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Vanguard’s Plateau Is Exactly What Jack Bogle Wanted · Trillions

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  Speaker 1: Bloomberg Audio Studios.
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  Speaker 2: Podcasts, radio, news. Bogle in his office in probably 10
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  Speaker 2: years ago, and he wrote a book called Enough. And
• 0:15
  Speaker 2: I remember I was in his office because he has
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  Speaker 2: a framed, he had a framed picture of his book, Enough.
• 0:20
  Speaker 2: And then he put Donald Trump's book, Never Enough, next
• 0:22
  Speaker 2: to it. And he goes, you like that? You know,
• 0:25
  Speaker 2: and he was very proud that he was about, he
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  Speaker 2: didn't think they needed to grow that much more.
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  Speaker 3: Welcome to Trillions. I'm Joel Weber.
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  Speaker 2: And I'm Eric Belchunis.
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  Speaker 4: Today, Vanguard is synonymous with passive investing. And on August 31st,
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  Speaker 4: the company celebrated the 50th anniversary of the first index fund.
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  Speaker 4: But just as the company has reached that milestone, here's
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  Speaker 4: the brutal reality. Its market share has actually plateaued. And
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  Speaker 4: in 1991, Jack Bogle, Vanguard's founder, even said, if this
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  Speaker 4: day ever came, it was a sign of Vanguard's mission succeeding.
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  Speaker 4: Who roots for their company to lose market share, Eric?
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  Speaker 2: Only a maniac. And that was really Jack Bogle. I mean,
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  Speaker 2: he was different. And his whole life, in my opinion,
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  Speaker 2: was really about addition by subtraction. And I think that
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  Speaker 2: was his life's work more than, say, the index fund.
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  Speaker 4: We're joined by Isabel Lee, a cross-asset reporter with Bloomberg News.
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  Speaker 4: This time on Trillions, the Bogle effect. Eric, you guys
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  Speaker 4: at Bloomberg Intelligence recently published a note about that I
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  Speaker 4: thought was pretty interesting about Vanguard. No surprise, you know
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  Speaker 4: a thing or two about Vanguard. You've actually written a
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  Speaker 4: book about Bogle, the founder of Vanguard. But this recent research,
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  Speaker 4: I think, is pretty important because it reveals that maybe
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  Speaker 4: Vanguard's dominance isn't on the ascent anymore.
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  Speaker 3: How about that?
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  Speaker 2: Yeah, I was at the 50th anniversary party For the
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  Speaker 2: index fund, which just happened recently at the New York
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  Speaker 2: Stock Exchange.
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  Speaker 3: Vanguard was throwing this party?
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  Speaker 2: Yeah, at the New York Stock Exchange. I mean, everybody's
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  Speaker 2: kind of a fan of indexing at this point. It
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  Speaker 2: was a Vanguard event for sure because two Vanguard executives spoke.
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  Speaker 2: But there was some reporters there, some old timers from
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  Speaker 2: back in the day, the Bogleheads folks. So it was
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  Speaker 2: a really cool room. I knew a good chunk of
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  Speaker 2: people from my Bogle effect book research. And anyway, I
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  Speaker 2: was going to write a couple notes on this milestone.
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  Speaker 2: What does it mean? Yada, yada. And when I went
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  Speaker 2: to pull the chart of Vanguard's market share and their assets,
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  Speaker 2: I noticed that it had plateaued. For 50 years, Vanguard's
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  Speaker 2: market share went up and up and up and up
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  Speaker 2: till they commanded 27% of all fund assets. That's ETF
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  Speaker 2: plus mutual funds. But that kind of leveled off and
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  Speaker 2: it even trickled down a little. And if you look
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  Speaker 2: at BlackRock and Fidelity, they're kind of coming up. But also,
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  Speaker 2: there's so many other issuers with so many cheap products.
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  Speaker 2: And I thought, oh, this is interesting. And I remember
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  Speaker 2: it in my book that Bogle had once said that
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  Speaker 2: he'll know that his mission and Vanguard's mission is beginning
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  Speaker 2: to be realized when their own market share erodes, which
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  Speaker 2: is like insane to say in 1991. But he saw
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  Speaker 2: that happening. And it's ironic, or I guess perfect, that
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  Speaker 2: it happened exactly 50 years. So I thought it was
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  Speaker 2: cool that this anniversary was not just the 50 years
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  Speaker 2: of the index, but also Bogle's really grand vision coming
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  Speaker 2: true of Vanguard investing. being so influential that everybody else
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  Speaker 2: got cheap and started getting their own flows and Vanguard's
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  Speaker 2: market share plateaued.
