WEBVTT - Eric Balchunas on the Vanguard Effect 0:00:02.000 --> 0:00:06.760 This is mesters in Business with Very Results on Bloomberg 0:00:06.880 --> 0:00:12.239 Radio this week on the podcast Hey guess what I 0:00:12.280 --> 0:00:15.960 have an extra special guest. Uh. Eric Baucunus is someone 0:00:16.000 --> 0:00:19.239 I've known from both the E t F industry and 0:00:19.320 --> 0:00:22.840 Bloomberg for I don't know a decade or two, um, 0:00:22.880 --> 0:00:26.120 and we hang out in a lot of the same circles. Uh. 0:00:26.160 --> 0:00:29.520 There are few people in the world who know as 0:00:29.640 --> 0:00:36.080 much about E t f's indexing vanguard, Jack Bogel. I 0:00:36.080 --> 0:00:37.920 mean I could count him on one hand the number 0:00:37.960 --> 0:00:42.120 of people who have his depth of knowledge in this space. Uh. 0:00:42.159 --> 0:00:46.879 And that's why he's really a fascinating character. Uh. You 0:00:46.920 --> 0:00:49.880 could tell when you listen to this conversation that it's 0:00:49.960 --> 0:00:51.960 two guys who know each other just b s ing 0:00:52.000 --> 0:00:54.680 and schmoozing. But I find those to be some of 0:00:54.680 --> 0:00:59.360 the best conversations because there's no pretense, there's no marketing, 0:00:59.400 --> 0:01:05.080 it's just people talking about things that genuinely interest them. 0:01:05.120 --> 0:01:08.080 And when I basically don't get to half my questions 0:01:08.080 --> 0:01:11.240 because we're just what about this? Tell me about that? Hey, 0:01:11.480 --> 0:01:14.319 isn't this wrong? Or it just leads to all sorts 0:01:14.360 --> 0:01:17.319 of fun and interesting places. I thought this was a 0:01:17.360 --> 0:01:21.000 fascinating conversation, and I think you will also so if 0:01:21.080 --> 0:01:27.160 you are remotely interested in passive investing E t FS indexing, 0:01:27.520 --> 0:01:30.319 or Vanguard and Jack Bogel, you will find this to 0:01:30.360 --> 0:01:34.959 be an absolutely fascinating conversation. With no further ado, my 0:01:35.160 --> 0:01:40.480 interview of Eric Balcunis of Bloomberg Intelligence. He is the 0:01:40.560 --> 0:01:43.800 senior E t F analyst for Bloomberg News. He is 0:01:43.840 --> 0:01:47.040 also co host of E t F i Q on 0:01:47.040 --> 0:01:52.600 Bloomberg Television, and he hosts a podcast called Trillions with 0:01:52.800 --> 0:01:56.640 Joe Weber, editor in chief of Business Week. He is 0:01:56.680 --> 0:02:00.960 the author of several books, most recently The Bogel Effect, 0:02:01.000 --> 0:02:04.840 How John Bogel and Vanguard turned Wall Street inside out 0:02:05.000 --> 0:02:10.399 and saved investors trillions. Eric balcun Is, Welcome to Masters 0:02:10.400 --> 0:02:13.080 in Business. It is a pleasure to be here, Barry always. 0:02:12.919 --> 0:02:14.520 It's like a home game for me. I just walk 0:02:14.639 --> 0:02:16.720 like ten feet here right. I texted you and said, 0:02:16.800 --> 0:02:20.880 come down to five. Time to start. Um. So, so 0:02:21.120 --> 0:02:24.239 let's talk a little bit about the home field advantage 0:02:24.360 --> 0:02:28.160 and your career. You've been reporting on finance pretty much 0:02:28.160 --> 0:02:30.720 your entire career. What what led to an interest in 0:02:30.800 --> 0:02:34.079 money and markets? Um? Well, I was in cooing to Rutgers, 0:02:34.120 --> 0:02:38.320 and I was wrote for the school paper, and I 0:02:38.360 --> 0:02:41.000 decided to major in journalism and communications because I liked it. 0:02:41.080 --> 0:02:44.120 And but I was at the Cook College, which is 0:02:44.120 --> 0:02:46.360 the Egg School, and in order to graduate from Cookie 0:02:46.400 --> 0:02:48.960 had to have at least a minor that was related, 0:02:48.960 --> 0:02:51.320 and I thought. I took an econ class and I 0:02:51.400 --> 0:02:54.280 kind of liked it. So I minded an environmental economics 0:02:54.800 --> 0:02:56.680 that got me through Cook because I was with a 0:02:56.680 --> 0:03:02.120 bunch of biology people. Um. And so I immediately applied 0:03:02.160 --> 0:03:05.720 to Bloomberg, but I got rejected job. Yeah no, no, 0:03:05.760 --> 0:03:07.679 it wasn't I got rejected. I only got in my 0:03:07.720 --> 0:03:11.559 third time. Um. I because obviously I'm like journalism, economics, 0:03:11.560 --> 0:03:15.320 I'm in Rutgers. Bloomberg makes perfect sense, and they were hiring, 0:03:15.400 --> 0:03:19.120 but I just wasn't qualified. Hard pass. Yeah, way did 0:03:19.160 --> 0:03:23.360 you start? I went to the Institutional Investor magazine newsletter division. 