McGraw-Hill Companies. - The house that Bogle built: how John Bogle and Vanguard reinvented the mutual fund industry

How John Bogle and Vanguard Reinvented the Mutual Fund Industry

LEWIS BRAHAM

Copyright 2011 by Lewis Braham. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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To my wife and family
we are without beginning or end.

I first met Jack Bogle in November of 2009 at his office in Malvern, Pennsylvania. Id seen the founder of Vanguard Funds before on television a few times and heard him talk once at a conference, but I had never actually spoken to him face to face. So I was nervous.

It isnt often in this life one gets to meet a legend. And I knew that as Bogles biographer, I would have to say some unpleasant things about him, that part of my unenviable job would be to see the clay in the heros feet. Whats more, the greatest advocate of shareholder democracy in the history of Wall Street was known for his autocratic personality and intolerance of dissent.

This, after all, was the same man who in his The Battle for the Soul of Capitalism railed against a system of dictatorship in corporate America... in which the power of the CEO seems virtually unfettered, and yet, during our first interview at Vanguard, told me, If someone says when I was running this place, I was a dictator, I would say, man, youve got that right!

Of course, I was also intrigued. A complicated soul who often contradicts himself, Bogle embodies that much abused and overused term maverick. In many ways he resembles my late father. Both grew up in the shadow of the Great Depression to Scottish American families. Both were born well-off and then lost it all. Both had fathers who were absent, and as a result had to become men when they were much too young. Im not going to make any exaggerated claims that Jack Bogle cest moi. My father never had the opportunity to go to the Blair Academy or to Princeton. Nor did he launch the worlds largest mutual fund company.

Yet the similarities were enough to pique my interest and terrify me at the same time. As it turned out, my journey to Malvern put me in the right mood to meet the king of the penny-pinching fund companies, as I didnt have much of a kitty for travel expenses. Consequently, I had to take a seven-hour Amtrak train from my home in Pittsburgh instead of a plane. I later told Jack I was living the Vanguard way.

Roaring through the blighted hinterlands of Pittsburgh on a gray, drizzly day with my Dell Precision M4300 and a stack of articles about Bogle balanced precariously on my lap, I couldnt help feeling like Marlowe going after Kurtz in the Congo, hoping to find a voice of reason in the dark heart of Wall Street, yet dreading that, when I finally reached Bogle, hed just gasp, The horror, the horror!

Since no train goes all the way to Malvern and I couldnt afford a taxi, my in-laws, who live nearby, had to give me a lift from the Exton station. The long, tortuous drive through multiple checkpoints onto the Vanguard campus did little to assuage my nerves. At the end of a tree-lined Vanguard Boulevard, the campus felt more like a remote military compound than the collegial edifice of financial wisdom the company would have investors believe. Although Vanguard houses none of its $1.4 trillion in assets here, its guards recently started carrying guns just in caseof what Im not exactly sure. They seemed out of place in a region of Pennsylvania known more for its Amish whoopie pies and giant King of Prussia shopping mall.

Bogle is no longer in the C-suite after being forced to retire as Vanguards chairman in 1999. His office as the titular president of the Bogle Financial Research Center is now on the same floor as the legal department of what can only ironically be called the Victory Building. It overlooks the main square of the Vanguard campus and a bronze statue of him. I guess in certain ways I like this much better, he says, smiling uncomfortably. Instead of overlooking the parking lot, I am overlooking this place out there. I can see my statue over there. I can see the crew members walking back and forth. I feel much more a part of things.