Latest / Masters in Business / Robin Wigglesworth on the Creation of the Index Fund (Podcast)

Transcript

Robin Wigglesworth on the Creation of the Index Fund (Podcast) · Masters in Business

• 0:00
  Speaker 1: M. This is Mesters in Business with very Renaults on
• 0:06
  Speaker 1: Bluebird Radio this weekend. On the podcast, I have a
• 0:09
  Speaker 1: special guest. His name is Robert Boglesworth, and he has
• 0:13
  Speaker 1: a brand new book out called Trillions, all about the
• 0:17
  Speaker 1: rise of passive investing and indexing. I thought I knew
• 0:20
  Speaker 1: a lot about this space, having covered Vanguard, Black Rocks,
• 0:25
  Speaker 1: State Street, having interviewed basically all of the CEOs of Vanguard,
• 0:30
  Speaker 1: people from Black Rock, Jim Ross from State Street, Jack Bogel, Uh,
• 0:35
  Speaker 1: all the d f A folks. I mean, I I
• 0:37
  Speaker 1: feel like I really know this space, and I learned
• 0:40
  Speaker 1: a ton of new stuff from the book. It's deeply researched.
• 0:45
  Speaker 1: He spent a lot of time doing a deep dive
• 0:48
  Speaker 1: into the area. I was kind of surprised by a
• 0:51
  Speaker 1: number of things. And if you're remotely interested in the
• 0:55
  Speaker 1: rise of passive and indexing and all the academic background
• 0:59
  Speaker 1: and how that translated in the real world into the
• 1:03
  Speaker 1: practice of of investing, well, I think you're gonna like
• 1:07
  Speaker 1: this book, and you're gonna like this conversation with no
• 1:10
  Speaker 1: further ado. My interview with the f t S Robin Wigglesworth,
• 1:17
  Speaker 1: This is Mesters in Business with very renaults on Bloomberg Radio.
• 1:23
  Speaker 1: My special guest this week is Robin Wigglesworth. He is
• 1:27
  Speaker 1: the Financial Times Global Finance correspondent residing in Oslo, Norway.
• 1:33
  Speaker 1: His focus is the biggest trends reshaping markets and investing,
• 1:37
  Speaker 1: including technological disruption and quantitative investing. But more importantly, he
• 1:43
  Speaker 1: is the author of a fascinating new book, Trillions, How
• 1:47
  Speaker 1: a band of Wall Street renegades invented the index funds
• 1:51
  Speaker 1: and changed finance Forever. Robin Wigglesworth, Welcome to Bloomberg. Thanks by,
• 1:58
  Speaker 1: it's so happy to be here. I'm happy to have you.
• 2:01
  Speaker 1: Let's let's start with a little bit of background about
• 2:03
  Speaker 1: you and your career. How does one go from the
• 2:07
  Speaker 1: London School of Economics to the United Arab Emirates. Tell
• 2:11
  Speaker 1: us about how that happened and how that led to
• 2:14
  Speaker 1: a career in journalism. It's basically a happenstance. Um. I
• 2:20
  Speaker 1: thought I always wanted to be a physicist, but realized
• 2:23
  Speaker 1: eventually that I, you know, I was good at numbers,
• 2:26
  Speaker 1: but not good enough to be anything other than the
• 2:27
  Speaker 1: mediocre physicists. And journalism sounded interesting, and I studied journalism,
• 2:33
  Speaker 1: but I didn't actually like that that much. I did
• 2:35
  Speaker 1: a master's that the LC and international relations Political Islam.
• 2:40
  Speaker 1: You know, it was very much the topic of the day.
• 2:43
  Speaker 1: And I was working as a subject at The Guardian,
• 2:46
  Speaker 1: just doing online putting pictures and captions and things like that.
• 2:49
  Speaker 1: And I saw a job for a financial journalist in
• 2:53
  Speaker 1: Dubai and I thought, well, you know, I know nothing
• 2:56
  Speaker 1: about finance whatsoever, but you know, to bio sounds kind
• 3:00
  Speaker 1: of interesting. I've studied the Middle East. This could be cool.
• 3:03
  Speaker 1: It's either that or do my my service in the
• 3:06
  Speaker 1: Norwegian Army. We start conscription over here. So yeah, I
• 3:10
  Speaker 1: grabbed my bags and jetted off to Dubai to cover
• 3:12
  Speaker 1: Islamic finance. Quite interesting. I totally relate to being interested
• 3:16
  Speaker 1: in physics but only being a mediocre um mathematicians. So
• 3:21
  Speaker 1: they're they're when's that. So you're in Dubai, what was
• 3:25
  Speaker 1: your first big story? A day after a landed, I
• 3:29
  Speaker 1: interviewed the local sheiks about Islamic reinsurance, which is as
• 3:35
  Speaker 1: esoteric as it sounds. So Islamic insurance is actually called takaffle,
• 3:40
  Speaker 1: and Islamic reinsurance is called a retakuffle, and it's actually
• 3:44
  Speaker 1: got a quite a cool, interesting twist to its fundamental
• 3:47
  Speaker 1: Islamic finances, all about risk sharing that he's not supposed
• 3:50
  Speaker 1: to getting money for nothing. So famously, interest is banned,
• 3:54
  Speaker 1: it's hot um under Sharia. So they were were various
• 3:59
  Speaker 1: work grounds there that ranged essentially from gimmicks two actual
• 4:05
  Speaker 1: series interesting mechanisms to make sure that people share in
• 4:10
  Speaker 1: the risk and reward equally. And it was fascinating. I
• 4:14
  Speaker 1: was petrified. I knew nothing about insurance reinsurance instead of
• 4:19
  Speaker 1: not Islamic reinsurance. But you know it just it fascinated me.
• 4:25
  Speaker 1: I loved learning about new things, and here I was
• 4:28
  Speaker 1: getting paid to learn about something new and interesting from
• 4:31
  Speaker 1: interesting people. So I fell in love with journalism that day.
• 4:34
  Speaker 1: And they have never left and never will leave. Industry
• 4:38
  Speaker 1: really quite interesting. So let's talk a little bit about journalism. Uh,
• 4:44
  Speaker 1: the Ft is printed five days a week. That's right,
• 4:46
  Speaker 1: there's no weekend edition. The New York Times is seven days,
• 4:49
  Speaker 1: The horse Rejournal is six days. What's it like having
• 4:53
  Speaker 1: to shove all their content into the more of that
• 4:58
  Speaker 1: daily beast? How how much of a stressor is needing
• 5:03
  Speaker 1: to keep the beast built? Well, it's actually a lot
• 5:08
  Speaker 1: of fun. I mean, it's stressful, but it's not stressful
• 5:12
  Speaker 1: compared to a lot of other jobs out there. My
• 5:14
  Speaker 1: wife is a nurse. She used to work in a
• 5:16
  Speaker 1: cancer ward. That certainly helps kip a bit of perspective.
• 5:21
  Speaker 1: And uh and you know, and my my first job
• 5:24
  Speaker 1: in some of a big mainstream organization was actually Boomberg
• 5:28
  Speaker 1: News and that's certainly know, a competitive driven organization. And
• 5:33
  Speaker 1: you know, it was very much oriented around news and yeah,
• 5:35
  Speaker 1: feeding the beast and getting stuff out there quickly. And
• 5:39
  Speaker 1: I loved it. You know, I always joked that, you know,
• 5:41
  Speaker 1: I mean that the ft far longer now, but if
• 5:43
  Speaker 1: you cut me and I still believe a little bit
• 5:45
  Speaker 1: of orange, it really left its marks. So you know,
• 5:51
  Speaker 1: these days, actually my job is fantastically relaxed because I
• 5:54
  Speaker 1: primarily write columns, features, um long form stuff and and
• 6:00
  Speaker 1: the occasional book when time allows it. And this was
• 6:03
  Speaker 1: your first book. Did you have to stop working to
• 6:07
  Speaker 1: dive into this or was this a side project? Well,
• 6:10
  Speaker 1: it started off as a side project because it overlaps
• 6:13
  Speaker 1: a lot with my day job. You know, I cover
• 6:15
  Speaker 1: paths of investing a lot. It's one of the biggest
• 6:18
  Speaker 1: trends in markets and finance these days. But my plan
• 6:23
  Speaker 1: was to take a decent chunk of off to write it.
• 6:27
  Speaker 1: So I've been doing research on an ongoing basis, but
• 6:29
  Speaker 1: writing is something I find, at least long form. I
• 6:32
  Speaker 1: needed to vote a big chunk of time to do
• 6:35
  Speaker 1: it properly. Unfortunately, when COVID hit I had to those
• 6:40
  Speaker 1: plans just completely collapsed. There was no chance I could
• 6:43
  Speaker 1: take any time off work. I was essentially doing twofold
• 6:46
  Speaker 1: time jobs, trying to homeschool the children because my wife
• 6:49
  Speaker 1: was not home she was a nurse. And yeah, writing
• 6:53
  Speaker 1: this every time I had like a spare evening, a weekend,
• 6:57
  Speaker 1: every holiday in and parts of one went to this book.
• 7:02
  Speaker 1: So it I think it worked. But I think if
• 7:06
  Speaker 1: I'm having to write a book again, I'm going to
• 7:09
  Speaker 1: definitely managed to carve out some proper time off and
• 7:12
  Speaker 1: pray that there isn't another pandemic, to say the least.
• 7:16
  Speaker 1: So you've been writing about markets and investing for well
• 7:22
  Speaker 1: over a decade. What do you think the investing public
• 7:25
  Speaker 1: doesn't know about the business of news that that they
• 7:28
  Speaker 1: really should. Now, it's a really interesting question. I get
• 7:32
  Speaker 1: this a lot. In fact, sometimes we discussed it internally. Um,
• 7:35
  Speaker 1: I think one thing that surprises people isn't purely business related,
• 7:40
  Speaker 1: but it's the lack of a house view and even
• 7:44
  Speaker 1: Frankie politics in journalism. I think fundamentally most journalists actually
• 7:49
  Speaker 1: just think like journalists. It's a culture rather than politics.
• 7:54
  Speaker 1: We think in terms of good and bad stories, rather
• 7:57
  Speaker 1: than pandering to owners. Advertising is and so on the
• 8:01
  Speaker 1: way that many people think it operates. A lot of
• 8:04
  Speaker 1: what outside is a tribute to ideology or commercial imperatives,
• 8:08
  Speaker 1: is sometimes simply the culture of journalism, for good and bad.
• 8:12
  Speaker 1: But on the business side, I mean, it's no secret
• 8:16
  Speaker 1: that running or working at a newspaper is not a
• 8:19
  Speaker 1: great way to get rich these days. To paraphrase Richard Branson,
• 8:24
  Speaker 1: I think the best way to become a newspaper millionaire
• 8:27
  Speaker 1: is probably to start off as a billionaire and buy
• 8:29
  Speaker 1: a newspaper. But I think where I changed, but I'm
• 8:32
  Speaker 1: a little bit different from a lot of my colleagues,
• 8:35
  Speaker 1: is that I'm actually quite optimistic on journalism as in
• 8:40
  Speaker 1: the practice of it, as opposed to the business or
• 8:42
  Speaker 1: the future for journalists, because I actually think the quality
• 8:46
  Speaker 1: is getting better on average, not worse. We just have
• 8:50
  Speaker 1: so many more tools at our disposal. There's so much
• 8:52
  Speaker 1: exciting stuff going on, so I try to remain an optimist,
• 8:56
  Speaker 1: and I still think this is just a phenomenally fun
• 9:00
  Speaker 1: thing to do. I'm going to agree with you, but
• 9:03
  Speaker 1: I'm also going to credit the non journalists for forcing
• 9:07
  Speaker 1: journalism to up its game, at least in the finance space. Historically,
• 9:13
  Speaker 1: financial media coverage, especially in the nineties and two thousand's,
• 9:17
  Speaker 1: it was it was really superficial and a lot of
• 9:22
  Speaker 1: clickbait and and you know, just what is the sexiest,
• 9:27
  Speaker 1: flashiest thing. And I think a lot of people from
• 9:31
  Speaker 1: from bloggers to now sub stack and newsletter writers forced
• 9:38
  Speaker 1: a reckoning where the major media outlets how to how
• 9:41
  Speaker 1: to up their game. They used to be pretty mediocre.
• 9:44
  Speaker 1: They're not. They're much better than they once were. No,
• 9:47
  Speaker 1: I completely agree. Actually, I think you know, the dirty
• 9:51
  Speaker 1: secret is really that nobody used to dream of being
• 9:55
  Speaker 1: a financial journalist when they grew up, right. You know,
• 9:59
  Speaker 1: I'm no different and I wanted to be a walk correspondent.