0:03:23.520 --> 0:03:26.919 Their their website is a regular in my morning reading list. 0:03:27.160 --> 0:03:30.280 Yeah it's always solid. Yeah, I mean the name turned 0:03:30.320 --> 0:03:32.800 me off comeing out of college. I was like, Institutional 0:03:32.880 --> 0:03:35.440 Investor just sounds so boring, like who would ever read this? 0:03:35.920 --> 0:03:39.440 But the money was pretty Tutions Yeah, institutions, which came 0:03:39.440 --> 0:03:41.760 in handy later in my when I wrote my first book. 0:03:41.800 --> 0:03:45.080 But I covered UM derivatives at first, and then I 0:03:45.120 --> 0:03:46.640 covered mutual fund So I work for a news that 0:03:46.680 --> 0:03:48.920 I called fund Action and did that for a little 0:03:48.920 --> 0:03:51.400 while and then went UM. I met a guy named 0:03:51.440 --> 0:03:53.640 Duff Ferguson at a line Bernston. He was the PR guy, 0:03:54.560 --> 0:03:56.760 and I just thought, man, I want to go behind 0:03:56.800 --> 0:03:58.680 the keyhole. And so I went and took a job 0:03:58.720 --> 0:04:00.960 in PR because I kind of like this guy's whole deal. 0:04:01.560 --> 0:04:03.760 And so I got a job in PR at um 0:04:03.880 --> 0:04:07.560 a crisis communication firm named Abernathew McGregor, and got to 0:04:07.640 --> 0:04:11.200 work with several clients. Uh, and you know, took them 0:04:11.200 --> 0:04:13.280 to Bloomberg, took them to Reuters, took them to there, 0:04:13.880 --> 0:04:15.680 and Uh, I came to Bloomberg. I was like, man, 0:04:15.680 --> 0:04:17.800 this place is different, right, So I always had an 0:04:17.800 --> 0:04:21.320 eye on Bloomberg for my early career and then UM 0:04:21.360 --> 0:04:25.279 in nine ish No No Nine two, early two thousand, 0:04:25.440 --> 0:04:27.680 I got headhunted. That's how good the economy was. You 0:04:27.720 --> 0:04:29.760 could be twenty five and you'd get headhunted for like 0:04:29.760 --> 0:04:32.599 all these jobs. And she comes and she goes I've 0:04:32.839 --> 0:04:36.400 got two jobs that are really good. One is that 0:04:36.560 --> 0:04:40.200 bear Sterns a lot of money doing PR, and the 0:04:40.240 --> 0:04:42.800 other one is at Bloomberg. And I was like, that's 0:04:42.839 --> 0:04:45.160 a easy choice. So I basically put all my chips 0:04:45.160 --> 0:04:48.200 on Bloomberg a plum and interviewed here to have a 0:04:48.279 --> 0:04:50.440 job in PR. Went through many interviews. It took a while, 0:04:50.520 --> 0:04:55.440 but yeah, really, yeah, so I started here relations So 0:04:55.440 --> 0:04:59.880 so first, the first question is if you weren't reject 0:05:00.279 --> 0:05:03.240 by Bloomberg right out of the gate when you were 0:05:03.320 --> 0:05:06.440 right out of school, might you have ended up at 0:05:06.440 --> 0:05:09.120 bear Stearns? Was was Bloomberg the one? It's a great 0:05:09.160 --> 0:05:12.640 point we chase the things that received from us, to 0:05:12.720 --> 0:05:15.839 quote the Tao of Steve. But having had like I 0:05:15.880 --> 0:05:18.839 had like three jobs, maybe four, I worked. I worked 0:05:18.880 --> 0:05:21.159 at a third party marketer for about six months, where 0:05:21.160 --> 0:05:23.000 you had to call pensions and try to pitch them 0:05:23.000 --> 0:05:27.480 on hedge funds. It was really tough. All those jobs. 0:05:27.520 --> 0:05:30.760 When I finally got to Bloomberg always helped me stay 0:05:30.760 --> 0:05:33.039 here because I know what is out there, at least 0:05:33.120 --> 0:05:35.560 to a degree. If this is my first job, I 0:05:35.600 --> 0:05:39.200 may have had such a I don't know, curiosity. I 0:05:39.200 --> 0:05:42.560 probably would have left. So maybe it's a blessing in disguise. 