Jack Brennan on Succeeding the Legendary John Bogle (Podcast)

of experience and perspective. Not just because he worked with Jack Bogel for dozens of years and was Bogel's handpicked successor to run the Vanguard Group, but he's done a variety of other things. He's on all sorts of other boards. He sees the world of investing and business and finance um from a three D and sixty re perspective. I find him not only just fascinating and intelligent and sincere, but really one of the few people who has that

full view of everything. His perspectives, his opinions are very well informed and and really matter a great deal. I found this to be a fascinating conversation and I think you will also so. With no further ado, the former chairman and CEO of the Vanguard Group. Jack Brennan. This is Mesters in Business with Very Renorts on Bluebird Radio. HI extra special guest is Jack Brennan. He was the CEO and chairman of the Vanguard Group from two thousand

and eight. He is currently chairman of Notre Dame's Board of Trustees, as well as being on a variety of other boards. He is the author of a new book, More Straight Talk on investing Lessons for a Lifetime. Jack and in Welcome back to Bloomberg, Great Meridi, Very good to have you back. I recall our last conversation was quite fascinating a couple of years ago. But for people who may have missed it, let's let's just spend a

few minutes going over your history. You joined Vanguard in serving as the company's president alongside Jack Bogel, the founder and CEO of Vanguard. Tell us a little bit what it was like in the eighties and what it was like working with a legend like Jack Bogel. Well, it was a gift to be hired by Jack Bogel and to join Vanguard when I did. Bangard was a quite small place for point four billion dollars in assets undermanagement. The industry is you might recall back in eighty two

was driven mostly by money market funds. You know, at Socks hadn't done much for a long time. Bonds had been terrible because we were in the stagflation. You're coming out of it. But the chance to work side by side with someone like Jack, we've been in the business since the day graduated from Princeton in nineteen fifty one, was extraordinary. You know, we had lunch together nearly every day when I was in town over thirteen plus years.

I learned a ton of stuff from him in so many ways, as did the whole team of us that we're part of the early days of the growth phase of Angard from eighty two as the markets turned around and it turned into be a pretty good business today. We had a lot of fun, went through a lots of business challenges, many of which were challenges of success. How do you keep a place together as you grow at a percent some years? Uh, and that you know compounded for all those years we also went through on

the personal side. You know, Jack had a lot of health challenges that you know, I tried to be helpful with and obviously lived with him through those. I had some on my family's side, and those kinds of things bond as well, very in a way that's different than a conventional just a business relationship, and was really another shared experience. So you know, you get lucky sometimes, and joining Vanguard and working with Jack and for Jack was tremendous.

Were thinking about that the other day. Actually, just a couple of years ago, you know, Jack and Pat Jack passed away and we had a celebration of life form at Vanguard and I was privileged to kick it off and just hit a four things that are lessons actually maybe for your listeners that really, you know, you think about what Vanguard is today, it was not that when Jack launched in n But four things were consistent and

hopefully you're very much still part of the company. And one was just the dedication of the mission of Vanguard those who followed Jack. He was continually on point about client, client clients. The second is passion for competitive success. You know, nobody liked to fight more than Jackie picked one now and then UH to try to get publicity for us and UH and things. But that focus on wanting to

win hugely, hugely valuable. The third thing that was remarkable, really to watch and learn from the power of communication, and you know, just consist can see and continual continually promoting in a sense what the message for the company was powerful force and the last thing focus. You know, we'd have people come to us very continually saying issue credit cards, do mortgages, do this, and Jack would always come back and say, now we do one thing pretty well.

We've managed package products in the form of mutual funds. Let's just go find people to buy them. So, when Vogel finally stepped down, you were as handpicked successor did you feel the weight of that transition or was he still not quite the legend he eventually became, and it didn't have the same gravitas that perhaps it does today. You know, in some ways, not too much. In some ways, certainly you feel the weight of it. In a sense, not so much. Was you know, We've just been handing

gloves together for thirteen years. I've been on the board for nine or something like that, the president for seven or eight, and most of the team that led the company I'd either hired or promoted and mentored along the way. So so the internal aspects of change weren't weren't very great and in that sense, and so it was incredibly smooth.

H And frankly, when I've been made the president, the board didn't he had announced that I would take his place, which was a little weird, but um, I think probably helpful in some ways, uh, internally in that regard. But the the other part of it is, um, you know, Jack had been the CEO from sin when this was announced, and I'm the new guide as some slice of the constituencies.

And you know, in a sense you have to prove yourself to two people who knew Jack as the face of the company, and we're very different, different ideas around that role. But you feel a way to it. And you know, I don't know any CEO who, irrespective of you know, his or her tenure at a company, who the day they become the scene, oh it. Uh, they don't feel the weight of it. It's a different It's different on day one than it was on day minus one when you become CEO. And that was a surprise

to me in some lay. I have to say, I didn't expect it and I felt it. And I can't sold low CEOs continually as they're moving into jobs that they will feel it and of the people say you're right, I get that really interesting. I love this quote you had in Business Week where you said, quote, being famous was never on my agenda unquote. And you tell the story You're coaching your son's soccer team and another player's mom comes up to you and says, I didn't realize

you were that Jack Brennan. She thought you were a gym teacher. What was that transition like into the public eye. That was the hardest part of it, because it's just not me. I love having tons of responsibility of bandrad and having nobody know my name. I don't think I was a gym teacher when I was coaching, right, And you take the job, you have to make that change.

