Acquired
01:49:06 · David Rosenthal, Ben Gilbert
[01:49:06] S1: Yes. Jack, unfortunately, has a bad heart. He was born with a rare genetic heart disease called arrhythmogenic right ventricular dysplasia or ARVD. And that means that Jack suffers his first heart attack in 1960 at age 31. So before he even becomes CEO of Wellington management, that was his first heart attack. He had, like, ten, twelve over his life. It was like a ticking time bomb. At any moment in time, he knew he could just drop dead. [01:49:42] S0: And what Jack decided to do with this was work. At the age of 36, he got a pacemaker, and he consulted a doctor. And that doctor said, you really shouldn't count on living past 40. Then he went and talked to a second doctor, and that doctor said, why don't you get a place out in Cape Cod and stop working and enjoy the last few years you have left? Don't work anymore. He wrote at one point, if I had taken the second doctor's advice, the first doctor would have been right. [01:50:15] S1: Yeah. Yeah. Man, this is totally Jack's unique personality. The way he approaches this part of his life is not gonna change a thing. I'm just gonna live every day the same way I would have lived it if I didn't have this disease. Yep. And the stories around this are amazing. I think one time he collapsed and had a heart attack waiting for the commuter train out of Philadelphia, and it was lying there on the ground. And the ambulance and the paramedics come, and he makes a bet with them that they won't get him to the hospital in time to save his life. He just had that kind of attitude and approach to it.
01:50:15 · David Rosenthal, Ben Gilbert
[01:50:15] S1: Yeah. Yeah. Man, this is totally Jack's unique personality. The way he approaches this part of his life is not gonna change a thing. I'm just gonna live every day the same way I would have lived it if I didn't have this disease. Yep. And the stories around this are amazing. I think one time he collapsed and had a heart attack waiting for the commuter train out of Philadelphia, and it was lying there on the ground. And the ambulance and the paramedics come, and he makes a bet with them that they won't get him to the hospital in time to save his life. He just had that kind of attitude and approach to it. [01:50:53] S0: He would bring defibrillators to squash matches. [01:50:56] S1: Oh, this is the best. Yeah. [01:50:58] S0: And it it happened at one point where he had a heart attack while playing and had to count on his opponent running over and reviving him. [01:51:06] S1: Yeah. Yeah. And he would use this to, like, intimidate his opponents while playing. He'd be like, make sure I got my defibrillator here. I could drop dead at any moment. Alright. Let's go. You know? [01:51:16] S0: It's amazing.
01:51:18 · David Rosenthal
[01:51:18] S1: So as Vanguard's really taking off and indexing is taking off, Jack's heart is just getting weaker and weaker and more and more worn down from all this. In 1994, his twin brother David dies also from heart complications. And by 1995, over half of Jack's heart has stopped working. Ugh. And so in early nineteen ninety five, his doctors say, hey. We know your approach to life, but we can't put this off any longer. Despite your relatively advanced age for this, he's 66 at the time, you need to have a heart transplant if you wanna have any hope of actually, you know, surviving for a meaningful period of time going forward. Jack and the family are brought around. They agree to this. So this, of course, impacts Vanguard. So in May 1995, the company holds a press conference where Jack announces that he's stepping down as CEO to prepare for his heart transplant. And the company announces that John Brennan, Jack's former assistant who had joined the company in 1982, will be taking over as the next CEO. Brendan had been Vanguard's CFO for many years leading up to this. And in late nineteen ninety five, Jack Bogle enters the hospital on a waiting list for a heart transplant. His heart has continued to degenerate. He needs to be hooked up to an IV, feeding him drugs to keep his heart beating constantly. He waits a hundred and twenty eight days in the hospital waiting for a heart transplant, and he keeps working the whole time. He hasn't officially transitioned out of the CEO role and given it to Brennan yet. Maybe a little bit of foreshadowing here. On 01/31/1996, Jack officially steps down as CEO, and Brennan takes over after more than three months of operating as CEO out of his hospital room. Unreal. Really, Jack is one of a kind here. And then in February, finally, they get the call. There's a heart available for Jack, and he has the heart transplant at the February. So the day of the surgery arrives.
01:53:37 · Ben Gilbert, David Rosenthal
[01:53:37] S0: And at this point, Vanguard is essentially planning for this to be the end of his career. Like, heart transplants today are obviously a giant deal. This is even thirty years ago. Medical science is still working on this procedure. The assumption is he's he's done at this point even if he survives. [01:53:57] S1: And so the company moves on. Brennan becomes CEO and starts working on a whole bunch of new initiatives. And Jack does make a miraculous full recovery. [01:54:08] S0: He would live for another twenty three years? [01:54:10] S1: He would live for another twenty three years on his transplanted heart. And within a couple weeks, weeks after his heart transplant, he's back on the squash court. Amazing. Playing squash and intimidating his opponents. Like, gosh. If you thought it was scary to play against Jack when he might have a heart attack, how about playing against Jack with a new heart? [01:54:31] S0: Seriously. [01:54:32] S1: So, of course, all of this is, like, wonderful and joyous and unexpectedly great, but it is unexpected. Jack didn't think he was coming back from the heart transplant. The company didn't think he was coming back from the heart transplant.
01:54:32 · David Rosenthal, Ben Gilbert
[01:54:32] S1: So, of course, all of this is, like, wonderful and joyous and unexpectedly great, but it is unexpected. Jack didn't think he was coming back from the heart transplant. The company didn't think he was coming back from the heart transplant. [01:54:45] S0: And the company's in this sort of funny place where even not thinking about leadership succession right now, but the core business, they made all these really long term trade offs starting back in '75, '76 where, you know, when the fund is subscale, the fees are kinda high, and the mutual ownership thing is, like, cute, but it doesn't mean much when it's small. Cutting the load so you go to a no load thing that, in the short term, just slows your distribution down. And all these things are sacrifices for the long term thinking, well, when it really starts working, it's gonna really start working. [01:55:22] S1: Yeah. [01:55:23] S0: In the nineties, this is that, like, harvesting phase for the company where twenty years of doing things the right way that caused really slow growth are now causing this giant inflection. I mean, David, you you said something about the crossing a billion line in the eighties. By 1996, the AUM across all of Vanguard is up to a $180,000,000,000. [01:55:45] S1: And the two index funds are, like, 50,000,000,000 of that going pretty quickly to a 100.
01:55:45 · David Rosenthal, Ben Gilbert
[01:55:45] S1: And the two index funds are, like, 50,000,000,000 of that going pretty quickly to a 100. [01:55:50] S0: Right. So it's just gotta be fun for all the company long timers at this point where they're sitting there thinking, we were right. We made all these long term trade offs, and it really sucked for a while. And no one would distribute our product, and no one would invest in our funds, and it's really, really, really paying off. [01:56:06] S1: Yep. And there's something else going on for the first time too. Vanguard has competition. Competitors have woken up and realized maybe we should jump on too in this passive indexing thing. [01:56:20] S0: Which is funny because they're not structurally incentivized to do it over at Fidelity and BlackRock and State Street and, you know, all the others that are starting to roll out these very low fee index funds, but they are doing it because they effectively have to. Yep. Consumers have woken up to the power of it, and they need to have an offering in this area. So even though they don't have this investor shareholder alignment the way that Vanguard does, they make money plenty of other ways in their business. And so they're happy to offer this as a near loss leader or or breakeven in order to retain and attract those clients for their other higher margin services. Indeed. So coming out of his recovery from the heart transplant, Jack is