Jack Bogle's Revolution

Brian Gongol

There aren't a lot of capitalist revolutionaries. Plenty of people like capitalism and like what comes from it, but they tend not to be beret-wearing revolutionaries. The red-hatted radicals usually come from the anti-capitalism left, romanticized in the kind of way one might see screen-printed on a Che Guevara t-shirt.

Maybe the lack of capitalist revolutionaries can be chalked up to the fact that competitive markets balancing supply and demand through scarcity and pricing-like feedback loops are the natural order of things. That's not a philosophical claim; nature balances supply and demand through market-like mechanisms all the time. Look no further than the population cycles of snowshoe hares and the lynx or the natural invasion of clover (a plant that adds nitrogen to the soil) into an unfertilized suburban lawn. Supply and demand are natural forces, and whether we like it or not, their interplay decide how much of the world works.

But, just as with nature, sometimes we can make decisions that can influence outcomes and improve upon natural market outcomes. And when someone like Jack Bogle comes along with just such an improvement, then it can be possible to truly revolutionize capitalism from within.

Bogle's revolutionary idea was that mutual funds really ought to be run out of mutual interest. The idea that investors ought to be subjected to as little overhead as possible when saving their money through financial investments was the animating feature of Bogle's career, particularly from the time he launched the Vanguard Group in 1974. Vanguard's philosophy of low-cost, index-based investing set it apart from mainstream money management, which had long reaped most of its profits from "active management" -- trading stocks and other instruments often, and for the kinds of high fees that pay for fancy buildings in high-rent districts like Manhattan. In Vanguard's world, the investor was to be the principal.

The revolution that Bogle begat said that ordinary people ought to be the capitalists; that a person with a modest sum to invest should be able to own a small piece of many different businesses and benefit as much from market-based economic progress as the people who started with a lot of wealth. The index-fund revolution didn't perfect finance or take every blemish off of capitalism, but it did help to democratize wealth-building.

Jack Bogle, who has passed away at the age of 89, devoted a working lifetime to preaching the primacy of the individual investor. His name was well-known within investing circles, but it has always deserved even greater renown. He wrangled the famous bull of Wall Street on behalf of the ordinary American -- not to slaughter it, but to harness its energy on their behalf. We are all much better off for his revolutionary spirit.