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  Speaker 1: I actually read that note, Eric.
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  Speaker 5: And then at the top, you said that it's kind
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  Speaker 5: of like Bogle's dream coming true because he wants the
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  Speaker 5: whole industry to be low cost. And then I thought,
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  Speaker 5: but is it really like, did he envision that it
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  Speaker 5: will be like in the US, a $ 13 trillion industry, globally,
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  Speaker 5: $ 22 trillion? I mean, maybe it was his dream, but
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  Speaker 5: I'm sure his people would want to still keep on dominating.
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  Speaker 5: It kind of reminds me of, do you guys know Hinge?
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  Speaker 5: I know everyone is married here, but Hinge.
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  Speaker 2: Is that like Match.com for Gen Z?
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  Speaker 1: Yes, sure. The dating app.
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  Speaker 5: So its motto is something like the app designed to
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  Speaker 5: be deleted. But do you really want to be deleted?
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  Speaker 3: You know what I mean? Well, I mean, do you
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  Speaker 3: want to try and find love? Yeah, sure.
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  Speaker 1: I guess.
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  Speaker 5: I mean, is the world better that everything is or
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  Speaker 5: most things are low cost?
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  Speaker 2: Sure.
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  Speaker 1: I'm happy.
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  Speaker 3: How conflicted? is Vanguard about this?
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  Speaker 2: Eric is a great question. This is why I called
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  Speaker 2: the book, the Bogle effect and not the Vanguard effect. Joel,
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  Speaker 2: I could have sold like five times more copies because
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  Speaker 2: when you travel around, A lot of people do not
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  Speaker 2: know the word Boggle. They call it Boggle.
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  Speaker 3: Yeah, totally.
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  Speaker 2: They're like the Boggle effect. Even people in the industry
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  Speaker 2: were like, Boggle, that's a word game, I think, from
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  Speaker 2: the 80s. Pretty good game, actually. But anyway, Boggle or
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  Speaker 2: Boggle the Mind.
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  Speaker 4: When you play that game, do you call it Boggle
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  Speaker 4: when you play it, Aaron?
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  Speaker 2: Now I do, yes. But anyway, they called Boggle and
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  Speaker 2: this and that. But everybody knows Vanguard, right? Which is
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  Speaker 2: testament to Boggle in effect because he really put Vanguard
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  Speaker 2: front and center, but I thought he was the anomaly
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  Speaker 2: in physics. This particular person was weird and different and
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  Speaker 2: on a different trip. Vanguard itself, since Bogle has stepped
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  Speaker 2: down as CEO, has done a lot of things he
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  Speaker 2: would not do. And he kind of crapped on from
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  Speaker 2: his office at the research center. He didn't want them
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  Speaker 2: to go into ETFs, although I'd say that was a
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  Speaker 2: good idea. He didn't even like international. He didn't like
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  Speaker 2: smart beta. They went into the quant world. They went
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  Speaker 2: into privates. He wouldn't have liked that. There's been a
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  Speaker 2: series of things that they did that he probably would
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  Speaker 2: not have done.
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  Speaker 1: Crypto, you're not mentioning.
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  Speaker 2: Well, they didn't get into crypto. They simply have a
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  Speaker 2: brokerage in which they allow crypto. So I would say
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  Speaker 2: that's neutral. I think being anti-crypto, if he ran Vanguard,
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  Speaker 2: he probably would still have a ban on crypto trading.
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  Speaker 2: He wasn't a fan of crypto or gold. Listen, Bogle basically,
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  Speaker 2: I think, was almost like a He started his life
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  Speaker 2: as a classic Wall Street active manager, asset manager guy.
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  Speaker 2: And he eventually, over 50 years, worked himself into being
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  Speaker 2: a Buddhist monk, sitting Indian style for 12 hours a
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  Speaker 2: day and eating crickets. It is so hard to get
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  Speaker 2: to that level of simplicity where he thought, really, everything
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  Speaker 2: is really a distraction. You just want to buy the
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  Speaker 2: S & P 500 for three bips and wait 50 years.
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  Speaker 2: But not everybody is that Puritan. So that actually put
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  Speaker 2: him in odds with his own company. But Vanguard itself,
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  Speaker 2: it's still mutually owned. It still has that Boy Scout reputation.