• 10:02
  Speaker 1: I got to pay a walk correspondent for half a
• 10:04
  Speaker 1: year during the Arab Spring when I worked at the
• 10:06
  Speaker 1: FT and it was incredibly exciting. But just the intellectual
• 10:10
  Speaker 1: stimulation of financial journalism is just incredible. And I think
• 10:14
  Speaker 1: the financial crisis was the tipping point that before then
• 10:18
  Speaker 1: people ended up in financial journalism because that's where the
• 10:21
  Speaker 1: jobs were for a long time and they generally paid
• 10:24
  Speaker 1: better than other jobs. But since the financial crisis kind
• 10:28
  Speaker 1: of hammered home to absolutely everybody how essential business finance
• 10:33
  Speaker 1: economics markets are. I just see the quality of the
• 10:37
  Speaker 1: graduate trainees we have coming in just so much better
• 10:40
  Speaker 1: when Frankie, when I applied for jobs, and these are
• 10:44
  Speaker 1: people that want to be financial journalists. I actually know
• 10:47
  Speaker 1: and have, you know, expertise far beyond what I had
• 10:51
  Speaker 1: when I stumbled into that conference room to talk to
• 10:54
  Speaker 1: a shake about Islamic reinsurance. So I definitely think things
• 10:58
  Speaker 1: are getting better. Yeah, I think your absolutely answer something
• 11:01
  Speaker 1: with that. Let's talk a little bit about passive investing
• 11:05
  Speaker 1: in index funds. It's really well trialed ground. There's only
• 11:10
  Speaker 1: so much to say about it. One inspired you to
• 11:13
  Speaker 1: write a whole long history of it. Well, as I mentioned,
• 11:17
  Speaker 1: you know, the the rise of passive investing was something
• 11:20
  Speaker 1: that I was covering, maybe not daily, but a lot.
• 11:23
  Speaker 1: It was the the overall backdrop to almost everything I
• 11:26
  Speaker 1: was writing about for a long time when I when
• 11:28
  Speaker 1: led the market's coverage for the Financial Times in New York,
• 11:32
  Speaker 1: and you know, it was unambiguous. Lee this hugely important
• 11:36
  Speaker 1: story that was not just affecting the investment industry. We
• 11:41
  Speaker 1: know obviously the pressures it's brought on fees, but reshaping
• 11:45
  Speaker 1: how the financial industry works in many ways, and investment
• 11:48
  Speaker 1: banks were retooling their trading desk to deal with this phenomenon.
• 11:52
  Speaker 1: Markets were functioning and acting differently in the area of
• 11:55
  Speaker 1: path investing. So I started scratching around into the back
• 11:59
  Speaker 1: story this. I mean, I'm not just a financial nerds,
• 12:03
  Speaker 1: come one. I have always loved history, and I do
• 12:06
  Speaker 1: believe that we understand better where we're going if we
• 12:09
  Speaker 1: understand where we came from. And lo and behold the
• 12:13
  Speaker 1: history of the invention of passive investing. It was just
• 12:17
  Speaker 1: far more interesting than idea to hope. It's just filled
• 12:21
  Speaker 1: with these combative, titanic personalities having huge arguments and getting
• 12:26
  Speaker 1: shunned by their own industry. So you know, when when
• 12:30
  Speaker 1: you're a journalist and you have a combination of an
• 12:32
  Speaker 1: important story and a fun story, you just you have
• 12:36
  Speaker 1: everything you need, or you you have everything you should need.
• 12:39
  Speaker 1: And the more time I spent with it, I realized, No,
• 12:41
  Speaker 1: this isn't just a magazine piece or a long feature.
• 12:44
  Speaker 1: This this would make, I hope, a really gripping book,
• 12:48
  Speaker 1: a way to kind of explain this huge, important trend,
• 12:51
  Speaker 1: but through the prism of these people and and what
• 12:55
  Speaker 1: they did and who they were, because they were just
• 12:57
  Speaker 1: fascinating people. Really, So let's talk about his history. As
• 13:01
  Speaker 1: I was reading the book, I was surprised how deeply
• 13:04
  Speaker 1: researched it felt. Tell us how you did this deep dive?
• 13:09
  Speaker 1: How did you uncover all the little tidbits that you did. Yeah,
• 13:13
  Speaker 1: there's a there's a published history, you have Bogel's biography,
• 13:17
  Speaker 1: and there's a bunch of other stuff out there. But
• 13:19
  Speaker 1: you really went very deep into this space. Well, I
• 13:23
  Speaker 1: mean it sounds incredibly um over the top that you know.
• 13:28
  Speaker 1: Isaac Newton once said, if I've seen further, it's because
• 13:32
  Speaker 1: I stood on the shoulders of giants. And I am
• 13:34
  Speaker 1: no Isaac Newton, but like you say, I stood on
• 13:37
  Speaker 1: the shoulders of many giants that went before me. So
• 13:39
  Speaker 1: Jack Bogel famously wrote many, many books. There are many
• 13:43
  Speaker 1: people that have written about parts of this. You know,
• 13:46
  Speaker 1: people journalists and Bloomberg have written phenomenally interesting features about
• 13:50
  Speaker 1: the birth of ets. Peter Bernstein the financial history and
• 13:54
  Speaker 1: has written a really interesting book on on on Wall
• 13:56
  Speaker 1: Street in the seventies and the academic ferment. Then. So
• 14:01
  Speaker 1: what I try to do was essentially combine and synthesize
• 14:04
  Speaker 1: all these disparate sources and combine them with just I mean,
• 14:09
  Speaker 1: god knows hundreds of of interviews with you know, primary characters,
• 14:15
  Speaker 1: secondary characters, other people that fill in blanks hearing there,
• 14:18
  Speaker 1: and just an exhaustive dive through the archives of institutional
• 14:22
  Speaker 1: investor and pensions and investments in the Wall Street Journal
• 14:26
  Speaker 1: and combine that into one holistic narrative. But essentially it
• 14:30
  Speaker 1: was just a lot of work and juggling a lot
• 14:34
  Speaker 1: of different strands of information and then cross checking what
• 14:38
  Speaker 1: person A said versus what person B said, and what
• 14:41
  Speaker 1: the contemporary these newspapers might have said at the time.
• 14:44
  Speaker 1: Because you know, as as the cliche goes, success has
• 14:48
  Speaker 1: as many parents. You know, the Index Fund is definitely
• 14:51
  Speaker 1: a success story, and there are many many people that
• 14:54
  Speaker 1: after the fact sometimes seek to yeah, paint repaint history
• 15:01
  Speaker 1: a little bit, maybe give it a bit of a
• 15:02
  Speaker 1: chine that it might not always have had. So I'm
• 15:05
  Speaker 1: gonna skip over some of the early history, the Wells, Fargo,
• 15:09
  Speaker 1: Sam Snight, and a lot of the academic history and
• 15:13
  Speaker 1: just fast forward us up to Vanguard, because it, in
• 15:18
  Speaker 1: your telling, it almost looks like the Index itself was irrelevant.
• 15:24
  Speaker 1: The Jack Bogel, the founder and first CEO of Vanguard,
• 15:29
  Speaker 1: his cost matters hypothesis almost made the group of holdings irrelevant.
• 15:37
  Speaker 1: It was the fees that mattered most. Discuss that a bit. No,
• 15:41
  Speaker 1: it's a great point, and I think Jack Bogel is
• 15:45
  Speaker 1: a far more complicated character than Frankie. He pretended himself
• 15:50
  Speaker 1: and a lot of people um semas. I mean he
• 15:55
  Speaker 1: was undisputable, you know, one of the great men of history.
• 15:58
  Speaker 1: I mean, he is one of the most incredi of
• 16:00
  Speaker 1: people I've ever had the privilege of interviewing. But I
• 16:03
  Speaker 1: actually think he's more interesting than he pretended himself, because
• 16:07
  Speaker 1: he was not a necessarily a fan of Index thing,
• 16:10
  Speaker 1: not even all his private Vanguard. This was this is
• 16:14
  Speaker 1: an accident of fortunate accident. In his defense, he was
• 16:18
  Speaker 1: definitely always a fan of low cost investment. That seems
• 16:21
  Speaker 1: to be backed up with his writing going back to
• 16:23
  Speaker 1: his days when he was a wonder by at Wellington.
• 16:25
  Speaker 1: He was a senior executive at Wellington and the air
• 16:28
  Speaker 1: apparent to Walter Morgan there uh he and he liked
• 16:32
  Speaker 1: the idea of mutualization, well at least he at least
• 16:35
  Speaker 1: had thought of it before Vanguard was set up. And
• 16:39
  Speaker 1: with this unique ownership structure being owned by its own funds.
• 16:42
  Speaker 1: Let's let me stop you there and jump in, because
• 16:44
  Speaker 1: in your telling, the mutualization of Vanguard also seemed like
• 16:50
  Speaker 1: an accident. It was a function of their contract that
• 16:54
  Speaker 1: they previously had with the company they were with Wellington,
• 16:58
  Speaker 1: that they ostensibly were trying to it free from the
• 17:01
  Speaker 1: idea of a passively managed index was hey, it's unmanaged,
• 17:05
  Speaker 1: therefore it doesn't violate our manage no managed funds contract
• 17:12
  Speaker 1: and the idea of creating a mutual allowed them to
• 17:15
  Speaker 1: escape a fee structure they didn't want to be involved in. Him.
• 17:19
  Speaker 1: Am I overstating that? Or is that a fair assessment? No?
• 17:23
  Speaker 1: I think so, But I mean so. Jack would often
• 17:26
  Speaker 1: afterwards talk about, you know, strategy follow structure. So if
• 17:30
  Speaker 1: we start with the structure, the reason why Vanguard is
• 17:33
  Speaker 1: mutually owned it's not just because Jack Bogel liked the
• 17:37
  Speaker 1: idea of mutualization, which he did, but I doubt he
• 17:40
  Speaker 1: would have mutilized if he'd stayed the CEO of Wellington's.
• 17:44
  Speaker 1: But the fact is that he merged Wellington with a
• 17:46
  Speaker 1: hot shot go go fund manager from Boston in the sixties,
• 17:50
  Speaker 1: and when the sixties go go error ended with a bang,
• 17:53
  Speaker 1: essentially the other people his partners own more stock than
• 17:56
  Speaker 1: he did and they sacked in the CEO. So as
• 17:59
  Speaker 1: a hay Mary, he went to the board of the
• 18:01
  Speaker 1: Wellington Funds because all mutual funds and need to have
• 18:04
  Speaker 1: their own independent boards in theory, at least in the US,
• 18:07
  Speaker 1: and trying to argue that they should essentially buy themselves
• 18:11
  Speaker 1: out of Wellington's. And this was it was a hail
• 18:13
  Speaker 1: Mary and Frankie. The legal representation at the time was
• 18:17
  Speaker 1: very clear that the SEC will not like this. Clients
• 18:20
  Speaker 1: consue us, Wellington consue us. So as if favor to
• 18:24
  Speaker 1: Jack Bogel, the boards of the Wellington Funds, the independent
• 18:28
  Speaker 1: boards of the Wellington Funds said that they'd set up
• 18:31
  Speaker 1: an administrative company that just did all the clerking jobs,
• 18:35
  Speaker 1: all the paperwork for the funds. That would be owned
• 18:38
  Speaker 1: by the funds themselves, but the investment management, the distribution,
• 18:42
  Speaker 1: the research, the trading, all the sexy part of investment
• 18:45
  Speaker 1: management would stay with Wellington. But Jack Bogel basically this
• 18:50
  Speaker 1: really you know, first of all, the sacking hurt him,
• 18:53
  Speaker 1: and he used this as his platform to essentially get
• 18:56
  Speaker 1: revenge on the Boston Partners that sacked him. And like say,
• 19:00
  Speaker 1: Index Funds, he later said that he had never even
• 19:04
  Speaker 1: heard of this until he read about it in the
• 19:07
  Speaker 1: Paul Samuelson article. And I think that is, first of all,
• 19:10
  Speaker 1: just actually inaccurate, because he pseudonymously wrote an article attacking
• 19:16
  Speaker 1: the idea of Index funds and anonymously, you know, many
• 19:18
  Speaker 1: years earlier. But he also saw the potential right and
• 19:23
  Speaker 1: he saw that this was unmanaged. It was a gimmick.
• 19:25
  Speaker 1: It was essentially a ploy to get out from under
• 19:28
  Speaker 1: the thumb of the Boston partners and it worked quite interesting.
• 19:32
  Speaker 1: Let's talk a little bit about State Street. They're the
• 19:34
  Speaker 1: first ones to market with the spiders. Spy become one
• 19:38
  Speaker 1: of the largest CTFs ever. Tell us how that came about. Well, essentially,
• 19:43
  Speaker 1: that story starts with Nate Most who was this unusually brilliant, eclectic,
• 19:49
  Speaker 1: pretty old by then head of derivative product development at
• 19:54
  Speaker 1: the AMEX, the American Stock Exchange, you know, very old,
• 19:57
  Speaker 1: came out of the curb side in New York. Uh,
• 20:00
  Speaker 1: the kind of found derivatives as a way to kind
• 20:03
  Speaker 1: of try to stay relevant in an era where you
• 20:06
  Speaker 1: had Nisy years that as a big brother that dominated listings,
• 20:11
  Speaker 1: and NADAC was kind of the hot rising exchange. But
• 20:16
  Speaker 1: they still they needed to find something. So Nate Mos
• 20:21
  Speaker 1: had the brilliant idea together with one of his partners
• 20:24
  Speaker 1: called Stephen Bloom, to basically lift tradeable index funds. They
• 20:30
  Speaker 1: thought they might go somewhere like Vanguard for example, and
• 20:33
  Speaker 1: get Bogel to list index funds on the AMEX so
• 20:37
  Speaker 1: people could trade them throughout the day, because then they
• 20:41
  Speaker 1: might get more customers and the AMEX will get trading revenues. Now,
• 20:44
  Speaker 1: it turns out that Bogel absolutely hated the idea. It
• 20:49
  Speaker 1: was just anathema to him, the idea that you trade
• 20:52
  Speaker 1: a fund in and out all the time. He wanted
• 20:54
  Speaker 1: people to buy a Vanguard five fund and hold it forever.
