Bogle could certainly have been a multi-billionaire. He could have founded Vanguard as a for-profit company and charged high fees. However, that wouldn't be like Buffett. Berkshire Hathaway doesn't operate on a percentage of the company's value going to Buffett every year.
In fact, Bogle took a similar path to Buffett: an investor-friendly path that meant little salary or fees going to them, but a great value for investors. It seems like the difference between them would be attributed to difference in starting point and differences in returns. Since 1964 (when Buffett took over Berkshire Hathaway) through 2017, Berkshire had an overall gain of 2,404,748%. By contrast, the S&P 500 only hit 15,508%. If Buffett and Bogle both started out with $1,000,000, Buffett would have ended up with $24B while Bogle ended up with $155M.
I don't think Bogle could have been a multibillionaire like Buffett unless he either 1) charged a lot of fees for Vanguard; or 2) actively managed his money to do significantly better than the S&P 500.
Don't get me wrong: Bogle has done amazing things for society by pioneering low-cost index funds and offering investors the investor-owned Vanguard. I just think it's fair to point out that Buffett's billions don't come off the back of fees or salary. The thing that made Buffett richer was the fact that Berkshire Hathaway has hugely outperformed the S&P 500. If Berkshire had gotten the returns of Bogle's S&P 500 index fund, Buffett would be rich (as Bogle was), but not a multibillionaire.
As you point out, Gates and Buffett became wealthy due to their ownership in their respective companies. I don't know how much Bogle "owned" of Vanguard - but I suspect the structure he set up made his ownership no larger than his actual investment in Vanguard mutual funds and ETFs.
Probably not good to compare Bogle to Gates or Buffet. Better to compare him to Larry Fink of Blackrock or Charles Schwab. Blackrock manages slightly more assets - around $6.5tr vs $5 for Vanguard. Blackrock is a $65bn market cap company. Point is, as a founder of a comparably large asset manager, he didnt leave this earth as a billionaire. All the better, you can't take it with you.
I thought this was a great point, and makes the comparisons to Gates and Buffett look really lazy. (The connection is...they are famous wealthy dudes.) For others wondering, Larry Fink has a net worth of about ~$1B versus Bogle's ~$80M. Vanguard is a bit older than Blackrock (1974 vs 1988), but I also think Vanguard would have been less successful, counterfactually, if it had charged higher fees that would have enriched Bogle. The low fees were part of what made it possible. So it's almost certainly true that Bogle left money on the table in order to make the world a better, but he probably left a factor of ~5x rather than 50x or something.
If you are ever confused about what firm should manage your money, remember this posting.
The current Chairman and CEO, Tim Buckley would be close to being a Billionaire right now if he was running any other firm, he does very well, but he makes a fraction of what SVP’s make at other firms.
I'm sorry but your comment didn't clarify this question for me. Do you mean I should invest in Vanguard because the money isn't all going to rich folks at the top, or I should invest in Fidelity because the wealth at the top is indicative is correlated to success for customers?
I noticed awhile back that a lot of my funds were very Apple heavy, and so not as well diversified as I would have hoped (index funds included). They disclose this, mind you, but you have to read what you are buying. Anyways, I moved more money towards international and mid-caps to try and offset risk. Index funds have a way of being frustratingly constrained. It's not a silver bullet is all I'm saying.
Don't get me started on bond funds. Total, total crap the last few years. REITs same way.
The only really decently reliable returns I have gotten were from my own portfolio of stocks (not a fund) and some high-dividend yield funds. But even dividend paying stocks nosedived last quarter (Q4 2018), which I attribute directly to the FEDERAL RESERVE and its fuckery with the funds rate.
Everything is manipulated one way or another, never forget that. It's hard to be a small investor with others moving billions around all the time.
If you're still reading, I ditched a lot of bond funds in 2018 and went towards shorter term individually purchased bonds and even brokered CDs until interest rates settle back down.