0:05:42.680 --> 0:05:45.600 So you were covering derivatives in the nineties, but not 0:05:45.760 --> 0:05:47.960 the two thousands leading up to the O eight or 0:05:48.040 --> 0:05:50.279 nine crisis. No, I only covered them for a little while, 0:05:50.279 --> 0:05:55.160 so I'm hardly an expert. You missed the fun that's right, 0:05:55.200 --> 0:05:57.320 That's right, I covered them. When you're like that in 0:05:57.320 --> 0:06:00.600 the nineties, who needs the idea? Was you just try 0:06:00.640 --> 0:06:02.880 to call these traders and just get them to give 0:06:02.960 --> 0:06:05.080 you information on why what went up and down in 0:06:05.120 --> 0:06:08.600 the futures market. It was a really, I mean honestly, 0:06:08.760 --> 0:06:13.680 very unglamorous, manual labor type job. Journalists need. Journalists need 0:06:13.760 --> 0:06:16.360 to get a reason for everything. It can't you see 0:06:16.360 --> 0:06:18.520 the market went up for the future? What happened? And 0:06:18.680 --> 0:06:20.880 you need someone from that where when? Why? Ye? Just 0:06:20.960 --> 0:06:26.119 what makes financial news coverage either really good or really bad? 0:06:26.240 --> 0:06:30.440 Because some people must impose a narrative when it's sometimes 0:06:30.440 --> 0:06:33.400 it's just random. That was my first thought two months 0:06:33.400 --> 0:06:34.880 in my first job. I was like, I don't know 0:06:34.920 --> 0:06:37.360 if there there's a reason for this. Maybe it went 0:06:37.440 --> 0:06:40.560 up like I don't know half a point today, maybe 0:06:40.560 --> 0:06:42.680 they just maybe there is no reason and there's no 0:06:42.760 --> 0:06:44.520 clear reason, it's okay. Can we just say that? And 0:06:45.240 --> 0:06:48.040 I know they hate that. You cannot say we don't 0:06:48.040 --> 0:06:50.960 know or who knows? We I think we've talked about this. 0:06:51.080 --> 0:06:53.080 My favorite thing in the world to do on TV 0:06:53.279 --> 0:06:56.200 is they ask you a question, say I have no idea, 0:06:56.680 --> 0:07:00.200 Well what what about? I don't know? Nobody does, but 0:07:00.279 --> 0:07:02.520 I'm telling you the truth. I don't know. The rest 0:07:02.600 --> 0:07:04.400 of them are lying to you when they answer, and 0:07:04.560 --> 0:07:06.960 people hate that. I agree, I don't know is a 0:07:07.160 --> 0:07:11.960 underrated phrase and mindset, whether it's religion, politics, sometimes you 0:07:12.000 --> 0:07:13.960 don't know, and I think I don't know is a 0:07:14.080 --> 0:07:17.480 very most Yeah, and most people can relate because a 0:07:17.480 --> 0:07:20.320 few of us are experts in anything or know anything absolutely. 0:07:20.360 --> 0:07:22.160 And so I'm a big fan of I don't know 0:07:22.240 --> 0:07:24.800 in general. But it doesn't really play well in the media. 0:07:25.200 --> 0:07:28.600 All right, So let's get serious. Now, you're the go 0:07:28.800 --> 0:07:32.120 to reporter for E T F s and passive indexes. Well, 0:07:32.560 --> 0:07:34.800 can I stop you? So some people do think of 0:07:34.840 --> 0:07:36.640 me as a reporter, and I started my career that way, 0:07:36.640 --> 0:07:38.800 but I'm in research. So what I do is I 0:07:38.840 --> 0:07:42.120 write notes that aren't I don't report on something. I'm 0:07:42.120 --> 0:07:44.880 more get our team gives takes on things. So your 0:07:44.960 --> 0:07:49.760 title is technically senior E t F Analysis. But when 0:07:49.920 --> 0:07:53.480 I think of everybody in the media who covers E 0:07:53.640 --> 0:07:59.600 t F, Passive Investing, Vanguard, etcetera, black Rock, etcetera, you're 0:07:59.720 --> 0:08:01.840 the first name that pops into. Oh you have a 0:08:01.920 --> 0:08:04.600 question of you