And you know, I'm a big believer that being the leader is notoriety enough, and that any credit for stuff that happens positively in an organization should go to the team. And he blamed that something that goes awry should you should accept that as the leader. And so it was. It was a challenge and an interesting one, particularly because you will recall, you know, the fund industry was kind of on the sidelines in in finance, if you will.

When I started out there, and then we were progressively but by we were very prominent part of the business. And so with all of the industry and and and company responsibilities, you really do have to change and adapt. And it's a growth opportunity for anybody who falls into that role. I think particularly challenged for someone like me who is Anonymity is something that is highly prized, uh, which makes me like an and not comment as I do this thing through this interview with you, but it's

it's very much real. That was I would say, hands down the hardest change for me as I took over the as the CEO of the company. That's the beauty of radio. Nobody knows what you look like exactly. So two questions about your leadership period at Vanguard. Tell us what you're most proud of from that period and if you had a mulligan, if you can have a do over for one thing, what what would that? Big? Yeah,

I get asked what are you most proud of? Question all the time, Verry, and I think the three things that that matter first and foremost is the team that you've helped put together over time and trig in a rapidly grown company where you know the team almost can't grow quickly enough to keep up with the challenges in

the company. But you know, from top to bottom, we were able to attract and help build great careers for people who had a sign on to this quirky mission in a quirky place where you're not public company, you're not private, you're owned by your mutual fund shareholders. But maintaining and enhancing the commitment to that, to our mission and the intense competitive edge and deal in the face of you know what, in many ways is UH remarketable success.

That that's a thing that I look back and I look today at Vanguard and see it there and really proud of that tangibly the billions and billions and billions of incremental rewards you delivered to the shareholders because of our structure, because our funds performed well critically important part. And that's that's what you're there for. That's why you

put your shoes on every day, um, you know. And then probably the last thing that I always like to highlight is the culture, which you would think would get diluted as it grew in by a hundred and then a thousand times would get diluted. I think the culture got stronger progressively and continues to get stronger around again, the singular focus on the client, and then even more important in many ways, always doing it the right way.

So I look at that and say, that's a that's a template if somebody said, you'll be around a long time and you'll feel this good about those three things high on my list of things. As to the Mulligan, I might need a roving a few roving. Mulligan's right in some ways the UH. I once said a relatively new person as officer at Vanguard, I think she was trying to insolve me, and I thought she was complimenting me. She said, I I live in a perpetual state of dissatisfaction,

and I think it is a compliment. I could give you a really long list, but I'll give you one thing that I look back and say, we we had it right and didn't do it right, if you will, and that is advice and support for the advice community. You know, Vanguard today is a burgeoning advice business delivering a great product at a great price. And we started

in the advice business twenty five years ago. But I wasn't aggressive and I wasn't aggressive enough in saying we should really build this out in a form and fashion, and then as a compliment, be even more aggressive in supporting the advisor community. There was a legacy there. We used to be a load fun group. We became no load and so on. But it was clear to us that advice was going to be a crucial part of

the investing future, and very importantly so. And if I look back and say, if there's one thing I would have spent a lot more money, put a lot more energy behind, it's that. And I'm really glad to see the companies doing it on both sides of that. By the way, delivering advice and then supporting advice providers, it's a core, very core part of Anger today. I wish we'd been much more advanced during my time leading a company. Really interesting, let's talk a little bit about your new book.

By the way, am I reading this right? The first book was straight talk on investing. Correct. It was because I read that one. You know, it's got to be five years ago when we did our person interview, when I plowed through whatever notes I had from that. Is this an update or is this a brand new book.

It's a combination. It's one of the great lessons in redoing and doing another book is the core of the book really hasn't changed, actually, And then there's lots of you think about this person one's book published in two thousand two. So you've got the GFC, you've got the last year, you've got twenty years almost to say how it's the aftermath of the dot com bubble of GFC and what we've been through. And you say, because what we've wrote then withstand the test of time. It's actually

it's rarities are enhanced by that test of time. And then there's some other new stuff that we can talk about it. But it's the advent of Ridholds Advisors and Vanguard's advisory services. It's radical decline and cost of investing in twenty years it's stunning, and some other stuff that is important. So it's a combination of new and new and reaffirmation of what was in the private book. Well, some of the basics from the other book is pretty timeless. Homework,

good habits, no fads, stay, continue to learn. I mean that's pretty straight talk as it gets. So tell us what motivated that approach. I appreciate the term straight talk. I had one of my colleagues at Vanguard the other day asked me do I enjoy being boring? And uh, and the with with this advice, But you know, um, it's what motivates it is this is the time tested way serious money gets invested successfully. And that might be an endowment at a great university, it may be a

pension fund. And this is really targeted at people who are their own personal financial entrepreneurs with their own assets, and they can get help from an advisor, they can do it themselves whatever. But if you look back over decades and decades very in some ways simple approach to investing, as you just highlighted around homework, good habits, avoiding fads is the proven strategy and the problem is it's always

challenged right by the new news thing. And so you know, we found, we find that it's important to reaffirm these test them, by the way, and there's unlimited amounts of data as you know, to look and and test them. But you come back to these core principles that define success strategies for any of us, whether an institutional investor in individuals. So that's the that's the motivation of it. And you know, for me personally, it's Uh, I had the privilege of knowing Walter or Morgan who found in

Wellington Fund. So I've had live tutorial from Mr Morgan. Jack. Now now I'm the old guy and had hired ends of advisors and advisory firms, have observed millions of investors, and you come back to core character traits that defined success, as you know, and in the end, there's two character traits that matter. One is humility and the other's discipline.

