This book is about Bogle, about Vanguard, and about investing. It succeeds at all levels. "Almost everyone who knows Bogle thinks he works too hard," Braham says. When asked how he handled his work-life balance, Bogle replied "Badly." When a man is so intertwined with his work, you want a biography that intertwines them as well. This biography does. And it reads well.
I mean, this is a REALLY GOOD BOOK. As a long-time Vanguard investor I knew it would interest me, but I really wasn't expecting anything this good. I don't see how you could have more satisfying book about Vanguard, or about Bogle.
It's not a puff piece. Braham does not even pretend to be objective, you hear the author's voice throughout. Bogle and Vanguard are seen through the eyes of a thoughtful, informed, and definitely opinionated observer. Braham lets us know what he thinks, and he has interesting things to say about Bogle, about Vanguard, and about the "efficient market hypothesis."
If I had to pick one passage to convey the flavor of the book, it would be this (p. 187): "Bogle says he believes in market fundamentals, that ultimately the stock market's total returns will equal its dividend payouts plus earnings growth.... Unlike so many others, he actually does believe what he says.... Underlying all his bromides, such as 'Stay the course,' is a basic faith in capitalism's inexorable progress, that in the long run stocks will go up, and that if investors just squirrel away enough in their 401ks week after week, they will be rewarded, provided they don't let the croupiers of Wall Street rip them off. Such a philosophy is immensely comforting to middle-class investors who often see the value of their entire life savings bounce around like a yo-yo during one of the market's tougher weeks."
I learned some things about Bogle, the man. He uses a slide rule, which to nerdy seniors like me speaks volumes about his approach to finance--no false accuracy, and keep the big picture in your head. I was curious to know Bogle's religious affiliation--I thought he might be a Quaker, but, no, he is an Episcopalian who attends Presbyterian services (p. 198). A self-described "religious person," he is a regular churchgoer but, Braham says, "takes religion with a grain of salt." He quotes Bogle as saying "No, I don't believe the Bible is the word of God. If it is, how did He learn to write in Hebrew and then Greek?"
"Saint Jack," author of "The Battle for the Soul of Capitalism," urges a return to business ethics and integrity. Braham accepts Bogles sincerity, but wonders about a "lost golden age of idealistic capitalism that never truly existed, or perhaps existed only for a brief time during his youth." He points out that Bogle's formative years occurred when the financial industry had temporarily reformed, "still smarting from all the financial scandals that had occurred in the wake of the Great Depression, scandals that inspired the government to pass the Securities Acts of 1933 and 1934 and the Investment Company Act of 1940." The industry was, perhaps, briefly, behaving itself.
I read Bogle's "Common Sense on Mutual Funds" but somehow missed what Braham pointed out: the title alludes to Thomas Paine's inflammatory call for revolution. And I had not appreciated the extent and seriousness of Bogle's campaign to convince mutual fund companies to vote their proxies for better corporate governance.
I learned a lot about Vanguard. I hadn't grasped the importance of bond funds in Vanguard's early history. Or understood the competitive importance of Vanguard's accurately named, precisely defined, easy-to-understnad funds:
"Traditionally, bond fund managers practiced a 'go anywhere' style.... Bogle believed in pursing a strategy that targeted rigidly defined slivers of the market so that investors knew exactly what they were getting when they purchased each fund. Typical for the period were the Vanguard Short-Term Federal and Vanguard Pennsylvania Long-Term Tax-Exempt funds. The strategy was pleasing to shareholders for its simplicity, but it also gave Vanguard a competitive edge. By sticking to narrow sectors of the bond market, it made it impossible for competitors to make any great claims of beating Vanguard in Short-Term Federal if they were investing in, say, long-term junk bonds. So the strategy forced them to compare their funds on an apples-to-apples basis, and inevitable, after deducting fees, they would lose in the competition.... Specialization [became] the name of the game... the question is how do we get people to buy more soap when to pay more for it when soap is soap and everyone on earth has a bar? In such commoditized markets, the low-cost provider always wins and vanguard was it."
In 2001, Vanguard was having a legal spat with S&P over licensing fees, "So Vanguard developed its own benchmarks with index designer's MSCI's help." So, it seems, many of Vanguard's index funds are indexed to Vanguard's own "house brand" indexes, a curious thing and I'm not sure what to make of it.
Is Vanguard losing its way? Is it reverting to the mean? Braham offers insights on how Vanguard operates as a company. He has a trenchant analysis of Vanguard's claims that clients invest "at cost," that it is "client-owned," and that Vanguard does not take a profit. These are not false, but they are partial truths. Vanguard's "mutualized" system of governance is arguably Bogle's biggest achievement. It has succeeded meaningfully at aligning Vanguard's corporate interests with client interests, and creating corporate values that have persisted after the founder's retirement. But it is not perfect, and Braham explains how Vanguard's "Partnership Plan" works and how it creates an incentive to grow assets under management in ways not always precisely aligned with clients' interests. Braham snipes accurately at Vanguard's decisions to offer ETFs in the first place, to eliminate ETF purchase fees, and to offer new narrow sector ETFs resembling the older sector funds Bogle counted among his greatest regrets.
Braham offers a delightfully scathing critique of Vanguard's new advertising campaign about "Vanguarding."
The book answered a few specific questions I'd wondered about, such as just how big the "Bogle FInancial Markets Research Center" actually is (answered on p. 154); and what Bogle really thinks of Vanguard's "Managed Payout" funds (p. 281).
Disclosures: I'm a member of the Bogleheads' online investment forum, and author of a chapter of "The Bogleheads' Guide to Retirement Planning," so I do have a built-in interest in Vanguard and in Bogle. And the publisher sent me a complimentary copy. Originally I had planned on donating it to the public library, but I'm keeping it, and I'm going to reread it.