Acquired
03:32:27 · David Rosenthal, Ben Gilbert
[03:32:27] S1: I would suggest that Jack bifurcated the public equities market into commodity and noncommodity. Before Jack and before That's interesting. [03:32:42] S0: He invented a commodity sleeve of [03:32:45] S1: It was all differentiated all marketed as differentiated products. Selling the dream of outsized returns. Jack took a huge chunk of that, broke it off, and said, nope. This is a commodity market. I still do think there is a successful and thriving industry selling the dream. [03:33:02] S0: I mean, clearly, there's an existence proof of that. [03:33:04] S1: And some of them deliver on it. But, yeah, Jack broke off a huge chunk of it and created a new market. [03:33:10] S0: Yeah. I love the quote that he he has. The the grim irony of investing is that we investors as a group not only don't get what we pay for, we get precisely what we don't pay for. Yes. That's great quote. Whole realization around investors as a whole are the market. It is zero sum. So, therefore, if you're gonna own the market, you have to do so with the lowest possible fees. And I think the thing that kinda makes it all work is holding for duration. There's gonna be lots of funds that you can be in that will outperform in fits and starts. But if you wanna be the in the upper decile after forty years, then it turns out owning the market with no fees is an almost surefire way to do it. Yep. Yep. Not investment advice.
03:33:10 · Ben Gilbert, David Rosenthal
[03:33:10] S0: Yeah. I love the quote that he he has. The the grim irony of investing is that we investors as a group not only don't get what we pay for, we get precisely what we don't pay for. Yes. That's great quote. Whole realization around investors as a whole are the market. It is zero sum. So, therefore, if you're gonna own the market, you have to do so with the lowest possible fees. And I think the thing that kinda makes it all work is holding for duration. There's gonna be lots of funds that you can be in that will outperform in fits and starts. But if you wanna be the in the upper decile after forty years, then it turns out owning the market with no fees is an almost surefire way to do it. Yep. Yep. Not investment advice. [03:34:00] S1: Not investment advice, but, know, hey. Warren says it. So Yes. Look to him. Which leads me right to my quintessence. My quintessence is that Warren Buffett was right. The world and America should erect a statue to Jack Bogle. And specifically, my quintessence is that more than almost any other episode I can think of, the Vanguard story and Jack's story is proof that one single human being really can change the world. This is not a product or an idea whose time had come. [03:34:36] S0: You don't think? [03:34:38] S1: Not like this. Not like this. Index funds probably would have come. Technology had gotten there. [03:34:45] S0: Ah, but a mutual ownership. [03:34:46] S1: But mutual [03:34:47] S0: ownership via loss leaders.
03:34:47 · Ben Gilbert, David Rosenthal
[03:34:47] S0: ownership via loss leaders. [03:34:49] S1: Yes. Yes. The Vanguard effect, Would Fidelity, would BlackRock, would State Street be charging the low low fees that they are today on their index products? Were it not for Jack Bogle and Vanguard, I don't think so. [03:35:05] S0: It's interesting. I wonder where it would have settled, because there would have been competition around pricing. And the way it usually works is you compete down to the minimum profit that firms are willing to make. Yep. So I wonder what that sort of floor would have been if not for Vanguard. [03:35:23] S1: Right. But usually, that minimum profit that firms are willing to make is not [03:35:28] S0: zero. Zero. Especially not in this industry. Very true. [03:35:35] S1: So, yeah, I think, I I agree with Warren, and millions and millions and millions of people have had their financial lives changed because of him and would not have happened without him. [03:35:46] S0: Yep. Alright. Alright. I've got two bits of trivia for you. [03:35:49] S1: Oh, okay. Great. Flame on me. [03:35:51] S0: Vanguard opened their doors on 05/01/1975. Yep. What other company started that same month? [03:35:59] S1: Oh, [03:36:01] S0: Microsoft. Microsoft. [03:36:02] S1: Yeah. Nicely [03:36:04] S0: done. That crazy [03:36:06] S1: that history. Thing [03:36:07] S0: At the same, you know, time that Bill Gates is toiling away in Albuquerque, you've got Bogle and crew amidst that crazy board fight all the way across the country in Pennsylvania.
03:36:07 · Ben Gilbert, David Rosenthal
[03:36:07] S0: At the same, you know, time that Bill Gates is toiling away in Albuquerque, you've got Bogle and crew amidst that crazy board fight all the way across the country in Pennsylvania. [03:36:21] S1: And, we didn't put this in the narrative, but the initial founding headquarters location of Vanguard Valley Forge. Not Philadelphia, not Malvern, but nearby Valley Forge, Pennsylvania, cradle of independence in the American Revolution. [03:36:38] S0: That's right. [03:36:39] S1: Right up the street from where I grew up. Spent many an afternoon as a child walking around that park. Little did I know what was going on there.
03:36:39 · David Rosenthal, Ben Gilbert
[03:36:39] S1: Right up the street from where I grew up. Spent many an afternoon as a child walking around that park. Little did I know what was going on there. [03:36:48] S0: Alright. So my second piece of trivia is something truly astonishing that is related to this episode, but didn't make the narrative. Arvin from Worldly Partners sent over this crazy piece of research to David and I. David, don't know if you looked at it, about the entire set of companies that have 100 x ed since going public. Because he's on this quest to figure out, was it knowable at time of IPO, how well they would do? And this basket of companies, on average, delivered a 533 x since going public. Wow. So, like, really good companies. On average, they saw drawdowns at some point in their life of 65% and took eight years to recover to get to their prior all time highs. Wow. So think Nvidia, Amazon, Meta, TSMC, Nike. And I bring this up because most investors just do not have the temperament or the research capacity to decide to continue to hold these assets. So it just doesn't make sense for most people to put material chunks of their net worth in them. I I don't think I realized that even for that whole basket of 100 Xers, the average drawdowns that they saw was 65%. Like, if if your goal is to invest in the world's greatest companies and hold for a long time, you are required to go through massive, massive downturns that could take on average eight years to return to the all time highs. Who does that?
03:36:48 · Ben Gilbert, David Rosenthal
[03:36:48] S0: Alright. So my second piece of trivia is something truly astonishing that is related to this episode, but didn't make the narrative. Arvin from Worldly Partners sent over this crazy piece of research to David and I. David, don't know if you looked at it, about the entire set of companies that have 100 x ed since going public. Because he's on this quest to figure out, was it knowable at time of IPO, how well they would do? And this basket of companies, on average, delivered a 533 x since going public. Wow. So, like, really good companies. On average, they saw drawdowns at some point in their life of 65% and took eight years to recover to get to their prior all time highs. Wow. So think Nvidia, Amazon, Meta, TSMC, Nike. And I bring this up because most investors just do not have the temperament or the research capacity to decide to continue to hold these assets. So it just doesn't make sense for most people to put material chunks of their net worth in them. I I don't think I realized that even for that whole basket of 100 Xers, the average drawdowns that they saw was 65%. Like, if if your goal is to invest in the world's greatest companies and hold for a long time, you are required to go through massive, massive downturns that could take on average eight years to return to the all time highs. Who does that? [03:38:20] S1: Well, there's two groups of people who do that. People with absolute iron stomachs and index fund holders. Right. So there you go.