Eric Balchunas on the Vanguard Effect

of people who have his depth of knowledge in this space. Uh. And that's why he's really a fascinating character. Uh. You could tell when you listen to this conversation that it's two guys who know each other just b s ing and schmoozing. But I find those to be some of the best conversations because there's no pretense, there's no marketing, it's just people talking about things that genuinely interest them. And when I basically don't get to half my questions

because we're just what about this? Tell me about that? Hey, isn't this wrong? Or it just leads to all sorts of fun and interesting places. I thought this was a fascinating conversation, and I think you will also so if you are remotely interested in passive investing E t FS indexing, or Vanguard and Jack Bogel, you will find this to be an absolutely fascinating conversation. With no further ado, my interview of Eric Balcunis of Bloomberg Intelligence. He is the

senior E t F analyst for Bloomberg News. He is also co host of E t F i Q on Bloomberg Television, and he hosts a podcast called Trillions with Joe Weber, editor in chief of Business Week. He is the author of several books, most recently The Bogel Effect, How John Bogel and Vanguard turned Wall Street inside out and saved investors trillions. Eric balcun Is, Welcome to Masters in Business. It is a pleasure to be here, Barry always. It's like a home game for me. I just walk

like ten feet here right. I texted you and said, come down to five. Time to start. Um. So, so let's talk a little bit about the home field advantage and your career. You've been reporting on finance pretty much your entire career. What what led to an interest in money and markets? Um? Well, I was in cooing to Rutgers, and I was wrote for the school paper, and I decided to major in journalism and communications because I liked it.

And but I was at the Cook College, which is the Egg School, and in order to graduate from Cookie had to have at least a minor that was related, and I thought. I took an econ class and I kind of liked it. So I minded an environmental economics that got me through Cook because I was with a bunch of biology people. Um. And so I immediately applied to Bloomberg, but I got rejected job. Yeah no, no, it wasn't I got rejected. I only got in my

third time. Um. I because obviously I'm like journalism, economics, I'm in Rutgers. Bloomberg makes perfect sense, and they were hiring, but I just wasn't qualified. Hard pass. Yeah, way did you start? I went to the Institutional Investor magazine newsletter division. Their their website is a regular in my morning reading list. Yeah it's always solid. Yeah, I mean the name turned

me off comeing out of college. I was like, Institutional Investor just sounds so boring, like who would ever read this? But the money was pretty Tutions Yeah, institutions, which came in handy later in my when I wrote my first book. But I covered UM derivatives at first, and then I covered mutual fund So I work for a news that I called fund Action and did that for a little while and then went UM. I met a guy named

Duff Ferguson at a line Bernston. He was the PR guy, and I just thought, man, I want to go behind the keyhole. And so I went and took a job in PR because I kind of like this guy's whole deal. And so I got a job in PR at um a crisis communication firm named Abernathew McGregor, and got to work with several clients. Uh, and you know, took them to Bloomberg, took them to Reuters, took them to there,

and Uh, I came to Bloomberg. I was like, man, this place is different, right, So I always had an eye on Bloomberg for my early career and then UM in nine ish No No Nine two, early two thousand, I got headhunted. That's how good the economy was. You could be twenty five and you'd get headhunted for like all these jobs. And she comes and she goes I've got two jobs that are really good. One is that bear Sterns a lot of money doing PR, and the other one is at Bloomberg. And I was like, that's

a easy choice. So I basically put all my chips on Bloomberg a plum and interviewed here to have a job in PR. Went through many interviews. It took a while, but yeah, really, yeah, so I started here relations So so first, the first question is if you weren't reject by Bloomberg right out of the gate when you were right out of school, might you have ended up at bear Stearns? Was was Bloomberg the one? It's a great point we chase the things that received from us, to

quote the Tao of Steve. But having had like I had like three jobs, maybe four, I worked. I worked at a third party marketer for about six months, where you had to call pensions and try to pitch them on hedge funds. It was really tough. All those jobs. When I finally got to Bloomberg always helped me stay here because I know what is out there, at least to a degree. If this is my first job, I may have had such a I don't know, curiosity. I

probably would have left. So maybe it's a blessing in disguise. So you were covering derivatives in the nineties, but not the two thousands leading up to the O eight or nine crisis. No, I only covered them for a little while, so I'm hardly an expert. You missed the fun that's right, That's right, I covered them. When you're like that in the nineties, who needs the idea? Was you just try to call these traders and just get them to give you information on why what went up and down in

the futures market. It was a really, I mean honestly, very unglamorous, manual labor type job. Journalists need. Journalists need to get a reason for everything. It can't you see the market went up for the future? What happened? And you need someone from that where when? Why? Ye? Just what makes financial news coverage either really good or really bad? Because some people must impose a narrative when it's sometimes it's just random. That was my first thought two months

in my first job. I was like, I don't know if there there's a reason for this. Maybe it went up like I don't know half a point today, maybe they just maybe there is no reason and there's no clear reason, it's okay. Can we just say that? And I know they hate that. You cannot say we don't know or who knows? We I think we've talked about this. My favorite thing in the world to do on TV is they ask you a question, say I have no idea, Well what what about? I don't know? Nobody does, but

I'm telling you the truth. I don't know. The rest of them are lying to you when they answer, and people hate that. I agree, I don't know is a underrated phrase and mindset, whether it's religion, politics, sometimes you don't know, and I think I don't know is a very most Yeah, and most people can relate because a few of us are experts in anything or know anything absolutely. And so I'm a big fan of I don't know in general. But it doesn't really play well in the media.

All right, So let's get serious. Now, you're the go to reporter for E T F s and passive indexes. Well, can I stop you? So some people do think of me as a reporter, and I started my career that way, but I'm in research. So what I do is I write notes that aren't I don't report on something. I'm more get our team gives takes on things. So your

title is technically senior E t F Analysis. But when I think of everybody in the media who covers E t F, Passive Investing, Vanguard, etcetera, black Rock, etcetera, you're the first name that pops into. Oh you have a question of you want to speak to a journalist in

the E T S space? Get ahold of Eric so so so well, I would say, you know some of these guys who work for ESPN who are like experts in the n B A or I kind of model myself and well, or they just get the latest news like woes for the NBA or Adam Schefter I believe that's his name, uh for NFL. I'm I'm that for E T F S And so there is an element of trying to get on top of the latest things. But more so I just see research is having to

get out there more. I think if you're in research you sort of need to put on a pundit hat sometimes and have a reaction on Twitter quickly, because if you wait and wait, then you're late to it. And I think it's good to just be um at a little punditry. So I would understand why you would think that. Plus I was a journalist, so I have maybe some vibes that are so let's call you the go to guy, should call you the go to reporter. Um, how do the expertise in E T F and passive investing come about?

Remember the fund action newsletter I wrote for so when I was at Bloomberg PR around nine eleven, I had a near miss and I moved back to South Jersey. Uh defined near miss? Uh? Well, Um, I was supposed to be in the top windows of the world that day. Really, Yeah, there was a way. There are thousands I know stories I've had. I know and I don't I'm not looking. I sometimes people over indulge themselves in these stories. And um,

but fate did intervene. Um. But there is a badge there was a conference up there Waters Technology, Um, with your name on it. There's a badge with my name on it that was at the top. Isn't that crazy? What did the event start? Oh? It started it like seven in the morning. Have been Yeah, there were three people from this company who were there. Yeah, sad And one of them is actually my friend from South Jersey knows him. And they still have a U I think a walk for him every year. It's you know, it

really hit home. But I also was looking to take a step, like I was looking to change gears in life. Anyway, I was about seven, So I moved back to South Jersey and I transferred to the Princeton office of Bloomberg. And when you do that, um, I still think I'm the first person ever in the history of this company to go from pr to data because that's all they do in Princeton is data and engineering. But I was like, well, I don't want to commute to New York every day

from South Jerseys all take a job here. So they looked at my background and sad, why don't you go work for funds data? So I got to work where they make the terminal. It's like the Keebler elves. So I've I've seen how the terminal is made, all where all the data comes from. And they I basically had to work on getting fund information from the prospectuses is before technology was really that great, put them into fields and then was annual press. Yes, and we we automated

it as we went. We're always looking to automate and so when you pull up a Bloomberg and you type in like the Fidelity Magellan Fund and then you type d E S. All that information there is really what we we did. And so I was doing that in two thousand, two thousand, two thousand, two, three four, And in two thousand six I got a hand at et F there like you work on et F now, and I was like, I had heard of him, but I, you know, it was still and let me just jump in.

So the Spiders had been around at that point in time, the SMP five Spiders by State Street, they had been around a couple of decades, and other companies had moved into the space. And I just was having this conversation with some of the other day. They said, who you who you're interviewing? Oh, Eric Beljunas, oh uh. And then the question they asked was was Bloomberg late to E T F. I'm like, I thought they were their pre financial crisis. They were fairly. They weren't the first one,

but they certainly didn't lag. That's a great question. So Bloomberg covers everything, and if a ticker is on the exchange, it's on the terminal. So we had E T S from day one. But did we care about them. Did we put a lot of resources into them? Not really. They were still small back then, and I think that's maybe part of my legacy. If there is one, here is too. I was in two thousand and six seven. I was like, oh my god, I was like kicking the tires on et F and I'm like, these things

are going to take over. They're too good, that to value is too strong. So I just was like became I'm like dove head first into E t F s and I went to Index Universe conferences, started listening to their podcast with your friend Dave Nadi Matt Hogan, and I looked at some of the stuff they how they talked, the data they looked at, and it was very inspirational. I said, we have to cover things like index weighting methodology, the criteria, the rebounding. There's all these A t S

specific fields we have to get on. So part of what I did was to make the d S page one for E t S that had all of fields that were prevalent for E t F Because the time they're putting ETFs into mutual funds and there you were a driver. You yeah, you helped separate it. And that's why people think of you as the e t F guy.