• 20:58
  Speaker 1: So he turned them down and Nate Most went to
• 21:02
  Speaker 1: State Streets instead. A State Street had a big institutional
• 21:06
  Speaker 1: business in indexing, so they thought, well, yeah, we could
• 21:08
  Speaker 1: totally do this. This is probably possible. But it took
• 21:12
  Speaker 1: years and years and years, and ironically a group of
• 21:15
  Speaker 1: Canadian exchanges managed to essentially copy the plans and they
• 21:21
  Speaker 1: got help from the AMEX because the AMEX didn't see
• 21:23
  Speaker 1: them as a straight competitor and managed actually to list
• 21:27
  Speaker 1: this isn't wide, you know, the first ever ETF is
• 21:30
  Speaker 1: actually listed in Canada. They managed to just steal ahead
• 21:35
  Speaker 1: of the State Streets and AMEX team because the SEC
• 21:38
  Speaker 1: was very, very slow about this very new fangled product
• 21:42
  Speaker 1: that had a lot of hair on it essentially. But
• 21:44
  Speaker 1: that's how that happened. And it's quite a journey from
• 21:47
  Speaker 1: where it wasn't to where it is today, to say
• 21:50
  Speaker 1: the least. And it's become you know, a few bibs
• 21:53
  Speaker 1: and you know the interesting story. And I recall this
• 21:59
  Speaker 1: and I think All Street Journal a couple of years ago, Hey,
• 22:02
  Speaker 1: how did State Street end up losing their leads there?
• 22:05
  Speaker 1: They're one of the pioneers in the US on both
• 22:10
  Speaker 1: passes and ets. How did they get dethroned by Vanguard
• 22:14
  Speaker 1: and Black Rock? It's a great question. That actually, look,
• 22:19
  Speaker 1: I have an answer in my book, but it is
• 22:23
  Speaker 1: an answer. I think sometimes these things happened, but I
• 22:27
  Speaker 1: think it came down to basically State Street not realizing
• 22:30
  Speaker 1: what it had in its hands. So you have to
• 22:33
  Speaker 1: remember that this was primarily in AMEX idea that State
• 22:37
  Speaker 1: three did because it worked well with their strategy. But
• 22:40
  Speaker 1: index fees on the institutional side were under massive pressure,
• 22:44
  Speaker 1: so they just didn't think of indexing as a potential
• 22:47
  Speaker 1: cash cow. They didn't see the potential of ets as
• 22:51
  Speaker 1: these basically lego like bricks that you can build broad
• 22:55
  Speaker 1: portfolios with. So they did it, and they put something
• 22:59
  Speaker 1: money into it, they just didn't invest enough, and at
• 23:02
  Speaker 1: the beginning, e T S was not a great business. Ironically,
• 23:06
  Speaker 1: Barkley's Global Investors did also launched soon afterwards something called
• 23:09
  Speaker 1: Webb's World Equity Benchmark Securities, which is kind of a
• 23:13
  Speaker 1: copy of of of the spider that am X and
• 23:18
  Speaker 1: State Street had done. Webbs and spides I was like
• 23:21
  Speaker 1: the intentional gimmick, and they'd also struggled. But what b
• 23:24
  Speaker 1: G I later did under you know CEO Patty Donne,
• 23:28
  Speaker 1: I think one of the great under estimated CEOs in
• 23:31
  Speaker 1: American corporate history and pretty remarkable for being not as
• 23:34
  Speaker 1: a woman but also somebody who wrote from to be
• 23:36
  Speaker 1: secretary to CEO and chairman. Uh. She, together with a
• 23:41
  Speaker 1: guy called the Crane, first realized the potential of this,
• 23:45
  Speaker 1: got Barclay's the UK Bank to commit to massive funding,
• 23:50
  Speaker 1: and they essentially did what Silicon Valley today call blitz scaling.
• 23:54
  Speaker 1: They basically launched tons of ETFs, just chucked ets out
• 23:59
  Speaker 1: there and lies, if your first you can win, you
• 24:02
  Speaker 1: can become the incumbent. So I think it was a
• 24:04
  Speaker 1: mix of State Street kind of doing fine but not
• 24:09
  Speaker 1: realizing the importance of what they've invented, and b G
• 24:13
  Speaker 1: I eventually realizing it and just chucking resources at it. Vanguard.
• 24:18
  Speaker 1: I think it's later done well purely because it's Vanguard
• 24:21
  Speaker 1: and they have an enormously positive brand among retail investors.
• 24:24
  Speaker 1: So let's stick with b G. I. How did how
• 24:28
  Speaker 1: did we go from Barclays too I shares to black Rock?
• 24:34
  Speaker 1: Give us that history? Well, it goes back to the
• 24:38
  Speaker 1: first index fund communiately for my book narrative of course,
• 24:43
  Speaker 1: but wellth Fargo set up a new into unit called
• 24:47
  Speaker 1: Wealth Fargo Investment Divided Advisors w f I A to
• 24:51
  Speaker 1: house the first index funds that they did. Now, the
• 24:54
  Speaker 1: issue was w f I A was that it was
• 24:56
  Speaker 1: filled with lots of brilliant academics. I mean, it's one
• 24:59
  Speaker 1: point six noble laureates consulted for that unit. It was
• 25:03
  Speaker 1: one of the biggest economic think tanks in history. I'd argue, UM,
• 25:07
  Speaker 1: but they cost money, and index funds didn't pay a
• 25:10
  Speaker 1: lot of money. So w f I A was always
• 25:13
  Speaker 1: incredibly brilliant, but it didn't actually turn a profit until
• 25:16
  Speaker 1: the eighties, so then it was taken over. Basically almost
• 25:20
  Speaker 1: came close to collapsing in a battle between w f
• 25:23
  Speaker 1: I A and Wealth Fargo the mothership, but eventually they
• 25:28
  Speaker 1: hired a guy called Fred Grower, and he managed to
• 25:31
  Speaker 1: turn the ship around just as the U S stock
• 25:35
  Speaker 1: market started on the biggest strongest bull run that's ever
• 25:39
  Speaker 1: had pretty much, and you know, so there's a bit
• 25:42
  Speaker 1: of luck and a bit of skill. But then he
• 25:44
  Speaker 1: merged it with a Japanese asset manager, but eventually managed
• 25:49
  Speaker 1: to sell the whole thing to Barclay's. The man merge
• 25:52
  Speaker 1: it with Barclay's asset management unit UM, but essentially just
• 25:57
  Speaker 1: became w f I A. Two point but under the
• 26:00
  Speaker 1: name more Barclay's Global Investors. That was where Webb's was
• 26:05
  Speaker 1: invented first, and that was a bit of a nothing burger. Frankly,
• 26:08
  Speaker 1: Webbs became Ice Shares and then black Rock. I could
• 26:13
  Speaker 1: see where the world was going, where the investment world
• 26:16
  Speaker 1: is going, quicker than many other people, and when Barclays
• 26:19
  Speaker 1: was up the creek without a paddle at all. In
• 26:23
  Speaker 1: the financial crisis, Barclay's basically had to sell the family
• 26:27
  Speaker 1: silver and black Rock was quickly cheap and they paid
• 26:31
  Speaker 1: to pay more. Historically, it looks like it was a
• 26:34
  Speaker 1: pretty cheap sale. What do you recall what this was
• 26:37
  Speaker 1: sold to black Rock for. Well, the agreed price was
• 26:40
  Speaker 1: thirteen and a half billion dollars in cash and equity.
• 26:42
  Speaker 1: So by the time the deal closed at the end
• 26:45
  Speaker 1: of two thousand and nine, I think it was the
• 26:47
  Speaker 1: final tag because black Rocks shares have gone up, was
• 26:49
  Speaker 1: around fifty billion. But yes, I mean, by far, probably
• 26:54
  Speaker 1: the great I mean, certainly the greatest deal in the
• 26:56
  Speaker 1: history of ATM management, and probably the greatest deal in
• 27:00
  Speaker 1: the financial industry as a whole, and possibly I mean,
• 27:03
  Speaker 1: I'm I'm trying to think of a such a slam
• 27:06
  Speaker 1: dunk in hound sight acquisition in the history of M
• 27:11
  Speaker 1: and A really obviously the history of M and A
• 27:13
  Speaker 1: litted with with car crashes. To put put some numbers
• 27:17
  Speaker 1: on it, black Rock now manages a little over a
• 27:20
  Speaker 1: little under nine and a half trillion. That's trillion with
• 27:24
  Speaker 1: the T like the title of your book. And their
• 27:27
  Speaker 1: market cap is just under a hundred forty billion. That
• 27:31
  Speaker 1: that fifteen billion dollar acquisition is really, you know, just
• 27:36
  Speaker 1: world beating talk talk about r O Y. It's quite amazing.
• 27:41
  Speaker 1: It's incredible. I mean it's just I mean you can
• 27:43
  Speaker 1: see it on the profits. I mean, black Rock is
• 27:46
  Speaker 1: more profitable than Google. I mean, the profit margins in
• 27:49
  Speaker 1: as management are actually quite good. Despite me of the
• 27:52
  Speaker 1: pressure that the industry is under. The dirty secret is
• 27:55
  Speaker 1: that it's actually quite a profitable industry and black Rock
• 27:57
  Speaker 1: is best in class and it is large thanks for
• 28:00
  Speaker 1: the acquisition or b g I, and it's et f
• 28:03
  Speaker 1: unit isshes and the broader indexing universe and a lot
• 28:06
  Speaker 1: of the more quantitative investing side that they also inherited
• 28:10
  Speaker 1: along with the purchase. So it's been incredible. I mean,
• 28:14
  Speaker 1: you know, basically the b g I now is just
• 28:17
  Speaker 1: that part. If you split that out, I'd argue that's
• 28:20
  Speaker 1: probably worth more than all of Barkeleys today, Barkleys has
• 28:23
  Speaker 1: essentially gone nowhere. Black Rock is now bigger than Golden
• 28:26
  Speaker 1: Sacks in market cap right, quite quite amazing. We were
• 28:29
  Speaker 1: talking a little earlier about how deeply researched the book was.
• 28:35
  Speaker 1: How much access did you get Because a lot of
• 28:37
  Speaker 1: these figures are still around, They're they're not youngsters anymore,
• 28:41
  Speaker 1: um and Jack Boggle passed a few years ago, but
• 28:43
  Speaker 1: a lot of the main characters in the book they're
• 28:46
  Speaker 1: still all around. Did you get access, uh, to people
• 28:50
  Speaker 1: like Bill Sharp and and David Booth and Gene Farmer. Yeah? So,
• 28:57
  Speaker 1: I mean my access was great for the most part.
• 28:59
  Speaker 1: I mean, I genuinely do think most humans are actually
• 29:02
  Speaker 1: quite helpful if you can, you know, make sure that
• 29:05
  Speaker 1: you you impress upon them that you're not gonna be
• 29:07
  Speaker 1: wasting their time. And some people, like you said, had
• 29:10
  Speaker 1: sadly passed away, like Lewis P. Kelly obviously pass away
• 29:12
  Speaker 1: almost a century go. Jim Verton at Wealth Fargo was
• 29:16
  Speaker 1: an important figure. He passed away just before I started
• 29:19
  Speaker 1: reporting it. Bill Faust passed away in the process of
• 29:22
  Speaker 1: it ate most passed a few way quite a few
• 29:24
  Speaker 1: years ago. And there were some people who won't name
• 29:28
  Speaker 1: that just didn't respond to emails or calls or just
• 29:32
  Speaker 1: who were the difficult people and getting the book together,
• 29:36
  Speaker 1: you don't know they know. I mean they know who
• 29:41
  Speaker 1: they are. Let's go that way. But broadly speaking, look,
• 29:43
  Speaker 1: I mean people are busy and maybe they're working on
• 29:46
  Speaker 1: the Room book project. I don't want to give away
• 29:47
  Speaker 1: the crown jewels as it were. Um So there are
• 29:50
  Speaker 1: many reasons why people declined to interview. And I have
• 29:53
  Speaker 1: to meet like as a journalist, I want everybody to
• 29:55
  Speaker 1: talk to me all the time. But I think now
• 29:58
  Speaker 1: you have to be understanding that not everybody feels comfortable
• 30:01
  Speaker 1: with that. And a lot of people were incredibly generous
• 30:04
  Speaker 1: with the time, including Gene Farmer aspect too many times
• 30:07
  Speaker 1: mc McCown. David Booth built sharp but is an incredibly kind, generous, interesting,
• 30:14
  Speaker 1: genial man. And a lot of these people are in
• 30:16
  Speaker 1: the eighties and some of them are in almost in
• 30:18
  Speaker 1: the nineties. And I swear if I'm half as sharp
• 30:22
  Speaker 1: at half the age, I would be a very lucky man.
