Allan Roth: 50 Years of the Vanguard Experiment

On May 1, Vanguard will celebrate its 50th anniversary. Second only to BlackRock, Vanguard manages about $10.4 trillion for over 50 million investors as of January 31, 2025. I’ve been following what the Vanguard founder, John C. Bogle, termed "the Vanguard experiment" for the vast majority of its 50-year history. 

Here’s some history along with my interactions with its leaders and thoughts about its future.

Vanguard's History

Bogle graduated from Princeton University in 1951, writing the thesis, “The Economic Role of the Investment Company,” which reached these conclusions:

• Investment companies should reduce charges and management fees.
• Funds do not beat market averages.
• Investment companies should serve the fund shareholders.

After graduation, Bogle then joined the Wellington Management Company and quickly rose through the ranks, becoming its CEO just 13 years later. After a failed merger and in a bear market, Wellington’s stock plunged to $4.25 a share from a high of $50. In 1974, after 23 years at Wellington, the board abruptly fired Bogle.

Though no longer employed by Wellington, Bogle was still chairman of the 11 Wellington funds. The day after his firing, he called a meeting of the funds’ boards, which eventually agreed to a mutualization of the funds. The new fund family would be called Vanguard, with Wellington acting as the distributor and investment advisor of the funds.

Wasting no time, on September 24, 1974, Bogle filed the Vanguard articles of incorporation. Current Vanguard CEO, Salim Ramji, told me that in many ways that was the founding date of the company, though the company didn’t start operations until the following year. As an analogy, the U.S. Declaration of Independence was signed in 1776, but the constitution itself wasn’t ratified until 1788.

Thus, the Vanguard experiment launched with a crew of only 28. One year later, in 1976, Vanguard began offering the first “unmanaged” mutual fund, which would become the first S&P 500 index mutual fund.

The experiment had radical components:

• Vanguard would be owned by the investors so it didn’t have to serve two masters.
• Their funds would have no sales loads to buy.
• Low fees would give the investor the best shot at higher returns.

A First Hand View of the Jack Bogle Culture

I first met Jack Bogle about 21 years ago. I had sent him a letter, thanking him for his work and telling him how much I’d like to meet him one day. A week later, I received a hand-written card telling me that he was going to be in my area in the next month and would be “pleased to set up a meeting.”  

Full of anticipation, I arrived early at the restaurant. But when he walked in and sat down with me, Bogle looked a bit angry. I asked if something was wrong, and he told me he had just lost a dollar in the hotel soda machine and that he was going to the front desk to get that dollar back after our meeting. I was immediately disarmed by his candor and frugality, and it was that same degree of frugality with which he led to relentlessly lower Vanguard’s costs. 

During our conversation, Bogle told me he thought the Vanguard experiment was a “failure.” Stunned, I asked why, and he said it was because no other mutual fund family had followed the same path of being owned by fund shareholders.

After that initial meeting, we kept in touch every year until his death on January 16, 2019. I found myself on the panel of experts every year at the annual Bogleheads conference. One year, Bogle couldn’t attend because he was hospitalized, but he called in on speakerphone, offering his thoughts from his hospital bed in intensive care. I served as the volunteer treasurer of the John C. Bogle Center for Financial Literacy.

The Vanguard Culture Today

On July 8, 2024, Salim Ramji became the first Vanguard CEO hired from outside the company. He was also the first who didn’t personally know Jack Bogle. Would outsider leadership signal the end of the Bogle culture? Quite the contrary. 

Vanguard has continued Jack Bogle’s relentless quest to lower fees. Earlier this year, Vanguard had its largest fee reduction in history, saving investors an estimated $350 million this year. There is a seven-foot bronze monument of Bogle just outside the cafeteria at Vanguard headquarters. Thousands of Vanguard employees walk past it daily, perhaps remembering the principles Bogle developed at Princeton and practiced every day in a long career of putting investors first.

But Vanguard isn’t perfect. I have sometimes been critical of Vanguard in my pieces in areas such as Vanguard's digital presence, customer service and even some products. Ramji’s response was criticism will make us better. In many ways, Ramji reminds me of Bogle. He certainly demonstrates a similar personal touch in his communication, sending me a personal response to a blind email I sent him and he later suggested a meetup. Ramji also accepted an invitation to come and speak at our next Bogleheads conference in October. 

I wrote Ramji that he reminded me a bit of Bogle and he responded, “That’s a rather high bar ... though I didn’t work with him—his books and the company he started are a source of inspiration for me.”

Ramji is a Boglehead, and I suspect the culture that Jack Bogle created will survive well beyond the next half-century. Millions of investors owe their financial freedom to Bogle and the firm that he created. I do as well. 

Happy 50th anniversary, Vanguard! You have accomplished so much in your 50-year history. Investors have much to celebrate with you. I think the Vanguard experiment launched by John C. Bogle is a resounding success. It has changed the way the world invests.

Here’s to the next 50 years.