John Bogle

John Clifton “Jack” Bogle (John Clifton “Jack” Bogle). To date, hundreds of billions of dollars invested by investors in index funds that will provide a stable income and has a low cost. For an excellent opportunity to get capital gains, not making much effort and not trying to “outplay” the market, investors should thank one man – John Bogla. Friends and colleagues, and often journalists call him Jack.

Bogle founded Vanguard, now managing the second largest family of mutual funds assets in the world, and in 1976 introduced to the market first index fund shares, effectively completing a revolutionary breakthrough in the industry. His idea, which he developed further in the thesis work while studying at Princeton, was simple as all genius. Realizing that in the long term, most investors, including mutual funds, lagging behind the market, and the commission for the transaction and asset management further reducing income investors, Bogle created the index funds simply by tracking the market. These funds do not feel the need either to expensive specialists on stock selection, or in high portfolio turnover and, hence, can invest without paying a significant share of income asset manager.

According to the most Bogla, his main accomplishment in life was “return of reciprocity in mutual funds.” Sounds simple, but in fact it has proved extremely difficult, and doing it, Bogle has amassed many enemies. In the preface to his first book published in 1994, he wrote about himself: “I became known as a rebel in the industry of mutual investment. Among the industry players I have, no doubt, is its most trenchant critic. And not because I think this industry a bad, but rather because the industry can be much better than it is. ” As pointed out ten years later, the Attorney General of New York Eliot Spitzer (Eliot Spitzer), “success Bogla, Vanguard has turned into a giant industry, proves the possibility to deal with customers correctly, and thus flourish.

Sarcastic nickname “Saint Jack” and the hostility of colleagues from the stock business Bogle received for his endless tirades about the sense of duty to the customers and criticism of management companies for their exorbitant, he said, and commissions. “Holy Jack” Bogla also called for the tone of his speeches and comments in which he tried to appear more honest and noble, rather than managers of other funds, created for his reputation.

For many competitors Bogle – the eternal “thorn in the eye”, which is not surprising, given the rigidity of its ratings. He argues that managers have usurped power from the owners and directors of mutual funds called “completely useless appendages.” The financial press, by contrast, tend to accept his ideas with enthusiasm. Journalists have repeatedly spoken of Bogle as the conscience of the industry and best friend of investors. In an interview a few years ago he was asked whether he touches the fact that in recent years, it almost never invited to industry events. Not in the slightest degree, said Bogle. According to him, if the financial sector, someone conducted a poll on the most unpopular person, he not only, certainly, would have scored a victory, but hardly could be described as a candidate for the second position. On the other hand – and this is the reason for his indifference to hostility on the part of the financial elite – though among the investors were interviewed about who is the most popular representative of the financial business, he is absolutely convinced that would have received the most votes, and again know who could become the second.

Such as Bogle, often called a natural leader, but he does not consider himself to be. According to him, he “was always just a strong, responsible, realistic guy who, due to some reasons, was given a rare opportunity to change the way of investment in America.” With his distinguished, so the ability to not lose sight of the ultimate goal, remain optimistic and never to give up halfway. Speaking at the Wharton School of Business (Wharton School of Business) to the participants of the MBA program for managers, Bogle said that his vision of leadership – it is the possession of an idea and its ability to engage others, to get to share it. It is a positive quality, even a virtue, and not based on power, fear or financial incentives. Ultimately, Bogle became a leader because it was his life choice, and he had the will, determination and energy to follow it. James Norris (James Norris), manager of Vanguard, he participated in the program MBA, wrote that examine a man like Bogle, with a view to finding a formula of leadership – is to doom ourselves to disappointment. It is like studying Michelangelo or Shakespeare: You can imitate, imitate, try to beat, but simply impossible to derive a formula for explaining all of David or “Hamlet.”

Bogle argues that “has always been a terrible idealist – or a great idealist.” And with age his idealism did not weaken. On the contrary, he says, he is now “an idealist in a much greater extent than could have imagined when finished college.” Idealism Bogla based on faith in the system of capitalism, the great possibilities of America, and this belief is supported in its “eternal optimism”, the realization that “mankind is moving towards better, not worse.” That’s just one example of his life attitude. Immediately after the tragic events of September 11 on the first page of the London “Times” was a photograph of what remains of the twin towers, with the caption “Good triumphs over evil.” Bogle instructed to insert the page in a frame and hang in front of his office.

