Index Funds

In 1951, Jack Bogle wrote his Princeton thesis arguing that mutual funds could not reliably beat the market after costs.

Nobody in the industry believed him. His idea sat for 25 years.

Then, in 1974, he was fired from the firm he had built. Bogle used the forced exit to finally act on his thesis, and he launched the first index fund for individual investors.

Critics called it un-American.
Wall Street called it "Bogle's Folly."
The fund only raised $11 million against a $150 million target.

But Vanguard was born.

Today Vanguard manages over $12 trillion, owns roughly 10% of every company in the S&P 500, and manages assets for 50 million clients. It has saved investors an estimated $500 billion in fees.

Takeaway 1: Novelty and heresy come together.

Paul Graham wrote an essay that explains the phenomenon Bogle faced. In it, he says "If you discover something new, there's a significant chance you'll be accused of some form of heresy."

The mockery wasn't evidence that Bogle was wrong. It was almost evidence that he was right.

Takeaway 2: There isn’t a perfect time to get started.

Bogle held his conviction for 25 years before he had the conditions to act on it. His idea was nearly a generation ahead of its time.

Most people abandon an uncomfortable idea long before the world catches up to it. Bogle didn't.

For more on Jack Bogle’s story, check out this ACQUIRED episode about Vanguard.

Thanks for reading,

Scott