By the way, the folks you mentioned I group you in with them, because when I befriended folks like David not Eig, I had no idea that this was the e t F MAFI and these were the people running, you know, really driving the mind share and the perception of e t f s, both in the industry and amongst the investment community. And I'm like, oh, what do

you guys do? Kind of we're hanging out and having some fun, and it's like, we've messed around with the t F so that we own e t F so we can hang with you not realizing oh no, no, you don't understand who these got, Jim, and go down the list of people. Um, these are the folks that really drove the entire expansion of the E t F industry quietly in the nineties, but as you mentioned in the two thousands, it was just starting to ramp up.

So how did you drive this company into putting a greater emphasis on e t f s and treating them as distinct from mutual funds. Yeah. I tried all kinds of ways, which is sort of I could relate to Bogel trying to sell index funds in this seven these and eighties when no one was really interested. UM. I think everybody has these plates in their life where they're trying to tell people about something and it just takes a long time to break through. So I would get

I would I would basically use my communication skills. I would talk to people internally. I would go to sales meetings. I would present the chart I really like to show was people think of E t f s at the time of having say like two percent market share of all funds. But I'm like, but they make up of all equity trading. So I would show them the volume and be like, and we're a service that does a lot with trading. We should have of the equity programmers.

If you think about it. That people would nod their heads. But I would never get the aguay programmers. But over over time we made some headway. We started doing events, and honestly, I I just really was like a one man army for a little while. But then the assets

started to come in. UM, and then someone like at a higher level would be told by somebody E t f s are big and that would help a little and Ultimately it was like a wave that just finally broke and now we have a lot of resources into et F s. But I also think that Bloomberg and what I would tell people back in the days, we might have been a little late to sort of E t F I S or d S pages and give you some functions. But it was always on the terminal. But once you do that, that's just the frost thing

on the cake. You click on an e t F, then you gotta look at the holdings, and then you want to analyze one stock you click on that you could just keep clicking on a terminal other services you had, your clicking had to stop somewhere. So I'm like all the stuff they did here in the eighties and nineties to connect to the exchanges, to get all the stocks and the bonds. We when the E t F came out, all we had to do is put some like you know,

sort of frosting on the cake. Now your analysis could go anywhere, and so the terminal and the infrastructure there was really a huge tail wind for my efforts. So so let me ask you a question that will tee up the rest of our conversation. Um, you started in the E T F space in the mid two thousand's, and you know, following the financial crisis, they exploded. Imagine, you know, just banging away at this for forty years with some limited success, but mostly being looked at as

that Jack Bogel guy in Pennsylvania. What is this stuff? He's well, he's just hitting his head against the wall. That is just going nowhere? Could you could you picture decades of this with just moderate at best acceptance to the whole idea? Yeah, I mean this is part of the story. I couldn't believe the numbers. Here's to two examples of how long it took took Vanguard twenty five years to get ten percent market share and funds. Nent of Vanguard's assets came after Jack Bogel step down to CEO.

That's even it's amazing, right, So he built a foundation largely an oblivion, right, but once it got built and then it became the gradually then suddenly thing. But he toiled around a long time, although he was a very loud, prominent voice. But the assets really weren't there until I would say the financial crisis two thousands when they really kicked in. But up until then they had less than a trillion, I believe, and uh, you know, they were

always out there. I remember when I covered for Fund Action in the in the nineties and late nineties, I would cover all the fund companies. I looked at Vanguard is maybe the fourth or fifth company. I was like, Fidelity got a cover, Fidelity t row like Mason, Vanguard was like fourth or fifth. Now when I think of the universe, it's like Vanguard black Rock and then you can need binoculars to see somebody else that. That's amazing

and I appreciate the Hamingweight reference. That's always uh, that's always really interesting. You wrote this very insightful and what turned out to be influential column in Cold the Vanguard Effects. Tell us what is the Vanguard effect? Yeah, so the Vanguard effect is, you know, Vanguard comes out there a mutually owned company, right, the investors, the funds on the company, the investors on the funds. That is really the heart of the matter here. Very different, more akin to an

insurance company than a typical COO or a nonprofit. It's not they're not exactly those things, but it's something like that. It's unique and this is part of the story. I was so fascinated with was why would someone set up a company where they deliberately turn over all the future profits to the to the people. It just it makes no sense. And so it's Marxists. It's crazy. And I asked everybody intrew fifty people for this book. I asked them all that question. How come nobody has copied the

Vanguard structure? And the answer was all the same. Well, there's no incentive to no one. And as Jason Swike said, no one goes to Wall Street to drive a Volvo. And so can I tell you that is the most one percent thing I've ever heard from you, because in normal middle class households of Volvo is considered a higher end called sure, but well I guess. But it's also

very accurate. But it's also Bogel worked hard. If you are going to go to Wall Street and you were going to put in those hours, I think most people want a big payoff, So I'm really gonna put this much of my sand intensity. It's and they got that on the belly thing. It's just the way the story goes.

On Wall Street. You make a ton of money, usually there's some fall, you know, where maybe you get into fight with people like the Bill growth story I thought was probably more traditional Wall Street story, the rise in the fall. Right. Um, So it's unusual, though, to have that much work ethic, that much drive and say, yeah, I want all the investors to have the money. I mean, they got paid well, but he was never going to get Jeff Bezos rich or you know, the Johnson family

rich if he turned over the profits. That decision was the biggest, I think the single biggest decision in the in the last fifty years. Indexing is just the lucky byproduct of that decision. If indexing was expensive, it wouldn't really catch hold. And I think it was Vanguard's mutual ownership structure that is the key ingredient, as well as Bogel's unique structure. So most of my book is exploring

those two things. I think those two things were created the explosion, and then when they were looking for something to apply this to, indexing was out there and they said, let's do that, and that I think in a weird way, I think indexing got lucky that Vanguard and Vogel existence. So so let me push back a little bit on that. If Vanguard had this mute see, I think they're they're

very complementary the mutual ownership structure. Of course, handing glove because hypothetically, in the alternative universe, Vanguard never gets into passive and indexing and instead just does low cost active, which would destroy though they'd get all the money, I don't think, yes, they wouldn't, because if you look at any study, the lowest cost active funds beat their benchmarks way more, and Vanguard's active funds, relatively speaking the monks

amongst active funds, the lowest cost wins. But if you're low cost active versus someone else doing low cost passive,

you're gonna lose. Yeah, over the fullness of time. Maybe part of my theory on low cost passive, I don't think it would have happened without Vanguard because it's just it could be true, because it's possible, you know, because the Wells Fargo Index fund, which was the second one to ever come out in the early seventies, right, yes, still charges forty four basis points and with a load, and that's with vanguarded the picture, and and how much

has the Wells Fargo Index amassed and as nothing It's like, no, it's very little. So that's why these two are so here's successful low successful indexing not attracting assets, but it's it's the low cost. This this whole thing that we're experiencing with with what I call the Bogel effect. It's it's low cost. That's the thing. I call it the great cost migration. It is much more powerful than indexing.

Indexing is really just taking a group of thocks and market cap waiting them right or and each index company does in a different way. Like there is no like is different from Vanguard is different. How about the Russell one thousands of different than the sp five. SPID is literally active. I mean, it's really because it's cheap. And if you were to have let's say, indexing wasn't even

a concept. We don't even know what it is. If you had made active mutual funds and got them down to those low fees that Vanguards active funds currently are at, they would utterly destroy They'd be the biggest active mutual fund shops six times over. Sex my opinion, I just feel like active is sold by performance, and if your

low costs, it will help your performance. But depending on your model, there there are active funds that have great years and then have terrible years, and if they were low cost, I think you would have inflows and outflows over time. Vanguards active funds would rise to the top in the ten and twenty year but it would take decades to get there, all right, It still would have taken a while. It would have been the graduate. Then suddenly it just would have all happened with active instead

of passive. It would have happened, though. I think cost, I think is really what he pushed forward and what is here to stay. So so the next thing is such a you know, there are active funds that are very very passive ish. There are a closet indext will come back hold that there's gonna condex funds that are pretty active. So index thing is a very nuanced conversation.

What isn't nuanced and what is the mother of all trends is high costs of low cost alright, So so let's put some flesh on those bones in And I think I totally didn't even answer your question, but well, I'll kay, I'm gonna pin you down. We got lots of time to make you answer the questions you're on you're on our Would you please direct the witness to what you asked what the Vandguard effect was in dollars.

Let's talk about dolls. So that mutual ownership company that he created, and once it got really popular and then gradually then suddenly kicked in in two thousand eight and they started getting trillions um. Once the trillions started kick in, a couple of things happened, and you can start to

calculate the savings that Vanguard saved investors. If you take the money they would have had and say a sixties seventy basis point active fund versus a ten basis point in X fund, and the turnover the trading cost is like another one percent for active funds, and you don't even see you add that up. You know, arguably it's five to a trillion. Uh, there's ways it could be more. Bogel wanted to reinvest the savings and that grows it more.

But let's say it's a lot of money. Now. The Vanguard effect is everybody saying, oh, they're getting all these flows, we're gonna have to copy their local feast to compete they And so in my book, a lot of people were like, nobody wanted to do this. Only Bogel wanted this. Everybody else did it because they had to, and that mattered to some people, but ultimately that's how everybody saw it,

and I agree, and that's the Vanguard effect. And that's why I was so attracted this topic because as somebody looks at the flows every day, I'm like, damn man, every every year we look at the flows, and I'm like, if you pull a thread on basically of this money, you end up in nineteen seventy four and it's all traced back to this guy in this decision to set this company up like this. And that is interesting that nobody copied Vanguard's mutual ownership structure, but it's the governing

force of the whole enchilada. Now basically people are they have to copy it, even they don't structurally copy, if they have to copy the products, which leads me to a statement that Bogel made that blew my mind. I didn't know he said this. I had known some of his quotes, but not all of them. In one of his books, Character Counts, where he goes over his speeches, he's given the crew. He talks about how the crew

is what they called the employee. Uh. He talks about Vanguard's mission will be will start, Vanguard's will know Vanguard's mission is beginning to be successful when our market share eroads, meaning everybody else has. And that's happened in specific spaces, but not overall, not overall. So he I wrote a note saying Bogel's dream on hold still despite passive revolution.

