New York City


One-on-One with John C. Bogle, Founder of Vanguard Group

By Scott Shrake



What would you say has changed about starting a business since you started Vanguard Group?

The speed of communications is so great. Twenty-five years ago, if you had a great idea, like an index fund, which I happened to start first thing after we started Vanguard, it took years for that to gain acceptance, for the word to spread. Today, the word spreads like lightning. The Internet is a truly remarkable means of communication, and I believe that usage is just beginning to be tapped.

What do you think the long-term growth curve will look like in high technology?

Well, right now it's ballistic — and those kind of exponential curves simply don't persist. Otherwise we'd have an economy that was 150% technology and minus-50% everything else. So there's some limit to how quickly you can go, and I would look for a gradual slowing, because that's what we look for in all businesses, whether it's the automobile business in the first decade or two of the 20th century, or the airline business in the second or third decade: Things just slow down.

As for the predicted dot-com shakeout,* what will that look like? [*Note: This interview was conducted in 2000]

I think there are far too many companies out there... there are just too many consumer Web sites that can possibly sustain themselves. It's been extremely easy to get financing, and this financing is not used to build buildings that will endure, but to build advertising programs that are as ephemeral as the air. The idea is to get in and create your mini-monopoly, to be the "first mover," and this just gets overdone. In financing, there's an enormous history of things getting overdone. Too much capital flowing after too few good projects. And they all look good in the beginning...

Vanguard has a huge corporate campus with a lot of employees. What's your philosophy for managing such a large group of people?

Treating individuals with dignity and respect... the smallest of us with the same honor, compassion and respect as the largest — maybe even more — is the way it should be in this life. While it's not possible for me to interact with 11,000 people, that spirit still pervades this enterprise. I am an idealist, as you can probably tell.

How would you define being a good corporate citizen?

A good corporate citizen realizes that it has a job to do, and that is to make a profit for the shareholders who have invested in it. But if that is all a corporation is, it's nothing. A business is, to me, nothing unless it is combined with virtue. A corporation should be there to serve. In the financial field, when you're investing other people's money, particularly, it requires a sense of stewardship. The idea is service and stewardship.

To be most successful, what should a young person study today?

I am still a believer in the classics, the liberal arts... I think that background makes a person who is well rounded and can get the most out of the tremendous — unbelievable — opportunities that there are in the area of information technology and communication technology. You want well-rounded people who fit technology into a scheme of moral values.

What was the goal when you founded Vanguard, and do you thing it's been fulfilled, or is there more you'd like to do?

Well, I don't really think in those terms. My idea is if I can get through the day and maybe do a couple of things right and maybe make the world a little bit better, make Vanguard a little better, then it's a good day, and we can go home and start all over again tomorrow. It's not as if there's some goal you can get to. It's not like Winning the U.S. Open, making that last 17-foot putt, and it's over and you're the champion. That doesn't happen in business, and it shouldn't happen.

Couldn't one say that what you do, as investment managers, is a form of customer service writ large?

It is, and it's stewardship writ large. Although we don't say customer here, we say client. We have three words we've banned at Vanguard. One is "customer," which suggests someone looking for the latest white sale... and it suggests a short-term relationship, whereas "client" suggests a long-term relationship. From the very beginning, when Vanguard started, I didn't want the word "employee" used. It strikes me as someone who comes in at 9, leaves at 5, keeps his mouth shut and gets paid on Friday, and that wasn't the spirit I wanted to encourage, so building off the HMS Vanguard name (the company name was inspired by Lord Nelson's ship),  we call them "crew members." And it's a little bit corny, but it does suggest that we're all on a ship, on a voyage, a warship at that, where if one person doesn't do his or her part, the ship can go down. And the third term is "product." This isn't a product business. You're in business to provide an investment program that is sound. So product is out. As I've been known to observe, for an enterprise without products, without customers, without employees, we're doing fine.

Finally, what do you most enjoy doing when you're away from the office?

Well, first a confession. Business has become my relaxation. It happens, and it's not necessarily a wonderful thing, because it preoccupies you, you get wrapped up in it. I think sometimes, "What did Rembrandt do on his day off? He painted."

Has it always been that way for you?

Yeah, I guess so. In the beginning, I didn't think of business as a calling. I thought about getting on with my life, making a living and hopefully exercising any ability I could. The idea of business as a calling has developed over the years. But I've always been wrapped up in trying to do a good job. I grew up as one of those kids who was just plain responsible. You know a lot of them, I know a lot of them, I know young ones and I know old ones, and you don't seem to be able to shake it. They just don't want to go around letting people down.


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