And then there's some practices that matter. And if you find that package in yourself or in your advisor or in the firm you hired to manage assets for you, you're going to be successful. And if you don't, the odds are you will not, and you will look jealously at people who followed these old school practices and old school behaviors and have won the game. Really interesting, Let's stick with the idea of character such as humility and discipline and just ask a simple question, why are so

many investors quote their own worst enemy unquote? Uh, you know one word and its emotions, right, And whether it's fear agreed, whether it's competitive juices that you're sister in law beta killing in some stocks, whether it's over confidence. Whether it's an institution saying I've got a hustle or I'm going to get fired by an institutional client. It's emotion is an incredible headwind of success in building and maintaining financial security and through the markets. The story that's

played out again and again and again over time. And you know, so you need to understand that simple. I will be my own worst enemy unless I take emotion out of the equation. Hard to do. It's easier with experience. But that's a simple answer to it. Verry, Let's stick with the idea of emotion as a valid factor. And I have to ask you one of the things you write about people would be more selective about the financial

content they consume. Explain what you mean by that, you know, one of the best things that's happened in my career since the early eighties today is the ability for individuals in particular about all of us too uh learn whether in the early days it was Money magazine and today it's just obviously the ubiquity of information on through online media. It's so different than um than it was a long time ago. The downside of that, it's like everything too much of a good things about and so there's too

much information, too readily available, too broadly covered. That it's a distraction, and distractions will lead to other emotions very and that that is the that is I think that the core challenge h and why people really need to say. I find certain writers on Bluebird valuable to me, and I'm going to follow them because they provide me with

information I find valuable as an investor. But zigging and bagging from this hot topic to that hot topic, or this influencer to that you know prognosticator is just damaging to your financial well being, and always it has proven to be, and I suspect you'll always will be because you know, this isn't a game, and it's not how the Red Sox do last night, right, Hoyla Red Sox did last night actually matters this year to their chances

to make the playoffs. But what happened in the markets today matters to almost nobody who you and I know, because they have long term time horizons, right, and they're not traders managing a book at at a Wall Street firm. There are people thinking about ten and twenty and forty years from now. So what happens today is in significance. So let's continue with that thought. Sometimes bear markets come along, and that seems to be what drives a lot of the sort of hair on fire hand waving in a

lot of the media. How should people think about bear markets? How should they prepare for one? And how should they behave during a bear market? So actually, in in uh in more straight talk, we have old chapter on bear markets for a reason, and it's because they're an inevitable part of investing if you're investing over a career, in a four ohn K plan or over a lifetime. So when you recognize they're going to happen, and then your question is is spot on? You say, so, what should

we do? Well? One, you should you know, on a strategic basis, know what your risk tolerance is and be prepared for. Then test that risk tolerance against your portfolio structure, diversification, your balance to say, am I gonna be able to sleep at night at the ark? It drops fair question and you should know it. And by the way, if you've only been investing in this century, if you've had

a chance to test that, how did you think? What did you think about in October of two thousand eight, what did you think about in March of could you not sleep? Etcetera. So you you understand their reality, you prepare structurally in your portfolio and importantly in your mental preparation. Am I going to react or am I going to assume that? In over my time horizon? This is uh in inevitable, an inevitable thing. But it I'm not going to do anything about it. Um And the answer for

most people is doing nothing in a bare market. It really is um because most people have a long term time horizon. I was talking to Tim Buckley, who's the CEO Advance Great CEO of Van Guard uh uh, the other day. He said they calculated that by not pay that King, Vanguard investors saved a trillion dollars trillion dollars. And the difference the important thing that gets back to your question on which you consume from an education standpoint

or an information standpoint. Fact, when I started at Vanguard, the activity level with small changes in the stocker bond market was frenhetic today, and Vanguard's just a microcosm of the market. More broadly, serious people generally don't panic, and you don't see that at a Vanguard. I assume it's true at a fidelity and the zero price that you don't see panic where before they had a chance to get experience and educated. My generation of baby boomers would react.

So do nothing should be your default option during a bearer market. And if you can dollar cost average down even better, but don't pass. It makes a whole lot of sense. So you wrote the first version of the book about twenty years ago? What made you think, Hey, now is the time to update this? Why bringing into the modern era? And who are you hoping actually reads it? So with respect to the why now, a few things I've been asked a lot over the years. Would you

would you do another version of this? And? Uh, frankly, the environment is what props it? And if you know, if you take out last March, um, we've been eleven year bull markets. The headlines are you read the headlines about investing and and it's uh, speculation is very prominent. Again, Um the headlines or somebody made a lot of money on game stoff? You don't read a lot about those who get killed and so on and so forth. You're trading is the new thing you can Oh, I saw

an ad on TV. You can start a trading account at one firm with as little as five dollars, I must fell out of my chair. So it was catalyst to say, you know what, it feels a lot like when I started writing the first book was just after the as back bubble, but lots of lessons to affirm there, and this one felt like it felt like a good time to do it, so I literally started it right around Frankly, when you may quite pressing call that's said don't assumeable market is over because of the pandemic is

right around then we started working on this. The other important part of it, frankly is um uh, A bunch of changed. Importantly that's made this to be a fantastic time to be an investor. You know, give you just give you two examples. One, the advent of the variety of advice choices today at different price points is staggering.