So so they at one point in time where the number one funds in a lot of specific categories and in many areas, that is no longer the case because other companies as a loss leader and to be able to market hey, where the number one in this have either cut their fees below Vanguard running at a loss, and so there's still two three four in everything and

much more asset's under management. But when you look at the fun tables and look at specific things, it used to be Vanguard Vanguard, Vanguard Vangard, and that's no longer the case. Is that the market share loss Jack was talking about, that's exactly he would he would have like, that's what's so uh interesting about this guy is that's a completely different trip to actually root for your market share?

Do road to think that that's that's like saying I want to actually change the whole industry, the whole industry, um, and it is happening. The problem is, overall, Vanguard still leads and flows every year like clockwork black Rock. Typically in a given year, Vanguard, let's say takes in ten, black Rock will take in seven, and then you know, go maybe three or two is the next one, and then after that it's a fraction. Yeah, and then there

a lot of people see outflow. So net wise, you know, Vanguard and black Rock are really can on Godzilla at this point, and then there's just this huge gap. But if Vanguards still takes in more than black Rock though, and we know how big they are, so ultimately Vanguard will pass black Rock. Eventual events con especially in a bear market. Bear markets are where Vanguard's market share really starts to grow because there's no asset appreciation. Asset growth

or market appreciation. Asset growth. The only thing that can actually grow your assets or stop the asset losses flows. So once flows are the only variable the market share percentage that Vanguard has start to go, it doubles the rate of growth. So bear markets are because I woul always over the years here, oh just wait till a

bear market. That's when all this Vanguard stuff constant, like, if you're active, you should root for fed liquidity forever, market appreciative forever, and just live with your outflows because the market appreciation will totally overwhelm that and you'll get

you'll still stay rich. A bear market is when you're probably gonna really find um, You're gonna start to see real erosion because you're gonna have the ass it's come down from the market, the outflows, and there's still arguably a couple of trillions stuck in there because of taxes. So I would say a bear market in my opinion. We have a phrase on the team is that bull markets are good for passive. Bear markets are great. That

that makes a lot of sense. But Bill McNab, the previous Vanguard CEO, told the fascinating story on that topic. So what they do, what some of the senior management does, is they call. They log into the call center to see what clients are saying, to see how people are dealing with it. And in O eight, McNab logs in and he hears not just nervous clients, but nervous customer service reps. No one knows middle of oh eight, no one knows what the hell is gonna happen. Am I

gonna lose my job? And he came to realize, Hey, our folks have to sound like they're comfortable, they're confident. They can't reflect the fear from clients. So he does an all hands on deck. It doesn't matter how low the market goes. There will be no layoffs. Everybody's job is secured and we're going to continue to pick up money. In oh eight o nine. Are inflows are strong? You guys just have to communicate that too to our clients. And at that point forward it was a fire hose.

Everybody was getting. All the things that were being sold was flowing straight to van. Eight was the year that made Vanguard and ETFs um. It was one of those years where a lot of active managers did worse than the market, and so it was one of those Ah, you couldn't even save me from the whole reason for existing. So that was one the liquid peak to trough um and in Vanguard astonishingly took in flows every month in two thousand eight, which even in October, where we were

already weary of going down. In October two the market was found seventeen percent in a month, and they took in money. And that's when I really I look back at this. This is I might have been starting to look at this at two. That when I really got on this whole notion that bear markets are actually going to speed this thing up. And we've been bringing that drum internally and we've been proven right so far. Uh and this year is no exception. Um Vanguard is leading flows.

I think I I did a status. I forget the exact flows. It's something like Vanguard's taken in I don't know the rest of the industry combined is like negative to fifty. It's it's almost as if people are selling under other funds and sending the money to Vanguard. I means coincidence. There's also this I see the Vanguard flows are so good and persistent because and I asked Bogel, why are why are Vanguard investors so disciplined? And he said,

because they had to find us. These are people who who weren't stuck in it because they got a kickback from a fund company through a broker. They found us, and they're usually pretty with it. And I also think this is and I point this on the book. Behavior of Vanguard investors is off the charts good. But I and I think advisors like you, who are are specialized in behavior, I think your job is made a little

easier by just introducing a cheap index fund. I think it's easier to behave when you have a cheap index fund as a tool, because you're, like I called the like a resignation. You're like, what am I gonna do? Hop onto some high flying who has a good year. They're under performing, but at least they're expensive, right yeah. Uh.

And I think that that resignation is made behavior. And there's all this stuff on psychology and behavior that seems to be like written about, But I'm like, I try to imagine, try writing all that stuff if all you have is active mutual funds that charge one percent, it's much harder. It's easier to reflect on behavior and how important it is when you have a cheap index fund. So I think Bogel's contribution to behavior was monumental just

by introducing the index fund. And also think Bogel was interesting in that he wasn't really into the efficient market hypothesis. He wasn't really an academic. A lot of what he did, though,

if impacted those worlds. I think but and people may see him as like thinking that way, but he I think he was just a very practical guy who kind of just saw it makes no sense to charge all this money because when stuff, when you start to compound, much of that compounding then goes to the intermediary, not you. So so it's interesting about the flows to Vanguard. My

partner Josh Brown calls this the relentless bid. And what he means by that is everybody who has Vanguard in their four oh one K, everybody goes Vanguard in their IRA. Their accountant says, hey, it's time to make your contribution. It goes to Vanguard twice a month or every other week, depending on when you get paid. In Wall Street, it

seems to be twice a month. You know that there's a percentage And and in my firm, I watched these like fifty thousand now checks go out every month to to the four one K company and a huge percentage of that is captured by Vanguard. So even when the tide goes out in the market, like the first half of the year, you're still sending money to Vanguard automagically. It just happens. The other thing is um An underrated

word is trust. Um, you look at Vogel and you had a quote in my book about this, which is must. You have used only quotes with curses for me, but it was hard to avoid them. Man. But if I think when you curse, you're saying your best stuff. That's why you curse, because you're so into it. So it happens to be your best points. When I listen back to your audio, happened to contain curses, and I maybe there's a correlation there, but it's it's good to know.

But you can take the ball and go home. Yeah. It basically over time, Uh, it was really other people shooting themselves in the foot active funds showing uh that they you know, people's experience over time that added up and then you see Vanguard over here and they just look boy scout in Comparison's phrase, And so that thrust it gets built over thirty forty years. Because people ask me all the time, how can how isn't Vanguard's market

share roting when everybody has cheap index funds? Now, even JP Morgan Goldman, who have armies of advisors, they could just move them all in. And I'm like, well, you have forty four years of trust built up, goodwill banked, and the low cost. So it doesn't matter if somebody zero and vanguards three basis points. It's not enough because the trust and the branding is so strong and it will be for a while. It could have wrote eventually, but right now that trust is so underrated. It's not

just the fees. Nobody's ever accused Vanguard of being a vampire squid jamming. It's funnel into the vein of money flows as as we heard about UH some large companies during the financial crisis, and there was no accounting scandal

at Vanguard. There was no I P O spinning, there was no go down the list of all the scandals the analysts scandals, scandal after scandal after the derivative scandal within County got It was one after another after another, and they're like, that's investors with a mutual fun overnight

trading scandal that Elliot Spitzer investigated. Here's the thing that I feel for the rest of the world is that the structure of a publicly traded asset manager is such that you are you're you have to serve the shareholders who want more money, and where where's the money going to come from the investors or your clients, and that is a vicious tension to live in. And and people try their best. And some companies like you take a black Rock, good people work there. They like to serve

their clients. I think they like what Bogel pushed onto them, but they are still having to live with that in her intention, and there's probably gonna be times where they have to make a decision, well we should we should try to get them into the higher costs one because we have to meet our revenue goals. And this is the sort of thing that Bogel would talk about any time he had a chance, which is the two masters that um speaking of masters in business, the two masters.

