Remarks by John C. Bogle
President, Bogle Financial Markets Research Center
Founder and Former CEO, The Vanguard Group
Former CEO, Wellington Management Company
On Receiving the Founders Award for Business Leadership
From the Union League of Philadelphia
November 22, 2002
I am deeply honored to receive
your Founder's Award for Business Leadership, not least because
your mottoLove of Country Leadsis so utterly
consistent with the manner in which I've tried to live my career.
Going back to my first job in the mutual fund industry, I've done
my best to serve American investors, offering our citizens no more
nor less than the opportunity to earn their fair share of whatever
returns our financial markets are generous enough to provide, the
result of whatever long-term economic value our system of democratic
Indeed, not only my career but my life are a tribute
to how blessed I've been to be a citizen of these United States
of America. I was raised in a family that was far from wealthy,
enjoyed public schooling through tenth grade, and then, thanks to
generous scholarships and the opportunity to earn enough extra money
through campus jobs, was privileged to attend and graduate from
Blair Academy and then Princeton University. A living example of
the fact that America is the land of opportunity, I am truly blessed
that my great-grandparents, William Brooks Bogle and his wife Elizabeth,
got on a boat in Scotland and landed on these shores 130 years ago.
Even as I have reveled in blessings of citizenship
and enjoyed its rights, I have done my best to assume its responsibilities.
Several years ago, my alma mater recognized my career by presenting
me with its Woodrow Wilson Award for Leadership in the Nation's
Service. And among my commitments to community, I'm proud to serve
as Chairman of the National Constitution Center, now rapidly rising
at Independence National Historical Park, directly facing Independence
Hall. The Center opens on July 4, 2003, just 224 days from now.
In all, I am proud to be among the "posterity" for whom
our Founding Fathers "secured the Blessings of Liberty."
As infinitely grand as they are, however, the blessings
I have received are hardly sufficient to explain the events that
bring me to this podium today. Nor are the marvelous experiences
that I have been privileged to enjoy, thanks to our Nation's historical
commitment to public education and then to the generosity of our
forebears who have not only built private schools and colleges but
have endowed scholarships for those less privileged who sought to
advance their own learning. Nor can an adequate explanation be found
in the still unremitting work ethic that was drummed into me by
some combination of my genes, my upbringing, and that greatest inspiration
of all, necessity.
While that background may be necessary to
explain my readiness when the lightning of opportunity strikes,
it is not sufficient. For the reality of life is that great
opportunity strikes but rarely. So never underrate luck as an essential
merit in any career that turns out well! For me, at every opportunitynever
so more that at three major turning points along the wayI've
truly been luck-struck. Each time, an almost random event directed
me into a new career. So I'm pleased to have this opportunity to
tell you about "Three Lucky Breaks Three Exciting Careers."
December 1949, Break #1Fortune Smiles
Fifty-three years ago, I was seated in the reading
room of Princeton's then brand-new Firestone Library and turned
to page 116 of the December 1949 issue of Fortune magazine.
There I read an article on a business I'd never even heard of: Mutual
funds. Describing the industry as "tiny but contentious,"
the story inspired me to choose this field as the subject of my
senior thesis. In my thesis, I baldly asserted that "the prime
responsibility of mutual funds must always be to their shareholders,"
and to demand that funds must serve"serve both
individual and institutional investors . . . serve them in the most
efficient, honest, and economical way possible." I urged funds
to reduce sales charges and management fees, to exercise their responsibilities
of corporate citizenship, to refrain from excessive claims of management
ability, and, almost eerily, to "make no claim to superiority
over the market averages."
If the words about efficiency, honesty, and economical
operation strike you as a design for a firm called Vanguard, and
if the idea that funds can't beat the market seems to lay the groundwork
for the index fund, so be it. But those things are probably what
any young college student, idealistically seeking to build
a new and better world, would have written.
