John "Jack" Bogle, the man who introduced low-cost, passive investments to the mutual fund industry and helped millions of small investors send their kids to college and retire better, died Wednesday in Bryn Mawr, Pa. He was 89 years old. The cause of death was cancer.
Mr. Bogle, who was named an icon in InvestmentNews' inaugural Icons & Innovators issue in 2016, founded The Vanguard Group Inc. in 1974. It is now the largest mutual fund company in the world, and through it was introduced the first index fund to the market in 1975. The Valley Forge, Pa.-based giant had $5.3 trillion in assets at the end of September, and its low-cost, passive approach continues to force other companies in the mutual fund business to lower their fees.
That revolution might never have happened without Mr. Bogle.
"His values, his strategy, the culture he established are the reason Vanguard has prospered," said Princeton University economist Burton Malkiel, author of "A Random Walk Down Wall Street," and an early board member of Vanguard. "They are his, and uniquely his."
Mr. Bogle founded Vanguard and became its first chief executive after a career failure at Wellington Management Co. taught him a painful and valuable lesson: Always put the investor first, even above the company. This principle sustained him through the early days of index investments, when the young company was hemorrhaging money, and industry peers called the new funds "Mr. Bogle's folly."
Mr. Bogle's folly turned out to be wisdom: Index investing has become the dominant form of investing for mainstream investors. Between 2007 and 2014, investors poured $1 trillion dollars into equity index funds, while they pulled $659 billion out of actively managed funds, according to the Investment Company Institute. Vanguard itself, meanwhile, grew at an annual compound growth rate of 21% between 1974 and 2014.
"Mr. Bogle's folly"
The investors-first principle led to Vanguard's unique nonprofit corporate structure, which has enabled it to continue to lower fees on its investment products. Vanguard's low fees have led to its market success.
"Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children's futures," said Vanguard CEO Tim Buckley. "He was a tremendously intelligent, driven, and talented visionary whose ideas completely changed the way we invest. We are honored to continue his legacy of giving every investor 'a fair shake.'"
John Bogle on how he changed the industry and the qualities that helped him succeed
"He has always been the conscience of the industry," said Mike Clowes, the former editorial director of InvestmentNews, who covered Vanguard's inception and Mr. Bogle's career over the years. "He took the index fund out of the institutional world and gave individuals access to this very efficient investment vehicle."
Thrifty, irascible and courageous, Mr. Bogle was a personal example to many. He was born into a well-to-do family but his father was an alcoholic and his parents divorced; his mother worked retail jobs to support the family. After attending Blair Academy, a private and, at the time, all-boys' school, on a full scholarship, Mr. Bogle worked his way through Princeton University. He married his wife, Eve, in 1956. The couple had six children, raising them in a four-bedroom house in suburban Philadelphia. Mr. Bogle said he tried to teach his children the value of hard work, but regretted that they didn't have the kind of hard-knocks experiences he had had as child.
"I feel sorry for kids who grow up never taking a job because they have to," Mr. Bogle said to InvestmentNews in January 2015.
Mr. Bogle is survived by his wife, and his children: Andrew Armstrong Bogle, Barbara Bogle Renninger, Jean Bogle, Nancy Bogle St. John, Sandra Hipkins Bogle and John C. Bogle Jr.
He survived a heart transplant in 1995, 35 years after doctors told him he might not live to the age of 40. He ignored what the doctors said and continued to work and play squash.
"I didn't think they knew what they were talking about and my first rule in life is get out of bed in the morning," Mr. Bogle told a reporter for the Baltimore Sun. "If you don't do that, absolutely nothing else is going to happen all day."
He said the transplant tested him as almost nothing else had. "I drew deeply on all the patience, persistence and courage I could muster — as anyone would — when, in 1995-96, I endured a 128-day hospital wait, on life-saving intravenous fluid, before receiving a heart transplant," he wrote in his classic book, "Common Sense on Mutual Funds" (Wiley, 1999).
Mr. Bogle sometimes called his transplant a miracle, but most often he treated it lightly, Mr. Clowes said.
He died a wealthy man, but not the megamillionaire or billionaire he might have been. The corporate structure that Mr. Bogle established for Vanguard precluded him from reaping the rewards that most founders of successful financial companies receive. He estimated his own net worth in the low double-digit millions and told The New York Times his only regret was not having more money to give away.
After Vanguard's mandatory retirement age forced Mr. Bogle to retire — a move he resisted — he became an investor advocate and fierce critic of the investment industry.
"Casino may be too kind a term to describe the Wall Street of today's marketplace," he said in his characteristic raspy voice during a speech in 2014 to hundreds of people at the Bryn Mawr Presbyterian Church, near his home. He railed against the "croupiers" of the investment industry, people who took fees for services that added little value to investors. He thought the industry was hopelessly conflicted because most fund companies are owned by conglomerates that demand profits that necessarily have to come from fees on investors.
Mr. Bogle had one central message for individuals — that in the long term, they were better off trying to mirror the market than beat it. His argument was that it is too difficult to find good funds, and nearly impossible to find one that continued producing higher-than-average returns. After fees, the math never made sense to Mr. Bogle.
"The investment business is 80% luck and 20% skill," he said. "We know that skill does not abide."