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  Speaker 2: But look, now the guy running it is from BlackRock.
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  Speaker 2: A lot of people who work there have MBAs where
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  Speaker 2: they're taught how to make more money. And you see
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  Speaker 2: the way they're launching funds. They're looking to get more assets.
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  Speaker 2: And when I saw Vogel in his office probably 10
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  Speaker 2: years ago, I remember he was like, can you believe
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  Speaker 2: we have $ 4 trillion in assets? What in the hell
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  Speaker 2: do we need all that money for? And he wrote
• 6:58
  Speaker 2: a book called Enough. And I remember I was in
• 7:00
  Speaker 2: his office because he had a framed picture of his book, Enough,
• 7:06
  Speaker 2: and then he put Donald Trump's book, Never Enough, next
• 7:08
  Speaker 2: to it. And he goes, you like that? And he
• 7:11
  Speaker 2: was very proud that he was about, he didn't think
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  Speaker 2: they needed to grow that much more. So again, Bogle,
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  Speaker 2: very different. But I do think that 99.9% of people
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  Speaker 2: who go to Wall Street are like, hey, how can
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  Speaker 2: we make more money? How can we get more assets?
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  Speaker 2: That's just how you're taught to do it. That's how
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  Speaker 2: people are programmed. Bogle was so different. And I think
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  Speaker 2: that that's why he would be really happy that it
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  Speaker 2: grew this much. There'd be some things he would not
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  Speaker 2: be thrilled about. But I think overall, he'd be like, man,
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  Speaker 2: we did it. Everybody out there can go to any
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  Speaker 2: asset manager now. Let's say you're a Fidelity customer or
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  Speaker 2: a BlackRock customer. And you can get a Vanguard-like product,
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  Speaker 2: no problem, for most asset classes. So he kind of
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  Speaker 2: forced the whole industry to change. So you can say,
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  Speaker 2: because some people ask me, why have no other companies
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  Speaker 2: structured themselves as mutually owned like Vanguard? And I'm like,
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  Speaker 2: they don't have to.
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  Speaker 3: They already are.
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  Speaker 2: They're basically governed by this force to a degree. And
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  Speaker 2: it is just a crazy, again, anomaly that we have.
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  Speaker 2: are witnessing that is still rippling out.
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  Speaker 3: Okay.
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  Speaker 4: So rewind the clock back 50 years. That was when
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  Speaker 4: the first index investment trust launched Vanguard launched that. And,
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  Speaker 4: and that that's the fund that is celebrating its 50th anniversary.
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  Speaker 4: Only that's now the Vanguard 500 index fund. How radical
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  Speaker 4: was the first index investment trust in 1976 era?
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  Speaker 2: Very radical. Now, he got the idea from reading a
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  Speaker 2: trade publication. I think it was called the Portfolio Management
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  Speaker 2: Index or publication, one of those journals. And in there,
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  Speaker 2: Paul Samuelson, I believe that's his name, who actually worked
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  Speaker 2: in the Kennedy administration, there was some buzz about active
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  Speaker 2: managers maybe not being as good as advertised. And Paul
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  Speaker 2: Samuelson in there said, hey, can someone please launch an
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  Speaker 2: index fund so we can grade these active managers? And Bogle,
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  Speaker 2: who had just set up Vanguard as a back office company,
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  Speaker 2: it was not allowed to run money, because of a
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  Speaker 2: situation with his old colleagues, he was like, wait, why
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  Speaker 2: don't we do it? It's not running money because it's
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  Speaker 2: an index fund. Let's try it. And that's how the
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  Speaker 2: idea was born, more out of necessity, really, than any
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  Speaker 2: grand vision. So he launched it. And I think the
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  Speaker 2: real bold part was, A, nobody had tried to actually
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  Speaker 2: put an index fund into action. There were indexes, but
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  Speaker 2: not funds, really. There was one tiny attempt before. But
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  Speaker 2: long story short, it was really a new idea. The
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  Speaker 2: big thing, I think, that made it unusual was there
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  Speaker 2: was no distribution fees. So at that time, it was very,
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  Speaker 2: very normal. and standard to pay a broker a load
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  Speaker 2: to put the client in there. And so without that load,
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  Speaker 2: the brokers weren't incentivized to use your fund. And so
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  Speaker 2: Bogle kind of set this up outside of the whole system.