Whatever the case, the thesis led me directly into
a career in this industry, for it was read by Walter L. Morgan,
long-time member of the Union League, fellow Princetonian, legendary
fund pioneer, and founder in 1928 of Wellington Fund. When I graduated
in 1951, Mr. Morgan hired me. With few hardy souls having come into
the beleaguered investment field during the 1930s and 1940s, my
ascent was rapid. This fine gentleman groomed me, challenged me,
trusted me, and liked mewe were friends for nearly half a
century until his death at age 100 four years agoand by 1965,
at age 35, I was running his company.
Mr. Morgan told me "to do whatever it takes"
to prepare Wellington for the future. Headstrong, self-confident,
and immature, I took a radical step, merging Wellington Management
Company with a Boston investment firm. But I relinquished too much
of Wellington's voting control for my own good. While at first the
merger was an extraordinary success, the end of the speculative
boom of the "go-go" 1960s and the onset of the great 1973-74
bear market brought tough times. Early in 1974, the four partners
with whom I'd earlier joined banded together to fire me. It was
the end of my Wellington career.
January 1974, Break #2A Door Slams . . .
A Window Opens
But a new career was only months away. Heartbroken
when the door slammed at what I considered "my" company,
I wasn't sure where to turn. But a window opened when I recalled
an idea I'd been playing with for some years, an idea, in fact,
whose genesis may have been in that 1951 thesis that talked about
building a better industry. The idea, simply put, was to "mutualize"
Wellington Fund and its ten sister funds, making the funds independent
of Wellington Management Company, the firm that controlled them
and the firm that had just fired me. (The Funds' Board of Directors
was largely independent of the Management Company's.)
After an arduous struggle and tedious negotiations
lasting through the winter, spring, and summer of 1974, the fund
board finally agreed to retain me as a full-time fund president,
in charge only of administrationaccounting, legal, and shareholder
recordkeepingbut continuing to retain Wellington as fund advisor
and fund marketer. But because success, as it were, in the fund
field is driven, not by how well the funds are administered,
but by what kinds of funds are created, whether superior investment
returns are attained, and how effectively funds are marketed, I
feared that I had won a Pyrric victory, for our new company was
formally prohibited from performing those critical portfolio supervision
and distribution functions.
In any event, we needed a distinctive name for our
firm, and Lady Luck quickly struck again. In mid-September 1974,
a dealer in antique prints happened by my office and sold me some
prints of naval battles of Great Britain during the Napoleonic Wars.
Glancing at the book from which they had been removed, I read the
text describing the Battle of the Nile in 1798, where Lord Nelson
demolished the French fleet. His dispatch announcing the glorious
victory proclaimed his flagship's name and location: "Vanguard,
off of the Nile." I knew immediately that I had the name for
our new enterprise!
As 1974 drew to a close, the new Vanguard Group was
a tiny company with a proud name, a staff of 28, responsible for
only the administrationnothing moreof $1.4 billion of
mutual fund assets, and a mutual structure without precedent
in the industrya structure in which the funds would be operated
at cost, and solely in the best interests of their shareholders.
While these might seem rather meager credentials, that structure
set in motion all that was to follow.
We quickly went to work to expand our mandate. Ignoring
the limitations in our charter, we created the world's first index
mutual fund, and then the industry's first targeted maturity bond
funds, now the industry standard. We eliminated the seller-driven
broker-dealer distribution force that had marketed the Wellington
funds for nearly half a century, replacing it with our own buyer-driven
"no load" system. By mid-1977, with our fund assets still
below $2 billion, each of the critical elements of today's Vanguard
was not only in place, but set on a firm foundation. We had built
it. Now we would test our thesis: "If you build it, they will
Our innovation, our structure, our strategy, our
faith in stock indexing and in disciplined bond management, our
over-bearing focus on low cost, and our attention to serving the
needs of our clients were what we built, and millions of
investors came. Year after year, unremittingly, our market
share of industry assets increased, and our fund assets now total
$560 billion. The Vanguard Experiment has worked.