• 30:25
  Speaker 1: There's something about fine that's an economics that seem to
• 30:27
  Speaker 1: keep a lot of people quite young. Well, that's a
• 30:30
  Speaker 1: little bit of survivorship bias in the sample set, because
• 30:33
  Speaker 1: you're only speaking to people who are alive, literal survivorship bias.
• 30:37
  Speaker 1: Tell us about something with without spoiling the ending, tell
• 30:41
  Speaker 1: us something from the book that was really surprising, because
• 30:44
  Speaker 1: I'm going to share a few things with you that
• 30:46
  Speaker 1: I was genuinely surprised about. But what surprised you? And
• 30:51
  Speaker 1: I'm looking forward to hearing what you think. I mean,
• 30:52
  Speaker 1: I think that that the Bogel issue that we touched upon,
• 30:56
  Speaker 1: it was really interesting that here was a far more
• 30:59
  Speaker 1: multi facet character. Uh. Then I think people realize and
• 31:04
  Speaker 1: I wish I knew all the stuff I know I
• 31:08
  Speaker 1: now know and could talk to him about it. Not
• 31:11
  Speaker 1: because it's salacious or anything like that, but he's he's
• 31:13
  Speaker 1: become even more of a hero in my eyes because
• 31:16
  Speaker 1: he is more multifaceted. I think that was really interesting. Uh,
• 31:20
  Speaker 1: And probably sadly a lot of people only felt comfortable
• 31:23
  Speaker 1: talking about some of this stuff after he passed away
• 31:27
  Speaker 1: in twenty nineteen. One thing that didn't surprise me in
• 31:31
  Speaker 1: the research, but actually happened almost fortuitously in the middle
• 31:35
  Speaker 1: of writing my book, but it was the stress test
• 31:39
  Speaker 1: that happened for the E t F ecosystem in March.
• 31:43
  Speaker 1: I guess fortunately it is the wrong word, because obviously
• 31:45
  Speaker 1: that was a horrific period for the world, and I
• 31:49
  Speaker 1: was generally worried that we were going to have a
• 31:52
  Speaker 1: obviously we're having a global health crisis and an economic crisis,
• 31:56
  Speaker 1: but we were perilously close to having a financial crisis
• 31:58
  Speaker 1: on top, and especially bond ets came under a massive pressure,
• 32:03
  Speaker 1: and before the fact, I would have predicted that we
• 32:05
  Speaker 1: would have had serious breakages. But I was actually positively
• 32:09
  Speaker 1: supplirized by the resiliency of bond ets in March. And
• 32:15
  Speaker 1: I know a lot of people don't agree with me
• 32:16
  Speaker 1: on that, but I think that was one of my
• 32:19
  Speaker 1: big takeaways that I've moved from the Quartius skeptic, virgin
• 32:24
  Speaker 1: cautious optimists on on E t F and credit ETF
• 32:27
  Speaker 1: to being more wholehearted behind that this is actually more
• 32:35
  Speaker 1: resilient supple product and people sometimes give it credit for
• 32:39
  Speaker 1: So first, you're right, and the proof is in the
• 32:42
  Speaker 1: pudding the people. And we're going to talk a little
• 32:44
  Speaker 1: bit about some of the criticisms of passive and indexing
• 32:47
  Speaker 1: and ETS in a bit. But if ever there was
• 32:51
  Speaker 1: an opportunity for for those vehicles to collapse, well, not
• 32:56
  Speaker 1: only did they all survive O eight or nine fine
• 32:58
  Speaker 1: and the flash crash in on ten and later, but
• 33:01
  Speaker 1: they came through. I mean, how many disasters do these
• 33:05
  Speaker 1: products have to live through before people will admit, Hey,
• 33:09
  Speaker 1: they seem to be robust and resilient. They survived just fine. Yeah. No,
• 33:14
  Speaker 1: I I think people look at the Federal Reserves intervention,
• 33:19
  Speaker 1: the extraordinarily aggressive intervention, as a bailout of ETS, and
• 33:26
  Speaker 1: I definitely think like the FED bailed out markets, and
• 33:30
  Speaker 1: they did by ETS. But I am increasingly convinced, having
• 33:34
  Speaker 1: talked to people about this and been digging around this
• 33:37
  Speaker 1: for a while, that we came far closer to mass
• 33:40
  Speaker 1: closure of bond mutual funds traditional bond mutual funds then
• 33:45
  Speaker 1: we did serious breakages in the credit et f ecosystem.
• 33:49
  Speaker 1: Those structures might not be perfect, and maybe the next
• 33:53
  Speaker 1: crisis will reveal some fault line we don't know about,
• 33:56
  Speaker 1: but I think that nobody can be honestly looked at
• 34:00
  Speaker 1: March and what happened there any people from the Federal
• 34:04
  Speaker 1: Reserve to the Bank of Canada and other people looked
• 34:06
  Speaker 1: at this and it will come broadly to the same
• 34:07
  Speaker 1: conclusion that credit ets were at worst not a contributor
• 34:13
  Speaker 1: to the issues, and actually probably in some respect helped
• 34:17
  Speaker 1: dampen some of the issues we saw in the financial
• 34:21
  Speaker 1: system at the time. Dampener is a really good, good
• 34:24
  Speaker 1: word for that. Let's let's stay with the book. There's
• 34:27
  Speaker 1: a quote from Paul Samuelson. I really like that your reference.
• 34:31
  Speaker 1: He ranks the birth of the vanguard five hundred funds
• 34:34
  Speaker 1: alongside things like the invention, the wheel, the alphabets, the
• 34:37
  Speaker 1: printing press, wine and cheese. Is he overstating this a bit?
• 34:42
  Speaker 1: What that? That's really um? You know, he left out fire.
• 34:47
  Speaker 1: But other than that, how is an index funds comparable
• 34:50
  Speaker 1: to the wheel and the alphabet? Samuelson, aside from being,
• 34:55
  Speaker 1: you know, one of the world's greatest economists, I mean
• 34:57
  Speaker 1: his his textbooks are quite literally still of the textbooks
• 35:00
  Speaker 1: that most economist read. Um, he was that he would
• 35:05
  Speaker 1: He was a bit of a joker as well. He
• 35:07
  Speaker 1: liked tweaking people, so I think there's a fair bit
• 35:09
  Speaker 1: of over the top wittiness there. But he genuinely did
• 35:15
  Speaker 1: believe that this was an incredibly important invention because you
• 35:20
  Speaker 1: can imagine, you know, sometimes the gains of this are
• 35:23
  Speaker 1: so ephemeral that we we don't really focus on it.
• 35:26
  Speaker 1: But the fact is that everybody on the planet pretty
• 35:29
  Speaker 1: much who has savings has benefited from the indexing revolution,
• 35:33
  Speaker 1: even if they don't invest in index funds, because of
• 35:36
  Speaker 1: the price competitive competition that they have brought. Not only
• 35:40
  Speaker 1: can you now put money in an index fund that
• 35:43
  Speaker 1: you know, I've seen people calculate, have said Americans just
• 35:46
  Speaker 1: in the past twenty five years three d and fifty
• 35:49
  Speaker 1: billion dollars. They've saved all of us trillions of dollars
• 35:53
  Speaker 1: in total, because the average cost of a mutual fund
• 35:56
  Speaker 1: or hedge fund even has fallen by a third over
• 35:59
  Speaker 1: the past two three, three decades. And maybe that would
• 36:02
  Speaker 1: have happened without the invention of the index fund, but
• 36:04
  Speaker 1: I don't think so to the same extent. And you know,
• 36:07
  Speaker 1: these somethings are going to be in the trillions. So
• 36:10
  Speaker 1: in a small way, but an important way, the invention
• 36:14
  Speaker 1: of this, how is helping hundreds of millions of people
• 36:18
  Speaker 1: have a little bit more for retirement than they normally
• 36:20
  Speaker 1: would have. So is it fire or the printing press. No,
• 36:25
  Speaker 1: but is it genuinely one of the finest financial innovations
• 36:30
  Speaker 1: in history and certainly of the past fifty years, And
• 36:33
  Speaker 1: ambiguously I would say yes. You know, you're not going
• 36:36
  Speaker 1: to get any disagreement from me about that. UM. In
• 36:40
  Speaker 1: the US, passive has been pretty robust. More than half
• 36:45
  Speaker 1: of the mutual fund and e t F world is
• 36:48
  Speaker 1: now consumed by by passive. It hasn't quite caught on
• 36:53
  Speaker 1: as aggressively in the rest of the world, but there
• 36:55
  Speaker 1: are signs that's changing. Tell us about this as a
• 36:59
  Speaker 1: you know, not necessarily US only phenomena. How quickly is
• 37:03
  Speaker 1: the rest of the world catching onto passive as an
• 37:07
  Speaker 1: investing strategy. No, it's it's an interesting theme seeing this
• 37:13
  Speaker 1: become more globalized. I mean, clearly the the you know,
• 37:18
  Speaker 1: the the origin story of of index funds is clearly American,
• 37:24
  Speaker 1: even though you know they the origin story of of
• 37:26
  Speaker 1: pooled investment trust goes back to the Netherlands and the
• 37:29
  Speaker 1: UK and hundreds of years ago. UM. It has caught
• 37:34
  Speaker 1: on in certain markets, but it depends a lot. And
• 37:38
  Speaker 1: this is somewhat technical and dull, but the distribution models
• 37:41
  Speaker 1: take Europe, for example, in Europe. The overwhelming distribution mechanism
• 37:46
  Speaker 1: for investment funds is banks. Banks are the sentralled locusts,
• 37:52
  Speaker 1: and banks tend to not want to steer people into
• 37:56
  Speaker 1: cheap products managed by other people. They tend to steer
• 37:59
  Speaker 1: people into products that they manage themselves and have pretty
• 38:03
  Speaker 1: empty fees. So you can always see there's not a
• 38:07
  Speaker 1: perfect correlation, but pretty close to one between you know,
• 38:10
  Speaker 1: how dominant banks are in distribution and the adoption of
• 38:14
  Speaker 1: passive So there are some markets where this has gotten
• 38:18
  Speaker 1: pretty far, and there are some markets where there's a
• 38:21
  Speaker 1: lot of quasi passive. Think Japan for example. There are
• 38:24
  Speaker 1: a lot of investors there that might not say that
• 38:26
  Speaker 1: they are passive or this is an index fund, but
• 38:30
  Speaker 1: they are essentially passive um. But clearly this is something
• 38:35
  Speaker 1: that works elsewhere that there are some markets that are
• 38:39
  Speaker 1: less efficient. Emerging markets are less efficient than large cap
• 38:43
  Speaker 1: us equities, so you can see that active managers do
• 38:45
  Speaker 1: do better there on average before and after fees, but
• 38:50
  Speaker 1: in the long run they still underperform the index. So
• 38:55
  Speaker 1: I think the data is a really hard taskmaster here,
• 38:58
  Speaker 1: and as the day it becomes more widely known in
• 39:02
  Speaker 1: more markets, whether China or India, or Europe or Norway
• 39:06
  Speaker 1: where I'm based. It's just going to grow and grow
• 39:09
  Speaker 1: and grow, because I think there's a lot of room
• 39:13
  Speaker 1: for money to shift from expensive on average underperforming products
• 39:18
  Speaker 1: the cheap passive ones really really quite interesting. Last question
• 39:23
  Speaker 1: before I share my surprises from the book with you,
• 39:27
  Speaker 1: what sort of pushed back did you? Again? And any
• 39:30
  Speaker 1: whole decide? The people who who ghosted you and never
• 39:33
  Speaker 1: responds to emails, any of the organizations or individuals push back, Vanguard,
• 39:38
  Speaker 1: d F A, Black Rock, anybody say, hey, your conception
• 39:42
  Speaker 1: of this is all wrong. No, they they were all helpful,
• 39:47
  Speaker 1: but too very varying degrees, and at various times maybe
• 39:51
  Speaker 1: one organization will fall on for this is an amazing story. Yes,
• 39:55
  Speaker 1: we'd love to help you tell it. And then they
• 39:58
  Speaker 1: suddenly ghosted me and refused to from my emails. Um
• 40:02
  Speaker 1: and broadly speaking, as you might imagine that the chapters
• 40:06
  Speaker 1: that deal with more present day issues were more sensitive
• 40:11
  Speaker 1: than the historical ones, even though the historical ones were
• 40:14
  Speaker 1: in many ways harder to report because frankly a lot
• 40:17
  Speaker 1: of them characters had sadly passed away or memories had
• 40:20
  Speaker 1: dimmed sufficiently that it was sometimes hard to piece everything together.