It's fantastic. You know, you can buy a robo advice, you get a advice from a robo advisor, a robo advisor plus the human being, or you can have of a wealth manager in a family office and everything in between. But it's all much lower cost than it was twenty years ago. And frankly, there's this whole cohort of people baby boomers who really my own view is need to make a conscious decision to do it yourself in retirement or or find an advisor. And today you can do

that in the variety of ways. It's a fantastic thing. We provide advice in the book about how to do that best. The second thing is, um, you know, even twenty years ago, Vanguard was a bit of an anomaly around cost and we preached it and it was a very it's a very important part of the culture. But if you look at the cost of investing, total cost of ownership, if you will, for individuals today, and how it's changed in twenty years, it frees you up with

lots of different ways you can think about investing. You know, obvious one being uts and how important they are, how low cost tax efficients, so lots had changed. The market said, um, you know, it's pretty frenzied, and it's not the market necessarily, but the chatter around the market. Um. So it felt like a good time to do it. First book. I wrote in the foreword that I was writing it for my kids who were in their late teens early twenties. UM, and I hope that they and their cohorts would get

something from this. Interesting part is how many people now my age shoes that this is just what I needed because it helps me think about my future in a different stage in life. Frank, I hope it's the same Calgary that that gets some value out of this book as well, people who are emerging investors and then people who look and earn a veteran and say, let's go back, let me go back and test how I think about things against this template. Not saying that this is you know,

this is true. This is uh, my experience based on lots of exposure to people. But I hope it's kind of hits both those cohorts. The last book that we we still get request from people in other countries to translate the first book, and uh so we've deferred them a bit and we'll have them, uh and we'll we'll

get them big translate this one. Let's talk a little bit about some of the lessons you've learned as it applied to which was clearly a crazy year between the rise of robin Hood and Game Stop and all sorts of manias. What do you make of the rise of the retail investors? Have they learned the wrong lessons in or is this just board gambling and when things go back to normal, their investment posture will go back to normal.

So my own view is it's just another cycle. Uh, you know that has is no different than you know, when discount broke breage came in in the late eighties, in the late eighties and the at a and was a bowl market and oh boy, I can change trade chiefly now right, Um, you know, it was the dot com phenomenon. At the end of the twentieth century, it was house flipping, right, they were tall and U two thousand six seven. So all of these things are high profile.

I would call them fads, not substantism in terms of fundamental changes in the way people should think about or you know, will think about once they get to once they realize that investing is not a game, Frankie, trading is not investing. There there's a business called trading, but it has nothing to do with investing in that sense. So I think it's cyclical. Um, it makes great headlines. It inevitably makes for great hard lessons learned from people.

And you know, my hope, frankly, is that people aren't doing this the headline making stuff with the serious money to people, aren't therey I think it's uh, you know, somebody wants to play around at the edges, trading stocks, trading bitcoin, do whatever they want to do. That's fine, um, but serious money needs to be treated seriously and again for any loss as individuals, the idea that we're going to trade our way to wealth is a fool talent,

pretty sharp observation. I never imagine for a minute that eight dollar trading was some sort of a speed bump, but it seems like once these apps went to free, suddenly everybody and their brother became a day trader. How much of this behavior is caused by free and and what does it mean? So the young people who are starting out with trading as as entertainment, well that's the interesting phraseology. M Is it entertainment or is it invested? Right?

And as long as you think of it as entertainment, you know it's us' is no different than slot machines or going to a casino, but it is not investing. And again I think the question is how and when do you learn that lesson right and free is absolutely a is one of the things that invests this no question. But listen, um, momentum is another part of it. And you know in assent everybody is smart in a momentum market if you're in the right sectors. But momentum investing

has never proven to be a long term viable strategy. Right. Substantent value uh is how people make money, So you know, I actually don't worry much about it. Um. It's a classic place right, tune out the noise, looking at the headline and reading it. Uh. And again, I think as long as using your tournament's package is entertainment, it's it's

it is what it is. You certainly hope that people won't put trading accounts into four owing K plans where most young people will do their first investing, right, as long as those plans stay in a sensible mode, I think you're going to segregate investment in financial security from entertainment and high profile trading. Interesting, So let me um wax philosophical with you a moment. One of the chapters of the book, you urge investors to define enough for themselves.

Explain you're thinking on that, and why do investors need to understand the concept of enough. It's such an important concept because it will determine how much risk you want to or can take in a in a in your investment portfolio. And again, not defining enough plays out tragically

in in so many different ways. Either somebody thinks I've done really well, boy, I can do even better, and it's at an inappropriate time or inappropriately executed um and they wake up saying, boy, if I, if I had a million dollars and that's what I needed, perhaps I should have been far more conservative. Just take that as an example, because a million dollars is going to serve me well for the rest of my life, but instead you double down and you end up with half a

million bad decisions. Right. Alternatively, somebody say, I have a million dollars, and my time arrives in this perpetual because I'm going to my state is going to go to charity.