Bogle is firmly convinced that the people standing at the head of big business, “must take care of the country, not only about themselves, because only credible business and financial system can provide social progress within the country and preserve America’s leadership in the world. We can say that all the activities of this man imbued with a deep sense of his role to the historic mission. He told me that once assembled a team of portfolio managers at the meeting, which dealt with the economic cycle and the ability of markets to self-correction, and one manager asked: “Why do not we just wait for the invisible hand of Adam Smith did not take care of everything?” Looking him, Bogle said: “God, do not you know that we are the invisible hand of Adam Smith?”

Ability Bogla implement the innovative ideas and improve the world around us is rooted in the stock of his nature. He always set myself high goals and went to him with unwavering confidence in his ability to correctly assess the situation and change it as he sees fit. He said: “God created some people with greater determination than I do. A distinctive feature of Bogla was unusually strong spirit of rivalry. One of his former aides described his boss as “a wild warrior,” whose “fighting qualities were manifested in the debates in the negotiation, in clashes, one by one, in speeches in defense of their beliefs and any other matters for which he took, — the solution to the crossword battle to squash.

Ability to fight and seek his Jack Bogle had since childhood, and perhaps already in the womb. There is a theory that Fight temperament often formed in children-twins, and Jack was a twin brother, David. The brothers were born May 8, 1929. At this time, the boy’s parents have the means and lived in his house in the fashionable district town of Verona, New Jersey. But after the stock market crash in 1929, Bogle’s father was forced to sell the house. The family lost its small state, and as soon as the sons have grown up a bit, they had to get to work. In the age of 10, Jack carried the mail and moonlighting in the ice-cream. Meanwhile, the father began drinking heavily, in the early 1940’s, lost his job, and even a few years later sold to Jack and his mother left the family. Later, Bogle said that these difficult experiences early pores life turned him into a financial conservative and awakened in him a strong desire to succeed, in order to restore the good name of the family.

Due to the lack of Jack and his brother the first few years were enrolled in public school, but when they were supposed to go into high school, his mother took them out and gave to the Academy of Blair (Blair Academy). It was a private men’s Comprehensive School, aims to prepare students for entry into the upper strata of American society. Of course, the family Bogla could not afford to pay for the education of children in private school. Helped solve the problem of mother’s brother, engaged in investment banking business and has granted scholarships to boys from the firm.

Jack has achieved excellent results in both the sciences and in sports, finishing school second in his class. And teachers and classmates were confident in its future success. He left the Blair Academy in May 1947, a feeling of great gratitude, and years later became a major sponsor of the school. It fits into the American tradition that the students have achieved success donate money to their alma mater. From 1986 to 2001. Bogle was chairman of its board of trustees.

Jack went to college at Princeton University, where he chose the specialty of the economy. He financed his studies through scholarships and various student podrabotok. The mother could not provide financial support for Jack, but he nonetheless felt deeply indebted to her and her two brothers because the family had decided that only one of the three sons will attend college, and the choice fell on him. The other two were to work full-time to ensure the family livelihood. In these circumstances, Jack has been further strengthened in its quest to achieve professional success.

In the last year of studies at Princeton, Bogle had to write a thesis, and chose as the theme for the industry of mutual funds. At that time this area was small and relatively little known. However, Jack is extremely interested in the article published in the issue of Fortune magazine in December 1949, which affirmed that mutual funds have huge potential for development. Jack has collected and analyzed a variety of materials and presented a thesis in size at 123 pages, earned the top grade of A +. It formulated the basic principles of mutual funds, later used by the author in creating Vanguard Group. The most important of them were minimized asset turnover ratio and size of transaction costs, creation of new types of funds, as well as honesty and openness in communicating with investors.

In May 1951 Bogle graduated from the University with a diploma with honors (magna cum laude) in economics, but did not consider their education complete. The desire to further expand their professional knowledge prompted him to continue his studies in high school. From 1952 to 1959. Jack in the evenings and weekends, taking classes at night school of business and finance at the University of Pennsylvania.