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  Speaker 2: And my metaphor with this would be like, let's say,
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  Speaker 2: Isabelle made the greatest movie ever made, like something like
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  Speaker 2: as good as The Odyssey or whatever. But she would
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  Speaker 2: not show it in any movie theater. And she wouldn't
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  Speaker 2: let Netflix or HBO or any of those distribution channels
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  Speaker 2: have it. You had to go to her backyard to
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  Speaker 2: watch it. You know, and I say that movie better
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  Speaker 2: be damn good.
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  Speaker 3: How much are you charging?
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  Speaker 5: First of all, there's no backyard in New York.
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  Speaker 1: Maybe Joel has a backyard. But that's a nice analogy.
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  Speaker 3: I can fit like 10 people.
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  Speaker 1: I can fit zero.
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  Speaker 5: Another thing that you mentioned, Eric, when we talked last week,
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  Speaker 5: because I wrote about this in the newsletter was, okay,
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  Speaker 5: it's radical when the fund launched, but it wasn't until
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  Speaker 5: they started really whittling down the fee that it gathered assets.
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  Speaker 5: Because when it first launched, it had something like a
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  Speaker 5: 43 basis point fee, which is kind of high in
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  Speaker 5: today's world. And it wasn't until they made it just
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  Speaker 5: two basis points, eventually becoming one basis point, which is
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  Speaker 5: dirt cheap, that it really gathered funds. And I feel
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  Speaker 5: like to your point, that's really the ethos of Vanguard,
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  Speaker 5: which is extremely low cost.
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  Speaker 4: But even 43 basis points was probably way cheaper than
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  Speaker 4: whatever the.
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  Speaker 1: Active funds were at the time, right?
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  Speaker 3: That is true.
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  Speaker 2: Yeah. People don't know that it started life at 43.
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  Speaker 2: They think it was born at like five and it
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  Speaker 2: just wasn't. It was the mutual ownership structure that every
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  Speaker 2: time it got some assets and they had extra profit,
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  Speaker 2: the board, which is made up of the investors, voted
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  Speaker 2: to lower fees because it was their funds. They wanted
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  Speaker 2: lower fees and not to endorse or say, sponsor a
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  Speaker 2: stadium or pay people more, executives more money. So that
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  Speaker 2: mutual ownership structure kept lowering the fee from 43 to
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  Speaker 2: 40 to 35. It wasn't until like the 90s that
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  Speaker 2: it got to 20. And that's when the flows even started.
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  Speaker 2: Like it was 20 years, nobody cared that much. Bogle
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  Speaker 2: was really out there just trying to get people to
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  Speaker 2: listen for a long time. Again, he's outside of the system,
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  Speaker 2: which makes it hard. So around 95-ish, it got below 20.
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  Speaker 2: That's when flows started to come in. but they still
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  Speaker 2: weren't hot and heavy. And at 95, that's when Vogel
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  Speaker 2: stepped down as CEO, index mutual funds have $ 22 trillion
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  Speaker 2: in assets. 99.8% of their assets have come in after 1995.
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  Speaker 2: So that means for 20 years, they only got 0.2%
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  Speaker 2: of the assets they have today. So that tells you
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  Speaker 2: how hard it was to get this going. And then
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  Speaker 2: in the 2008-ish period, a bunch of things came together
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  Speaker 2: that made this trend explode. One, the fees got below 10.
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  Speaker 2: That's big. Because a 40 basis, 40 index fund is
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  Speaker 2: pretty good. But a free index fund, basically, that's hot stuff.
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  Speaker 2: Then 2008, active managers didn't sidestep the great financial crisis.
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  Speaker 2: They all went down as much or more than the market.
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  Speaker 2: So people are like, why am I paying all this
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  Speaker 2: money for this manager? I'll just go vanguard. And then
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  Speaker 2: the third thing was the internet really started to spread
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  Speaker 2: in the mid-outs, right? They Everybody started getting internet connection.
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  Speaker 2: And when you got the spread of information, more people
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  Speaker 2: were aware of like costs and long-term returns. It was
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  Speaker 2: hard to get this information up until then. So those
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  Speaker 2: three things all kind of hit and kicked in around 2008, 2009.
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  Speaker 2: And that's when you see the index assets go parabolic.