• 40:24
  Speaker 1: But broadly speaking, I have to say, you know, whether
• 40:26
  Speaker 1: it's a black Rock or Dimensional or Vanguard or State Street,
• 40:31
  Speaker 1: you know, people were incredibly helpful. I mean, the journalist
• 40:33
  Speaker 1: lives and dies by their sources, and my book would
• 40:37
  Speaker 1: be a pile of crap if I hadn't gotten so
• 40:39
  Speaker 1: much help from so many individual people, sometimes at these organizations,
• 40:44
  Speaker 1: because sometimes the organization itself might be standoffish, but there
• 40:49
  Speaker 1: might be other people in there that designed. Actually I'm
• 40:51
  Speaker 1: just going to help out anyway, because meantly, most humans
• 40:54
  Speaker 1: are actually kind of helpful. So you know, I cannot
• 40:58
  Speaker 1: fault anybody really, um everything. I'd love people to have
• 41:03
  Speaker 1: opened up their personal email correspondence or letty correspondents going
• 41:06
  Speaker 1: back fifty years, but within you know what was realistic.
• 41:10
  Speaker 1: I don't have any major complaints. Really interesting, all right,
• 41:14
  Speaker 1: So I'm going to share. Look, two things in particular
• 41:18
  Speaker 1: that I was genuinely surprised at in the book. And
• 41:22
  Speaker 1: I kind of knew around these some of things, but
• 41:26
  Speaker 1: I didn't I certainly didn't know all of it. And
• 41:28
  Speaker 1: and the first was just how really incidental the index was,
• 41:37
  Speaker 1: along with the mutual structure to the rise of Vanguard.
• 41:41
  Speaker 1: There's no doubt in my mind Vanguard would have been
• 41:44
  Speaker 1: successful regardless, but there's an incredible amount of just good
• 41:50
  Speaker 1: fortune that turned Vanguard into a behemoth. Is that a
• 41:55
  Speaker 1: fair statement? I think so. I mean, I think maybe
• 41:58
  Speaker 1: the secret here is really that in any success story,
• 42:02
  Speaker 1: we sometimes over attribute it to the brilliance of the
• 42:06
  Speaker 1: people involved, and under a attribute it to just blind
• 42:10
  Speaker 1: luck sometimes. I mean, when I think of my life,
• 42:13
  Speaker 1: I'm sure you can do the same with yours. And
• 42:15
  Speaker 1: we know, you know, luck in serendipity, you can be
• 42:20
  Speaker 1: good at taking advantage of that break. And Jack Bogel
• 42:23
  Speaker 1: was unambiguously brilliant, and like you say, you know he
• 42:26
  Speaker 1: was not going to die of failure almost whatever he did.
• 42:30
  Speaker 1: But a lot of it was timing. I mean literally
• 42:34
  Speaker 1: just imagined that Jack Bogel, the reason why he ended
• 42:37
  Speaker 1: up in investment management was just he happened to be
• 42:39
  Speaker 1: at Princeton's Library and reading out the Fortune magazine that
• 42:42
  Speaker 1: had an article about this hot new invention called the
• 42:46
  Speaker 1: mutual fund, and he thought he was interesting and cool,
• 42:49
  Speaker 1: so he wrote his thesis about that, and that got
• 42:50
  Speaker 1: him his first job at at Wellington's and then he
• 42:54
  Speaker 1: got sacked from Wellington by the people he had merged with.
• 42:57
  Speaker 1: Imagine if he hadn't imagined if Wellingtons had decided, no,
• 43:01
  Speaker 1: we are not going to merge with anybody who We're
• 43:03
  Speaker 1: just going to keep plowing on with our boring conservative
• 43:05
  Speaker 1: funds that looked really unsexy in the Go Go nine
• 43:09
  Speaker 1: sixties when everybody wanted xerox in IBM that it was
• 43:12
  Speaker 1: the third dot com bubble. You know, actually, Wellington's would
• 43:16
  Speaker 1: have looked really good when the dot basically the sixties
• 43:20
  Speaker 1: bubble bursts in the seventies, because they would have looked
• 43:22
  Speaker 1: really steady, and he probably would have retired eventually as
• 43:26
  Speaker 1: an immensely successful but largely anonymous CEO of a major
• 43:31
  Speaker 1: mutual fund company in America, and nobody would really know
• 43:34
  Speaker 1: the name Jack Bogul outside of some corners of finance.
• 43:39
  Speaker 1: So his sacking actually ended up being the making of him.
• 43:43
  Speaker 1: And then even when like when they basic form bangor
• 43:46
  Speaker 1: there's so many englisttle lucky breaks that happened, you know,
• 43:50
  Speaker 1: him just reading an article by Paul Samuelson about indexing
• 43:54
  Speaker 1: when he was sitting there skewing and angry and wondering
• 43:57
  Speaker 1: what he was going to do with this new grand
• 43:59
  Speaker 1: the those grandios be named administrative company called Vanguard. I mean,
• 44:04
  Speaker 1: it was a company that did paperwork from mutual funds
• 44:07
  Speaker 1: called Vanguard. It had to do something sexy, but he
• 44:10
  Speaker 1: didn't know what it was until he read Paul Samuelson
• 44:12
  Speaker 1: an article saying, Hey, I see lots of really interesting
• 44:16
  Speaker 1: pension plans are doing some interesting stuff for and index funds.
• 44:19
  Speaker 1: I wish somebody would do this for ordering investors. What
• 44:22
  Speaker 1: if you hadn't read that article? So it is incredible
• 44:25
  Speaker 1: to think about this and the I love this in
• 44:27
  Speaker 1: all history books, all stories about people, really just how
• 44:31
  Speaker 1: much serendipity plays a role in how events turn out.
• 44:36
  Speaker 1: You notice say that, say the very least, we seem
• 44:39
  Speaker 1: to often be one random left instead of a right
• 44:44
  Speaker 1: away from the world being very different than it turns out. Uh.
• 44:49
  Speaker 1: The second thing I wanted to ask about that I
• 44:52
  Speaker 1: was shocked, having interviewed Bogel once and Jack Brennan twice,
• 44:57
  Speaker 1: is I had no idea about that fallout. That fallout
• 45:02
  Speaker 1: is really something substantial, and you know, obviously neither of
• 45:07
  Speaker 1: them advertise it. Brennan still speaks very glowingly about Bogel
• 45:14
  Speaker 1: and the opportunity he created, but that that really was
• 45:19
  Speaker 1: kind of a surprise, how everybody stopped talking to each other. No,
• 45:25
  Speaker 1: it was you know, people can fall out, and good
• 45:29
  Speaker 1: friends can fall out and maybe stay enemies or don't
• 45:34
  Speaker 1: talk to each other for a long time, but this
• 45:36
  Speaker 1: was far beyond that. And I have to admit that
• 45:39
  Speaker 1: I think I have the broad contours of what happened,
• 45:42
  Speaker 1: but the two main people, Jack Brennan Jack Bogel, have
• 45:45
  Speaker 1: never ever talked, not just publicly about this, but frankly
• 45:50
  Speaker 1: to even people that know them. I spent a lot
• 45:52
  Speaker 1: of time talking to some of the people are very
• 45:54
  Speaker 1: close to both men, and none of them said they
• 45:57
  Speaker 1: really knew the exact details of this schism. But I
• 46:01
  Speaker 1: think it was incredibly painful for both because they were
• 46:04
  Speaker 1: so close. I mean, Jack Brendon played the role that
• 46:07
  Speaker 1: Bogel had played for Walter Morgan at Wellington before the
• 46:10
  Speaker 1: ear Apparent, the boy Wonder, and he was the yeend
• 46:13
  Speaker 1: to Bogel's yang. Bogel was all vision and charisma and
• 46:17
  Speaker 1: statesman like behavior, and Brennan was probably again one of
• 46:21
  Speaker 1: the great underrated CEOs of America, just somebody who everybody
• 46:26
  Speaker 1: I talked to said he was a phenomenal manager, that
• 46:29
  Speaker 1: Vanguard would not nearly be what it is today if
• 46:32
  Speaker 1: he hadn't taken it over at the right time. But yeah,
• 46:36
  Speaker 1: they fell out, and you know I have in the book,
• 46:39
  Speaker 1: you know, the broad contours. It was Bogel's heart failure
• 46:42
  Speaker 1: and he basically couldn't keep working. So he handed the
• 46:45
  Speaker 1: reins over to Brendon and then he got a heart
• 46:49
  Speaker 1: transplant and made him miraculous recovery, and when he came back,
• 46:52
  Speaker 1: essentially thought that he was going to take over the
• 46:55
  Speaker 1: company again. And that ended up with a big battle
• 46:58
  Speaker 1: with the board, and the board sided with Brennan and
• 47:01
  Speaker 1: he was no bringing chicken at that point, right. I
• 47:03
  Speaker 1: mean there was a mandatory retirement age coming up regardless, yes,
• 47:08
  Speaker 1: and the all the mandatory retirement age that Bogel had
• 47:11
  Speaker 1: instituted himself, right, But I think I mean clearly the board,
• 47:16
  Speaker 1: and this is Bogel's argument, the board could have overturned
• 47:20
  Speaker 1: that if they wanted to. The dirty I mean, it's
• 47:22
  Speaker 1: not even does think The obvious secret here that everybody
• 47:26
  Speaker 1: knew at the time and all the press knew. You
• 47:27
  Speaker 1: can see it in the subtext of the writing was
• 47:30
  Speaker 1: that yes, the board could obviously have overturned this, but
• 47:32
  Speaker 1: they thought that Brennan was a better CEO for the
• 47:35
  Speaker 1: Vanguard of that time than Bogel. And you do a
• 47:39
  Speaker 1: nice job in the book explaining that, hey, Brennan could
• 47:43
  Speaker 1: not have founded or launched Vanguard. It needed someone who
• 47:47
  Speaker 1: was more visionary. You know, the parallels today are Steve
• 47:51
  Speaker 1: Jobs as the visionary behind Apple, but Tim Cook is
• 47:55
  Speaker 1: the guy who makes the trains run on time, the
• 47:57
  Speaker 1: the you know, the operations wizard. That parallel was very
• 48:01
  Speaker 1: much there with with Brennan and Bogel, No exactly, And
• 48:06
  Speaker 1: I think it's it's something we see again and again
• 48:08
  Speaker 1: in corporate history that different types of seers work at
• 48:11
  Speaker 1: different points of a company's lifespan. You know, you just
• 48:14
  Speaker 1: think of in personal relationships, who you might have dated
• 48:17
  Speaker 1: and when you're in your when you're eighteen nineteen is
• 48:19
  Speaker 1: not necessary who you maybe should end up married to write,
• 48:23
  Speaker 1: And Brennan was exactly the person that Vanguard needed, and
• 48:27
  Speaker 1: Frankie had been running the place for quite a few
• 48:30
  Speaker 1: years before he formally took over. The tragedy was that
• 48:34
  Speaker 1: they never made up. When Bogel did kiss and make
• 48:37
  Speaker 1: up with the Boston Partners that had fired him decades earlier.
• 48:42
  Speaker 1: He'd read the story about Hamilton and Jefferson and how
• 48:46
  Speaker 1: they made up and was inspired and got in touch
• 48:48
  Speaker 1: with them and they used to hang out together. But
• 48:50
  Speaker 1: he never made up with Brennan. Even on his deathbed
• 48:54
  Speaker 1: when people, some of their friends trying to engineer some
• 48:56
  Speaker 1: sort of reproach more and you refused. And that's tragic. Yeah,
• 49:02
  Speaker 1: that that was the single biggest surprise, uh in the
• 49:04
  Speaker 1: book to me. Also, I want to push back on
• 49:08
  Speaker 1: some of the criticism of indexing, because let me just
• 49:13
  Speaker 1: start off with this Paul Singer quote. We are always
• 49:17
  Speaker 1: amazed by decent ideas and insights which are stretched so
• 49:22
  Speaker 1: far beyond their original version that they become caricatures of
• 49:27
  Speaker 1: themselves and sometimes contrafunctional. So so that's a true statement,
• 49:33
  Speaker 1: except I don't see how this applies to either passive
• 49:38
  Speaker 1: or indexing. What's the beef with indexing other than it's
• 49:43
  Speaker 1: costing Wall Street a lot of fees, it's costing big
• 49:46
  Speaker 1: firms um to have to provide more services at a
• 49:50
  Speaker 1: lower charge. Other than that, Mrs Lincoln, what's the problem
• 49:55
  Speaker 1: with passive? No, it is it's the you know, twenty
• 50:02
  Speaker 1: trillion dollar question now probably right, um, So clearly you
• 50:07
  Speaker 1: know you cannot entirely disentangle the criticism from the fact
• 50:12
  Speaker 1: that this is essentially cheap, simple product being offered in
• 50:16
  Speaker 1: an industry that does not like cheap simple products, plexity
• 50:21
  Speaker 1: and expense. But I think I think sometimes indexing proponents,
• 50:27
  Speaker 1: including men you, right, we sometimes it's too easy to
• 50:31
  Speaker 1: dismiss the criticism as pure sour grapes, right. I think
• 50:36
  Speaker 1: at some point you need at least try to engage
• 50:39
  Speaker 1: on the factual basis. And I think there are some
• 50:42
  Speaker 1: areas that I think are essentially total ball, the criticism
• 50:47
  Speaker 1: or the total ball. And you don't believe that indexing
• 50:52
  Speaker 1: is a communist plot or anti American r No, I
• 50:57
  Speaker 1: do not. I think it's very much. You know, it's
• 50:58
  Speaker 1: a free market. You know, it's most the perfect embodiment
• 51:03
  Speaker 1: of capitalism. But what about the criticism that, hey, all
• 51:07
  Speaker 1: these companies know they're all owned by big indexes, so
• 51:11
  Speaker 1: they're gonna get together and conspire to fix prices. I
• 51:15
  Speaker 1: don't mean the investment companies, but hey, all the banks
• 51:18
  Speaker 1: are owned by the same companies, and all the airlines,
• 51:20
  Speaker 1: and we're going to see price fixing. Yes, so this
• 51:24
  Speaker 1: is the common ownership theory. Um, so it has many
• 51:28
  Speaker 1: passes to it. So funny. Mean, I do think this
• 51:30
  Speaker 1: is one of the thornia ones. I do not think.