He was one of the few figures in investing with enough star power to draw a crowd, and he used his pulpit often, though he tried to shrug off his fame.
The media called him "St. Jack." On there being "Bogleheads" in the world, he modestly said, "It's embarrassing, that's what it is." He said his legacy would be the effect he had on Vanguard and its values.
A poetry lover, Mr. Bogle combated arrogance by hanging a copy of Percy Bysshe Shelley's "Ozymandias" by his desk. The poem about the wreckage of an ancient king's statue ends with these lines.
Mr. Bogle also found ways to laugh at himself.
"You know what's wrong with that poem," he asked? "Why did he use the word 'look?' Why didn't he say, 'gaze? Gaze is a much better word."
Then he started to laugh. "Now I'm done criticizing Shelley."
Reversal of fortunes
Mr. Bogle was born in Montclair, N.J., on May 8, 1929, the eldest of three sons. His grandfather was William Yates Bogle Sr., who co-founded the American Can Co. That gave the family a social stature in the town. But the affluence didn't last.
"My father grew up a playboy," Mr. Bogle said. "Like Scott and Zelda [Fitzgerald] he and my mom would go off to resorts and things like that, and he got into bad habits ... everything but the song — wine and women."
The family lost its money in the Great Depression, and Mr. Bogle's father for a time held a job as a salesman at a brick company. On a sales call, with young Jack accompanying him, he paused with his hand on the door, looked across the street and noticed a bar. "I didn't think he wanted any bricks that day," the father told his son. "I thought I'd better stop in the bar and have a drink."
Mr. Bogle's father lost his job. The family "broke up," Mr. Bogle said. His mother held the family together, with her three sons contributing to the family income.
"You just can't imagine the burden she had, day after day," he said. "I don't ever recall her complaining. Life has a lot of burdens. She never showed them."
At Princeton, he took various jobs, including one at the local post office and managing the football team's ticket office.
His thesis at Princeton on the nascent mutual fund industry led to a job at Wellington. Mr. Bogle credited its founder, Walter L. Morgan, with being his mentor. Within a decade, Mr. Morgan handed the reins to Mr. Bogle. In an effort to ramp up the company's faltering returns, Mr. Bogle merged it with Thorndike Doran Paine and Lewis, a Boston-based consulting group. By 1974, Wellington's investing style began to fail, and Mr. Bogle's partners forced him out.
In the struggle afterwards, Mr. Bogle had plenty of time to think. He realized what he had done wrong.
"To save the management company, which as a business was falling apart, I had to do things that were not in the interests of the funds' shareholders."
Vanguard is born
And thus was born the idea for Vanguard. The name came to Mr. Bogle from a visit with an antiques salesman. To furnish his new office, Mr. Bogle bought some prints for the walls. The salesman happened to have a copy of a book describing Admiral Horatio Nelson's battles. There was a picture of the Duke of Wellington on His Majesty's ship, the Vanguard, and Mr. Bogle knew he had his name. "If I had spent $10 million on it, I could not have come up with a better one," he said.
The book was still on the coffee table in his office in 2015.
Vanguard was not an immediate success, the years between 1974 and 1981 were a struggle. The idea of index investing took hold with institutions first. It even took the SEC four years to approve the corporate structure that created Vanguard. The first index fund crossed the $1 billion mark in assets 15 years after its founding, Mr. Bogle reported in his book.
His career at Vanguard included controversies. In 1991, he turned down a chance for the company to get involved with the first ETFs. The product's inventor, Nathan Most, offered the concept to Vanguard first before taking it to State Street Global Advisors.
Mr. Bogle's conviction that investors are best served by long-term, passive investing was offended by the new products, which can be traded intraday. He thought the product would encourage too much trading by individuals without the skill to pick stocks.
"Why do I want to do something that hurts investors?" Mr. Bogle said in the interview. "You bring out something that is going to be very marketable. So say you get to $4 trillion in 2018, just for the fun of it. If you do nothing, you're going to get to $4 trillion in 2020.
"So what's the hurry? What difference does it make?"
He stood by the decision, even occasionally criticizing Vanguard when the company began offering ETFs after his departure as chief executive.
In 1996, the mandatory retirement age at Vanguard forced him to step down from his CEO position, though he retained the role of senior chairman. At the time, the media reported tension between Mr. Bogle and his successor, Jack Brennan.
After a three-year stint as senior chairman, Mr. Bogle turned to public life. He wrote 10 books — (the most recent being "The Clash of the Cultures: Investment vs. Speculation" (Wiley, 2012) — spoke at conferences and gave frequent interviews.
Mr. Bogle received an honorary doctorate degree from Princeton late in life, for which he was invited to a dinner where he was asked to speak, along with other honored guests. A noted professor went ahead of him in the lineup.
"It was the most beautiful thing you ever heard in your life," Mr. Bogle recalled. "I told myself, you're outclassed."
He rose to his feet and told the room, "I'm just going to try to tell you how I feel."
Then he began to quote from Alfred Lord Tennyson's "Ulysses," in which the eponymous hero speaks before embarking on his final journey:
"I saw some of the people starting to listen," Mr. Bogle remembered. "And then the ovation was enormous."