all in the

1822
01:34:21,479 --> 01:34:24,839
Speaker 1: one book though, I think it's just in three sections.

1823
01:34:24,880 --> 01:34:29,840
Speaker 1: But um, you know, he definitely he wrote all the time.

1824
01:34:29,920 --> 01:34:32,439
Speaker 1: It seems like, so, yeah, he's got a ton of

1825
01:34:32,520 --> 01:34:35,080
Speaker 1: books out and I'm not. I can't say I'm a

1826
01:34:35,200 --> 01:34:37,080
Speaker 1: huge expert on that air, so I kind of let

1827
01:34:37,120 --> 01:34:40,880
Speaker 1: me see what that cover looks like. Winston Churchill, Yeah,

1828
01:34:40,920 --> 01:34:43,880
Speaker 1: I'm looking at great contemporaries, he says, book three of

1829
01:34:43,960 --> 01:34:45,920
Speaker 1: five and other works. How many stars does it have?

1830
01:34:46,080 --> 01:34:49,120
Speaker 1: Like or how many ratings? Four and a half isn't?

1831
01:34:51,120 --> 01:34:54,559
Speaker 1: And it's actually him not and it's his words that's

1832
01:34:54,640 --> 01:34:57,759
Speaker 1: I found that interesting. So anyway, had tipped Hunter Hunter Horsley,

1833
01:34:57,800 --> 01:35:00,680
Speaker 1: who recommended that to me, And and then when I

1834
01:35:00,760 --> 01:35:02,360
Speaker 1: told my Daddy's like, I've never heard of it, I'm like,

1835
01:35:02,560 --> 01:35:05,840
Speaker 1: that seems weird to me, given how much he loves

1836
01:35:05,880 --> 01:35:09,720
Speaker 1: that guy. Really interesting and and our last two questions

1837
01:35:09,840 --> 01:35:12,040
Speaker 1: that we ask all of our guests, the first is

1838
01:35:12,640 --> 01:35:14,920
Speaker 1: what sort of advice would you give to a college

1839
01:35:14,960 --> 01:35:19,040
Speaker 1: grad who was interested in a career in either investment

1840
01:35:19,080 --> 01:35:24,560
Speaker 1: in finance or journalism or research and analysis. Um, you know,

1841
01:35:24,600 --> 01:35:26,320
Speaker 1: I would. I would get out there and do it,

1842
01:35:26,479 --> 01:35:29,320
Speaker 1: you know, right for the school paper, go in turn somewhere.

1843
01:35:29,400 --> 01:35:32,120
Speaker 1: I i'd tew I you know, I did not get

1844
01:35:32,160 --> 01:35:34,000
Speaker 1: a c f A, although I would recommend that to

1845
01:35:34,120 --> 01:35:35,960
Speaker 1: I if I could go back, I might take at

1846
01:35:36,040 --> 01:35:39,040
Speaker 1: least c f A one, because sometimes sometimes I would

1847
01:35:39,080 --> 01:35:42,240
Speaker 1: be I would find things that were logical and James

1848
01:35:42,280 --> 01:35:43,560
Speaker 1: will be like, oh, yeah, that's in the c f A.

1849
01:35:43,720 --> 01:35:48,519
Speaker 1: I'm like, okay, So I I definitely would recommend though,

1850
01:35:48,600 --> 01:35:50,840
Speaker 1: getting out and doing it and and being as social

1851
01:35:50,920 --> 01:35:55,000
Speaker 1: as possible. I think, you know, uh, being able to

1852
01:35:55,040 --> 01:35:58,559
Speaker 1: work with people, being likable, and also it can help

1853
01:35:58,640 --> 01:36:01,960
Speaker 1: with your longevity because you don't burn bridges. You end

1854
01:36:02,080 --> 01:36:04,439
Speaker 1: up getting into an industry and like, the E t

1855
01:36:04,600 --> 01:36:07,160
Speaker 1: F industry is great. I feel like it's a scene,

1856
01:36:07,760 --> 01:36:11,519
Speaker 1: and I would encourage getting into a scene. Interesting. And

1857
01:36:11,600 --> 01:36:14,040
Speaker 1: our final question, what do you know about the world

1858
01:36:14,160 --> 01:36:17,479
Speaker 1: of E t F s, mutual funds, financial journalism today?