• 51:33
  Speaker 1: I am convinced that, you know, these companies, these investment
• 51:36
  Speaker 1: companies are not getting together with portfolio companies because they're
• 51:39
  Speaker 1: a black rock and Vanguard own yes, a big chunk
• 51:42
  Speaker 1: of very major bank in American every major airline, and
• 51:44
  Speaker 1: every major hotel group and telling them to essentially fix prices.
• 51:49
  Speaker 1: Uh why why wouldn't they do though? Isn't there a
• 51:52
  Speaker 1: ton of upside for them in in their struggling businesses?
• 51:56
  Speaker 1: Would they want to engage in illegal antitrust behavior because
• 52:00
  Speaker 1: they're all doing so poorly? I mean, the theme the
• 52:04
  Speaker 1: thesis could be one of the stupidest ideas I've ever
• 52:07
  Speaker 1: heard in either of finance or legal that these three giant,
• 52:12
  Speaker 1: wildly successful companies who couldn't care less about the cost
• 52:16
  Speaker 1: of hotels or airline tickets are somehow can to engage
• 52:20
  Speaker 1: in a conspiracy to fix prices. I don't like. I'm
• 52:25
  Speaker 1: looking for some rationality there, and it's just talk about
• 52:29
  Speaker 1: flinging stuff against the wall to see what sticks well.
• 52:32
  Speaker 1: I mean, it's brawling it down. It's about whether incentives matter.
• 52:37
  Speaker 1: And I think that we can all agree that incentives
• 52:40
  Speaker 1: in some form of fashion do matter in how we
• 52:42
  Speaker 1: structure the moderate economy. And I think I completely agree
• 52:47
  Speaker 1: that there is no cut how behavior whatsoever going on.
• 52:51
  Speaker 1: And I think the the example that the perfect example
• 52:54
  Speaker 1: that people have kind of shown in data that kind
• 52:56
  Speaker 1: of struggles in the face of common and this common
• 53:00
  Speaker 1: sense is airlines. The idea that airlines you could see that,
• 53:04
  Speaker 1: you know, whether it's great cross holding between investment managers
• 53:07
  Speaker 1: and airlines. They seem to compete less aggressively. The problem is,
• 53:10
  Speaker 1: of course, there's hard in industry that's gone more serily
• 53:13
  Speaker 1: bankrupt for half a century than airlines. Massive consolidation. What
• 53:18
  Speaker 1: are they're like for what are their four major carriers today?
• 53:21
  Speaker 1: They used to be fourteen. It's just they they you know,
• 53:26
  Speaker 1: that's the exception that proves the rule. They had to
• 53:29
  Speaker 1: use airlines, but they ignored technology, they ignored finance, they
• 53:33
  Speaker 1: ignored consumers. There's a million other sectors that they had
• 53:38
  Speaker 1: to ignore because there's no evidence. So almost randomly, you know,
• 53:43
  Speaker 1: airlines have never been a good business, at least dating
• 53:46
  Speaker 1: back to kitty hawk, And so think about all the
• 53:49
  Speaker 1: airline companies that have gone belly up. It shows you
• 53:53
  Speaker 1: if you're gonna use airlines as your example, and you
• 53:56
  Speaker 1: can ignore technology or consumer goods or fine, as you've
• 54:01
  Speaker 1: already lost, you've admitted your your thesis is intellectually bankrupt. Well,
• 54:07
  Speaker 1: I mean, so we need to split out the theory
• 54:10
  Speaker 1: from the evidence. And I agree that the reason why
• 54:12
  Speaker 1: they use airline is purely that they had very granular
• 54:15
  Speaker 1: data on the costs of individual lines and competition between
• 54:20
  Speaker 1: hubs and so on. So this is what they had
• 54:22
  Speaker 1: good data for. The theory is and again this is
• 54:26
  Speaker 1: something that you know I can I am very much
• 54:28
  Speaker 1: on the fence on and probably leaning through the all skepticism.
• 54:31
  Speaker 1: But the idea that if you are a CEO of
• 54:34
  Speaker 1: a company and you know your major shareholders are also
• 54:39
  Speaker 1: the major shareholders and all your competitors, does that somehow
• 54:43
  Speaker 1: even subconsciously dent your winningness to compete aggressively even by
• 54:49
  Speaker 1: a little bit. Now, I think there are all sorts
• 54:53
  Speaker 1: of other incentives embedded in a CEO job. I mean,
• 54:57
  Speaker 1: just the fact that obviously they comp is usually time
• 55:00
  Speaker 1: to share price. So if competition makes sense, then they
• 55:04
  Speaker 1: will compete aggressively. But it is within I think theoretical
• 55:08
  Speaker 1: possibility that if you are the THEO of a company
• 55:13
  Speaker 1: and your major shareholders are all major shareholders in your rivals,
• 55:17
  Speaker 1: that you might be slightly on the margin less inclined
• 55:21
  Speaker 1: to compete aggressively. That is at least possible. But I
• 55:24
  Speaker 1: see these concerns is more a manifestation of this. Why
• 55:28
  Speaker 1: the concern that the big three, State three, black Rock,
• 55:32
  Speaker 1: and Vanguard, but primarily Vanguard and black Rock are just
• 55:36
  Speaker 1: so enormously gigantic now and I'm just going to get
• 55:39
  Speaker 1: bigger and bigger. And this was something that bothered even
• 55:42
  Speaker 1: Jack Bogel before he passed away. So so to put
• 55:46
  Speaker 1: pieces of pushback on this and you could see you
• 55:48
  Speaker 1: I've spent some time thinking and writing about this. The
• 55:51
  Speaker 1: first is everybody wants to talk about the fund industry,
• 55:56
  Speaker 1: but that's a tiny percentage of the overall assets. Have
• 56:00
  Speaker 1: more than half fifty something per cent of mutual funds
• 56:04
  Speaker 1: and ETFs are passive, not active. But you know, that's
• 56:07
  Speaker 1: a twenty trillion dollar industry out of a hundred plus
• 56:12
  Speaker 1: trillion dollars. The vast majority of stocks, bonds, and other
• 56:17
  Speaker 1: assets are still owned actively outside of funds. So within
• 56:23
  Speaker 1: that little group, you're gonna ignore the balance of the
• 56:27
  Speaker 1: ownership structure of your that that's what makes this a
• 56:30
  Speaker 1: fever dream of of law professors and and not reality.
• 56:36
  Speaker 1: I mean, the reality is most equities are held actively,
• 56:42
  Speaker 1: majority of funds are passive, but funds are a minority
• 56:47
  Speaker 1: of of investing dollars. Tell me where that's wrong. No, No,
• 56:52
  Speaker 1: I agree, And like I said, I'm the reason why
• 56:55
  Speaker 1: I said I'm still on the fence rather than fully
• 56:58
  Speaker 1: kind of shrugging off this there it's not just a
• 57:01
  Speaker 1: concern about where we are now, but where we are heading, right,
• 57:05
  Speaker 1: I mean, given the economics of indexing, black Rock, State Street,
• 57:10
  Speaker 1: and Vanguard are already you know, the biggest and the
• 57:14
  Speaker 1: cheapest providers of index funds and in funds in general.
• 57:17
  Speaker 1: And this is a an oligopy that benefits us in
• 57:19
  Speaker 1: the form of cheaper investments. But they are now account
• 57:22
  Speaker 1: for around the quarter of all vote casts on average
• 57:26
  Speaker 1: in the sure Yeah, and with the next couple of decades,
• 57:32
  Speaker 1: we're going to be colosted given the growth rates. And
• 57:35
  Speaker 1: this is something Jack Bogel not exactly you know, an
• 57:39
  Speaker 1: enemy of indexing said that this kind of concentration would
• 57:42
  Speaker 1: probably not be in the national interest. So I see
• 57:45
  Speaker 1: that the common ownership theory is just one part of
• 57:49
  Speaker 1: a multiheaded hydra. That is the the gigantism that the
• 57:55
  Speaker 1: the inexorable logic of index funds and the economics of
• 57:58
  Speaker 1: index funds means that the big will become bigger, and
• 58:02
  Speaker 1: at some point we are going to be in a
• 58:05
  Speaker 1: world where essentially they control the majority of most major
• 58:08
  Speaker 1: companies in America and even in the world. But to
• 58:12
  Speaker 1: get there we have to ignore. To get there, we
• 58:15
  Speaker 1: have to ignore. The past two years have not been
• 58:21
  Speaker 1: about indexing, have not been about passive investment. It's been
• 58:26
  Speaker 1: about memestocks and robin hood and actively trading. And by
• 58:31
  Speaker 1: this cell that you know, the mind share that active
• 58:37
  Speaker 1: um investing and trading has grabbed from passive since the
• 58:43
  Speaker 1: financial lockdown has begun, has told you that half the
• 58:47
  Speaker 1: world are our closet day traders just waiting for an
• 58:52
  Speaker 1: opportunity to come out of there um spidy holes and
• 58:56
  Speaker 1: uh start trading. How do you explain the rise of
• 59:01
  Speaker 1: everything we've seen over the past two years in the
• 59:04
  Speaker 1: face of efficiency and low cost of of the passive
• 59:09
  Speaker 1: side of the world. Well, fundamentally, I think hope springs eternal.
• 59:15
  Speaker 1: Everybody thinks and wants to try and beat the index.
• 59:18
  Speaker 1: Everybody wants to get rich. And we've seen throughout history
• 59:21
  Speaker 1: these these manias, sometimes the last for a few weeks
• 59:24
  Speaker 1: in the weird esoteric corners of the market. Sometimes they've
• 59:27
  Speaker 1: been you know, countrywide or even global, such as the
• 59:30
  Speaker 1: dot com bubble famously, and over time they they tend
• 59:35
  Speaker 1: to end always the same way, in a massive burst,
• 59:38
  Speaker 1: and people get their faces ripped off, and there will
• 59:41
  Speaker 1: be congressional hearings and so on. I think this is
• 59:43
  Speaker 1: a little bit different in that there are secular changes
• 59:47
  Speaker 1: in the financial system, such as free trading, gamified apps,
• 59:51
  Speaker 1: social media. That means that this is probably going to
• 59:54
  Speaker 1: be a little bit different at some point that things
• 59:56
  Speaker 1: will settle down, but it's not going to settle band
• 59:58
  Speaker 1: to what we saw before. But even this year, a
• 1:00:01
  Speaker 1: year that has I agree, in the past eighteen months
• 1:00:04
  Speaker 1: characterized and largely by the the rise of retail trading
• 1:00:09
  Speaker 1: and active funds have actually taken in billions of bowls
• 1:00:12
  Speaker 1: this year. It's more it's almost the exception that proves
• 1:00:15
  Speaker 1: the rule that even in a year where this has
• 1:00:17
  Speaker 1: been going on and active has had inflows for the
• 1:00:19
  Speaker 1: first time in over a decade. Essentially, hundreds of billions
• 1:00:23
  Speaker 1: of dollars have gone out every year from active funds,
• 1:00:26
  Speaker 1: year after year after year after year, essentially for fifty
• 1:00:29
  Speaker 1: and sixteen years since the dot com bubble, and this
• 1:00:32
  Speaker 1: year they've got taken in. There were I think a
• 1:00:33
  Speaker 1: hundred fifty billions. Passive is still taken in. I think
• 1:00:37
  Speaker 1: close to five or six hundred billion dollars, And if
• 1:00:41
  Speaker 1: include market gains, we're still saying it's it's gaining market share,
• 1:00:44
  Speaker 1: it's growing, and it's broadening out. Index bond funds, passive
• 1:00:49
  Speaker 1: bond ETFs. They are now growing. So what was primarily
• 1:00:53
  Speaker 1: an equity phenomenon is now gaining groups, setting routs and
• 1:00:57
  Speaker 1: far broader swaths of markets. So definitely this year is
• 1:01:02
  Speaker 1: all about active, but we know that the data will
• 1:01:04
  Speaker 1: show that the majority of active managers at the end
• 1:01:08
  Speaker 1: of one will have underperformed, and over the ten years,
• 1:01:12
  Speaker 1: past ten years, the vast majority of them will underperform
• 1:01:15
  Speaker 1: and the money will keep shifting because a lot of
• 1:01:17
  Speaker 1: this is an autopilot target date return funds, pension funds,
• 1:01:20
  Speaker 1: let know the data. They will just put money in
• 1:01:23
  Speaker 1: cheap index funds and forget about it, essentially and do
• 1:01:26
  Speaker 1: better than most of the active traders out there, who sadly,
• 1:01:29
  Speaker 1: I think, you know, at some point some of them
• 1:01:31
  Speaker 1: will become millionaires, but most of them will end up
• 1:01:34
  Speaker 1: losing a lot of money and it will be a
• 1:01:36
  Speaker 1: very sad denial. More. Yeah, farmo is a big deal.