It's hard to of two masters. And his structure was such that there was only one master, which was the owner of the company, was the investors. So and I know this story gets told all the time. People kind of know it, but it again when you dive into it and trace it. The amount of money this guy commandeered and the idea that no one's copied it just

makes this such a fascinating story. I heard your interview with Spencer Jacob and the Memestocks and you said you couldn't make this fiction because you could never invent I would say the same thing about Bob. You could never dream this guy up in like the sixty. You just couldn't. You couldn't dream this. Maybe possibly, but and I know the story isn't that interesting. But if you again, the more you think about it and ponder it, you're like, wow, you know that's the the old joke. I don't know

who I'm stealing in the line from. But the difference between fiction and nonfiction is fiction has to be plausible. Nonfiction can be utterly insane because it's real. But you tell some of these stuff. Listen the I I have coming up, Bill, Bill Outer and Red Notice would have will have broadcast, And that has to be a work of nonfiction, because if it was fiction, you would look in and say, this is just too ridiculous to have ever occurred. It can't be real, and so the story

loses effect. But you find out that all the stuff happened, it's it's insane. I totally agree with you. We'll talk a little more bit more about Jack and how completely contradictory his background is and how how interesting it is. Um. The thing with the other E T F companies. You what you're essentially saying is that there are fiduciaries and then there are really fiduciaries. Is that what I'm hearing from you. Yeah. Bogel wasn't necessarily against high cost or

active with a word. He focused it on with stewardship. He thought there are good stewards and bad stewards, because he says, if you're a small company asset manager, you probably need to charge one percent because you gotta keep the lights on. One percent of a million isn't a lot of money. One percent on thirty billion is a ton of money. And so what he thought was they broke their stewardship by not sharing any of those economies

of scale. The dollar fees were enormous. So I think that's ultimately where he was trying to separate what they did from others, because again I found in a lot of his books he was proud of some of the active funds. So I thought stewardship was the main word. And you can be active and be a good steward. You could be even moderate costs and be a good steward. I think the idea is, are you you know, sort of totally abusing the relationship you have as the controller

of somebody's money. And I think that's where he really had problems. And he wrote many books that are just all one big rant, especially rant about the two eight crisis, and he wrote a rant about two thousand one and end Ron, and these books are where he just is like he's unmarnished. In other books he's just a little softer. But he found that that was what pissed him off the most is when people broke their fiduciary and stewardship bonds, not necessarily active or even high cost. It was about

is the high cost warranted um? And in the case of asset managers, I think I have a chapter called the Fall and Rise of Active because Active is evolving in different ways, but the fall is a missed opportunity. I think these companies in the eighties and nineties, when they got enormous, they got into four one K plans that se basis points, they charged even more um was once you got ten thirty fifty billion dollars in that fund. They never shared any of that, and I think it

was a missed opportunity. Had they shared a little bit of it, they still would have made tons of money, and they would have been able to bank goodwill, lower the fees and increase their beat rates against the benchmark because their fees are now lower. It was a missed opportunity. And I find it interesting that they were so disrupted when their whole job is to analyze companies and stocks and try to figure out who's going to get disrupted

and why. And they've seen Amazon's come along in these other industries, but they it's like they never applied it to themselves. And I find that kind of interesting that they were so disrupted and their students of disruption. Well, first, very few people have an accurate self perception, and that includes companies. But second, more important, how often do companies cannibalize themselves, compete against themselves cut fees if competition does enforce them, And so I can think of you know,

my favorite example is Apple. Remember the first Apple was like a deck of cards. It was five hundred bucks. The first the first iPod a thousand songs in your pocket, A thousand songs laughable, and it was I think three. It was big and heavy. So they come out next year with another one. Now it's ten thousand songs. And it's a hundred bucks less, and the next one is forty thousand songs, and now it's one until eventually you get the little i iPod touch. And the reason the

Apple story is so instructive is it's an outlier. People don't cut cut costs unless they have to. People won't cannibalize themselves and lets and then they said, oh, we're gonna build that into our phone and give it away for free. And you know, someone had to say, what are you crazy. This is a billion dollar business. Well, if we don't do it, someone else will, so we

have to Wall Street. Isn't that self reflective? Yeah, they all love Steve Jobs and that mindset, but they didn't apply it um And I have a section called the Steve Jobs rule, which is, if you don't cannibalize yourself, somebody else will. And I think you either have to cannibalize yourself or create enormous value and keep just throwing value and value and value to keep that price steady, or do both then become the biggest company in the world exactly. And so I do think there was there

are these outliers of people who are that hardcore. But you're right, and again, this is what made the Vanguard story interesting. And I also think what what made it interesting was lowering fees in the seventies, eighties and even the nineties. Nobody really cared, Like there wasn't a during the bullmarket, you know, nobody cared. So he was doing this at times when Wall Street was not. It was decades before the world figured out this actually makes sense

and that vision is is pretty rare. And I have, uh this sort of comparison in the book where I look at and the movie Wall Street comes out, Gordon Gecko is giving as greed as good speech Bogel's in Valley Forge, given the Christmas you know speech to all the employees, and the side by side of all these young people watching Gordon Gecko wanting to go to Wall Street and make a ton of money, and then Vanguard Bogel is sitting there talking about like, oh, we shaved

one basis point off the fund this year, if we keep doing good fiduciary and like in eighties seven, And I'd say this in the book multiple times. Ay, if I, if I was an active manager, I wouldn't shared economy to scale. I would have bought the sport they did I know, and so I. They did what most of

us would have done. Same thing. In the eighties. I would have gone crazy in the eighties culture, I would have just got carried away, so I and ferraris so you know, in the nineties in the bullmarket, that was a whole thing. It was Bogel is just weird. So he's an outlier, and that's why the book is on him. But I make points to say that I would have done the same thing as them. I don't. I don't

think I would have shared it. I would have thought, well, we earned this money, let's spend it, let's buy hire new people, give us our ourself raises. So so let's let's imagine that you're you're working in Fidelity, or you're working at Templeton, or you're working wherever, and in you just had your best year in history, and you walk in and say, I have a great idea, we should cut our fees because think about how great that will be for investors, how it will improve fun performance, and

how sticky clients will become. And you wouldn't have been laughed at. They would have thrown you out of the room and fired you. Isn't that crazy? And so you have a guy who did nothing but that for forty five years. But now you he changed the whole world. I mean, he changed the whole investing world with that concept. But you're right again. I and you know the twelve one fee, which is to say, which is the marketing

fee for mutual funds. It's to say, like, hey, look we we have We're gonna take your money and we're gonna go spend it on marketing. That way we get bigger, so we can share economies to scale with you and lower the fee. Well, they forgot the second part, and Bogel was all about the second part constantly, And so I try to tell people there is a great business case study in this story. And I also tell my Crypto friends, you guys should read this heavily. Bogel was

more defined. They're all about saving fees. Yeah, that's the thing. Like Crypto almost sells themselves as Vanguard, but they're really old school Wall Street. And I'm like, you need to get more Vanguard in your life because all we see is these billionaires hiring movie stars to do commercials. And I'm like, and you sell yourselves though, is populous? And for the people read this story. This guy was the real deal. I him the o G of DeFi absolutely so.

So let's talk a little bit about Bogel. Boggle. Everybody gets his name wrong, Jack Bogel. I know, I've had people internally called the Boggle effect, and that's yeah, that's where I knew man Um. Some people know about him, but some people don't know about him inside the bubble. So so let's start with Jack Bogel's early career. He writes a senior thesis. It went to Princeton undergrad he did that. That thesis seemed to have sealed his fate. Yeah, it did. It was a thesis about, you know, how um,

the asset management industry should be better stewards. It was just basically return it was. It was very much again the seed was planted quickside. Note. I interviewed Michael Lewis for this book, and when I told him that, he said he keeps a file of Princeton thesis that have changed the world, Like the Adam bomb was a Princeton teach for America. He's like, I'm gonna have to add this to my file. May maybe he'll have a book on it one day. But I thought it was kind

of cool. Um. But yeah, Also the Prince and thesis is interesting because when he was searching for an idea, went to the library, didn't know what he's gonna write about, and just found um Fortune magazine randomly random mumbles across the magazine and on the cover it didn't even say mutual funds. You had to like open it and it was like big money in Boston or something, and it was about mutual funds, all right about this? So I actually went and looked at magazines that were also from

December nine that we're probably laying around the library. Time magazine cover Conrad Hilton, so I tell I told the hotel industry dodged a huge bullet there. Man. Uh So anyway, he that's there was a lot of serendipity in bogel story that again reminded me of that Meme stock interview you did. There was a lot of things that had to come together to prove that that meme uh sort of moment, and there were a lot of things that came together that were serendipitous. I would say that thesis

was the first one. So so Bogel eventually gets a job at the Wellington Fund, which had been around. I don't remember if they were the earliest mutual funds or one of their there was like there's like ten funds that came out in the twenties. But they went through the twenty nine crash and survived and the Yeah, and they actually was a balance fund that UM pat It buffered a lot of the downfall because it was a

conservative dos and buttons. So so what was he doing at Wellington and how long did that last join Wellington? I want to say early, like early sixties, maybe even the late fifties. Uh no, abuse sixties because he wrote the thesis. Uh anyway, he's in at Wellington the sixties, will say UM. And then the guy who ran Wellington UM was like I'm out of here. I want you to take over the company. Bogel was I think, I want to say thirty five, pretty young, and they had

a problem. They were losing money because the sixties were like a great It was like the last decade where all the all the people taking your money were like Cathy Wood and stuff except of their day, and Wellington was like boring. It was like the value investors, how we make fun of them? And uh so they're like Bogel was like, I was selling bagels, nutricious bagels. Everybody wanted donuts, so I figured, I gotta start selling donuts,

so we're gonna be out of business. So he teamed up with a high flying growth manager, which is interesting because it was the fourth or fifth one on the list. Um. This company wasn't very well known, but they had a fund called the I V. S fund Um. But the first choice he had was Franklin and Capitol Group, and they didn't say yet, they said they declined. Now, I, theorized in the book, had one of those in acquisition.