want to speak to a journalist in 0:08:04.640 --> 0:08:08.200 the E T S space? Get ahold of Eric so 0:08:08.200 --> 0:08:11.120 so so well, I would say, you know some of 0:08:11.120 --> 0:08:14.640 these guys who work for ESPN who are like experts 0:08:14.640 --> 0:08:17.240 in the n B A or I kind of model 0:08:17.320 --> 0:08:21.480 myself and well, or they just get the latest news 0:08:21.560 --> 0:08:25.560 like woes for the NBA or Adam Schefter I believe 0:08:25.560 --> 0:08:29.120 that's his name, uh for NFL. I'm I'm that for 0:08:29.200 --> 0:08:31.160 E T F S And so there is an element 0:08:31.240 --> 0:08:33.680 of trying to get on top of the latest things. 0:08:34.120 --> 0:08:37.960 But more so I just see research is having to 0:08:38.000 --> 0:08:39.920 get out there more. I think if you're in research 0:08:39.960 --> 0:08:41.800 you sort of need to put on a pundit hat 0:08:41.840 --> 0:08:44.760 sometimes and have a reaction on Twitter quickly, because if 0:08:44.760 --> 0:08:46.600 you wait and wait, then you're late to it. And 0:08:46.640 --> 0:08:48.719 I think it's good to just be um at a 0:08:48.760 --> 0:08:51.880 little punditry. So I would understand why you would think that. 0:08:51.920 --> 0:08:53.760 Plus I was a journalist, so I have maybe some 0:08:54.000 --> 0:08:56.320 vibes that are so let's call you the go to guy, 0:08:56.559 --> 0:08:59.880 should call you the go to reporter. Um, how do 0:09:00.200 --> 0:09:03.560 the expertise in E T F and passive investing come about? 0:09:04.160 --> 0:09:07.400 Remember the fund action newsletter I wrote for so when 0:09:07.440 --> 0:09:10.120 I was at Bloomberg PR around nine eleven, I had 0:09:10.120 --> 0:09:12.640 a near miss and I moved back to South Jersey. 0:09:12.960 --> 0:09:18.520 Uh defined near miss? Uh? Well, Um, I was supposed 0:09:18.520 --> 0:09:22.240 to be in the top windows of the world that day. Really, Yeah, 0:09:22.720 --> 0:09:26.200 there was a way. There are thousands I know stories 0:09:26.240 --> 0:09:28.040 I've had. I know and I don't I'm not looking. 0:09:28.360 --> 0:09:31.520 I sometimes people over indulge themselves in these stories. And um, 0:09:31.600 --> 0:09:34.920 but fate did intervene. Um. But there is a badge 0:09:34.960 --> 0:09:39.760 there was a conference up there Waters Technology, Um, with 0:09:39.800 --> 0:09:41.680 your name on it. There's a badge with my name 0:09:41.679 --> 0:09:43.760 on it that was at the top. Isn't that crazy? 0:09:43.800 --> 0:09:47.200 What did the event start? Oh? It started it like 0:09:47.480 --> 0:09:50.280 seven in the morning. Have been Yeah, there were three 0:09:50.320 --> 0:09:53.600 people from this company who were there. Yeah, sad And 0:09:53.720 --> 0:09:55.840 one of them is actually my friend from South Jersey 0:09:55.880 --> 0:09:58.040 knows him. And they still have a U I think 0:09:58.040 --> 0:10:00.520 a walk for him every year. It's you know, it 0:10:00.960 --> 0:10:03.680 really hit home. But I also was looking to take 0:10:03.720 --> 0:10:06.920 a step, like I was looking to change gears in life. Anyway, 0:10:07.320 --> 0:10:09.160 I was about seven, So I moved back to South 0:10:09.240 --> 0:10:11.840 Jersey and I transferred to the Princeton office of Bloomberg. 0:10:12.559 --> 0:10:15.000 And when you do that, um, I still think I'm 0:10:15.000 --> 0:10:16.760 the first person ever in the history of this company 0:10:16.760 --> 0:10:20.000 to go from pr to data because that's all they 0:10:20.000 --> 0:10:22.840 do in Princeton is data and engineering. But I was like, well, 0:10:23.040 --> 0:10:24.400 I don't want to commute to New York every day 0:10:24.400 --> 0:10:26.480 from South Jerseys all take a job here. So they 0:10:26.640 --> 0:10:28.120 looked at my background and sad, why don't you go 0:10:28.160 --> 0:10:31.320 work for funds data? So I got to work where 0:10:31.360 --> 0:10:33.760 they make the terminal. It's like the Keebler elves. So 0:10:34.080 --> 0:10:36.439 