You know, you have an up and bucket A bucket beak can be a more aggressive portfolio than somebody might recommend view in a certain age, you know five iron plan accounts or a great example of this, where you accumulate money up to a point in time and then the glide path takes it down to a very conservative positioning. When when the kid turns eighteen, because you know there's

a time I'm certainly going to need that money. So I think that that that's a metaphor for the way all of us, whether an institution or an individual, should think about assets and how those assets, what those assets need to fund for us. And you've seen some universities make the mistake of being overly aggressive, even when they were particularly well endowed, paying a big price and then

playing catch up. And that's that's a shame. That's a shame because that's real money affecting real students ability to go to that university. So I learned this from a wise, older gentleman many many years ago, and I continue to talk to people about it. Uh. And it's a question you should ask yourself regularly because enough may change. It may be greater or less than you thought it was at a different point in time. But it's the perfect time to then reassess your ability to take risk, or

your willingness to take risk. It's funny because I know the book was written last year, but as I was, as I was reading that chapter and crossing the headlines was the news about the highly leveraged ARCA ghosts hedge fund.

I'm sure I'm pronouncing that wrong. Archigost arca coach who has twenty billion dollars of personal wealth and leverages it to the health to the point where they lose that it's just an astonishing lesson for people that there has to be a line where you say, Okay, I'm good, i may play with a little bit of money here, but I'm gonna pull this twenty billion dollars off the table because it would be horrible if it went to zero in two days, which is what happened. It's absolutely true.

And that's as good an example as you can find. And you know somebody will counter with so and so double down, and then they had choice as much money. But that's a bad risk award trade off, right, And but it happens. A lot, happens a lot. You see it with You see it with sophisticated pools of capital. Who makes some their mistakes in endowed places. And it's why again it's a it's a it's a one word

investment governor, if you will, Is that word enough? And again that's that's when you think you have enough, then you take it. You make it conscious decision, which fork you want to take in the room. Huh. Yeah, the regret minimization framework is more important than how much alpha you're generating in any given quarter. To say that that

that's one of the other. Right. There's a chapter in the book called I'm in Boca, and the very short story is getting Jason's wide from the Wall Street Journal was in Boca. Asked a bunch of people whether they're marked, whether their investment portfolio said I'll perform the market or not, because some said yes, some said no. But the guy he remembers most as the guy say why don't what

do I care? I'm in Boca? Classic, Absolutely classic. That's very smart because the only benchmark any one of us as is our goals and objectives. Right, how we did against the S and P or how we did against you know, how Harvard did against Yale and their endowment turns into a headline every year, and it's irrelevant. They have different financial situations. So what is Harvard's what is

Harvard's spoke and what is yale spoke? Is much more important than how they did against persons each other, And that that's the critical part of this. Absolutely true. So let's talk a little bit about what's going on in the industry today. And I have to begin with some of the attacks we've seen recently on index thing that it's Marxist, that it's an American, that it's an antitrust violation. What do you think of some of these sort of

wacky esoteric attacks on basic passive investment. Well, first, it's um, so you still found it. They just put it that way. You know, there's similar Some of them are the same as came out when A. T and T ran the first index fund and nineteen seventy years sixty nine, or when we came out with the first index neutral fund. It's not American, it's Marxists, etcetera. So you know the data data. Uh, to say that it's anything but a

highly successful investment strategy is just plain and correct. So uh. And then the idea that of now the time to be active active, meaning high cost active, is flawed. Um. So the sort of investment arguments are just repeating what's been repeated continually over half century at the stage. UM. You know, some of the other academic ish arguments are just as ill founded. The antitrust idea, UM, the sense that there's too much concentration and voting and so on

and so forth. Again, I have a strongly held view, not having anything to do with my former role of van guard, that the day the index fund's own half the stock and companies and there'll be more providers who are in that half the stock ownership is going to be a great day for the markets, because ceo s will have and companies will have permanent shareholders who will be interested in strategy, not the next two week sales points.

And I think it will free companies up to think long term, in away that they aren't totally able to do today right, and so to be somehow promoting a myth that indexing is anti competitive, or indexing is bad for markets, or indexing is a bad investment strategy is just flood logic and wishful thinking. The critics don't say it's a bad investing strategy because the data overwhelms them, so they're they're forced to fall back to things like

voting rights or any trust. If it was a bad investing strategy, I think the market it would resolve that. But I'm kind of intrigued about your point of Are you suggesting once half of the ownership of US public companies are held by indexes. Company management are then free to focus on the long term instead of the next quarters earnings. That would be my perspective. Yeah, actually because um, you know, uh, Wall Streets it does great research, but

they get paid for activity. And what you want as a owner of if you're a permanent holder of a company, as you want companies to build great businesses, not to facilitate activity. And so if you can have you know, we always be people buying and sowing your stocks, it will be plenty of transparency and liquidity and market clearing

exercises to value the company. But uh, the idea that I can talk to seven or eight or nine permanent shareholders if you will, about strategic choices, whether it's in a crisis like a year ago or it's long term, I think we'll give manage the good, the best management even more confident. There's confidence to think long term. I think it's a very important thing. And you look at you know, controlled companies or you look at private equity