Vanguard's bond funds are just kind of trash and don't do what they are purported to do for your portfolio which is try to solve the ever-elusive correlation problem. Many times, I've watched bond funds move in lockstep with equities because the Fed is king. Not a safe haven during a big drop, just smaller losses?
The people on Bogleheads will hate me for saying this stuff. If you're new to investing or naive or don't care, just do a 2-fund portfolio with total stock and total bond and call it a day. There.
RIP John.
This is how capitalism is supposed to work from the ground floor. Toiling away 25 years in a cubicle eschewing social responsibilities like the FIRE subreddit ought to be morally reprehensible - that’s how strongly I feel about it (I’m active in two businesses I’ve co-founded and have enjoyed seeing economic theory from the ground up).
>For more than 20 years, he donated half his annual income to philanthropic causes, particularly those institutions that helped develop his mind and form his character.
Everything I've read about the guy says he was a stand up guy that put a real dent in the world.
I hope his legacy lives on and his mission continues to be carried out.
Index funds are slowly consuming more and more capital. To achieve democratic socialism smoothly, all we have to do is set up state-owned index funds, and let them keep growing until they've accumulated all of the capital.
Voila, full democratic ownership of the means of production!
Basically you are saying the state should just slowly buy stock in every company until it owns every company.
> Basically you are saying the state should just slowly buy stock in every company until it owns every company.
That's right. The goal is full public ownership of the means of production.
Because of short-selling, index funds could own all the market or more and active funds could still exist. For example we could imagine that index funds grow until they're 105% of the market, and active funds own 5% of the market long and 10% of it short. That adds up: 105% + 5% - 10% = 100%. And the active funds would still be doing all the price discovery. Of course the index funds wouldn't have all the assets-under-management, those would be split in the ratio 105:15 (with 10 of that 15 being collateral for the shorts).
In other words: it doesn't matter if index funds own all the shares, active funds can just make side bets with each other.
With the progress AI is making, I predict a future where humans-run firms will mostly go out of business. What will emerge are companies that are great at training models that then act as active investors. These models bet against each other and some emerge as winners.
Ultimately, the models that make the most bank (sorry couldn't resist) will be the ones smart enough to make its decisions based on public data from companies, social media etc.
This is already happening, HFT, Two Sigma Investments, many hedge funds. And they don't just use public data, they work really hard to get as much proprietary information as they can. Just one example: https://www.cnbc.com/id/38722872
[1] https://www.bloomberg.com/opinion/articles/2016-08-24/are-in...
If that’s a strange thought, consider that the Bank Of Japan is a significant owner of equities on the Nikkei.
Disclaimer: Vanguard customer
I'm interested in this question: would the US economy be where it is today without index funds? Or is it the index funds like Vanguard that allowed millions of Americans a cheap, safe way to predictably grow their wealth?
The reason I ask is that throughout American history, its the banking sector that was responsible for financial crises and a loss of wealth for most Americans. Have index funds plugged this hole and allowed the US to grow?
Yeah yeah I know about 2008 etc. but that _was_ caused mostly by active investors.
Yes.
You could out public funds into any investment and end up with all the capital.
The way index mutual funds work is to distribute returns to everyone according to how much capital they have contributed.
The socialist version would be a find that everyone is required to contribute all their capital too. And then each citizen receives an equal share of the returns.
(The company is actually named after Lord Nelson's flagship at the Nile, but who's counting?)
a group of people leading the way in new developments or ideas.
1. https://en.wikipedia.org/wiki/Salvador_Allende#Presidency
2. https://www.investopedia.com/terms/l/lia.asp
> “Jack could have been a multibillionaire on a par with Gates and Buffett,” said William Bernstein, an Oregon investment manager and author of 12 books on finance and economic history. Instead, he turned his company into one owned by its mutual funds, and in turn their investors "that exists to provide its customers the lowest price. He basically chose to forgo an enormous fortune to do something right for millions of people. I don’t know any other story like it in American business history.”