I've I've seen how the terminal is made, all where 0:10:36.480 --> 0:10:39.079 all the data comes from. And they I basically had 0:10:39.120 --> 0:10:42.640 to work on getting fund information from the prospectuses is 0:10:42.760 --> 0:10:46.600 before technology was really that great, put them into fields 0:10:46.679 --> 0:10:50.000 and then was annual press. Yes, and we we automated 0:10:50.040 --> 0:10:52.079 it as we went. We're always looking to automate and 0:10:52.120 --> 0:10:53.600 so when you pull up a Bloomberg and you type 0:10:53.600 --> 0:10:55.360 in like the Fidelity Magellan Fund and then you type 0:10:55.440 --> 0:10:58.640 d E S. All that information there is really what 0:10:58.679 --> 0:11:01.080 we we did. And so I was doing that in 0:11:01.200 --> 0:11:04.240 two thousand, two thousand, two thousand, two, three four, And 0:11:04.240 --> 0:11:06.400 in two thousand six I got a hand at et 0:11:06.559 --> 0:11:08.920 F there like you work on et F now, and 0:11:08.920 --> 0:11:10.280 I was like, I had heard of him, but I, 0:11:10.360 --> 0:11:12.679 you know, it was still and let me just jump in. 0:11:12.840 --> 0:11:15.559 So the Spiders had been around at that point in time, 0:11:15.600 --> 0:11:18.480 the SMP five Spiders by State Street, they had been 0:11:18.520 --> 0:11:23.280 around a couple of decades, and other companies had moved 0:11:23.320 --> 0:11:26.560 into the space. And I just was having this conversation 0:11:26.559 --> 0:11:28.480 with some of the other day. They said, who you 0:11:28.520 --> 0:11:31.960 who you're interviewing? Oh, Eric Beljunas, oh uh. And then 0:11:32.120 --> 0:11:36.559 the question they asked was was Bloomberg late to E 0:11:36.679 --> 0:11:39.079 T F. I'm like, I thought they were their pre 0:11:39.200 --> 0:11:42.640 financial crisis. They were fairly. They weren't the first one, 0:11:42.640 --> 0:11:45.480 but they certainly didn't lag. That's a great question. So 0:11:46.280 --> 0:11:50.280 Bloomberg covers everything, and if a ticker is on the exchange, 0:11:50.280 --> 0:11:52.319 it's on the terminal. So we had E T S 0:11:52.360 --> 0:11:55.360 from day one. But did we care about them. Did 0:11:55.360 --> 0:11:57.400 we put a lot of resources into them? Not really. 0:11:57.440 --> 0:11:59.839 They were still small back then, and I think that's 0:12:00.120 --> 0:12:02.280 maybe part of my legacy. If there is one, here 0:12:02.360 --> 0:12:04.960 is too. I was in two thousand and six seven. 0:12:05.240 --> 0:12:06.800 I was like, oh my god, I was like kicking 0:12:06.800 --> 0:12:08.319 the tires on et F and I'm like, these things 0:12:08.360 --> 0:12:10.280 are going to take over. They're too good, that to 0:12:10.440 --> 0:12:12.960 value is too strong. So I just was like became 0:12:13.080 --> 0:12:15.360 I'm like dove head first into E t F s 0:12:15.520 --> 0:12:18.240 and I went to Index Universe conferences, started listening to 0:12:18.280 --> 0:12:20.920 their podcast with your friend Dave Nadi Matt Hogan, and 0:12:20.960 --> 0:12:23.320 I looked at some of the stuff they how they talked, 0:12:23.440 --> 0:12:26.079 the data they looked at, and it was very inspirational. 0:12:26.120 --> 0:12:28.920 I said, we have to cover things like index weighting methodology, 0:12:29.160 --> 0:12:31.719 the criteria, the rebounding. There's all these A t S 0:12:31.679 --> 0:12:33.960 specific fields we have to get on. So part of 0:12:34.000 --> 0:12:36.280 what I did was to make the d S page 0:12:36.720 --> 0:12:38.760 one for E t S that had all of fields 0:12:38.760 --> 0:12:41.200 that were prevalent for E t F Because the time 0:12:41.200 --> 0:12:43.400 they're putting ETFs into mutual funds and there you were 0:12:43.440 --> 0:12:46.480 a driver. You yeah, you helped separate it. And that's 0:12:46.480 --> 0:12:48.360 why people think of you as the e t F guy. 0:12:48.440 --> 0:12:52.600 By the way, the folks you mentioned I group you 0:12:52.720 --> 0:12:57.079 in with them, because