backed companies. You know, depending on the structure and private companies, um, you know, they can behave differently and sometimes it's at the margin, but sometimes it's core. Strategic choices that they can make, and so I believe they will. The markets will be advantaged by companies being able to think in a way where today there's there's just so much noise in the system for them. So let me switch gears

on you and ask you about the classic portfolio. We're now seeing the lowest yield we've ever seen on that mix of stocks and bonds. What do you make of that? And are there any viable alternatives to traditional fixed income investment? So you know, I think is challenged Barry right now as a matter of strategy because of going lowgoing and yields. What's likely to be at the engineer view positive correlation

to stocks at these low levels? Right um? And so uh I encourage and we encourage people in the book to think hard about alternatives that The last chapter in this book is called where do my income go? You know, your income from short term cash reservices down four or five years for intermediate, for ten year treasury attent, sixty year,

seventy over that same period. And so you come back and I think it's important for investors to take a step back and a if I've got a time horizon of some uh duration, not next week, or next year or four or five years from now. You know, there are fabulous companies and portfolios of companies that yield the

same as a tenure treasurer. And am I what I should I be willing to take equity more equity risk, get the same income with a call option on growth by helping my equity exposure today because for the foreseeable future, the traditional role of bonds is going to be unlikely to play out the way it has over very long periods of time. And the question is when do we get out of this very low yield period. I don't see many very valuable options alternatives to to traditional fixed

income assets. Frankly, you know it's certainly not how yell bonds, which is a misnomer today. You know you've played through. You know there are segments of the equity markets, whether it's reachs or something else, that offer a good yield. But it feels strange to say it's in the midst

of the long bowl market. But my own sense is that people with any kind of time horizon should be thinking about income being generated by stocks, because you know, over time, the diven end growth of a vertisfied portfolio of stocks is far out, how far outplaced outpaced inflation. And if all you get is that income growth, you've

done well. If you get capuality growth to go with it, it's it's a good trade to take that incremental equity risk today because of the unique period of time or really unique you know, if you if you look back, it's a seven hundred year bull market and box if you look at some charts from England, but that that is seventy year bull market in the United States, and so, uh, fixed income doesn't look very attractive, right. I think we

reached the same conclusion you did. If if you're young enough, seventy thirty or eighty twenty makes much more sense than sixty forty. But the caveat is, hey, if you're in your sixties or if you're a few years away from retirement, that additional risk isn't worth the additional return because as we see all two regularly corrections. You know, those hundred year floods come along every ten years. We we probably

need to rename the hundred year floods. Yeah, it's true, but um, the one factor you don't have in that in that equation is what are you drawing off your assets okay, And so the best thing you can do is draw as little as possible from your assets. It allows you to take more risk with your assets. Makes sense, And so that you know when people ask me my best financial advice, I see a little below your means.

They want something sophisticated. That's what I give them. And I think it's very important today to say you know that for five draw is too much likely from retirement portfolio. Can you live on three? And if you can't live on three, you can probably take some more capital risk, uh, to to make those assets grow and endure in real terms for the longer term, especially given longer lifespans. That's another fact I think I have. I'll be sixty seven and a couple of months, I think I have a

third year time harress. Well, that's family's life legacy is pretty good, long longevity. But that's the way I think about things. And I think most people at sixty seven should be thinking twenty years. It's that's a long time, that's long term. But gets you're spending, get the spend. The outgo part of this correct is a critical part for individuals. It's also critical part for institutions, critical parts for institutions, lower your expectations and then live within those.

Hey man, so we're talking about yield, let's look at the flip side of that. What do you make of all the inflation chatter these days? Do you think that's a viable risk to portfolios? And and how much of this is just transitory noise? So I have to say I am a child of inflation. Of the video, I came out of college in nineteen seventy six sin stag inflation lived through the next five or six years before

Chairman Bulker, you know, took it on. So I actually have a sort of inherent worry about it, and I do think it's real. I think, you know, I don't believe in modern monetary theory. I think the question of how much money you can pump into the system is a really important one. And I don't think we're going back to the late sixties, early at the late seventies

early eighties from an inflation standpoint. But we've had thirty years of minimal inflation, and I think the noise for me is valuable because even if it's proved to be wrong, it educates people to think about it. But I talked I counsel people to fact or some inflation into their own financial planning in a way that we have experienced

in thirty years. I hope I'm wrong. I hope I'm wrong, But my economics training tells me, UH, be wary of too much liquidity in a system and UH and the pressure on prices and whether globalization can offset it again like it has in the past, whether technology can offset it fair question, but I would worry more about it for the next fifteen years than it than it's been relevant in the prior fifteen years. Quite interesting. Let's talk a little bit about what's going on in the industry

in general. We saw a massive purchase pretty recently Schwab took over t DU merit Trade. That's had a big impact on the industry. We've seen a variety of other mergers and acquisitions between big companies and smaller fin techs between other big Panese What are your thoughts on on these, especially given Vanguard's history of not really playing in those waters. So it's one of the great assets to the investing public in my view, is the tremendous sense of competition

for all segments of our business. Right um, and if you just look over time, whether it's the active management business, the brokerage business, the advice business, UM. The inherent entrepreneurism creates new competitors, whether they're fin techs or whether it's your firm. Seven years ago in the advice space, UM, you know, Swab and America came together, big impact on the financial advisor community. Scale for the for the firm UM.

