Acquired
01:06:10 · Ben Gilbert, David Rosenthal
[01:06:10] S0: Yeah. Ish. Yeah. [01:06:11] S1: Yeah. Ish. And John turns to him and says, if you do that, you will destroy this entire industry. Now, of course, what's fascinating is that, you know, Capital Group and active management today has kinda never been better. Capital Group manages 3,000,000,000,000 in assets. [01:06:29] S0: You can see why they had the fear, which is if you provide this existence proof that you can run this business at cost and you don't need to pay huge sums of money to the people managing this, then our customers will demand the same from us, which is sort of right because you can buy an S and P 500 index fund from basically anyone today at basically no cost, but also sort of wrong because Capital Group, BlackRock, Fidelity, these are all giant profitable companies. And so I think the the interesting thing to sort of tease out across the rest of this episode is the competitors were probably right to be terrified of this sort of communist act where they took a crown jewel of capitalism and and communized it. But at the same time [01:07:14] S1: Kinda like the NFL, it ended up being great for everybody. [01:07:17] S0: Right. Right.
01:07:17 · Ben Gilbert, David Rosenthal
[01:07:17] S0: Right. Right. [01:07:18] S1: So yes. So Jack's starting down the path. The first thing that this new subsidiary company needs is a name. So right as this is happening, Jack gets a visit from an antiques dealer. Again, you can't make this stuff up, who offers him some prints of British naval ships from the Duke of Wellington era. The Duke of Wellington was the British prime minister and military leader for whom Walter Morgan had named the Wellington firm. Jack is looking to the prince, and one of them is of a ship, the HMS Vanguard, which was the flagship in the naval battle of the Nile where the British forces defeated Napoleon and ensured British independence and the state of Europe for centuries to come. And so on the spot, he decides Vanguard is the name, which is hilarious because Vanguard is a great name. It is steadfast, trustworthy, everything we think of it today. [01:08:18] S0: Short, memorable, unique.
01:08:18 · Ben Gilbert, David Rosenthal
[01:08:18] S0: Short, memorable, unique. [01:08:19] S1: Memorable. It's also, you know, it's the Vanguard. It's the leader. It's a pioneer. It's leading a revolution. But knowing all the history now, like, obviously, Jack chose the name because it represented total victory and, like, complete annihilation of the other side. Yes. So funny. Not at all how people think of the brand today. So in September 1974, the Vanguard Group files for incorporation, commencing operations, and taking over the back office of the Wellington Fund and the other funds that Wellington managed. Exciting. Nobody cared. All of the great fear that, you know, John Lovelace at Capital Group and Forbes and everybody else in the industry had about this is gonna destroy everything. This is gonna burn the industry to the ground. [01:09:14] S0: Well, because it didn't actually get mutualized. [01:09:16] S1: Yeah. Nobody cares. [01:09:17] S0: If any venture capitalists are out there listening or private equity guys or if you're in the investment management business, okay, you switch back offices. This happens all the time. This happens every five years. This has no bearing on your peers in the industry. What would have a lot of bearing is if you said, oh, all of my fees and all of my sort of performance compensation, that we're just gonna take down to at cost. That would be significant, but that is not what this is. No. It was not.
01:09:17 · Ben Gilbert, David Rosenthal
[01:09:17] S0: If any venture capitalists are out there listening or private equity guys or if you're in the investment management business, okay, you switch back offices. This happens all the time. This happens every five years. This has no bearing on your peers in the industry. What would have a lot of bearing is if you said, oh, all of my fees and all of my sort of performance compensation, that we're just gonna take down to at cost. That would be significant, but that is not what this is. No. It was not. [01:09:44] S1: And it turned out that Jack would need to lead another second and totally separate revolution as well before anyone would pay attention to what he was doing. A revolution not in the legal structure of funds, but in the very nature of the investment product that they offered. [01:10:05] S0: But, David, I thought he was barred from doing that. [01:10:07] S1: Well, if you're not offering any investment advice at all [01:10:14] S0: Perhaps you still could be in the business of deciding what to invest in if you're not actually doing any deciding. [01:10:21] S1: Yes. And that second revolution would be the index fund. Yep. But before we tell that story, now is a great time to thank our longtime friend of the show, ServiceNow. [01:10:34] S0: Yes. It is. Listeners, if you are running a large enterprise, then AI agents are likely spread across every single team, and deploying them is actually not the hard part anymore.
01:10:34 · Ben Gilbert, David Rosenthal
[01:10:34] S0: Yes. It is. Listeners, if you are running a large enterprise, then AI agents are likely spread across every single team, and deploying them is actually not the hard part anymore. [01:10:47] S1: Yep. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. The risks are real. [01:11:00] S0: Yep. So if you think about the companies like the ones we cover, at that scale, you can't have a blind spot. Your systems, your employees, your permissions, they all need to be accounted for to maintain customer trust. That is the problem that many companies have with AI right now. A lot of intelligence, but not enough visibility. [01:11:19] S1: Yep. And that is what ServiceNow does. Building on top of their end to end enterprise workflows, every device on your network, every permission across every system, your AI agents, all visible and secure in one place. [01:11:32] S0: They've been at this for over twenty years. Today, they run the workflows behind more than 85% of the Fortune 500, over 95,000,000,000 workflows a year. A big part of the world already works with ServiceNow. [01:11:44] S1: And now as the AI control tower, they're giving companies a single place to manage all of it, turning AI chaos into AI control.
01:11:44 · David Rosenthal, Ben Gilbert
[01:11:44] S1: And now as the AI control tower, they're giving companies a single place to manage all of it, turning AI chaos into AI control. [01:11:52] S0: So listeners, if you are thinking about how to scale AI securely, go check out servicenow.com/acquired, and just tell them that Ben and David sent you. So, David, the creation of the first commercially available index fund for retail investor consumers. [01:12:13] S1: Yes. [01:12:13] S0: People really care. Right? They're they're they're lining up around the block for this thing. It's the most hotly anticipated financial product of all time, except that it's not at all. [01:12:22] S1: It's so funny. This would change the world, and not just, like, [01:12:26] S0: a little bit, like, a massive, massive impact. Most of all of your net worth is in these funds. [01:12:34] S1: Yeah. People today are concerned that index and passive funds are too much of the market. What will happen to corporate governance when 70% of the equity ownership of America's companies are all in passive index funds? Like, this is, you know, existential fear happening right now. That could not be farther away from the reaction in the industry to the launch of these things fifty years ago. Okay. So, David, take [01:13:04] S0: us to 1974 and the journal article that inspired it all.