when I befriended folks like David 0:12:57.160 --> 0:13:00.240 not Eig, I had no idea that this was the 0:13:00.280 --> 0:13:03.920 e t F MAFI and these were the people running, 0:13:04.840 --> 0:13:09.679 you know, really driving the mind share and the perception 0:13:09.720 --> 0:13:12.640 of e t f s, both in the industry and 0:13:12.679 --> 0:13:15.480 amongst the investment community. And I'm like, oh, what do 0:13:15.480 --> 0:13:17.520 you guys do? Kind of we're hanging out and having 0:13:17.559 --> 0:13:19.839 some fun, and it's like, we've messed around with the 0:13:19.960 --> 0:13:21.720 t F so that we own e t F so 0:13:22.040 --> 0:13:24.440 we can hang with you not realizing oh no, no, 0:13:24.440 --> 0:13:26.920 you don't understand who these got, Jim, and go down 0:13:26.960 --> 0:13:31.000 the list of people. Um, these are the folks that 0:13:31.160 --> 0:13:34.760 really drove the entire expansion of the E t F 0:13:34.840 --> 0:13:38.760 industry quietly in the nineties, but as you mentioned in 0:13:38.800 --> 0:13:41.920 the two thousands, it was just starting to ramp up. 0:13:41.960 --> 0:13:48.160 So how did you drive this company into putting a 0:13:48.280 --> 0:13:51.000 greater emphasis on e t f s and treating them 0:13:51.040 --> 0:13:55.640 as distinct from mutual funds. Yeah. I tried all kinds 0:13:55.640 --> 0:13:58.040 of ways, which is sort of I could relate to 0:13:58.040 --> 0:14:00.199 Bogel trying to sell index funds in this seven these 0:14:00.200 --> 0:14:02.559 and eighties when no one was really interested. UM. I 0:14:02.600 --> 0:14:04.400 think everybody has these plates in their life where they're 0:14:04.440 --> 0:14:06.560 trying to tell people about something and it just takes 0:14:06.559 --> 0:14:08.600 a long time to break through. So I would get 0:14:08.600 --> 0:14:11.000 I would I would basically use my communication skills. I 0:14:11.000 --> 0:14:13.720 would talk to people internally. I would go to sales meetings. 0:14:13.880 --> 0:14:16.000 I would present the chart I really like to show 0:14:16.120 --> 0:14:18.200 was people think of E t f s at the 0:14:18.240 --> 0:14:20.800 time of having say like two percent market share of 0:14:20.800 --> 0:14:23.600 all funds. But I'm like, but they make up of 0:14:23.600 --> 0:14:26.360 all equity trading. So I would show them the volume 0:14:26.360 --> 0:14:28.520 and be like, and we're a service that does a 0:14:28.560 --> 0:14:32.320 lot with trading. We should have of the equity programmers. 0:14:32.680 --> 0:14:36.240 If you think about it. That people would nod their heads. 0:14:36.240 --> 0:14:39.480 But I would never get the aguay programmers. But over 0:14:39.560 --> 0:14:42.240 over time we made some headway. We started doing events, 0:14:42.240 --> 0:14:45.280 and honestly, I I just really was like a one 0:14:45.280 --> 0:14:47.560 man army for a little while. But then the assets 0:14:47.560 --> 0:14:50.400 started to come in. UM, and then someone like at 0:14:50.400 --> 0:14:52.720 a higher level would be told by somebody E t 0:14:52.840 --> 0:14:54.640 f s are big and that would help a little 0:14:54.880 --> 0:14:57.200 and Ultimately it was like a wave that just finally 0:14:57.240 --> 0:14:59.400 broke and now we have a lot of resources into 0:14:59.400 --> 0:15:02.120 et F s. But I also think that Bloomberg and 0:15:02.160 --> 0:15:04.360 what I would tell people back in the days, we 0:15:04.440 --> 0:15:05.800 might have been a little late to sort of E 0:15:05.920 --> 0:15:08.040 t F I S or d S pages and give 0:15:08.040 --> 0:15:10.360 you some functions. But it was always on the terminal. 