In other words, he their private company. He offered to buy them and fold them into Wellington and they said thanks, but no thanks. Yes, they did not want any part of merging or any acquisitions with him or Wellingtons. He finally gets this growth manager down fifth, fourth or fifth on the list, and it goes well for a while. You know, they've got the boring stuff and the arc stuff and uh, but then the basically the stock market

goes into a bear market. Sixty six is the peak following the post war around by the way, parallel to oh wait or not about of fifty and right before that the people who were at Wellington UM changed the Wellington Fund. His new partners changed the Wellington Fund to be much more equity oriented at the exact work, exact wrong time, and even Bogel had a memo saying, we can't do this, and he's like, no, this is the right way to trust me. Anyway, So they're growth funds

fall off a cliff. They go down worse than the market. But the Wellington Fund goes down the same as the market, the same thirty It doesn't buffer at all. And I think this was probably had to be one of the most pivotal life moments of Bogel to feel he betrayed himself, he betrayed his mentor, he sold him. He sold it all out and these guys had voting control the board and they got into massive fights. The clashes were historically bad. They were you know, basically piste off at each other, uh,

you know, blaming each other. And they fired him, even though he later in life he's always like, I was the victim. But stories are he wasn't a picnic to deal with. He's a big pain in the Yeah, he's a pain in the butt. So anyway, UM, long story short,

he realized there's a loophole. Instead of being fired and going away, he's like, I'm actually the owner or the chairman of the funds themselves, and so that gave him some leverage to sort of dig in and fight them, and they had to come up with a resolution and that the board would agree with. And so one of the ways he was able to keep a job there was He's like, I'll do the back office work and

I'll set this company up mutually owned. That way, it doesn't look like I'm doing some cash grab here, and all eleven people on the fund boards agreed with that. So the mutual ownership structure, I'm not sure it would have been born ever, if it wasn't for this necessity to sort of uh satisfy different groups of people at a time when everybody was piste off and and upset and figure out how to do something. So this really awful, crazy situation that was just nasty ironically produced this amazing

sort of unique structure. It was almost like a freak accident. So that was the first half of the freak accident. His contract says he cannot manage a fund, and so he comes up with this very clever back door. That's the according to the Bogel Effect book, that very cleverly says, Hey, you guys said I can't manage a funds, but there are these indexes that are unmanaged funds, and we want to put an unmanaged fund in the separate entity. Tell us.

So that's the other freak accident. Tell us what happened from there? Yeah, that the the idea that an index fund wouldn't be quote managed and wouldn't violate his agreement with his former partners or current partners that we're not talking was also a lucky break. And indexing was starting to become a thing. People were writing about it in the academic journals. It it was a thing in academia,

but not on Wall Street. Not a mutual fund. Wells Fargo had tried one, but it was eaten work, and because of the glass tigle, they couldn't do mutual funds. There was a lot of things that made it um. It was you know, Steve Johns wasn't the only one in a garage thinking about PCs. Okay, something was in the air. So Bogel read a journal piece by Paul Samuelson that basically was like, can someone please just put in the next fund out so we can have something

to benchmark these gun slingers against because he had. Again, people are starting to come up with this notion that active me wasn't that great back then. So let me just let me interrupt your second because some of the audience is a little younger and they're gonna find this hard to believe. In the sixties, seventies, even eighties, if you wanted to know how your fund was doing day to day, week to week, month to month, quarter a quarter, year to date, that information was not a click away.

Most of the time it didn't exist. You waited till the end of the year to get an annual update, and if you were a mutual fund holder you would get some sort of quarterly update, but most of the time you had no idea how well these funds were doing.

This is a great point and Michael Kittsis, who is a great writer about the advisor world, once wrote a blog post called um the Internet killed the active fund star, and it was all about how once information started to spread quickly, it was over because you could quickly compare. Back then, you couldn't do that, and it was it helped active I think back in the day by the displaying their expensive, underperforming funds. How could that hurt them?

I sent that article to Bogel and an email and I was like, hey, what do you think of this internet theory? He writes back like two pages and he's like, well, it helped a little, but I'd like to think I had something to do with it. And he proceeds to write like all the things that went into creating the passive revolution, and he did, and he said, you know, internet helped at the end, but the foundation had to

be there. But anyway, UM, back to your story. So Bogel says, I will take this guy up on his offer and do an innex fund. And it's not doesn nothing managed, so I can hopefully squeeze it by the board. He even knew he was like sort of right near the line because he was way over the line. But but he they bought it. Yeah, he might even said they actually bought it. So his his uh Jan Twardowski, which who was his first PM of that fund, had to call himself a portfolio administrator. Yeah. So they went

through the whole thing of like, we're not managing money here. Yeah, So that necessity was also a lucky break. There were many of these as we just went over. That makes you think there was some universal force ushering this along somehow, because if any of these things doesn't happen, this probably doesn't happen the way that we see it. So but long story short, Um, they come with the indext Fund. Uh,

they launched it. Nobody cares. Uh, it doesn't sell it well because it's this is an underrated point of Vogel story. The Index Fund ultimately would not pay brokers, so he had to. It was it's like making a movie outside of all the distribution systems the theaters, Netflix and you, and you're gonna people have to come to your backyard to watch it. It's so he made something that you had to leave the entire system and go to them

to buy. And that was really ballsy. I mean, it's a guy with like five kids at the time and trying to raise a family. I mean a couple of time eatings for a hard transplant at the same time. Yeah, I'm like a couple of times in the book, I'm like, you know, I have a bad heart, I'm raising a family. I might just go to the big company and take the pay day and just like, not worry about this, but to do these moves and to purposely delay the success.

I give him a lot of credit. This is the long, hard walk that a lot of people just don't have the courage to take. But he did it over and over. So so let's talk about I was only half joking about the heart transplant. However, in the book you talk about it gave him a certain life is short lived every day like it's your last, and don't go for the money grab impact the universe? How significant were his health issues and eventually he gets a life saving heart transplant.

Used to joking and say, hey, over the heart of this of a twenty year old, really twenty eight year old? I think how significant was the fact that his life expectancy for the least for the first was it fifty sixty years? Was he could drop dead tomorrow? And almost did several times? Oh yeah, His wife took him to the hospital all the time. It was a whole recurring thing. He brought a defibrillator. Did I say that right? Play squash?

So he told them whoever he's playing with, if I fall over, just you know, but these on my shocked me back. So people like people were hesitant to play squash with him, but I would think that it would encourage him to let other people if you're winning too much, It's like I couldn't forget out of the package. Yeah, Uh, you're right. I think his heart was one of ten things that made Bogel. And I have a chapter called

Explaining Bogel, because again, he's so unique. I'm like, what went into produce this particular character, And his heart was one of the things I go into And I think that idea that you're going to die any minute, any day, we're all we can push that off as people normally. He couldn't. He could not. It was all It was right in his face constantly. And I think that gave

him a jolt of life. Um. You know, people who survived car crashes and airplane crashes or nine eleven have similar experiences of and he had that almost probably like more daily than most people. Uh So that was probably a big thing that helped him. Your point about not wanting the money, Um, I do think he was almost

miscast in this industry. I think he wrote a book called Enough about how you don't need that much money, YadA YadA, um, And I think he almost would have made a better He would have been better in a different industry. I think he was almost miscast. I also think he was miscast in time. I think he was meant for the eighteenth century. Well, it wasn't. His grandfather did something very similar with insurance, if I remember your

book correctly. Yeah, he had a great grandfather who was basically a gad flyer or uh what would you call that, like the jack of the annuity. Yeah, it was like the fire insurance business. And you read this guy's pamphlets and he's like, the insurance companies are ripping off these firemen, lower your fees, and and you realize, man, this you can you can read Bogel in there. So there is

set There's some genetics involved as well. And I included that because Bogel loved his great grandfather, he would read these speeches he gave and take a lot of inspiration from it. But yeah, I would I would say that, you know, that is definitely one of them. But I think the enough thing, even though he had enough money and he wasn't um, he was sort of immune to that greed for money, what he couldn't ever get enough was adulation. That's why. I almost think like usually if

you really wish one adulation, you go into the media entertainment. Um, maybe you're a physician, you know, somebody who's like good at getting thanks a lot. So I think he he was we all have to fill some void, like we're all you know, holes in the middle. And I think his was he wanted, you know, people to tell him how great he was. He wanted people to say he was important. And his son, you know, told me that when he would get stopped on the street. He never

tired of hearing that. And the kids could never understand why he would sit there and talk to this X doormanaged and men, Yeah, and um, you made my retirement possible, you helped me pay from You could never get that just endless and he choked it up. Yes, so he could. So he gotta hit enough was applied to the money, but maybe not the sort of adulation and that that's that's what drove him. And I tried to get at that because he wasn't a even though I'm very complimentary

of him here, he was a human being. He had flaws and he had needs. They just weren't exactly this the prototype of somebody on Wall Street or running money, they were completely different, uh in many ways. And so I, you know, explore that in the book because again when I said, why hasn't anybody copied Vanguard structure? There so there's no economic consentive And then I said, well, why did this guy do it? And everybody had the same answer.

That's a good question. And so you have to kind of look at the character of the person um and you know, try to figure out what what drove them. And so I tried to do my best to sort of lay all that out. So, so here's the key Jack Bogel question with Vanguard today following this rally off the lows in June two um making up more than half of the first half of the year's crash. And and that means the Vanguard is what seven and a

half eight trillion dollars. I don't even know where they are these days, but they were eight point three at this sort of top. I think the probably seven point five today something like that. So sola between seven and a half eight trillion dollars? Would that? Could that have ever happened without Jack Bogel and and his philosophy? No, just just happen. No, I agree the people who ran Vanguard after. I have a chapter called Bogel versus Vanguard

because he had that's is fascinating. He had problems with his own company and the the tfs overseas. He would take giant craps on all like of the funds that they served because he kind have honed it on, you know, and I found that really interesting. And he'd be on campus doing it, especially ets that really pissed them off, Smart Beta, all of that. He just thought it was needless distraction. Why are you doing this? And he thought,

why is Vangard trying to get so big? But the other people who manage Vanguard, I thought they did a good job. Um. So in the book, I try to thread the needle because there's a growing gap between the Bogel heads and Vanguard because they see Vanguard going into wealth management, going into private equity, going into these places. And Bogel was more like, enough, we don't need to be that big. When I met with him once, he was like, I can't believe we have three trillion dollars

like that is that is almost absurd. It's it's a ridiculous. Now they have Bill McNab says home my beer Jack, So watch this, But then you have to ask yourself. You know, Bogel was sort of pushed out of Vanguard. That's what's interesting about Bogel. He was pushed out of but but not off the campus. He was pushed out of the executive site into a chair airman. You're the gray hair, you're the driving philosophy. Now I have an E T F meaning and a private equity meaning for

a four one case. But please tell everybody about our philosophy. Yeah. I mean, the core of Vanguard is still very much Bogel's dna um, But on the outskirts, they're changing. They are pushing people into E T F s. He would have hated that. Um, the wealth management, you know, I don't think he would have done that. He wouldn't have done E T S. We know that. I probably wouldn't have expanded that much overseas as they are now. But one could make the argument, well shouldn't these other places,

don't they need a little vanguarding. Yeah? Absolutely, And so there's you could see both sides of this story. But Bogel also the way he was pushed out, I believe, And then they went and launched E T f S. Like within ten years of him saying no to E T F S. That was sort of a I mean he might have saw it as a slap in the face. Um that the book you you describe his gentle easing out is while he's in the hospital dying, right, didn't didn't? Um? What was it? Jack? Who? Who was the Brennan? Jack

