Acquired
00:00:00 · Ben Gilbert, David Rosenthal
[00:00:00] S0: I was telling my wife, you know, I think I'll be able to do bedtime tonight, maybe maybe even dinner. And she was like, woah. Woah. Woah. Don't get ahead of yourself. [00:00:07] S1: Let's not go crazy here. [00:00:10] S0: How complicated could it be? It's index funds. [00:00:12] S1: And active funds and money market and brokerage and advisory. [00:00:19] S0: Yeah. Yeah. [00:00:19] S1: But, really, it's mostly index funds. [00:00:21] S0: Alright. Let's do it. Let's do it. [00:00:23] S1: Vanguard. Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got the truth? [00:00:41] S0: Welcome to the spring twenty twenty six season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert. [00:00:49] S1: I'm David Rosenthal.
00:00:49 · David Rosenthal, Ben Gilbert
[00:00:49] S1: I'm David Rosenthal. [00:00:51] S0: And we are your hosts. Today's episode is more relevant for you than any other company we have ever covered. For most of you, you have most of your net worth tied up in this company or the copycats who followed. The company is Vanguard, who effectively created the first index fund for individual investors in 1975 and today is the largest provider of index funds in The United States. They manage over $10,000,000,000,000 in passive index funds. That means they own an average of almost 10% of every company in the S and P 500. General Motors, Nike, Starbucks, Lockheed Martin, Visa, Apple, you name it. Vanguard is the largest shareholder of most US corporations, and together with the other big index funds like BlackRock, State Street, and Fidelity, they own 24% of the entire US stock market. [00:01:49] S1: It's absolutely incredible. And none of those other firms would be in this market or doing it in the same way if it weren't for Vanguard. No. I mean, the impact is just wild. I mean, millions and millions and millions of people have sent their kids to college, bought homes, retired comfortably because of Vanguard and Jack Bogle.
00:01:49 · David Rosenthal, Ben Gilbert
[00:01:49] S1: It's absolutely incredible. And none of those other firms would be in this market or doing it in the same way if it weren't for Vanguard. No. I mean, the impact is just wild. I mean, millions and millions and millions of people have sent their kids to college, bought homes, retired comfortably because of Vanguard and Jack Bogle. [00:02:09] S0: So Vanguard has an incredibly unique corporate structure. If you are an investor in a Vanguard fund, you own a piece of the firm. Vanguard is owned exclusively by its customers, and it's not publicly traded. It doesn't have outside shareholders of any other kind. Even the CEO doesn't have any equity, except, of course, then what he has from investing in the funds just like me and David and all of you. In many ways, it is a different kind of capitalism. Dare we say communist capitalism. Oh, I like it. A company whose products exclusively serve the interests of its customers and no other shareholders. And, David, as you've been alluding to, the man behind this idea is a visionary, an iconoclast, and a pedantic stick in the mud who was as disagreeable as he was right, Jack Bogle. [00:03:02] S1: Oh, that's great. I couldn't have written it better myself then.
00:03:02 · David Rosenthal, Ben Gilbert
[00:03:02] S1: Oh, that's great. I couldn't have written it better myself then. [00:03:05] S0: And his story is wild since he didn't start Vanguard until he was 46 years old. And you might think it was started idealistically given the structure we're talking about. And it was, sort of, but the story is equal parts idealistic as it is vindictive. But what is clear, we all owe Jack a giant thank you. Because of Vanguard's relentless cost cutting and low fees, Vanguard has saved investors over $500,000,000,000 in fees and trading costs since its founding in 1975. And as a recent book, The Bogle Effect argues, Vanguard's actions also forced the hand of the rest of the industry to cut their fees totaling another $500,000,000,000 over time. So Jack Bogle and Vanguard are responsible for a trillion dollars of wealth transfer out of the pockets of Wall Street and the finance industry and into the pockets of individual investors in the form of fees that they didn't have to pay. [00:04:01] S1: Absolutely incredible. [00:04:03] S0: I was catching up with good friend of the show, Morgan Housel, a couple days ago. Oh, yeah. Of course. And his comment to me was, I view Bogle as an undercover philanthropist. And at a trillion or even half $1,000,000,000,000, that would make him the greatest philanthropist of all time. [00:04:18] S1: Wow. Wow. I love that framing. Yeah. I mean, a large portion of that trillion dollars could easily have flowed into Jack's own wealth, and he made the choice that it didn't.
00:04:18 · David Rosenthal, Ben Gilbert
[00:04:18] S1: Wow. Wow. I love that framing. Yeah. I mean, a large portion of that trillion dollars could easily have flowed into Jack's own wealth, and he made the choice that it didn't. [00:04:28] S0: Yeah. Maybe. Maybe, David. We'll get into it. So listeners, you can join the email list at Acquire dot FM slash email. That's where we're gonna send out our big takeaways from each episode, past episode corrections, exclusive behind the scenes photos that we find in our research, and it's where you'll get to vote on future episode topics. Plus, David writes a little hint each time about next episode's topics, so come play the guessing game with us at acquired.fm/email. Come talk about this episode with the whole community in the Slack after you listen. That's acquired.fm/slack. And before we dive in, we wanna thank our presenting partner, JP Morgan. [00:05:05] S1: Yes. And just like how we say every company has a story, every company's story is powered by payments, and JPMorgan is a part of so many of their journeys from seed to IPO and beyond. [00:05:16] S0: So with that, this show is not investment advice. David and I may and definitely do this time have investments in the companies that we discuss, and this show is for informational and entertainment purposes only. David, where do we begin?
00:05:16 · Ben Gilbert, David Rosenthal
[00:05:16] S0: So with that, this show is not investment advice. David and I may and definitely do this time have investments in the companies that we discuss, and this show is for informational and entertainment purposes only. David, where do we begin? [00:05:29] S1: Oh, alright. Well, we start. In May 1929, on the eve of the great Wall Street crash of October nineteen twenty nine that would throw America and the world into the Great Depression, wipe out millions of family savings, ruin countless lives, forever scar an entire generation. We we don't often talk about the Great Depression on acquired. It was truly horrible. I mean, the financial crisis was quaint compared to this. 9,000 banks failed after the Wall Street crash of nineteen twenty nine. 9,000,000 individual family savings accounts were wiped out. Almost a 100,000 businesses failed. Unemployment reached 25, and it truly did scar an entire generation. I mean, I remember my grandparents still, like, into the nineteen nineties doing absolutely insane things because of their experience during the depression. My my dad's mom never threw out a plastic bag in her entire life. When she