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  Speaker 2: And that's when it really took off. So again, it
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  Speaker 2: took 30 years to get to that point. And that's
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  Speaker 2: why the Bogle is an interesting story because he purposely
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  Speaker 2: would take the harder road. No distribution fees. really delayed
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  Speaker 2: the success for many years, but he knew it would
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  Speaker 2: give the investor a better deal.
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  Speaker 3: And he also built a better mousetrap. He built a
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  Speaker 3: better mousetrap.
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  Speaker 2: Yes. And also, again, as you know, Joel, we wrote
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  Speaker 2: this article comparing Vogel to punk rock, because I do
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  Speaker 2: think at the end of the day that, you know,
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  Speaker 2: Indexing needed Vanguard more than Vanguard needed indexing. What Vogel's
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  Speaker 2: story is really about is addition by subtraction. Let's take
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  Speaker 2: the fees out, expense ratio. Let's remove the trading costs
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  Speaker 2: because indexes don't trade that much. So there's not that
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  Speaker 2: much fees from the portfolio turning over like with active funds.
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  Speaker 2: Let's also remove brokers. He wanted you to just like
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  Speaker 2: not use a broker and go right to Vanguard to
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  Speaker 2: your backyard, to the backyard metaphor. And that would be,
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  Speaker 2: and also he wanted to solve the behavioral issue. Stop
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  Speaker 2: buying high and selling low on your emotions. Just marry
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  Speaker 2: this index fund and don't look at it for 50 years.
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  Speaker 2: So by really, I guess, removing all of these bad things,
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  Speaker 2: he created like the ultimate mousetrap, in my opinion. And
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  Speaker 2: that's his life's work. And it's much more complicated than
• 14:40
  Speaker 2: the index fund. It's really about addition by subtraction.
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  Speaker 3: Did you get that punk rock reference, Isabel? No. That
• 14:47
  Speaker 3: was the addition by subtraction.
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  Speaker 1: No, but I like the Mary analogy.
• 14:51
  Speaker 2: Hold on. Have you heard of the Ramones?
• 14:54
  Speaker 1: No.
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  Speaker 4: This is becoming a thing. We ask Isabel about music
• 14:58
  Speaker 4: and then it horrifies us.
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  Speaker 1: Wait, what did you say? The Ramones?
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  Speaker 2: Yeah.
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  Speaker 1: No.
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  Speaker 3: Okay.
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  Speaker 2: All right. Listen, I got to make you a playlist. Anyway,
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  Speaker 2: I'll send you Ramones. If you listen to Ramones' song,
• 15:09
  Speaker 2: they came out in the 70s. Punk rocks in the 60s.
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  Speaker 2: A lot of music was big and had long guitar solos.
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  Speaker 2: And the punk said, let's remove all that bloated stuff
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  Speaker 2: and let's just have two and a half minute quick
• 15:21
  Speaker 2: punk songs. Kind of like Green Day. I would say
• 15:23
  Speaker 2: Green Day is a Ramones cover band.
• 15:25
  Speaker 3: Green Day, I know.
• 15:25
  Speaker 2: Yeah, Green Day copied the Ramones. Anyway, so punk was about- So.
• 15:29
  Speaker 1: We're one generation removed, but okay.
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  Speaker 2: Yes. And anyway- So.
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  Speaker 3: Many listeners are like, like pulling your hair out right now.
• 15:38
  Speaker 2: I know. I know. Well, at least you knew Green Day.
• 15:41
  Speaker 4: Yeah.
• 15:42
  Speaker 2: I would have said two to one odds on that one.
• 15:44
  Speaker 2: So anyway.
• 15:45
  Speaker 3: We're going to get you an ETF playlist.
• 15:48
  Speaker 1: Trillions playlist.
• 15:49
  Speaker 2: Isabel's welcome to the 20th century playlist.
• 15:54
  Speaker 1: Welcome to Boomer.
• 15:56
  Speaker 3: You know what? We're going to, this is an upcoming episode.
• 15:59
  Speaker 4: Isabel's welcome to Boomerland playlist. We're going to make this
• 16:01
  Speaker 4: a thing. We're going to make this a thing. It's investing,
• 16:03
  Speaker 4: a new version of investing wisdom through.
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  Speaker 2: Music, Eric.
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  Speaker 1: Yes, that would be nice.
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  Speaker 4: This punk rock metaphor is an important one because I
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  Speaker 4: think it explains what Eric was just talking about there.
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  Speaker 4: By stripping everything down, you end up with an index fund.