This thrilling ride drew on my every talenthowever
modestand seemed to ignore my numerous weaknesses. My energy
and sheer delight in making a radical departure from industry norms
and in building a new business, and my feisty taste for the competitive
battle were unflagging. But while my spirit was willing, my flesh
was weak and growing weaker by the day. A genetic heart disease,
first manifested when I was 30 years of age, gradually worsened,
and by early 1995, the right half of my heart had ceased to beat.
I decided to step down, and end my career as Vanguard's chief executive.
February 1996, Break #3"You Have A New
Of course my failing heart was a major reason for
my decision. But I also did not intend to outstay my usefulness,
and, truth told, I had found the operating challenge of managing
a firm that had already grown to some 5000 crewmembers (on the way
to 10,000) paled by comparison with the entrepreneurial challenge
of building a new company and establishing its characterits
common sense investment philosophy and its ethical human values.
Further, I'd remain at Vanguard, for the Board agreed that I would
continue to serve as Chairman.
In October 1995, I entered Hahnemann Hospital to
await a heart transplant. As a round-the-clock intravenous line
carried heart-stimulating drugs that kept me alive, I remained cheerful,
optimistic, and of course busy in my Vanguard duties. On
February 21, 1996, after 128 days in the hospital, I received my
new heart. Awakening in the blackness, the first words I remember
hearing were, "Congratulations. You have a new heart, and it
is young and strong."
And so it was. It was also a near-perfect match.
I've had 33 consecutive zeros on the rejection scale, have long
ago ceased taking the most potent anti-rejection drugs, and am enjoying
perfect health. With my miraculous second chance at life, I have
the energy of a colt, play squash doubles a couple of times a week,
again sail my aging 15-foot sailboat, enjoy my family, and take
long walks with my wife. I'm also vigorously engaged in what has
turned out to be my third career.
For when my long tenure as a director came to an end
as 2000 began, the Board, happily, agreed with my proposal that
Vanguard would sponsor a newly-formed Bogle Financial Markets Research
Center. Through this unit, my two assistants and I do our daily
work, supporting my Vanguard activities in dozens of speeches each
year, writing four books so far, with more to come, working with
the press and on television, regularly meeting with Vanguard crewmembers,
and acting as a sort of ambassador to our shareholders/owners around
But perhaps the most rewarding part of my third career
is the opportunity to apply my unflagging missionary zeal to the
building of a better financial world. As I wrote years ago, investing
is an act of faithfaith in our financial markets, faith in
the stewards who manage our corporations, and faith in the trustees
who invest our hard-earned assets. Given the events of the past
few years, it can be no surprise that in each case investors are
losing faithand with good reason. So my new efforts focus
on rebuilding faith in investing, on making the mutual fund industry
a better place to invest, and on restoring the traditional values
of Corporate America. In a sense, I have come full circle, for that
very same 1949 issue of Fortune that included the mutual
fund story also carried an extensive essay entitled, of all things,
"The Moral History of U.S. Business"one more marvelous
I take on these challenges with the same idealistic
spirit that Fortune inspired in my ancient thesis, the same
aspirations with which I joined and then ran Wellington, the same
steadfastness that was required after I got fired, and the same
energy, enthusiasm and zest for accomplishing the impossible with
which I created and ran Vanguard. Through some combination of scientific
miracles, my medical guardian angels, my faith, and the Lord, my
second chance at life has miraculously granted me the marvelous
luxury of this third career. Indeed as I count my blessings of family
and friends, and reflect upon how infinitely lucky I have been in
my career, it gives me a bit of a tingle. Of course there is so
much to be done, and so little time. But the words that Tennyson
attributed to Ulysses as he returned from his long odyssey inspire
me to press on:
Come, my friends, 'tis not too late to seek a newer world.
Push off, and sitting well in order smite
The sounding furrows; for my purpose holds
To sail beyond the sunset til I die.
Tho' much is taken, much abides; and tho
We are not now that strength which in old days
Moved earth and heaven, that which we are, we are-
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
Thank you again for this signal honor.
Note: The opinions expressed in this article do not necessarily represent the views of Vanguard's present management.
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