Knut Rostad's New Book Celebrates Bogle

January 31, 2014

The many fans of Vanguard’s founder now have a common home in a fine new book.

John Bogle is, without question, one of the most important figures in American finance, and a new book with contributions from a variety of esteemed sources counts the ways. Whether it’s Vanguard’s launch of the world’s first retail index fund or the founding of Vanguard itself—an actual mutually owned mutual fund firm that systematically keeps costs down, Bogle’s influence on the world of investing continues now and will continue well into the future.

In the new book, “The Man in the Arena,” Knut Rostad unabashedly extols the virtues of "Jack," who in his golden years has cemented his reputation as the conscience of American capitalism. Rostad happily admitted to Managing Editor Olly Ludwig that he’s drunk the Kool-Aid when it comes to Bogle, but nonetheless reckons a lot more people should know about him. Rostad’s new work, which presents like a coffee table book for indexing nerds, is likely to help his cause. When did you decide you wanted to put together a book that celebrates John Bogle?

Knut Rostad: The origins of the book go back to the January 2012 Legacy Forum that we spearheaded in New York City, along with the Museum of American Finance and CFA Institute to gather those within the financial arena to discuss the significance of John Bogle’s legacy. So you had an epiphany at that event?

Rostad: As we were planning the event, and as I immersed myself more deeply in what was out in the marketplace about Jack Bogle, it struck me that there was an opportunity for a book that focused on the highlights of his legacy, and included parts that I don’t think have been sufficiently covered before. So it was during the planning of that event. The very title of your book, “Man in the Arena,” is an allusion to Teddy Roosevelt and an allusion to Mr. Bogle’s admiration for him. Can you speak to Mr. Bogle’s admiration for Roosevelt?

Rostad: Yes. I think there are two or three aspects that stand out about TR that resonate with Jack. And I think the first and foremost one was TR's legacy as a progressive, as a reformer, who was to get a “Square Deal” for the American people in the context of the very large and influential corporations whose impact had really come to a head in the first years of the 20th century.

And when you go down just one level and look at what TR was good at doing, I think it’s perfectly fair to say that Jack Bogle has those attributes, i.e., first and foremost, TR was perhaps the first president who fully appreciated the significance of the media in terms of its potential to help and support what he wanted to accomplish, and his skills at cultivating relationships. That is clearly a part of what, I think, sets Jack Bogle apart—his intuitive understanding and ability to do the same thing. Yes, Jack Bogle has had a really good relationship with reporters, hasn’t he?

Rostad: I think he’s had a superb relationship. And it’s based on a huge part of what Jack Bogle represents, and who Jack Bogle is. And that is, in my view, speaking plainly and clearly and honestly and to the best of his ability about the matters at hand. And I think this also goes back to Roosevelt in terms of both his ability and appreciation for speaking clearly and plainly and honestly to the American people. One of the things that I find interesting about Jack Bogle’s interest and admiration for TR is that in some sense, there’s a real similarity between the two of them insofar as they both represented a threat to the way things had been done.

Rostad: Absolutely. Going back to TR, the first episode in terms of politics was when he was in his mid-20s and he went up to Albany; what did he immediately try to do? He tried to reform, he tried to change. That was clearly his gut instinct.

And in the same way, Jack Bogle’s entire being in the mutual fund industry was as a reformer in the sense of bringing to the marketplace a company that was unlike any company before it, in terms of Vanguard, in terms of its operating premise and then his signature product, the index fund. Those at their core were huge changes, and I think are clearly the anchor of his legacy. Yes, I think the parallels there are strong. Obviously, there were dark days at Vanguard. What is your sense about when the corner was turned at Vanguard?

Rostad: Right now, we can look backward and say of course it was obvious what would happen, but I don’t think that’s the case if you put yourself in Vanguard’s place in the first 10 to 15 years. If you just look at the asset flows, it’s only in the more recent years—20 years, plus or minus—where you could actually say that the market was really beginning to move and that there was a certain momentum.

So I think at the outset it wasn’t at all clear that it was going to be the smashing success that it has been, and that it took several years before that sense truly developed, that this was not just an experiment. We smile when we are reminded that at the outset this was called un-American. Wall Street, as I love to say, can be the locus of lies and legalized theft. And John Bogle definitely has very different ideas. How does a man like this materialize? Because it’s extraordinary—and I use that word very, very advisedly.

Rostad: I think when you look at his background and you look at the difficult times he had in his earlier life—I don’t know how to sort of explain that more than that—and Jack says himself that if it weren’t for the fact that he ran across this article in the Princeton library in 1949, there never would have been a Vanguard and none of this would have happened.

That’s literally how it started. He ran across this article about big business in Boston and mutual fund companies back then. It piqued his interest and thus he produced his thesis.

His first employer at Wellington, who he just dearly loved, said after interviewing Jack for a job, “Jack Bogle understands our business better than we do.” I think that speaks to who he is and is one part of what explains how things came together.

But I don’t think of that as a full explanation. There may be far more truth to what Jack himself says about it in terms of pure luck and coincidence. So, how will we remember this man?

Rostad: Well, we have to wonder, What impact has Vanguard had? What impact has indexing had? We do have some quantifying data about that. And so there is that piece of it, but there is more research to be done, more exploration to be done to fully appreciate what it is, the difference it has meant for tens of millions of investors over the last 40 years.

And then the other piece of it is after Jack left the management of the firm, and over the last 18 years, how he has written books focusing on the issue of ethics. And that is what has gotten attention. I think that is what has been the main ingredient for what my third piece of the legacy is, and that is how he has touched people.

And some of these people are the highest, most respected luminaries, literally, in the country. As I like to say, he has perhaps the most respected investors in the world and the most respected people in public life, Warren Buffett and Bill Clinton, leading a virtual parade in his honor. And that parade includes a slew of other luminaries, including Paul Volcker and—I don’t want to leave anybody out—Paul Samuelson.

Samuelson compared the index fund to the invention of the alphabet and the wheel, and perhaps wine and cheese in terms of its significance. I don’t know anybody who could ever do it better than that. So in terms of his impact on people, Jack has a parade of luminaries that I think is unheard of outside of a national or international true leader.

Notwithstanding the huge accolades he’s gotten, he hasn’t been fully recognized for this impact. And that is what moves me now in terms of this book. More than selling books, I think the point is creating a fuller appreciation for exactly what Jack Bogle has done.



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