• 1:01:40
  Speaker 1: And as much as people like saving money and being
• 1:01:44
  Speaker 1: passive and guaranteeing themselves some beta, you know, the idiot
• 1:01:49
  Speaker 1: next door buys some hard stock or some crypto coin
• 1:01:54
  Speaker 1: and makes a ton of money and suddenly everybody thinks
• 1:01:56
  Speaker 1: their day traders, So let's talk. Let's talk a little
• 1:02:00
  Speaker 1: bit about um. You mentioned smart data and factor investing
• 1:02:05
  Speaker 1: seems to have been struggling over the past couple of years.
• 1:02:09
  Speaker 1: Value oriented funds like d f A you have seen
• 1:02:11
  Speaker 1: a performed performance lag value has underperformed growth for more
• 1:02:17
  Speaker 1: than a decade. How do you put that into context?
• 1:02:20
  Speaker 1: We we thought we saw a factor investing and the
• 1:02:24
  Speaker 1: farmer French factors as as a sea change. Is this
• 1:02:28
  Speaker 1: going to turn out to be a temporary phenomena or
• 1:02:32
  Speaker 1: or or is this the underperformance temporary. Uh, it's it's
• 1:02:38
  Speaker 1: one of my favorite themes. I mean, apart from some
• 1:02:41
  Speaker 1: past investing, it's the quant investing is one of my
• 1:02:44
  Speaker 1: main favorite subjects out there. I think, I mean katy.
• 1:02:48
  Speaker 1: Factor investing has fallen out of favor primarily because, I mean,
• 1:02:52
  Speaker 1: some factors have done well. Momentum has done wealth quite
• 1:02:54
  Speaker 1: a while, but the big mainstream ones like value especially
• 1:02:57
  Speaker 1: has had a awful run. I've seen studies that show
• 1:03:01
  Speaker 1: it's done. The worst is basically financial records began essentially
• 1:03:06
  Speaker 1: like two three hundred years ago UM and most most
• 1:03:10
  Speaker 1: notably a lot of quant hedge funds. You know, the
• 1:03:13
  Speaker 1: more sophisticated complex strategies also did suffer a lot in
• 1:03:19
  Speaker 1: because we entered an entirely newmarket regime and models that
• 1:03:22
  Speaker 1: were trained on existing financial data essentially, you know, data
• 1:03:27
  Speaker 1: that that didn't have any pandemics in them um discontackle.
• 1:03:33
  Speaker 1: So they they fizzled. But I think the broader phenomenon
• 1:03:37
  Speaker 1: or factor investing in quant investing, certainly it's still alive
• 1:03:40
  Speaker 1: and well because fundamentally, I do believe the data on
• 1:03:43
  Speaker 1: these factors is pretty robust. The problem is, I think
• 1:03:48
  Speaker 1: that when it comes to the factor stuff. I think
• 1:03:51
  Speaker 1: for a lot of order investors, the discipline needed to
• 1:03:54
  Speaker 1: hold onto them is so enormous that the vast majority
• 1:03:58
  Speaker 1: of people should stick to boring play dumb beta, as
• 1:04:02
  Speaker 1: you know, one might call it, because essentially, yes, over
• 1:04:06
  Speaker 1: a twenty thirty year period, you might do better in
• 1:04:08
  Speaker 1: a value fund. But you know, when you've got a
• 1:04:11
  Speaker 1: ten fifteen year draw down like we've had now the
• 1:04:15
  Speaker 1: long run, you know, in the long run, we're all dead, right,
• 1:04:18
  Speaker 1: it just becomes so difficult to hold on. The reason
• 1:04:20
  Speaker 1: why these factors work is because on the drawdowns to
• 1:04:24
  Speaker 1: large extent, West Gray famously said even God couldn't stay
• 1:04:28
  Speaker 1: invested in a deep value fund. No, I think, I think,
• 1:04:34
  Speaker 1: I think God would have bailed out a few years ago.
• 1:04:36
  Speaker 1: I think it's only a few very dedicated value people
• 1:04:40
  Speaker 1: and Cliff Fastness left standing and that in that trade.
• 1:04:42
  Speaker 1: So good year, now, right? Yeah? No, this year, This
• 1:04:45
  Speaker 1: year has been good for both both some value players
• 1:04:48
  Speaker 1: and some of the quant funds. Let's talk about that
• 1:04:51
  Speaker 1: a second. You you cover quant funds in the f
• 1:04:55
  Speaker 1: T and it kind of seems like, I don't know,
• 1:04:57
  Speaker 1: the past eighteen months twenty four months cover Ridge news
• 1:05:00
  Speaker 1: flow on it has really died down, perhaps following some
• 1:05:05
  Speaker 1: softer performance of the big quants. What's going on in
• 1:05:09
  Speaker 1: the world a quant well, I think broadly speaking it
• 1:05:14
  Speaker 1: because you know I talked about the cultural journalism, right,
• 1:05:17
  Speaker 1: I mean, we knew is better than old, bad is
• 1:05:20
  Speaker 1: better than good, and kind of nothing to write home
• 1:05:23
  Speaker 1: about is nothing to write about, essentially. So when quant
• 1:05:28
  Speaker 1: was considered hot and sexy and fun and that's what
• 1:05:31
  Speaker 1: where all the money was going, there was naturally a
• 1:05:33
  Speaker 1: lot of coverage on that. And when quant funds had
• 1:05:36
  Speaker 1: a terrible time in twenty a lot of them that famously,
• 1:05:40
  Speaker 1: even Renaissance, you know that the big daddy of the
• 1:05:43
  Speaker 1: quant world had a terrible years in many of its
• 1:05:46
  Speaker 1: public funds. UM people wrote a lot about that, including me.
• 1:05:49
  Speaker 1: But now it's kind of just generally a story of
• 1:05:52
  Speaker 1: improving returns. Nothing kind of sensational, nothing that's going to
• 1:05:57
  Speaker 1: make the front page of the journal, war or the ft,
• 1:06:00
  Speaker 1: but you know, it's just better across the board a
• 1:06:02
  Speaker 1: qu are. There's a big factor quant fund is doing
• 1:06:05
  Speaker 1: better as well. But for the reason why I spent
• 1:06:08
  Speaker 1: so much time thinking about this and covering about this,
• 1:06:11
  Speaker 1: it's just fundamentally whether way our investor is going to
• 1:06:16
  Speaker 1: be using more technology to invest more systematically in the
• 1:06:20
  Speaker 1: future or less, And I think the direction of travel
• 1:06:23
  Speaker 1: is just clear. So that's why I spent lots of
• 1:06:27
  Speaker 1: time on this, because if you want to understand how
• 1:06:29
  Speaker 1: mark is actually functioned today, let's learn how they are
• 1:06:32
  Speaker 1: going to function in the decades time. You need to
• 1:06:35
  Speaker 1: understand the quant ecosystem. So I'm just trying to go
• 1:06:38
  Speaker 1: where the puck is heading. And I think we are
• 1:06:40
  Speaker 1: going to see convergence as more and more discretionary people
• 1:06:44
  Speaker 1: kind of become more quantity and some of the quants
• 1:06:47
  Speaker 1: even add a bit of a discretionary overlay that this
• 1:06:50
  Speaker 1: kind of always a little bit blurry line between systematic
• 1:06:53
  Speaker 1: and discretionary investing is is going to get washed out
• 1:06:56
  Speaker 1: a little bit, I think in the coming ten years
• 1:06:58
  Speaker 1: or so. Let's tackle a bit about skating to where
• 1:07:01
  Speaker 1: the park might be going. You briefly mention um direct indexing.
• 1:07:07
  Speaker 1: What do you think about this? It's small, but it's
• 1:07:10
  Speaker 1: rapidly growing and it's a very interesting take on the
• 1:07:14
  Speaker 1: concept of passive investing. No, there's a fascinating trend and
• 1:07:19
  Speaker 1: I do actually think it has a great future. People
• 1:07:22
  Speaker 1: clearly do want customization. I mean, I might make it
• 1:07:26
  Speaker 1: like it in many areas as well. We've got to
• 1:07:29
  Speaker 1: use it some many other parts of life. That makes
• 1:07:31
  Speaker 1: perfect sense that this is coming to indexing as well.
• 1:07:34
  Speaker 1: But I still think that the vast majority of people
• 1:07:38
  Speaker 1: still want simplicity and especially in their financial products. So
• 1:07:43
  Speaker 1: you and I, you know, slightly moved, slightly more interested
• 1:07:47
  Speaker 1: in these things than the average punch on the street.
• 1:07:51
  Speaker 1: Might want to fiddle around with a broad let a
• 1:07:53
  Speaker 1: a Vanguard total stock market fund and take away the
• 1:07:56
  Speaker 1: companies that might do stuff we find reprehensible. Or maybe
• 1:08:01
  Speaker 1: American Airlines dumped you from a flight and you feel
• 1:08:03
  Speaker 1: angry about that. Or you might want to cut out
• 1:08:06
  Speaker 1: your employer, right because you don't want to have double
• 1:08:09
  Speaker 1: economic risk or expise working there. Yeah, so that makes
• 1:08:14
  Speaker 1: perfect sense. But the vast majority of people don't want
• 1:08:16
  Speaker 1: to fiddle around with this, right, I mean, who likes
• 1:08:19
  Speaker 1: doing their taxes? Nobody? I mean, so I can see
• 1:08:23
  Speaker 1: it as a really useful tool for a lot of
• 1:08:24
  Speaker 1: financial advisors, but most people are still going to be
• 1:08:27
  Speaker 1: basically better off and prefer buying broad index fund. So
• 1:08:31
  Speaker 1: I see this it can easily become a trigging stolar thing.
• 1:08:35
  Speaker 1: But I do not see it as the truth of
• 1:08:37
  Speaker 1: indexing three point oh as some people see it, nor
• 1:08:40
  Speaker 1: as a viable, genuine competitor in size and scale to
• 1:08:46
  Speaker 1: ETF and some traditional index mutual funds. So there's a
• 1:08:49
  Speaker 1: huge trend. They're definitely going to grow, But right now
• 1:08:53
  Speaker 1: I feel some of the hype around it is probably
• 1:08:57
  Speaker 1: people are getting a little bit over their skis. Yeah,
• 1:09:00
  Speaker 1: I can see that that makes some sense. I'm intrigued
• 1:09:04
  Speaker 1: by it, but I want to get your take, so
• 1:09:06
  Speaker 1: I only have you for a fine amount of time.
• 1:09:09
  Speaker 1: Let's jump to some of our favorite questions that we
• 1:09:13
  Speaker 1: ask all of our guests, starting with tell us what
• 1:09:16
  Speaker 1: you're streaming these days? Give us your favorite Netflix, Amazon podcast?
• 1:09:21
  Speaker 1: What's keeping you entertained during lockdown? Well, I mean, I
• 1:09:25
  Speaker 1: just had our third child, so I have to meet
• 1:09:28
  Speaker 1: my sort of entertainment time budget has been a little
• 1:09:33
  Speaker 1: bit destroyed lately. But during Lockdown, one of my my
• 1:09:38
  Speaker 1: paying guilty pleasures when I actually did have a little
• 1:09:40
  Speaker 1: bit of time between work, childcare, and and writing the book,
• 1:09:45
  Speaker 1: was actually rewatching Buffy, the Vampire Slayer series from my teens. Okay,
• 1:09:50
  Speaker 1: and I thought it held up really well. It was
• 1:09:52
  Speaker 1: quite a lot of fun. Um. So yeah, I still
• 1:09:56
  Speaker 1: recommend that to people. It's still very it was a nostalgic,
• 1:10:00
  Speaker 1: guilty pleasure. UM. I recently watched Turning Point, the nine
• 1:10:03
  Speaker 1: and eleven Netflix documentary, which was excellent. I knew a
• 1:10:07
  Speaker 1: lot of the history of again, but something sometimes putting
• 1:10:10
  Speaker 1: it all in one place together in a nice bowl
• 1:10:13
  Speaker 1: just really worked. I thought that series was really good. UM.