Brennan before Bill McNabb. Jack was his protegee. They were very tight. And the board says, hey, Jack, Bogel's in the hospital waiting for a hard he's dying. I just wanted to see him yesterday. It doesn't look like this guy is gonna make it. Someone has to run the farm. Yeah, and what happened, Well, Brennan was again I think he was a great CEO, fabulous, fabulous steward. The big issue there was the E T F S and Gus Souder was the one who had the idea. Interviewed Gus for

the book. Gus Souder told me that was the chief and he was also very close with Bogel. Um, you know, I think they had a very good relationship. Souder looked at Vanguard and thought about a massive crisis. What's going to happen. All these people are index funds, and we're gonna get all these calls. How are we going to deal with redemptions? And he thought if we could make the e t F a sheriff last people who wanted

to come in out of the fund, we could. They could use that to trade and that would buffer and protect the index fund investors. Bogel kind of saw et F s ays, they just want to get bigger, they want to distribute, and that's why he was against it.

Sounder's reason almost is more Bogel, like Souder told me, he told Bogel that later in life, and Bogel kind of I think it softened him because during my interviews with Bogel over say, the last six years before he passed away, he got more and more soft on et F s um he would the last interview in particular, here's what he'd say say, something like, well, look, I've always said, as long as you buy the broad market ones and you don't trade them low cost like hours,

they're fine. But then he couldn't just let that stay. He couldn't just let it go like he always said that. That was what he always said. But it wasn't that they would be like dot dot dot, and then he just would be like, but these things are marketing tools there for trading. We don't even know what people are doing, you know. I don't like them, and so he was

always wrestling with them. I like my metaphor. I uses that the index fund was his beautiful firstborn daughter and the E t f s like the tatted up bad boy that she married, right, and so E t f s did a lot to advance indexing and there and now they're in the family and he has to deal with them. And it was always this sort of like push pull and it was never an easy relationship with him. And it's I the chapter in the book that goes over this is Bogel and ETFs. It's complicated because it

is complicated. I'm Rick Ferry, who I interviewed also, who's big Bogel head. He tried to tell Bogel many times. ETFs have really helped advance your cause, and they made it very easy to get everywhere. You never have to go to Vanguard to get index funds. Now you can just buy them anywhere through the E t F So it you know, even the most diehard Bogol heads and friends of Jack Bert Malkiel, their fans of TS. Yeah. Basically three things. Everybody disagree with Bogo on pretty much

E T F S international investing. Bogel says, you don't need it. Almost everybody I've talked to, even his friends, said I like a little international. And the third thing was Bogel's prediction for what will happen to the asset management industry. I couldn't find anybody to agree with this.

In his last interview six months before he passed away, he was the most prophetic I've seen him, and he said, there's gonna be a mass mutualization of this industry because these companies, it's not gonna be enough to lower fees. It's too late. They're just gonna give away all their margins. It makes no sense. They're just gonna that they're gonna have to do at some point is just convert to our structure. And so the big asset managers will be

a mass mutualization. And no, I couldn't find nobody to agree with that. So those are so Bogol said a lot of things that even his closest friends and people who look up to him did not agree with huh quite quite fascinating. So let's start out with my my favorite discussion on indexing. Indexing has been called un American, anti competitive, Marxist, communist, It will ruin the economy, it will crash the market. It turns out to be none of those things. Why so much hate for something that

has saved investors trillions in fees? Well, that's why the answer is in the question. I asked the question that weigh on purpose because this has come primarily from the active community and the academics they've hired. Bogel really found he heartbroken by the academics. He really thought he got the active people doing it, but he thought the academics

were a little irresponsible on this front. I am convinced if you took all the people who have ever trashed UH indexing or fear mongering and looked at therefore, in one case, it's got to be low cost inext monk because they're smart, they're not done. And by the way, the next time one of these things happens in a debate, I'm gonna steal that and say what's in your four oh one K? Yeah, this is exactly how to debate. Somebody on this. If they start doing that, just say, well, okay,

well how do you invest? Yeah, because if you're not willing to like that, Warren Buffett is an advocate, I mean, and and I think most most of us think Warren is an honest steward of active investor. Yeah, and Buffett recommends, I mean, Buffett is an active investor, but he recommends, if unless you're going to do this all the day, all the time, just put it index fund. You'll be

and you'll do better than almost all the pros. Anyway, that was his advice to people, and I he actually I was able to interview him for this book, and I asked him if his advice was the same because index is getting bigger, and he said, yes, it's still by SMP. But then I said, well, do you think the nexting is too big or and he's like, no, it's possible it gets so big that it's a regulatory matter,

but that's an issue for another day. So I do think that ultimately the reason the problem here with indexing isn't necessarily indexing, because look, all you're doing is taking a basket of stocks and you're buying them. It's all funds are all cross the board. Look at the Philly Magellan. It's Apple, it's Amazon. It's the same stuff, man, it's just cheaper. Right. This is all indexing is. It's not that different. It's just the same group of stocks for

a lower fee. Right. I think the problem that we're going to have run into is Vanguard and black Rock are going to own too much of corporate America. Right now, Vanguard owns about eight nine of most stocks, black Rocks seven, so it's fifteen between them. At this rate, they're probably gonna own thirty of stocks collectively because the rule is a fund can own no more than ten percent, not a company, and the rules old. It was made back

when fun complexes one fund, not thirty fifty. So I think there might Regulation is probably the only thing that can stop their growth at this point, and I think it will probably be an issue of Bernie Sanders tweeted about it, although I don't think I actually put Bernie in his place, because he said the most the most ignorant, I mean, on either side of the aisle. I don't remember a politician misunderstanding. Hey, Bernie, not for nothing, but

all your supporters are giant winners because of Ania. I have. I had a line in the book that I removed, which is that Bogel has done more for average people and to reform Wall Street than Bernie Sanders could ever dream of. Then he doesn't put bills that that fail. Um yeah, I mean he's he talks a big game, but he doesn't get much done. Um. I'm surprised Bernie isn't more in touch with that. That's why I was very polite in the post. Began Bernie, Bernie, Bernie, come

on you. If anybody should understand mutualization and communal ownership, it's a socialist like you shouldn't you get that? But but but real quick, I think what we're gonna find is passive is going to continue to grow. Right, it's going to be the core of most people's portfolios because it's just too too good of a deal. So let me push back on what's gonna happen. Let me just get me finishing. But and this is a chapter I have. What's gonna happen is Active won't die. It's just gonna

get crazier. So what's gonna happen is the core of a portfolio will be low cost passive vanilla. Check that box. Then people are going to decorate that with arc um call options. They're gonna play that, you know, trade. They might use bitcoin or crypto basically like hot sauce on otherwise dull meal to sort of distract them. And I think active is going to get ironically way more active because of passive, and I think that maybe that's okay.

So I think that's ultimately where we'll stand, and those active funds will shine enough consistently to make it that it's never fully passive. There will always be somebody who's gonna figure it out for a little while, and they'll be used, probably to complement passive. But I do not see a reversal where an eight basis point growth manager from a legacy active shop replaces Vanguard. So that's why when people freak out about Cathy Wood and they're like,

how can she have money dollars? I'm like, dude, you're hitting her from a fundamental stockpicker point of view. Your competition is an arc it's Vanguard, Dude, You're fighting the wrong enemy. She's competing with like lottery tickets and crypto and stuff that would go on the outside of your portfolio. And I say, if you have vanguard in the core. You want a little wild and crazy. You want somebody who's dreaming five years in the future. Just in case

they're right. You don't want to miss out. She's the ornament, not the Christmas Tree. I totally exactly. And I think Kathy has been a kind of negative on index funds, and I've I've told her privately in public, like I really think you should team up. I think you should be explaining that the cake you because she should a She's like, well, people, index funds are misallocation to capital. They're just putting money randomly. But I'm like, honestly, you can't.