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  Speaker 2: Yes.
• 16:18
  Speaker 4: That is, you know, a perfect little vehicle to make
• 16:21
  Speaker 4: money and embrace capitalism. And that's why the flows have
• 16:24
  Speaker 4: been what they've been. But Eric, just to bring this
• 16:26
  Speaker 4: back to the market share thing. If Vanguard has plateaued,
• 16:31
  Speaker 4: what does that look like for Vanguard and the rest
• 16:33
  Speaker 4: of the industry?
• 16:35
  Speaker 3: If that market share will continue to erode.
• 16:38
  Speaker 1: And why have they plateaued, Eric?
• 16:40
  Speaker 2: Yeah, well, let me give you an example. Fidelity, that
• 16:42
  Speaker 2: was their biggest competitor in the 80s. Good trivia, by
• 16:46
  Speaker 2: the way, for anybody out there. What was the last
• 16:49
  Speaker 2: two biggest funds on planet Earth before Vanguard Total Market
• 16:53
  Speaker 2: took over? The answer is Bill Gross' PIMCO total return,
• 16:56
  Speaker 2: and then before that, Fidelity Magellan. So those two active funds. Yeah,
• 17:00
  Speaker 2: Magellan in particular.
• 17:01
  Speaker 3: Which one of those were bigger?
• 17:03
  Speaker 2: Bill Gross is, but remember, a billion isn't what it
• 17:06
  Speaker 2: used to be. As the years go on, you have
• 17:08
  Speaker 2: to inflation adjust, really. But they were both monsters. And
• 17:11
  Speaker 2: anybody who was alive, anybody over 45 probably remembers the
• 17:15
  Speaker 2: Fidelity Magellan. It was all over the Wall Street Journal
• 17:18
  Speaker 2: all the time. Whatever the portfolio manager was doing was
• 17:21
  Speaker 2: a big deal. That was Peter Lynch's fund. People remember
• 17:24
  Speaker 2: his name.
• 17:24
  Speaker 1: Yeah, it's still a big deal now.
• 17:25
  Speaker 2: Yeah.
• 17:26
  Speaker 3: Yeah.
• 17:26
  Speaker 2: So anyway- Fidelity, their biggest fund today is the Fidelity
• 17:30
  Speaker 2: 500 Index Fund that charges one basis point, has $ 850 billion. Wow.
• 17:35
  Speaker 2: That's four times bigger than any other fund they have.
• 17:38
  Speaker 2: So that just tells you how powerful Vanguard's concept was.
• 17:42
  Speaker 2: And Fidelity even puts out press releases saying, hey, we're
• 17:45
  Speaker 2: actually cheaper than Vanguard, which is like, wow, the world
• 17:47
  Speaker 2: has turned. That's where we're at. So Fidelity doesn't exactly
• 17:52
  Speaker 2: love that you love that fund, though, because it only
• 17:54
  Speaker 2: makes one basis point.
• 17:55
  Speaker 1: Yes, yes.
• 17:57
  Speaker 2: To be fair to Vanguard, they want you in the
• 17:59
  Speaker 2: cheap stuff. A lot of other people do it because
• 18:01
  Speaker 2: they have to, because their customers are like, I'm going
• 18:04
  Speaker 2: to go somewhere else if I can't get cheap beta
• 18:05
  Speaker 2: with you. Then that company will be like, okay, have
• 18:09
  Speaker 2: your core beta, but use us for some ancillary satellite
• 18:13
  Speaker 2: positions and maybe hot sauce, and we can make some
• 18:16
  Speaker 2: more money there or use our advisory service or a
• 18:18
  Speaker 2: brokerage platform. So they just try to upsell you and
• 18:21
  Speaker 2: do some other things with you that make them money.
• 18:23
  Speaker 2: But these index funds have become a loss leader. You
• 18:25
  Speaker 2: almost have to have them.
• 18:27
  Speaker 1: I agree. It's like the chicken in Costco, right?
• 18:30
  Speaker 5: $ 5 rotisserie chicken.
• 18:33
  Speaker 2: It's like that, yes.
• 18:34
  Speaker 3: You can't make it any cheaper or more expensive. It's
• 18:38
  Speaker 3: just got to be what it is.
• 18:39
  Speaker 1: To Joel's point, why doesn't Vanguard make it cheaper? Because
• 18:42
  Speaker 1: they just can't anymore?
