Acquired
00:10:10 · David Rosenthal
[00:10:10] S1: They're both insiders and outsiders at the same time. So as the boys get older and they enter high school, again, the family no longer has any money, but they do still have these connections and relatives and friends who have resources. And so they managed to get all of the boys scholarships to go to Blair Academy, one of the sort of prestigious East Coast boarding schools for their junior and senior years of high school. And Jack, especially, just, like, flourishes at Blair. He becomes a fantastic student. He graduates cum laude. He gets voted both best student and most likely to succeed by his classmates at graduation. Obviously, he's going places. Yep. Now there's just one problem, though, as Jack and David are approaching graduation. The boys in the family still have no money even though they've gone to this, you know, prestigious boarding school that they're gonna graduate from. And they all need to keep working both to support themselves and, you know, their mother who's still alive. So the three of them get together and decide that, hey. Because of our situation, only one of us should actually go to college, and the other two need to keep working and providing for the family. And because Jack has been so successful at Blair and is such a good student, he gets chosen as the one of the brothers that's gonna get to go to college. And Jack would say that, like, the weight of that decision just rested on him for the whole rest of his life. Like, he alone was given this chance to do something bigger, and he felt like a tremendous obligation to make good to his family on this opportunity. And the other two never go to college. I mean, all three of them remain close, but David and Bud never go to college.
00:11:57 · Ben Gilbert, David Rosenthal
[00:11:57] S0: And it's funny listeners, David, you're referencing the things that Jack would say. It is incredibly easy to find Jack's words everywhere. There is no shortage of commentary that Jack would give on his own life, on his philosophies. The man gave thousands of speeches. He wrote memoirs. He wrote 12 books, investment advice, reflections back on Vanguard. He would go on TV and talk to journalists and speak in classes anytime anyone would have him. So there is no gaps in the historical record Yeah. Of Jack's life. [00:12:30] S1: Of Jack's memory. Yeah. Jack loved nothing more than to give a speech. So after graduation from Blair, Jack goes on to college at Princeton. Once again, on a work scholarship, he's working in, like, the dining halls. He ends up working in the ticketing office for athletic events and football games. And while he's at Princeton, he becomes fascinated with economics after he takes a intro econ course in the fall of his sophomore year, during which he gets a d plus on the midterm, an inauspicious beginning to his finance career. Yeah. But he loves it. He works hard. He finishes with a c minus in the class. Incredible for, like, you know, the guy who would go on to revolutionize all of finance. Yep. So the next year, during Jack's junior year at Princeton, he's decided that he's gonna major in economics or concentrate in Princeton's, you know, fancy terms. You know, majors. You have concentrations. Really? And yeah. Yeah. Really. [00:13:28] S0: Just every every day, I learn one more quirky little Princeton thing.
00:13:28 · Ben Gilbert, David Rosenthal
[00:13:28] S0: Just every every day, I learn one more quirky little Princeton thing. [00:13:31] S1: I know. I'm sorry. I'm sorry. I, of course, went to Princeton, so I went through all this. And, specifically, I also went through the rite of passage that Jack has to go through, which is he needs to write a senior thesis. So one of the hallmarks of Princeton is that every single undergraduate must write a senior thesis, which must be a unique piece of scholarly research in order to graduate. It's it's like a mini version, a very, very mini version of what you would do as a PhD. Mine, of course, was on the marketing history of champagne, being a French literature major. [00:14:08] S0: Which is so funny for Acquired. Like, it's actually very useful for us in the LVMH episode. [00:14:13] S1: Incredibly useful. There you go. David Rosenthal, Jack Bogle, you know, the connection's bound. [00:14:18] S0: Okay. Continue the story.
00:14:18 · Ben Gilbert, David Rosenthal
[00:14:18] S0: Okay. Continue the story. [00:14:19] S1: Okay. So one afternoon, Jack's casting about for what would become his thesis topic. He's in Firestone, the main library on campus, and he's reading the current issue of Fortune magazine, where he comes across an article deep in the back of the magazine on page one sixteen entitled big money in Boston. It's about the growth of a relatively new industry of open ended public funds. What today we would call mutual funds. That term wasn't even in use yet. And the article centers on this new firm that's leading this innovation, this new sector on Wall Street, even though they're based in Boston, the Massachusetts Investors Trust Company, known and marketed as MIT. No actual connection to, you know, the real MIT, Massachusetts Institute of Technology, but, this gives you a sense of the marketing to the public of these open ended public funds. [00:15:25] S0: We'll see it over and over again on this episode. Appropriating prestige is a signature of the mutual fund industry for really, the the finance industry. [00:15:34] S1: A hallmark of this industry. Absolutely.
00:15:34 · David Rosenthal, Ben Gilbert
[00:15:34] S1: A hallmark of this industry. Absolutely. [00:15:37] S0: The interesting thing about this, you might say, well, what do you mean mutual funds were new at this point in time? Well, that comment that I made before the Great Depression in the twenties, only one or 2% of Americans owned stocks. By 1949, that was still only up to 4.2% of Americans. And what they were doing is they were working with a stockbroker to buy individual stocks. There really hadn't been any academic research around finance of any kind yet, let alone sort of investment and diversification and funds. So this notion of you are going to mutually pool your money with a bunch of other investors into a fund and buy a basket of stocks in that fund and hold it for an open ended period of time, these public equities, that was brand new. Yes. And this is [00:16:28] S1: what Jack decides to write his thesis about, this new phenomenon. Now there are actually two important things to talk about here that you started to allude to, Ben. One is this concept of a open end fund versus closed end funds. So this is the real pioneering thing that the Massachusetts Fund, we're not gonna call it MIT here, pioneered, which is there's no set fund size. It's elastic. So it's not like they have to write a prospectus and go out and say, we are raising a $100,000,000 fund and get everybody in it, and then, you know, it gets to a 100,000,000, and then they close it and they manage it. Nope. Could be 1,000,000, could be a 100,000,000, could be 5,000,000,000,000 as we will see approaching towards the end of
00:16:28 · David Rosenthal, Ben Gilbert
[00:16:28] S1: what Jack decides to write his thesis about, this new phenomenon. Now there are actually two important things to talk about here that you started to allude to, Ben. One is this concept of a open end fund versus closed end funds. So this is the real pioneering thing that the Massachusetts Fund, we're not gonna call it MIT here, pioneered, which is there's no set fund size. It's elastic. So it's not like they have to write a prospectus and go out and say, we are raising a $100,000,000 fund and get everybody in it, and then, you know, it gets to a 100,000,000, and then they close it and they manage it. Nope. Could be 1,000,000, could be a 100,000,000, could be 5,000,000,000,000 as we will see approaching towards the end of [00:17:16] S0: the year. Dumping more dollars in, and we'll keep buying more stuff in the basket.