0:15:10.560 --> 0:15:13.400 But once you do that, that's just the frost thing 0:15:13.440 --> 0:15:15.120 on the cake. You click on an e t F, 0:15:15.240 --> 0:15:16.880 then you gotta look at the holdings, and then you 0:15:17.000 --> 0:15:19.080 want to analyze one stock you click on that you 0:15:19.120 --> 0:15:21.840 could just keep clicking on a terminal other services you had, 0:15:21.880 --> 0:15:24.520 your clicking had to stop somewhere. So I'm like all 0:15:24.600 --> 0:15:26.160 the stuff they did here in the eighties and nineties 0:15:26.160 --> 0:15:28.080 to connect to the exchanges, to get all the stocks 0:15:28.080 --> 0:15:30.840 and the bonds. We when the E t F came out, 0:15:30.840 --> 0:15:32.240 all we had to do is put some like you know, 0:15:32.280 --> 0:15:35.480 sort of frosting on the cake. Now your analysis could 0:15:35.520 --> 0:15:38.520 go anywhere, and so the terminal and the infrastructure there 0:15:39.000 --> 0:15:42.360 was really a huge tail wind for my efforts. So 0:15:42.360 --> 0:15:44.160 so let me ask you a question that will tee 0:15:44.240 --> 0:15:48.880 up the rest of our conversation. Um, you started in 0:15:48.920 --> 0:15:50.840 the E T F space in the mid two thousand's, 0:15:50.880 --> 0:15:56.320 and you know, following the financial crisis, they exploded. Imagine, 0:15:57.480 --> 0:16:00.480 you know, just banging away at this for forty years 0:16:01.240 --> 0:16:06.480 with some limited success, but mostly being looked at as 0:16:06.680 --> 0:16:11.640 that Jack Bogel guy in Pennsylvania. What is this stuff? 0:16:11.760 --> 0:16:13.800 He's well, he's just hitting his head against the wall. 0:16:13.880 --> 0:16:16.640 That is just going nowhere? Could you could you picture 0:16:16.800 --> 0:16:21.560 decades of this with just moderate at best acceptance to 0:16:21.640 --> 0:16:24.800 the whole idea? Yeah, I mean this is part of 0:16:24.800 --> 0:16:27.800 the story. I couldn't believe the numbers. Here's to two 0:16:27.880 --> 0:16:31.040 examples of how long it took took Vanguard twenty five 0:16:31.120 --> 0:16:35.720 years to get ten percent market share and funds. Nent 0:16:35.760 --> 0:16:38.480 of Vanguard's assets came after Jack Bogel step down to CEO. 0:16:39.840 --> 0:16:44.000 That's even it's amazing, right, So he built a foundation 0:16:44.840 --> 0:16:48.160 largely an oblivion, right, but once it got built and 0:16:48.200 --> 0:16:50.720 then it became the gradually then suddenly thing. But he 0:16:50.800 --> 0:16:53.600 toiled around a long time, although he was a very loud, 0:16:53.680 --> 0:16:57.720 prominent voice. But the assets really weren't there until I 0:16:57.720 --> 0:17:00.200 would say the financial crisis two thousands when they really 0:17:00.240 --> 0:17:02.160 kicked in. But up until then they had less than 0:17:02.200 --> 0:17:05.320 a trillion, I believe, and uh, you know, they were 0:17:05.359 --> 0:17:07.280 always out there. I remember when I covered for Fund 0:17:07.280 --> 0:17:09.159 Action in the in the nineties and late nineties, I 0:17:09.160 --> 0:17:11.880 would cover all the fund companies. I looked at Vanguard 0:17:11.960 --> 0:17:13.520 is maybe the fourth or fifth company. I was like, 0:17:13.560 --> 0:17:16.520 Fidelity got a cover, Fidelity t row like Mason, Vanguard 0:17:16.560 --> 0:17:18.919 was like fourth or fifth. Now when I think of 0:17:18.920 --> 0:17:21.440 the universe, it's like Vanguard black Rock and then you 0:17:21.440 --> 0:17:24.440 can need binoculars to see somebody else that. That's amazing 0:17:24.440 --> 0:17:28.280 and I appreciate the Hamingweight reference. That's always uh, that's 0:17:28.320 --> 0:17:32.840 always really interesting. You wrote this very insightful and what 0:17:32.960 --> 0:17:39.760 turned out to be influential column in Cold the Vanguard Effects. 