• 18:44
  Speaker 3: I don't know if you can go cheaper.
• 18:46
  Speaker 2: I've thought about this. I personally think at three basis points,
• 18:51
  Speaker 2: maybe they go one lower because SPYM now is two.
• 18:55
  Speaker 2: And that actually just helped close. That's it. It was
• 18:57
  Speaker 2: four S & P 500 ETFs. Anyway, you can get one.
• 19:00
  Speaker 2: I mean, Bank of New York has a zero fee fund,
• 19:03
  Speaker 2: but it is not the S & P 500. Long
• 19:05
  Speaker 2: story short, there's a couple funds below three basis points.
• 19:09
  Speaker 2: So it is already there. I think Vanguard, their reputation
• 19:12
  Speaker 2: is so strong. And people, I think, generally want to
• 19:15
  Speaker 2: pay something. I don't think the zero fee thing is
• 19:18
  Speaker 2: that actually attractive. Ironically, I think it feels gimmicky. So
• 19:21
  Speaker 2: I think like three basis points is like perfect for
• 19:23
  Speaker 2: people or two. I think also Vanguard is using some
• 19:26
  Speaker 2: of their money towards their tech and their customer service.
• 19:29
  Speaker 2: Because here's another stat that's mind-blowing. They have 27% market
• 19:32
  Speaker 2: share of fund assets, but only 5%, 6% of revenue
• 19:37
  Speaker 2: of the industry. So they don't make a lot of
• 19:39
  Speaker 2: money because they charge so little, and they don't have
• 19:41
  Speaker 2: a lot of money for good customer service. So there's
• 19:42
  Speaker 2: been some complaints about long lines and stuff. So there's
• 19:45
  Speaker 2: been pressure on the new management to make better tech,
• 19:49
  Speaker 2: better customer service. And I think that's where I think
• 19:52
  Speaker 2: even their customers would rather them spend money right now.
• 19:54
  Speaker 2: But they might go to two. You might see Vu
• 19:57
  Speaker 2: at two basis points, especially since buy-in cut. But the
• 20:00
  Speaker 2: other thing back to Jules, what do other people do?
• 20:02
  Speaker 2: We have this thing called the Jack Bogle paradox, where
• 20:04
  Speaker 2: the more money that goes into the low-cost passive, whether
• 20:07
  Speaker 2: it's Vanguard or other people, the more exotic the new
• 20:11
  Speaker 2: launches get, which is ironic, right? And that's why you
• 20:13
  Speaker 2: see all these crazy ETF launches, because I think people
• 20:17
  Speaker 2: have a cowboy account that they want to just go
• 20:19
  Speaker 2: wild in, or you have younger people who are looking
• 20:22
  Speaker 2: to gamble and stuff and So that is another way
• 20:26
  Speaker 2: that I think the Bogle effect has changed different things.
• 20:29
  Speaker 2: It's sort of made other people, if you're competing for
• 20:32
  Speaker 2: the core active or index, you got to get cheap.
• 20:35
  Speaker 2: So it's made like core stuff get cheaper. And alternative,
• 20:38
  Speaker 2: it's made people innovate more on the crazy stuff. And
• 20:42
  Speaker 2: I think that's sort of how what he did has
• 20:46
  Speaker 2: actually almost like made everybody orbit around it in different ways. Yeah.
• 20:51
  Speaker 5: I think your book is the perfect title, The Bogle Effect,
• 20:53
  Speaker 5: because we really see the ripple effects until today. But
• 20:57
  Speaker 5: do you think that if Jack Bogle was a millennial,
• 21:00
  Speaker 5: like would his business model or belief or ethos, would
• 21:03
  Speaker 5: it have survived? Because now a part of me thinks,
• 21:06
  Speaker 5: I mean, you said it yourself in the note and
• 21:09
  Speaker 5: facts back it up that their dominance is plateauing. Let's
• 21:13
  Speaker 5: not use eroding, just plateauing. Because there's such immense competition
• 21:17
  Speaker 5: in this space now.
• 21:18
  Speaker 2: So.
• 21:19
  Speaker 5: What if he launched... Jack Bogle was a millennial, I
• 21:22
  Speaker 5: don't think. Do you think it would have been possible
• 21:24
  Speaker 5: for him to succeed?