But you know, in the grand scheme of thing, none of us is that big a player, interestingly when you think about it. So I think we'll continue to watch. We'll see certain areas where scale really matters a lot. You know, index on management very important in that regard. But there'll be continual growth in boutique advisory firms, boutique

investment management firms. And I think that's one of the great parts of the business is the dynamism of the business just forces every firm in a trench position to get better. And so whenever I see deals like this happened, I think it's good for the investing public. At the end of the day, I do think that, Uh, you know, obviously I'm a huge fan of agard. Organic growth is always better than an or growth and because you do

it culturally you don't have integration challenges. And so to see what Vanguard has accomplished, I think it's attributed in the market says we like that that strategy mean something appropriate couldn't be bolted onto the firm. But you know, so there will be different ways of building businesses UH

in the business. But sort of directly, my own view is it's all good because nobody in this space should be worried about monopoly power because it's just not there is anybody with enough in this relatively fragmented business to create monopoly power. So it just enhances competition. So let's talk about one of the small boutiques that are out there. You join the board of Rockefeller Capital Management, even though the company itself has been around a while, obviously a

very different animal than the giant Vanguard Group. What motivated you to work with a smaller firm and what's that experience like compared to you know, the behemoth that's Vanguard Group. Well, and it's it's been a great experience. Let me just

say that right off. The bad Rock Start family has been tremendous part of this three years journey, the UH back biking, the backing firm has, but Greg Flemming has put together a tremendous leadership team deeply focused on providing advice to high network families and very much and in that complementary in some ways to the wave of Angerant does its business UM and so they're very focused on

in a sense, doing one thing while providing advice. Rocktal Asset Management provides is a niche specialist in UH E s G investing and the family office and the private wealth management businesses at Rockefeller are deeply focused on their in a sense small niches, but they want to be as deep as anyone is expert as anyone in those uh in those channels, and so it's about a lot of fun, been tremendous to watch UH great lead this business and kind of peoplely suttract the clients who have

UH less generally much larger brokerage house based advisory business to come to Rockefeller Capital. And so far it's been a terrific success story. UH thoroughly enjoyed it, UH frankly because it's very different than where I spent my professional life at Vanguard prior to that. So it's fun to watch and more to come. And let's talk about another board. You're you're the chairman of Notre Dame's Board of trustees. What's that experience like and how involved are you with

the Notre Dame endowment? So when I first came on the board, I went on the investment committee, as you might imagine, And we've had a tremendously successful endowment management uh operation there man named Scott Malpass letter for thirty issue years. Might Donovan now once it today, I would say, and the record has been outstanding um over time because they followed the principles of patients and research and and and and so on. So that was a gratifying way

to get to know Notre Dame. Being the board chair as a tremendous honor. They have a standing leadership team top to bottom through you know, lots of challenging times. You know, the pandemic. This has been as big as challenge for higher education as anything in a century really in many ways, and you know, uh, we decided to

be open within person classes. We decided last May, made it happen, delivered eighty five percent of our classes in person, invited all the students back to campus for both semesters. So it's been tremendously gratifying. You know, my kids are all noted name grats, so it's it's a privilege to serve the place that affected our family so positively. But it's been a great experience frankly to learn another business as well, try to bring some capabilities, as does our board.

We have a wonderful board of trustees with diverse backgrounds and diverse experiences, so you see the value of that outside and view look from from a board of trustees, but at the board chair you're more deeply involved and learning a lot about what is a critically important business of this country and a very successful entering in that business and Notre Dame. So it's been one of the

highlights of my professional career frankly. Quite interesting. I know we only had we made we made the football playoffs, which is always a good thing, that's right, And they actually did a pretty good job of maintaining a healthy team and staff in a in a period where a lot of colleges were having a hard time not having half the team catch COVID. Well, you see these student athletes and cross the board, um and we could very

good results. But it tells you a lot about the character of the kids and coaches, and our our coaches that notre dame. They will tell you first and foremost their educators. They want to win on the field for their educators, and they have tried to build strong cultures in their programs and from the top down. Or athletic director Jack Schaubert is a big proponent of culture. And

to watch these kids what they sacrificed. You know, they sacrifice being a college kid at some level right to avoid getting COVID and across the board with our teams, it's been a great outcome. So I never been proud of the student athletes, the coaches, and the people involved in athletics, but the student body broadly as well. Uh the way they've handled adversity. You know, sometimes college kids

get a bad rap. They don't deserve it. They're tremendous young people and you're just proud to be able to try to help them a little bit in a role like being a TRUSTe or of board chair. So I only have you for a few more minutes. Let me jump to my favorite questions that I ask all of my guests, starting with what are you streaming these days? Give us your favorite Netflix or Amazon prime shows or

what podcasts you're listening to. But we seem to have become my wife and I seem to become tremendous fans of British cops shows. You know, things like d c I Banks are endeavor prime suspects. So that's if you looked at our Amazon on her Netflix accounts, you'd see a lot of those um uh podcasts. No kidding and apologize for this. Masters and Business is one that's a regular weekly listen. I have to say thank you for