I can't. I would not bank my kids college education money on our high growth manager. I just wouldn't do it. So but I do. I can understand the idea of a little fomo. I don't want to miss out on something like a crypto bitcoin arc, you know, some of these high flying growth thocks, because it's like a call

option on the future. And I think those are why those funds not only sell, but if with this bare market they haven't really seen the autum, but think by withstanding that they may be down six but they're still seeing in Yeah, they're still seeing in flows or no outflows, and so I try to explain to them that the Vanguard effect is actually that. And so that's why this book again, it's not just index funds Bogel. The Bogel effect is the way it's impacting active it's impacting the

wealth management industry, it's impacting trading, it's impacting behavior. That's how powerful this is. It's not just a mutual fund story. That that was what also made the book exciting. So so let's come back to you know, if if Vanguard did an active low cost they would have been a successful here's the pushback to that. First, you buy an

index funds or you make your own index. Of course, you almost nothing to create the portfolio, meaning here's what you're gonna own, and you don't need a staff of forty, you don't need a research team, you don't have to buy outside wall st research, you don't have these massive trading costs. Inherently the fact that it's an index. And whether it's the Vanguard Total Market or the SPI, you're living in a world where Vanguard has low cost active funds,

but somebody has invented indexing. Okay, my my thing was indexing isn't a concept. Okay, I just pretend, just pretend it doesn't exist. Oh so low cost indext low cost active versus expensive active, Well you would agree with that, of course you can't disagree with that. But here's the thing. But but but low cost active versus low cost passive. But there's an inherent advantage to pass. Here's the problem with your premise. Though. Indexing never would have gotten low

cost if Vanguard didn't do it. I promise you I think you're right about that. No, I'm not disagreeing with because I think they would have come out with indexing. But you know these firms like, oh we'll charge eight, we'll charge even if fifty, I still think you're not powerful enough to overwhelm. It's because it's under ten that it becomes. That's what. So what did the State Street Spiders s p Y come out? What was the feast

for asking this? Because this is one of the data points that drove me to write this book as well. SPY came out at twenty basis points, so that's still cheap. But this why did it pick twenty basis points? I actually interviewed Steve Bloom, who from am X who put out Spy with Nate most because that's what the Vanguard five index fund was. So think about that. And Vogel hated ETFs, but the dude had a profound positive influence on the because it started dirt cheap. I think Spy

would have been one percent if there's no Vanguard. I think et s probably would have been invented to but they would have been one percent, and it would not have been twenty and ten basis points as they are now. So here's the crazy market efficiency question. There are index E t F some mutual funds that charge a hundred fifty and two hundred basis points and they still have tens of millions, not billions, but tens, maybe even hundreds of millions in assets. How do these things still exist?

They probably have loads. They probably are bribing somebody to put somebody in there. Oh, there's no doubt that that's it. I mean, that's the answer. Souch, no natural reason for that. I mean, look, um, we have a phrase we use in the team called the Cabernet lane. There's still a huge market out there for wining and dining advisors. Um, your friends and your golf buddies. People still will hook you up. I'll buy your index fund. I know it's

sixty basis points, but it's my friend. There is still a lot of that going on and not and that happens in every business. But there's still a decent Cabernet lane in asset management. But that can only happen on the brokered side. I so we're let me get self, let me insert myself a little further into the conversation. So at my shop, we're in r i A. We're

a fiduciary. If I'm looking at an index fund and there's a sixty basis point because somebody version because someone took me out to dinner, and there's a Vanguard five basis point, I don't believe I can legally on behalf of my clients by the sixty bit fund as if as an advisor, we have to buy the five bit fund. Now, if you're a brokerage house, if you're and you follow what what's the And there's some dual people who do who try to do both, but you can't. It's either you,

we said fiduciers in the fiducia. Either you are a legitimate fiducier where the best interesting client dominates or you are a broker, and really it's the old it's the old Louis B. Mayor um joke, which I'll skip the dirty part and just say, hey, we've already decided that

now we're just debating price. I think my point of the cabernetlane was even beyond that index fund example, into e t f s, where you know, you just get to know somebody they sell you on the narrative of this worry and maybe they decided to put some money into your dividend fund. That might be you know, thirty fifty basis points more than a Vanguard one. But you could say to yourself, well, this strategy is better. But in your case of the index fund, you're right, there'd

be no fiduciary reason to go to the sixties. So, like I said, it's probably all loads or sort of captive assets somehow that that makes a whole lot of sense.

But by the way, some people are like, no, I think somebody would come out and just put zero feet you know how like Robin Hood came out, will do free trading, like somebody would have come out like just all like, but are they the problem with that premise of like somebody who isn't Bogel in a for profit asset manager to do this as a loss leader is ultimately they would have that that the curtain would would have come up at some point and you would have

figured out, oh my god, here's how they're screwing me over here. In other words, if you put something out there for that cheap, you're you're you're almost gonna always look to make money somewhere else. That's would make Vanguard unique. There is no curtain to pull. It's just that cheap because it's that cheap, because that's their business model. That's

their business model. So I do think maybe somebody would have come out gimmicky style and done, oh free index funds, But I think ultimately people would have been like, oh, you're just trying to upsell me on this, or your pay for order flow, or you're taking money monment money and getting more interest on it somewhere else. There would have been something that would have soured people, and it would have then gotten a bad name. Low cost is a good has a good reputation because it was done

the hard way. And so we go back to when Spy was twenty and Vanguard was twenty What people don't realize is that Vanguard started at forty six basis points. They came down like one or two a year, so it wasn't until the nineties they were even twenty and then in the last decade now they're three four across the board pretty much. That's when people went gaga for them. They didn't really sweep the nation until they got to ten.

So you and I the quote you used that. I think the other factor was the financial crisis was the last straw for a lot of main street investors. So we we had the animal scandal, we the I p O scandal, we have the mutual fund scandal, on and on and on and on, not even talking about Bernie made Off, and the financial crisis was you know what, I'm done with this game. I'm just gonna give my money to Vanguard and let it run and I'll check

my portfolio once a year. That was the sea change from If you remember in the nineties, you couldn't walk into a bar or a restaurant without CNBC being on the TV. Everybody, every barbecue, every dinner party, every conversation was about stocks. For a while, investing in the market was America's pastime, and the two thousand's kind of cured

us of that, at least until the pandemic. This is why I think books written on behavior in psychology need to give vanguards index funds and Bogel way more credit than they do. They don't even mention them really, But I'm like, try try behaving in a two thousand and eight without this as an option. Well, think about it. If you're buying an active fund versus an index, you're buying it. There's a little bit of ego involved. I'm looking to outperform. There's a little bit of fomo and

greed there. Passive is just I want to own everything and let lead. I'm investing in the world, and as planet Earth does better economically anyway, I'll participate in it, in stocks, bonds, real estate, whatever. It's a very different headspace then I believe I have the ability to either pick the guy that's going to outperform or pick the

guy that picks the guys that outperformed. Also, you know, uh there, I have a chapter on looking at all the ways Bogel had to sort of explain that indexing wasn't quote average because he had to sort of sell a concept that's Unamerican. It is average is not. We're America, right,

we want number one, yeah, top gun whatever. Like you know, indexing seems like middle of the road and almost like Marxist, as you said, so I think one of the ways he did that was to look at the long term compounding effect of indexing, but also just explain that, you know, what are we doing here. We're investing in companies that everybody goes through work every day, creates value. There's cash flow there, there's dividends. That's what you're buying, right, and

over the decades that investment returns pretty stable. It's the speculative return that can be a smoke screen, but that's just you know, people making the pe go up a lot and then there's a crash and then up. But investment returns have been pretty stable throughout the decades, and he just tried to get people to understand that that's all we're doing here, and also the idea of the zero sum game. I think some people think of the stock market like they don't really view it as people

in a circle trading. It's not. Once you view yes, once you view it as a table, you realize, oh yeah, half the people will win, but after costs only like two winners, you know, you start to really latch onto this. But this was part of the challenge of what Bogel had. That's why I took a long time. I think also was that he had to really explain some of these concepts and also again show compounding. Compounding is such a powerful concept, and if you pounded seven versus five and

fifty years, the gap is enormous. And I think some people don't look at a percent where bibs as a big deal because they also write. They don't write checks out of their assets when the markets, who cares about ten or twenty gas? It's irrelevant? All right? Last question before we get to our favorites, which circles back to what with Jack Bogel and e t F and mutual funds.

When we look at e t F today, they're super efficient, they're super cost effective, and and perhaps most important of all, the tax advantages of an e t F vastly just destroy mutual funds. So the question is if if the mutual fund was introduced as a new product today, would that pass sec muster versus the dominant et F with its tax efficiency. Good question um, I assume if it just check the regulatory boxes, that could come out. But

I just we have this product. And by the way, if somebody sells, I would the tax problem goes to the other shareholders who didn't sell. Yeah, that's the thing. I almost feel like ETFs are the way it should be done. You sell, you pay mutual funds where you're sitting there as a good soldier, by the way, and you get a tax bill because somebody else sold. It's I almost feel bad for mutual funds. This is just a bad break because it's not it's just not fair.

It's a legacy that they're stuck with from the government. Almost should like. I'm surprised the i c I hasn't lobbied the government to remove that and put them on a level playing field with the ets, because they might do a little better. But I also think mutual funds generally, you know a lot of their costs or internalize e. T F externalized a lot of costs. You know, you trade on your own, you bought on your own, your tax bills on your own, and people like that. It's

much more of a fair deal. I think people think so. I think mutual funds there's possible some spaces it might make sense. Um, maybe some less liquid spaces. An active mutual funds still has some value fixed income they do

pretty well. UM. But I think overall, if a mutual fund came out today, I think it would be something akin to like a compact disc coming out today, Like if you invented CDs right now and said, oh, take this disc, go stick it into your computer or your TV and watch this movie and be like why would I do that? So I do think. Look, every industry is evolving, you know. I compare the e t F and the Index fund to the MP three, just like music,

the MP three really changed that industry. Uber completely revolutionized the taxi industry, and some of these industries are caught a little flat footed. There's nothing this is I this story. I think it's not just the mutual funds. It's it's a business story. It's a story about disruption, um and I think if you're and also it's a story about patients. One of the people interviews was Brad Kutzi Yama of I X the Flash Boys guy, and it was like when I told him it took Vanguard twenty five years

to get the tempercent market share. He's like, you just made my day, because he's also sort of an out of out, writing, out of the shop guy. So I concept try to tell people this book, whether you're crypto or you're building a business. I think a lot of people can learn from some of these guys, some of what this guy did, how he did it, and maybe find some comfort and how long it took and then

when it finally kicked in, how much change it actually forced. Alright, so let's jump to our favorite questions that we ask all of our guests, starting with, Hey, what's been keeping entertained during the pandemic? Give us your favorite Netflix and Amazon Prime podcast? Whatever? Um? I mean my I have an eleven year old son, so we've really enjoyed Stranger things. That's probably an obvious answer. Another thing we do is

I I'll go to Google. He likes scary kind of stuff, right, so I'll go PG thirteen scary, and we'll just go through these movies I never heard of, Like right now we're watching Escape Room and Escape Room too, and he loves them and they're good enough for me that I can like, you know, when he was young, he would want to watch Pixar movies, and they're like a little dull for an adult. But I don't know, I'm not.