• 21:26
  Speaker 2: Probably. You know, I just think Jack Bogle was miscast
• 21:32
  Speaker 2: on Wall Street. I just think he probably would have
• 21:34
  Speaker 2: made a better preacher, maybe even like an actor. I mean,
• 21:37
  Speaker 2: I just think he wanted... He was more after adoration
• 21:42
  Speaker 2: than money. And I think once he locked into this St.
• 21:45
  Speaker 2: Jack concept of saving everybody money.
• 21:47
  Speaker 4: He really.
• 21:49
  Speaker 2: leaned into it. And he didn't really, money didn't drive him.
• 21:52
  Speaker 2: His son said he wore the same khakis for like
• 21:54
  Speaker 2: 40 years. He was one of those dudes. He's a
• 21:57
  Speaker 2: lot like Buffett, ironically. But I think making things cheaper
• 22:02
  Speaker 2: for people is always going to work, especially if it's
• 22:05
  Speaker 2: good quality. I mean, Amazon came along, and to me
• 22:08
  Speaker 2: is similar to Vanguard in some ways, in that you
• 22:12
  Speaker 2: can get really anything quickly, cheaply, and people feel like
• 22:14
  Speaker 2: it's a good deal. It's hard to compete with that.
• 22:16
  Speaker 2: So I think he could have existed in any era,
• 22:18
  Speaker 2: but If you read the story, the 60s blew up,
• 22:25
  Speaker 2: and he learned a lot of lessons. And that's why
• 22:26
  Speaker 2: when he restarted his career in the early 70s, he
• 22:29
  Speaker 2: had a good amount of information to do it differently.
• 22:33
  Speaker 2: And so some of this story is circumstantial. So I
• 22:35
  Speaker 2: don't know if you could have dropped him in this
• 22:37
  Speaker 2: environment with the bull market going crazy. Would he say,
• 22:40
  Speaker 2: let's get cheap funds? I don't think he could have
• 22:42
  Speaker 2: because he didn't think of that idea in the 60s
• 22:45
  Speaker 2: when everything was going well. It took a complete market crisis,
• 22:47
  Speaker 2: which is why I have another book project idea, which
• 22:50
  Speaker 2: I have a long list, but one of them is
• 22:51
  Speaker 2: called The Early 70s. I think it makes the case
• 22:55
  Speaker 2: for creative destruction. The Fed and everybody wants to keep
• 22:58
  Speaker 2: stocks up in the economy, and they just print money
• 23:00
  Speaker 2: to keep everything kosher. I think if you let things
• 23:03
  Speaker 2: just blow up sometimes, it's good. It clears out the crap,
• 23:07
  Speaker 2: and what rises up is some good stuff. In the
• 23:10
  Speaker 2: early 70s, we saw changes in culture and business, and
• 23:13
  Speaker 2: a lot of those things have lasted because they came
• 23:15
  Speaker 2: out of the rubble of the blow up of the 60s,
• 23:18
  Speaker 2: both economically and culturally, there was a lot of bloat.
• 23:22
  Speaker 4: And so I just think that's why we're going to
• 23:23
  Speaker 4: get this playlist to you with some Ramones.
• 23:26
  Speaker 1: Eric has so many books in him. I have zero
• 23:28
  Speaker 1: books in me, honestly.
• 23:30
  Speaker 2: Well, we'll see. I think there's a couple of things
• 23:32
  Speaker 2: that get you going. We can get that.
• 23:34
  Speaker 3: We will go over there now.
• 23:35
  Speaker 2: Yeah.
• 23:35
  Speaker 3: Isabel, thanks for joining us on Trillions.
• 23:37
  Speaker 1: Always a pleasure. If you don't invite me back, I'll
• 23:39
  Speaker 1: take offense.
• 23:40
  Speaker 3: Don't worry, you're coming back.
• 23:47
  Speaker 4: Thanks for listening to Trillions. Until next time, you can
• 23:49
  Speaker 4: find us on the Bloomberg Terminal, Bloomberg.com, Apple Podcasts, Spotify.
• 23:54
  Speaker 3: Or wherever else you like to listen. We'd love to
• 23:56
  Speaker 3: hear from you. Hit us up on social.
• 23:59
  Speaker 4: Trillions is produced by Magnus Hendriksen and Keshav Pandya. Amy
• 24:02
  Speaker 4: Keene is our executive producer. Cheryl Brumley is the head
• 24:06
  Speaker 4: of Bloomberg Podcasts.
• 24:08
  Speaker 2: Bye.