1859
01:36:17,960 --> 01:36:21,519
Speaker 1: You wish you knew twenty five years ago, I guess

1860
01:36:21,560 --> 01:36:23,920
Speaker 1: I would go with compounding. UM. When I was in

1861
01:36:24,080 --> 01:36:25,920
Speaker 1: my twenties, I withdrew a lot of my four one

1862
01:36:26,000 --> 01:36:27,800
Speaker 1: K because I just wanted money to hang out with,

1863
01:36:28,160 --> 01:36:30,840
Speaker 1: like spend life. So I actually took money out of

1864
01:36:30,880 --> 01:36:34,960
Speaker 1: my form kids get idiot, and I just I didn't

1865
01:36:35,000 --> 01:36:38,800
Speaker 1: know that much about it UM and I wish compounding

1866
01:36:38,960 --> 01:36:41,880
Speaker 1: is probably the single most important word in investing in

1867
01:36:41,960 --> 01:36:45,880
Speaker 1: my opinion. Compounding also, I think sorts of it shows

1868
01:36:45,920 --> 01:36:48,760
Speaker 1: you the end, which helps you in the now, and

1869
01:36:48,800 --> 01:36:51,400
Speaker 1: it helps you just relax because it's just like, you know,

1870
01:36:51,520 --> 01:36:53,200
Speaker 1: let let it grow. It's like watching a tree grow.

1871
01:36:53,520 --> 01:36:57,880
Speaker 1: It's not like running or do the action. It helps

1872
01:36:57,880 --> 01:36:59,920
Speaker 1: you take less action. I think compounding is something I

1873
01:37:00,040 --> 01:37:05,040
Speaker 1: would immediately learn about, whether it's compound interest or the investing.

1874
01:37:05,120 --> 01:37:08,559
Speaker 1: I think that that term is really powerful. I mean,

1875
01:37:08,840 --> 01:37:10,960
Speaker 1: that's not a great answer, but I can't see a

1876
01:37:11,000 --> 01:37:13,720
Speaker 1: lot about that. It's it's a pretty good answer. We

1877
01:37:14,000 --> 01:37:17,479
Speaker 1: have been speaking with Eric Balcunas. He is the senior

1878
01:37:17,520 --> 01:37:22,320
Speaker 1: et F analyst at Bloomberg and author of The Bogel Effect,

1879
01:37:22,479 --> 01:37:26,120
Speaker 1: How John Boglan Vanguard turned Wall Street inside out and

1880
01:37:26,360 --> 01:37:31,360
Speaker 1: saved investors trillions. If you enjoy this conversation, well, be

1881
01:37:31,479 --> 01:37:34,639
Speaker 1: sure and check out any of our previous four hundred

1882
01:37:34,760 --> 01:37:38,160
Speaker 1: or so episodes we've done over the past. Uh is

1883
01:37:38,240 --> 01:37:40,599
Speaker 1: it eight years? Wow? That's kind of crazy. You can

1884
01:37:40,680 --> 01:37:44,719
Speaker 1: find that at iTunes, Spotify, wherever you feed your podcast fix.

1885
01:37:45,240 --> 01:37:48,439
Speaker 1: We love your comments, feedback and suggestions right to us

1886
01:37:48,600 --> 01:37:52,920
Speaker 1: at m IB podcast at Bloomberg dot net. Sign up

1887
01:37:53,040 --> 01:37:56,040
Speaker 1: for my daily reading list at Ridlts dot com. Follow

1888
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Speaker 1: me on Twitter at rid Halts. I would be remiss

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Speaker 1: if I did not think the crack team that helps

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Speaker 1: put these conversations together each week. Juan Taurus is my

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Speaker 1: audio engineer. Attica Valbron is my project manager. Sean Russo

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Speaker 1: is my head of research. Paris Wald is my producer.

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Speaker 1: I'm Barry Ritolts. You've been listening to Master's in Business

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Speaker 1: on Bloomberg Radio.