I wasn't. I mean, Cars is okay, but like now that he's you know, we both I think equally enjoy stranger things some of these movies that we some are better than others. But that's sort of where I've been. I'm probably a bad person to ask. I did see The Thirteen Lives on Amazon Prime, about the cave rescue in Thailand, Ron Howard movie that came out fairly real. It was pretty good. Colin Farrell's in it. I he's so underrated. Everything he's in is pretty good. So sometimes

I'll do that. I'll take actor like Colin Farrell or Bill Pullman, like somebody you don't really think about, and I'll just put their name into Amazon Prime and I'll just start going through some of their work that I haven't heard of. Because if you just go to Amazon Primary Netflix now, you end up scrolling forever. So you need a search term, and so a lot of times go to Google and put in PG thirteen scary or something specific. What I really want them to have is

in Netflix. I want the rotten Tomatoes people to team up with Netflix, so I can go, Okay, I want a thriller that's ninety plus critic seventy audience, where I want a comedy that's fifty critic ninety audience. And I want to set these parameters so I can totally pinpoint what I want. I cannot believe that hasn't happened yet. Netflix, go by, go buy Rotten Tomatoes so Eric and I can find better films. Second question, tell us about your mentors who helped to shape your career. Mmm. I mean

I never had one real mentor. I guess you know. Indext the institutional investor. Tom Lamont ran the show there and he was sort of this gruff old editor guy and he was really about fact checking, checking everything thirteen times and it hurt. But that was a good lesson. By the way, I have yet to interview a journalist who, on the mentor question pretty much the exact. He was old school as a gruff no bs guy, and you know,

and now I realize how useful it was. I've heard also over and over the first meeting at that company, Tom Lamont is sitting there, and remember Aldamato was senator at the time. Yeah, he's like, listen, you gotta get to work early. You gotta get there before the gate key papers in the secretary show up. That's what they called him back. Their assistance is the word. Now He's like, you get there at seven am. You call Alda Motto. You're gonna hear themato a thirty. You're gonna hear Alda

Motto's office. How can I help you? Oh yeah, sure whatever. Click. So he he also had this like just you know, use the phone, pick up the phone, call the people go to the thing um. And I thought that was he was a good mentor mine. I'll say my dad as well. My dad was a highway or is a where he retired, but he would go around and try to get contracts to pave highways. So he'd go to like the New Jersey Transportation and I saw him present a couple of times, and it was I liked his style.

He would present on like hot mix boring topic right, like like mutual funds, but he would have them rolling like he would. He would he'd have a little a little dry jokes here and there. You can tell he curated this and sick. This doesn't have to suck. And that's and that's what I thought with David Matt and my first inside ETF conference, This doesn't have to suck.

These guys had a lot of fun up there with your power point, and I find that with you guys, this stuff can actually be fun, interesting, and I really try to apply that to my world. It doesn't have to be boring and stayed and just the dull lets fall asleep. So I think i'd say those two people the idea coming out of COVID of doing a conference in a hotel room. Conference ends or or haven't been the Javit sensor. It's why we tied up future Proof on the beach in California. Like I've been locked in

the house for two years. I don't want to sit in a hotel room. Let me out in the sunshine. So yeah, absolutely, the idea that anything that might be a little dry, you gotta make punch it up and make it interesting. Yeah, and especially the younger generation, zero tolerance for tolerance for bullet points on a power Yetta, show me a picture that's funny and then explain to me, you know the data behind it, Like that's the it's it's our team really pays attention to this. We think

it's very important. The wise, you're going to just fade into oblivion, You're just gonna torture people. Everybody's favorite question, what are some of your favorite books? And what are you reading right now? Um? For some reason, the book keeps going to mynd read it twice now. Is Bob

Dylan's Chronicles? Really? Yeah? He only wrote one book. But I got into Bob Dylan late, but I really got into him and I find him it's fascinating, still alive to my mom to see him, can't understand where he's saying, singing, But but you realize this guy influenced the Beatles, the Beatles, the Beatles. I want to hold your hand. If it wasn't for Bob Dylan, Jimmy Hendricks worshiped. I mean, this dude is like a walking Smithsonian Institute, right, So I

was like, I gotta read his book. His book is fascinating because it's he writes about his childhood up until nineteen sixty three and six sixty three. He's sort of just like sleeping on couches in Manhattan, but he's starting to read books on people's shelves and he's starting to go into art exhibits, and he's taking the books and the art, and then he's taking his Woody Guthrie of and he's merging it all together, and and the you really get an idea for how creativity happens in his books.

And then when sixty three happens he has the big album, the book stops and then it starts again in when he's in a slump and he tries to figure out like he's lost, and it goes and how he found his groove again and his inspiration. So I find that to be so Bob Dylan. None of the book is about his popularity, the big albums he wrote, nothing. It's all about finding the spark, finding the creativity, putting together different things together in a stew and how to do that.

And for anybody who writes or does anything creative, it's a It's just a fascinating read. And clearly this guy was ahead of his time and a very interesting figure. So I would recommend that to anybody. Um chronicles, Yeah, and I'm a gen extra. I wasn't. I didn't grow up with Bob Dylan, but I I can't sometimes I can't believe how good his like his albums are when he wrote when he was twenty one two, I'm like

his way beyond his years. It's really it's interesting. Is Scorre Stacy did a documentary called um No Direction Home that's also very good. Give us one more books? So chronicles by Bob Dylan. Um, let's see. Uh oh there's another. You want a music one or a different one, doesn't matter whatever you read. Um. I just got this book that Hunter Horsley of bit Wise recommended to me. I got it because I sent it to my dad. I

do my dad would love this. It's Winston Churchill, and it's a book of all his takes on different figures. So it's like all his notes and writings on all these different figures in history, f Dr Charlie, Chaplin, Hitler, and I find Churchill kind of fascinating. My dad's really in love with him. So I sent my dad the book. I got the book, and so now I'm reading that. Churchill is also interesting because he wrote what's the name

of the book, Winston Great Contemporaries. Oh, what an interest thing. My dad, who's read almost everything about him and by him, never heard of it. If anybody's a fan of Churchill at all, I took its way. This is a five part Winston Churchill reflects on FDR Hitler Kipling Book three of five. How many of these books are there? Um, I'm not sure. I just download the one. There might be three sections, and I think it's all in the one book though, I think it's just in three sections.

But um, you know, he definitely he wrote all the time. It seems like, so, yeah, he's got a ton of books out and I'm not. I can't say I'm a huge expert on that air, so I kind of let me see what that cover looks like. Winston Churchill, Yeah, I'm looking at great contemporaries, he says, book three of five and other works. How many stars does it have? Like or how many ratings? Four and a half isn't? And it's actually him not and it's his words that's

I found that interesting. So anyway, had tipped Hunter Hunter Horsley, who recommended that to me, And and then when I told my Daddy's like, I've never heard of it, I'm like, that seems weird to me, given how much he loves that guy. Really interesting and and our last two questions that we ask all of our guests, the first is what sort of advice would you give to a college grad who was interested in a career in either investment in finance or journalism or research and analysis. Um, you know,

I would. I would get out there and do it, you know, right for the school paper, go in turn somewhere. I i'd tew I you know, I did not get a c f A, although I would recommend that to I if I could go back, I might take at least c f A one, because sometimes sometimes I would be I would find things that were logical and James will be like, oh, yeah, that's in the c f A. I'm like, okay, So I I definitely would recommend though, getting out and doing it and and being as social

as possible. I think, you know, uh, being able to work with people, being likable, and also it can help with your longevity because you don't burn bridges. You end up getting into an industry and like, the E t F industry is great. I feel like it's a scene, and I would encourage getting into a scene. Interesting. And our final question, what do you know about the world of E t F s, mutual funds, financial journalism today? You wish you knew twenty five years ago, I guess

I would go with compounding. UM. When I was in my twenties, I withdrew a lot of my four one K because I just wanted money to hang out with, like spend life. So I actually took money out of my form kids get idiot, and I just I didn't know that much about it UM and I wish compounding is probably the single most important word in investing in my opinion. Compounding also, I think sorts of it shows you the end, which helps you in the now, and it helps you just relax because it's just like, you know,

let let it grow. It's like watching a tree grow. It's not like running or do the action. It helps you take less action. I think compounding is something I would immediately learn about, whether it's compound interest or the investing. I think that that term is really powerful. I mean, that's not a great answer, but I can't see a lot about that. It's it's a pretty good answer. We

have been speaking with Eric Balcunas. He is the senior et F analyst at Bloomberg and author of The Bogel Effect, How John Boglan Vanguard turned Wall Street inside out and saved investors trillions. If you enjoy this conversation, well, be sure and check out any of our previous four hundred or so episodes we've done over the past. Uh is it eight years? Wow? That's kind of crazy. You can find that at iTunes, Spotify, wherever you feed your podcast fix.

We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Sign up for my daily reading list at Ridlts dot com. Follow me on Twitter at rid Halts. I would be remiss if I did not think the crack team that helps put these conversations together each week. Juan Taurus is my audio engineer. Attica Valbron is my project manager. Sean Russo is my head of research. Paris Wald is my producer.

I'm Barry Ritolts. You've been listening to Master's in Business on Bloomberg Radio.