His first job after college, Jack Bogle found through contacts, for which so many students choose to study prestigious universities. Manager of his university dining club turned to Walter Morgan, Princeton graduate (Walter L. Morgan), is the founder and CEO of the fourth-largest U.S. mutual fund Wellington Fund, and recommended Bogla him as an employee. Morgan assigned two of its managers to talk to Bogla, and they, being under the strong impression from the interview and persuaded the boss to read the thesis of the young pretender. Followed their advice, Morgan was in such admiration, that he ordered to make copies and distribute them to read each of the fifty employees Wellington.

Morgan took Bogla to work without having a clear idea about what he will do. Having the fund July 4, 1951, Bogle for several years performed a number of routine clerical duties and administrative nature, working directly with Morgan. Finally in 1955 he was officially appointed as assistant manager. Over the next seven years, he got the job associated with many different sides of the company, and took the opportunity to thoroughly examine all aspects of the business of mutual funds.

In the late 1950’s. Bogle started to persuade Morgan to open a second mutual fund. Wellington is a balanced fund which invested in stocks and in bonds. Bogle suggested the creation of a new fund based solely on the action. Morgan liked the idea, and the new fund was presented to the market in 1958. Initially, he was named Wellington Equity Fund, but in 1963 renamed the Windsor Fund. Wellington funds were administered by a separate company, called Wellington Management Company. In 1960, Walter Morgan conducted a public offering of its shares. Retained the controlling interest, he sold a significant number of shares to other investors, including Bogla, which purchased 10,000 of the 877,800 shares of the company.

In 1965, Bogle was appointed executive vice president with the task of raising the incomes of Wellington Management Company. It was obvious that this can be done by increasing the assets under management of the company. The best way to achieve this goal Bogle considers the creation of a new fund aimed at achieving a high yield. But such a fund, in the first place, needed to effectively manage the investment portfolio, to find that, according Bogla, the easiest way was through the merger. He therefore entered into negotiations with the Boston-based Thorndike, Doran, Paine and Lewis (TDP & L), provides consulting services in the field of investment. In the management of TDP & L was Ivest Fund, which, with relatively small sizes, while showing the best results in the U.S. among mutual funds. The negotiations were successful, and in 1966 the two companies merged under the name of Wellington Management Company, in which the owners of TDP & L received a 40 per cent. According to both parties involved in the transaction, TDP & L brings to the merged company’s skills, experience of analytical work, plus the reputation of a reliable company with the conservative principles of investment management. It was expected that the newly formed company, therefore, be able to offer customers more options for investing their funds.

However, for Bogla merger, which he wanted, turned into a continuous headache. Despite the fact that he was appointed president and CEO of the combined company, he has encountered serious difficulties when trying to reach agreement with new partners from Boston. After some time the differences between him and the Boston group exploded into open hostility. Bogle and his partners had different views on investment strategies. For example, in 1970, the Boston group sharply opposed the proposal to submit Bogla market bond fund. According to witnesses, one of the Bostonians even Bogle said that the proposal for a bond fund is “the most stupid idea, which he had ever heard.” Hostility is also due to differences in methods of leadership. Bogle was extremely sure of himself, preferring an authoritarian style and did not believe in the effectiveness of participation of subordinates in decision making. His Boston Partners, by contrast, were convinced of the benefits of such participation, which focuses on achieving consensus. In addition, they were not strong supporters of the detailed approach that could not disturb Bogla, distinguished by great thoroughness.

Exacerbated by the management of conflict in some way contributed to health problems Bogla, who suffered severe heart failure and in the 1960’s. suffered several cardiac arrests. He was forced to periodically go to the hospital, and in the end it was implanted pacemaker.

Differences between the parties, especially on the deeper background of very weak financial results, demonstrated by the funds in the early 1970’s. As a result of the sharp downturn in the stock market that occurred in 1973, total assets managed by Wellington declined from a peak $ 2.6 billion recorded in 1972, to $ 2 billion in late 1973 Earnings Wellington Management Company decreased from $ 2.7 million in 1972 to $ 1.9 million in 1973 cost the company’s shares, which at the time of the merger was $ 40, the beginning of 1974 fell to $ 8.

The conflict between Bogla and the Boston group has reached a climax in early 1974 and was resolved in favor of the latter. At the meeting of the Board of Directors of Wellington Management Company, held on January 23, 1974, by ten votes in favor with two abstentions, it was decided to dismiss Bogla.

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