• 1:10:16
  Speaker 1: I watched the low Key Marble series, which was entertaining.
• 1:10:19
  Speaker 1: I mean, I've got kids, so I had to get
• 1:10:21
  Speaker 1: Disney plus UM. On podcasts, obviously Masters of Business. I
• 1:10:26
  Speaker 1: hear great things about it. You've got fantastic guests, especially today.
• 1:10:30
  Speaker 1: But New Bizarre it's a podcast started by two of
• 1:10:34
  Speaker 1: my former colleagues at the FT. I've listened a few
• 1:10:36
  Speaker 1: episodes of that. That sounds really promising. I like a
• 1:10:39
  Speaker 1: lot of the economic podcasts. I tend to be more
• 1:10:43
  Speaker 1: oppositistic when it comes to the podcast, So when there
• 1:10:46
  Speaker 1: is a specific topic or guest that I really want
• 1:10:48
  Speaker 1: to get into, I don't have it on in the background.
• 1:10:51
  Speaker 1: It's more for specific reasons. Yeah, and then yes, essentially, yes,
• 1:10:57
  Speaker 1: I'm constantly entertained by the antics of my children, which
• 1:11:01
  Speaker 1: never seemed to end that maybe will at some point
• 1:11:04
  Speaker 1: and obviously start missing it. Then tell us about your mentors.
• 1:11:07
  Speaker 1: Who are the folks who helped shape your career. I
• 1:11:10
  Speaker 1: wouldn't mentor is such a big word, and I don't
• 1:11:13
  Speaker 1: have to downplay their their importance, but maybe, um, who
• 1:11:17
  Speaker 1: are the influential people who affected you? Yeah, well, let's
• 1:11:21
  Speaker 1: say three. So Paul McNamara was my my boss at
• 1:11:25
  Speaker 1: my financial journalism job covering Islamic finance in the Middle East.
• 1:11:29
  Speaker 1: He was a very acerbic guy and I loved them
• 1:11:32
  Speaker 1: to bits, and he gave me my first job and
• 1:11:33
  Speaker 1: I learned a lot from him, mostly just that sense
• 1:11:36
  Speaker 1: of that actually enjoying the job because this held a
• 1:11:38
  Speaker 1: lot of fun. When I joined Bloomberg News, I had
• 1:11:42
  Speaker 1: a guy called Chris Kirkham was my team leader, and
• 1:11:44
  Speaker 1: he was phenomenal. He was also stardly, even more on
• 1:11:48
  Speaker 1: the on the gruff and grumpy side of the spectrum,
• 1:11:50
  Speaker 1: but just a phenomenal editor, a really great guy who
• 1:11:55
  Speaker 1: you know, Bloomberg can be a little bit tough at times,
• 1:11:58
  Speaker 1: and he knew the right time to yell at you.
• 1:12:01
  Speaker 1: And they're the right time to sort of take a
• 1:12:03
  Speaker 1: metaphorical armor on your shoulder. I remember especially one time
• 1:12:06
  Speaker 1: I made a genuine screw up, like a huge mistake
• 1:12:10
  Speaker 1: and it was and he didn't yell and me. He said, look,
• 1:12:12
  Speaker 1: I think you know you made a mistake, so I'm
• 1:12:14
  Speaker 1: not going to say anything more. Ground have a drink
• 1:12:16
  Speaker 1: and expense it and we'll speak tomorrow. And I really
• 1:12:19
  Speaker 1: appreciated that. And at the FT, my first editor, the
• 1:12:23
  Speaker 1: guy that had to have beat my copy into FT
• 1:12:25
  Speaker 1: shape was a guy called James Drummond, again very much
• 1:12:29
  Speaker 1: on the on the grumpy side of the spectrum, but
• 1:12:32
  Speaker 1: he was great. And I've learned from so many people
• 1:12:35
  Speaker 1: and John authors, Jillian Te, James Macintosh, through phenomenal colleagues too,
• 1:12:40
  Speaker 1: of which sadly are with the FT anymore. You know,
• 1:12:42
  Speaker 1: they've gone to the enemies at Boomberg and the journal
• 1:12:46
  Speaker 1: Um and just so many people outwhere in the industry,
• 1:12:49
  Speaker 1: and it is really areas where you can just learn
• 1:12:52
  Speaker 1: so much from people like Jason's I got the journal right,
• 1:12:55
  Speaker 1: I mean, a phenomenal journalist still that just churns out
• 1:12:58
  Speaker 1: stuff that every time I say, I wish I had
• 1:13:01
  Speaker 1: written that, so I think that's that's my mentors are
• 1:13:04
  Speaker 1: all the people I read and love their work. Essentially.
• 1:13:07
  Speaker 1: That's the key line is when when you see something
• 1:13:10
  Speaker 1: you say, damn, I wish I wrote that. That's how
• 1:13:13
  Speaker 1: you know someone's doing really, really good work. Um, let's
• 1:13:17
  Speaker 1: talk about everybody's favorite question reading. What are some of
• 1:13:21
  Speaker 1: your favorite books and what are you reading recently? Well,
• 1:13:25
  Speaker 1: I've got a backlog because of the work related to
• 1:13:28
  Speaker 1: my book. Given all the work in that, that that was
• 1:13:32
  Speaker 1: the one thing that just had to end, like any
• 1:13:34
  Speaker 1: sort of pleasure reading, But I picked up again The
• 1:13:36
  Speaker 1: Emperor of All Maladies, book on the history of cancer,
• 1:13:40
  Speaker 1: came out over a decade ago. My wife had already
• 1:13:43
  Speaker 1: read it, but I've wanted to read it for a
• 1:13:45
  Speaker 1: long time, so I finally got around to us reading that.
• 1:13:48
  Speaker 1: I'm almost done. So I've also started reading The World
• 1:13:51
  Speaker 1: for Sale, by two former colleagues, history of a busy
• 1:13:54
  Speaker 1: commodity trading. It's absolutely fascinating. I'm very angry at Jack
• 1:14:00
  Speaker 1: Farcie and having a blast for leaving the Ft and
• 1:14:02
  Speaker 1: joining the evil Bloomberg death Star, but it's a phenomenal books.
• 1:14:08
  Speaker 1: I'm enjoying that. There are many fifty in really really
• 1:14:12
  Speaker 1: quite interesting. What sort of advice would you have for
• 1:14:16
  Speaker 1: a recent college grad who was interested in a career
• 1:14:21
  Speaker 1: uh in financial journalism? Who financial journalism is hard? I mean,
• 1:14:28
  Speaker 1: read a lot, a lot, and maybe develop a niche
• 1:14:33
  Speaker 1: that that you know really well, because that can help
• 1:14:38
  Speaker 1: get you your first job. Uh. And you know this
• 1:14:42
  Speaker 1: is advice that lots of trolls give all journalists on
• 1:14:44
  Speaker 1: the internet. But you know, learning to code or at
• 1:14:48
  Speaker 1: least understanding some of those fives is incredibly helpful. The
• 1:14:52
  Speaker 1: days when journalism used to hoover up so humanities graduates
• 1:14:59
  Speaker 1: I think are over. I think the value of a
• 1:15:02
  Speaker 1: journalism degree is primarily in the piece of paper saying
• 1:15:07
  Speaker 1: that you are a journalism graduate, but in practice it
• 1:15:10
  Speaker 1: is pretty minimal compared to the practical experience. I'd rather
• 1:15:14
  Speaker 1: have somebody who, let's say, studied finance, took an internship
• 1:15:18
  Speaker 1: at a bank or an investment fund, absolutely hated it,
• 1:15:22
  Speaker 1: and try to get an internship at the FT or
• 1:15:25
  Speaker 1: Bloomberg or the journal I think that's far better than having,
• 1:15:28
  Speaker 1: you know, studied as I did. Sadly journalism and history
• 1:15:32
  Speaker 1: and the international relations. It's worked out for me, but
• 1:15:35
  Speaker 1: it's going to become progressively harder. I think for the
• 1:15:38
  Speaker 1: next generations of journalists, and I would I mean, this
• 1:15:41
  Speaker 1: is also well trodden ground, but we desperately need more
• 1:15:45
  Speaker 1: diversity in journalism. So I joke a lot that I'm
• 1:15:49
  Speaker 1: the Norwegian diversity candidate at the FT. We don't. We
• 1:15:52
  Speaker 1: only have one other journal and Norwegian journalists, but um,
• 1:15:57
  Speaker 1: we need more people from all walks of life applying
• 1:16:01
  Speaker 1: and thinking about careersing financial journalism. So if anybody's listening
• 1:16:05
  Speaker 1: to this and it's mildly curious, then drop me a line.
• 1:16:09
  Speaker 1: I will jump on the phone our slide with anybody,
• 1:16:13
  Speaker 1: because that's something I care quite a lot about. And
• 1:16:16
  Speaker 1: our final question, what do you know about the world
• 1:16:19
  Speaker 1: of investing, finance, journalism, indexing, quantitative investing today that you
• 1:16:26
  Speaker 1: wish you knew when you were first getting started twenty
• 1:16:29
  Speaker 1: or so years ago. Mm hmm. Well, aside from maybe
• 1:16:33
  Speaker 1: if I had a time machine I traveled back and
• 1:16:35
  Speaker 1: tell myself to buy long dated out of money, Apple calls, well,
• 1:16:39
  Speaker 1: that's a cheap. This isn't a This is less a
• 1:16:42
  Speaker 1: time travel question and more a process question. What what
• 1:16:46
  Speaker 1: what have you incorporated into your process now that would
• 1:16:51
  Speaker 1: have been helpful to do, you know, years ago. Uh,
• 1:16:57
  Speaker 1: there are certain things I've always been good at, like
• 1:16:58
  Speaker 1: taking notes, keeping notes, writing stuff down. There's always been
• 1:17:02
  Speaker 1: a fairly handy mnemonic tool for me. It helps me
• 1:17:05
  Speaker 1: remember things that once I've written something down, I remember
• 1:17:08
  Speaker 1: it pretty well. And I see quite a lot of
• 1:17:10
  Speaker 1: people that aren't good at writing stuff down. And if
• 1:17:12
  Speaker 1: it works electronic, no otherwise do that. But that's not
• 1:17:15
  Speaker 1: the advice I give to myself. I'd say, and this
• 1:17:18
  Speaker 1: is very sad and tragic, but very cynical and useful,
• 1:17:24
  Speaker 1: which somebody told me this, um, and it worked in
• 1:17:27
  Speaker 1: many professions. But every job is sales. Yeah, it's it's
• 1:17:33
  Speaker 1: the dirty truth that people don't want to always say.
• 1:17:36
  Speaker 1: But every job in sales is yet sales. And when
• 1:17:39
  Speaker 1: you're young, everybody has this realization. Some people realize it
• 1:17:42
  Speaker 1: in the mid twenties, some people in their thirties, maybe
• 1:17:45
  Speaker 1: some people later. But you always think that, you know,
• 1:17:47
  Speaker 1: good work will always get recognized, and it can. Again,
• 1:17:50
  Speaker 1: you can be lucky or you can be unlucky. But
• 1:17:52
  Speaker 1: every job is sales. Um and that is certainly not
• 1:17:55
  Speaker 1: something I appreciate for a long time. Um, And yeah,
• 1:18:00
  Speaker 1: it's It's not the fun, sexy, inspiring piece of advice,
• 1:18:04
  Speaker 1: but it's probably something that more people could do with Harry.
• 1:18:08
  Speaker 1: Thanks Robin for being so generous with your time. We
• 1:18:11
  Speaker 1: have been speaking with Robin Wigglesworth. He is the financial
• 1:18:15
  Speaker 1: correspondent for The Financial Times and author of Trillions, a
• 1:18:19
  Speaker 1: new book on indexing and passive investing. If you enjoy
• 1:18:23
  Speaker 1: this conversation, well be sure and check out any of
• 1:18:26
  Speaker 1: the nearly four hundred prior discussions we've had over the
• 1:18:30
  Speaker 1: past is it seven years? Yes? Since you can find
• 1:18:34
  Speaker 1: that at Spotify, iTunes, wherever you get your podcasts. We
• 1:18:40
  Speaker 1: love your comments, feedback and suggestions right to us at
• 1:18:43
  Speaker 1: m IB podcast at Bloomberg dot net. Sign up for
• 1:18:47
  Speaker 1: my daily reads at Rit Halts dot com. Check out
• 1:18:50
  Speaker 1: my weekly column at Bloomberg dot com slash Opinion. Follow
• 1:18:54
  Speaker 1: me on Twitter at Rit Halts. I would be remiss
• 1:18:57
  Speaker 1: if I did not thank the craft team that helps
• 1:19:00
  Speaker 1: with these conversations together each week. My director of research
• 1:19:04
  Speaker 1: is Michael Batnick, My producer is Harris Wald. My project
• 1:19:09
  Speaker 1: manager is a tick of Alban I'm Barriers Hubens in
• 1:19:13
  Speaker 1: into Master's Business on Bloomberg Radio