0:17:39.960 --> 0:17:43.639 Tell us what is the Vanguard effect? Yeah, so the 0:17:43.720 --> 0:17:47.040 Vanguard effect is, you know, Vanguard comes out there a 0:17:47.119 --> 0:17:50.800 mutually owned company, right, the investors, the funds on the company, 0:17:50.840 --> 0:17:53.320 the investors on the funds. That is really the heart 0:17:53.320 --> 0:17:55.600 of the matter here. Very different, more akin to an 0:17:55.640 --> 0:18:00.200 insurance company than a typical COO or a nonprofit. It's 0:18:00.200 --> 0:18:02.600 not they're not exactly those things, but it's something like that. 0:18:03.160 --> 0:18:05.800 It's unique and this is part of the story. I 0:18:05.840 --> 0:18:08.760 was so fascinated with was why would someone set up 0:18:08.760 --> 0:18:11.119 a company where they deliberately turn over all the future 0:18:11.119 --> 0:18:13.920 profits to the to the people. It just it makes 0:18:14.000 --> 0:18:18.040 no sense. And so it's Marxists. It's crazy. And I 0:18:18.080 --> 0:18:20.400 asked everybody intrew fifty people for this book. I asked 0:18:20.440 --> 0:18:23.159 them all that question. How come nobody has copied the 0:18:23.240 --> 0:18:25.600 Vanguard structure? And the answer was all the same. Well, 0:18:26.400 --> 0:18:29.120 there's no incentive to no one. And as Jason Swike said, 0:18:29.119 --> 0:18:30.760 no one goes to Wall Street to drive a Volvo. 0:18:31.320 --> 0:18:34.879 And so can I tell you that is the most 0:18:34.960 --> 0:18:39.479 one percent thing I've ever heard from you, because in 0:18:39.880 --> 0:18:44.879 normal middle class households of Volvo is considered a higher 0:18:44.960 --> 0:18:47.800 end called sure, but well I guess. But it's also 0:18:47.960 --> 0:18:52.240 very accurate. But it's also Bogel worked hard. If you 0:18:52.320 --> 0:18:53.919 are going to go to Wall Street and you were 0:18:53.920 --> 0:18:55.920 going to put in those hours, I think most people 0:18:55.960 --> 0:18:58.000 want a big payoff, So I'm really gonna put this 0:18:58.080 --> 0:18:59.920 much of my sand intensity. It's and they got that 0:19:00.440 --> 0:19:02.680 on the belly thing. It's just the way the story goes. 0:19:02.720 --> 0:19:04.280 On Wall Street. You make a ton of money, usually 0:19:04.320 --> 0:19:07.800 there's some fall, you know, where maybe you get into 0:19:07.800 --> 0:19:09.560 fight with people like the Bill growth story I thought 0:19:09.640 --> 0:19:12.159 was probably more traditional Wall Street story, the rise in 0:19:12.200 --> 0:19:16.439 the fall. Right. Um, So it's unusual, though, to have 0:19:16.560 --> 0:19:19.800 that much work ethic, that much drive and say, yeah, 0:19:19.920 --> 0:19:22.400 I want all the investors to have the money. I mean, 0:19:22.400 --> 0:19:23.960 they got paid well, but he was never going to 0:19:24.040 --> 0:19:27.280 get Jeff Bezos rich or you know, the Johnson family 0:19:27.359 --> 0:19:31.240 rich if he turned over the profits. That decision was 0:19:31.400 --> 0:19:34.840 the biggest, I think the single biggest decision in the 0:19:35.000 --> 0:19:38.200 in the last fifty years. Indexing is just the lucky 0:19:38.240 --> 0:19:42.520 byproduct of that decision. If indexing was expensive, it wouldn't 0:19:42.520 --> 0:19:45.880 really catch hold. And I think it was Vanguard's mutual 0:19:45.920 --> 0:19:49.119 ownership structure that is the key ingredient, as well as 0:19:49.160 --> 0:19:52.879 Bogel's unique structure. So most of my book is exploring 0:19:52.960 --> 0:19:55.800 those two things. I think those two things were created 0:19:55.840 --> 0:19:58.639 the explosion, and then when they were looking for something 0:19:58.680 --> 0:20:00.880 to apply this to, indexing was out there and they said, 0:20:00.960 --> 0:20:03.919 let's do that, and that I think in a weird way, 0:20:03.960 --> 0:20:07.360 I think indexing got lucky that Vanguard and Vogel existence. 0:20:07.560 --> 0:20:10.199 So so let me push back a little bit on that. 0:20:11.000 --> 0:20:14.760 If Vanguard had this mute see, I think they're they're 0:20:14.920 --> 0:20:20.000 very complementary the mutual ownership structure. Of course, handing glove 0:20:20.200 --> 0:20:24.600 because hypothetically, in the alternative universe, Vanguard never gets into 0:20:24.640 --> 0:20:28.600 passive and indexing and instead just does low cost active, 0:20:28.760 --> 0:20:31.239 which would destroy though they'd get all the money, I 0:20:31.320 --> 0:20:34.880