Jack Bogle


Forbes - - CON­TENTS -

In 1965, my men­tor, Wal­ter L. Mor­gan, the founder of Wellington Man­age­ment Co., called me into his of­fice. It was the go-go era, and we only had a con­ven­tional, bal­anced mu­tual fund. “I want you to do what­ever it takes to fix the com­pany. You’re in charge now.” I was 35. So I merged with a very ag­gres­sive eq­uity fund out of Bos­ton with man­agers younger than I was. It seemed like an act of ge­nius, un­til it wasn’t. The go-go era fell apart, and they turned out to be ter­ri­ble money man­agers. In Jan­uary 1974, the board of Wellington Man­age­ment, con­trolled by that Bos­ton group, fired me.

Ex­cept that the mu­tual funds them­selves had a sep­a­rate board con­trolled by in­de­pen­dent di­rec­tors, and I per­suaded that board not to fire me. So there was a big fight, and it was re­solved with a ter­ri­ble deal: I would con­tinue as chair­man and CEO of the funds, which would be re­spon­si­ble for their own le­gal, com­pli­ance, ad­min­is­tra­tion and record keep­ing. (And I had to come up with a new name—that was the start of Van­guard Group.) My ri­vals, the peo­ple who fired me, would con­tinue to over­see dis­tri­bu­tion, mar­ket­ing and in­vest­ment man­age­ment. The scheme was to­tally ir­ra­tional.

I had to find a way for Van­guard to take on the in­vest­ment man­age­ment and dis­tri­bu­tion of our funds. I had done some work on in­dex funds in my se­nior the­sis at Prince­ton in 1951. I had ex­pe­ri­enced the fail­ure of ac­tive man­age­ment first­hand. And I had just read an ar­ti­cle by No­bel Lau­re­ate Paul Sa­muel­son, say­ing, in essence, “Some­body, some­where, please start an in­dex fund.” I took the idea to the board and they said “You can’t get into in­vest­ment man­age­ment,” and I said, “This fund has no in­vest­ment man­age­ment.” They bought it, and there’s where the in­dex rev­o­lu­tion be­gan. Then I de­cided we couldn’t al­low Wellington and its sales force to con­tinue to dis­trib­ute the funds—so we elim­i­nated all sales com­mis­sions and went no-load overnight. The di­rec­tors said “You’re not al­lowed to take over dis­tri­bu­tion,” and I said “We’re not tak­ing it over; we’re elim­i­nat­ing it.” They bought it, again.

When a door closes, if you look long enough and hard enough, if you’re strong enough, you’ll find a win­dow that opens.

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