doing it. Freakingomics is another one I find very interesting that gives you a different point of view and and you can't live without Wait Weight don't tell me, which is not as good without the audience, but it's still a great way to spend a Usually I listened to it Sunday after Saturday afternoon after it's on the radio on Saturday morning where I am. But I've been a lot of a lot more TV watching Turn the Pandemic than there has been in the prior forty years of

our marriage. I can assure you, I'm glad to hear I'm not the only one suffering through an excess of television. And thank you for the kind words about about the show. Let's talk a little bit about mentors who helped shape your career. Talking about Jack, obviously, that was a great privilege to to uh to work with him and and a ton from him. I had the great fortune of having a father who was one of these great American

success stories. You know. His father was a ditch digger and then got a good job as a janitor and he ended up as the chairman CEO and built a great bank in Boston and started as a mutual savings bank, became a public company, and you know snow days, you get the day off. He'd said, come on getting the car, we're going to the office. But I grew up in Boston and he would stand at the front door and greet everybody who made it in on a snow day to the bank and thank them for coming. It's those

kind of lessons that you can't make up. And so um that that was a sixties something, I guess, a fifty something year mentorship that was tremendous and one of what I just call out. You know, my first boss out of college, guy Nam Bill McKenna, then Eric Bank for Savings a similar story. Actually, um, very blue collar background, the president of a bank, and he probably it was like to be a businessman at twenty one years old,

you know, and he hard feedback, great feedback. I still consider him a great friend forty five years later, So how good is that? And there's tons of others, but those three when I always think about how they affected my life, you know, in from different periods of time. But what a gift, right and you do it. I hope I've been able to try to pay it back a little bit by mentoring some other people. And you hope somebody names you somewhere along the way. Tell us

about some of your favorite books. What are you reading right now? Well? I love historical biographies. He's funny. My wife reads fiction all the time that I have read a fiction book in twenty years. So I love historical biographies. I feel like it stills in the gaps of what I didn't learn. Uh, I didn't learn in high school or college, you know. So you know, always loved and I love leaders, interesting leaders, you know. Doris Current's good

with Current Scotland's book Bully Pulpit about Teddy Roosevelt. Uh, The Splendor and the Vine about about Churchill. Right now, I'm reading long biography by Andrew Roberts about Napoleon and learning a ton what an unbelievable what an what an unbelievable life? That is that much more so than I ever knew. So I find those as two firs. You learned about an interesting person. You also learn about the history, but you've got to pepper up with some other things.

One of the ones I've read recently that's great is uh it's called The World Beneath Our Feet, and it's about the race to climb out effort, and you learn about geopolitical issues that So I probably don't read enough for fun. I read to try to fill in the holes in my knowledge base more than anything. But there's nothing better than sitting down for two hours with a

great book, is there? No, not at all. What sort of advice would you give to a recent college grad who was interested in a career in investment management or investment advisory? Do it? It's a great profession. It's it's it really is a great profession. You're you know, our business is one that's so interesting because it changes every minute, every hour, every day. There's something in the newspaper that's

going to affect your business and your clients. So for me, I don't think enough people go into investment advisory frankly, and I hope more and more will because there is a big demand for it. It's very gratifying. Uh, it's constantly changing. As I said, Uh, and you can you can really do well for yourself while doing good for

your clients. That's a great combo. Last piece, I always tell people find a great firm, find a great firm, and if you're lucky enough, find a great mentor and a great firm to help you accelerate your learning as you move along. So I'm very bullish on the industry I was in, very bullish and the industry you're in. I think they each have tremendous psychic gratifications as well as financial awards for people. So I'm pitching them all

the time to people. Really interesting and our final question, what do you know about the world of investing today that you wish you knew thirty or forty years ago when you were first getting started? You know, in a sense, I think I knew that to produce differentiative results, you really had to be very different from the market. Um. But I obviously know that a lot more soundly today

the statistics, but more more valuably the experience. Um. You know, one of my sons runs a long only investment firm, and his diversified fund has fourteen stocks and his non

diverse fund has not has fund as nine. Wow. And I wouldn't have him invest not that he asked me, but I wouldn't have him invest in any other way because otherwise, if he's going to give you a beta in our square by our total stock market fund, right, And and the differentiation between being willing to be wrong and take risk is the only way you're going to deliver results that are differentiated and valuable to people, because

the alternative is not hypothetical any longer. The alternative you can invest any way you want in an indexed portfolio, So that that that it's an affirmation of what I learned early in my career from some tremendously successful portfolio managers. But I wish I was as sure of that thirty years ago him today. Quite fascinating. Jack, thank you for being so generous with your time. We have been speaking

to Jack Brennan. He is the former CEO and chairman of Investing John and the Vanguard Group If you enjoy this conversation, well, be sure and check out any of our previous four hundred such discussions. You could find those 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 reads at Rid Halts dot com. Check out my weekly column at Bloomberg dot com slash Opinion. You

can follow me on Twitter at Rid Halts. I would be remiss if I did not thank our crack team that helps put this conversation together each week. Tim Harrow is my audio engineer. Attica val Bron is my project manager. Michael Boyle is my producer. Michael Batnick is my head of research. I'm Barry Hults. You've been listening to Master's in Business on Bloomberg Radio.