Jack Bogle (born John Clifton Bogle) is the founder of The Vanguard Group, the world’s largest mutual fund manager.
Bogle is renowned for many innovations in the financial services industry including:
- academic research into the under-performance of actively managed funds, compared to index-trackers,
- creation of the first index fund available to individual investors, and
- ensuring that The Vanguard Group remained a mutual company, thereby owned by its customers.
These days it is hard to imagine a life without index-tracking funds and no-load funds; they are ubiquitous. But it wasn’t always like this and one cannot underestimate the importance of Bogle in their creation, and how much longer the world might have waited for them without him.
“Index funds are so popular now that it’s easy to forget how courageous and tenacious Jack Bogle was in starting them. They were called Bogle’s Folly because all they did was replicate the returns of the market. But, of course, that’s a great deal. In the academic world many people saw the wisdom of this — but Jack is the guy who actually made it happen” said Burton Malkiel, an economist at Princeton University and author of the best seller “A Random Walk Down Wall Street.”
Bogle is also a prestigious and prolific author where he describes, in layman’s terms, the justification for index funds. His books should contribute to the core of any investor’s library and their gravitas has attracted former President Bill Clinton, Yale University’s Chief Investment Officer David Swensen, Princeton University Professor Alan Blinder, and former SEC chairman Arthur Levitt to write Forewords. A bibliography of his work can be found at the bottom of this article.
It is for these contributions to the financial services industry, and the increased returns for retail customers, that we profile Jack Bogle here. Arguably, he has done more for individual retirement funds’ performance than any other person.
Bogle’s investment career essentially started when he was accepted by Princeton University to study Economics and Investment, graduating in 1951. His undergraduate thesis, “The Economic Role of the Investment Company,” was one of the first attempts to analyze the mutual fund industry, and is still very relevant today.
After graduating from Princeton, Bogle started work at Wellington Management Company (which managed The Wellington Fund), whose founder, Walter L. Morgan, another Princeton graduate, had read Bogle’s thesis and offered him a position “largely as a result of his thesis.” In his 2013 Journal of Portfolio Management article “Big Money in Boston” Bogle refers to Morgan as his “mentor and great hero.”
At Wellington Bogle rose to become chairman at the age of 38 before being fired for “an extremely unwise merger.” This Fortune article gives his answer when asked about his greatest ever mistake:
As a result of his departure from Wellington, Bogle founded Vanguard in 1974 and, the following year, created the first index mutual fund available to the general public, the Vanguard 500 Index Fund. This fund’s investment approach was based upon the research of Eugene Fama, Burton Malkiel and Paul Samuelson, all leading academics.
Vanguard is a mutually owned company meaning that the company is ultimately owned by the policy holders (the customers); there are no separate shareholders. As a consequence, costs can be kept lower because there is no requirement to extract profits for distribution to the shareholders.
Bogle’s success in building Vanguard into one of the financial services industry’s giants has been recognized widely. For example directorship.com, home of The National Association of Corporate Directors, has said that “the father of index funds and founder of the Vanguard Croup, John C. Bogle created a new way for millions of ordinary people to invest in stocks” (and as a side benefit, “index funds also gave rise to shareholder activism, since some large institutions felt they could no longer show their dissatisfaction by simply selling their shares“) in a document uploaded to the Harvard Law School’s Corporate Governance and Financial Regulation website.
And in the 2016 letter to Berkshire Hathaway shareholders (pdf), published February 25, 2017, on page 24 Warren Buffett writes:
Many people have speculated that Bogle’s wealth, which at USD 80m is not small but is in no way comparable to some of his peers (such as Charles H. Brandes, Mario J. Gabelli and Fayez Sarofim, all billionaires), would have been much greater if he had established The Vanguard Group as a conventional joint-stock company.
But “strategy follows structure,” he says, explaining that with no parent company or private owners to siphon profits, Vanguard can keep costs lower than anyone else.
In 1996, Bogle stepped down as Chairman and CEO of Vanguard. In the same year he had a heart transplant. Having recovered from the surgery, he returned to Vanguard in a Senior Chairman capacity, but Bogle and his successor as CEO, John Brennan, could not work together effectively. In 1999 Bogle left Vanguard to setup Bogle Financial Markets Research Center.
In 1996 Bogle also commenced public speaking. Many of his speeches are recorded on the Vanguard Bogle mini-site.
Recently Bogle has focused attention on how the structural changes in the mutual fund industry have not been accompanied by legal and regulatory changes regarding the necessary fiduciary duties of the industry’s actors. In 2013 he wrote to the SEC at least two times (only two letters have been made public) about how the industry structure has changed since the Government enacted the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
As promised, here is a chronological bibliography of Jack’s work:
- Bogle on Mutual Funds: New Perspectives for the Intelligent Investor (McGraw-Hill, 1993)
- Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor (John Wiley & Sons, 1999)
- John Bogle on Investing: The First 50 Years (McGraw-Hill, 2000)
- Character Counts: The Creation and Building of The Vanguard Group (McGraw-Hill, 2002)
- The Battle for the Soul of Capitalism (Yale University Press, 2005)
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (John Wiley & Sons, 2007)
- Enough : True Measures of Money, Business, and Life (John Wiley & Sons, 2008)
- Common Sense on Mutual Funds: Fully Updated 10th Anniversary Edition (John Wiley & Sons, 2009)
- Don’t Count on it!: Reflections on Investment Illusions, Capitalism, “Mutual” Funds, Indexing, Entrepreneurship, Idealism, and Heroes (John Wiley & Sons, 2010)
- The Clash of the Cultures: Investment vs. Speculation (John Wiley & Sons, 2012)
And this is a bibliography of the most important and/or popular books about Bogle and his approach to investing:
- Slater, Robert. The Vanguard Experiment: John Bogle’s Quest to Transform the Mutual Fund Industry (Irwin Professional Publishing, Inc., 1997)
- Braham, Lewis. The House That Jack Built: how John Bogle and Vanguard reinvented the mutual fund industry (McGraw-Hill, 2011)
- Rostad, Knut A. The Man in the Arena, Vanguard Founder John C. Bogle and His Lifelong Battle to Serve Investors First (John Wiley and Sons, Inc., 2013)