John C. Bogle, founder of the Vanguard Mutual Fund Group and President of its Bogle Financial Markets Research Center, knows something about the pitfalls and perils of investing, and how we got where we are in today's maelstrom of economic crisis. The author of The Little Book of Common-Sense Investing has been warning us for decades about the danger of short-term thinking and greed as motivator in the U.S. financial sector.
William Bernstein, acclaimed author of The Four Pillars of Investing, has this to say about Enough. -- Bogle's new bestseller: If you are wondering about the cause of the current market crisis, then you haven't been reading enough of Jack Bogle. Because he certainly knows not only where, but why and how. For decades Jack has been communicating his disquiet in previous books, speeches, and public testimony. Years from now, when historians and investors dissect the economic and market meltdowns of 2008, they'll consult this slim, well-written volume.
Bogle's thesis in Enough. is that our nation has been engaged in decades of unchecked financial excess, for which we are now suffering: excess in investment company fees; excess in financial speculation masquerading as diversification and innovation; excess in the salaries of top executives; excess in salesmanship; and most importantly, excess in the role played by the financial industry in our national economy and national life.
Black swans and market returns
Bogle argues the difference between investing and speculation lie at the rotten core of today's financial crisis. Not only is speculation a loser's game: it's a game whose outcome can't be predicted with any kind of confidence, Bogle writes in Enough.
The laws of probability don't apply to our financial markets, Bogle states. For in the speculation-driven financial markets there is no reason whatsoever to expect that just because an event has never happened before, it can't happen in the future. Metaphorically speaking, the fact that the only swans we humans have ever observed are white doesn't mean that no black swans exist.
An example of this uncertainly was 1987's infamous Black Monday, when stocks plunged 25 percent in a single day -- the deepest dive since just before the Great Depression. Far from being an omen of dire days ahead, it proved to be a harbinger of the greatest bull market in recorded history. So, no one knows.
In these volatile and uncertain times, Bogle argues, investing in good faith for the client's long-term well-being is the only responsible and ethical strategy.
Return to the Founders' values
Given that we can't take it with us, Bogle bids us to search for meaning in our amassing of money and material things. He turns to the Founding Fathers to illustrate the differences in what he refers to as entrepreneurs and capitalists.
For [Benjamin] Franklin, the getting of money was always a means to an end, not an end in itself. The other enterprises he created, as well as his inventions, were designed for the public weal, not for his personal profit. Franklin created the first fire brigade which led to founding the Philadelphia Contributionship, which continues today as the oldest property insurance company in the United States. He also founded a library, an academy and college, a hospital, and a learned society -- none for his personal enrichment, all for the benefit of his community.
Bogle observes that as the first decade of the 21st century comes to a close, Franklin's noble 18th century values stand in bold contrast to the bitter patent wars of today, to the obscene salary demands of the executives of our giant corporations and the enormous compensation paid to hedge fund managers.
The importance of character
Quoting the Bible, Enlightenment philosophers, Shakespeare, and modern socioeconomic theorists, Bogle urges today's business students to examine character-building and the ability to live a balanced life as well as their classroom skills.
We'll be better human beings and achieve greater things if we challenge ourselves to pursue careers that create value for our society -- with personal wealth not as a goal, but as the by-product. Best of all, by setting that challenge for ourselves, we'll build the character that will sustain us in our labors.
In the end, Enough. is more about life than investing. It encourages introspection both as individuals engaged in business and as human beings engaged in leaving the world a better place than we found it.
Bogle's book begins with money, winds through the philosophical ponderings of thousands of years and even touches on spiritual values. It's all connected to our concept of enough -- what we think is enough and what really, essentially, is enough to live our best lives.
John C. Bogle's 10 rules for building a great organization, using simplicity as a touchstone:
Rule 1: Make Caring the Soul of the Organization.
Rule 2: Forget about Employees. (Create a crew in the sense of the company as a ship -- all working together on the journey toward the destination of success)
Rule 3: Set High Standards and Values -- and Stick to Them.
Rule 4: Talk the Talk. Repeat Values Endlessly.
Rule 5: Walk the Walk. Actions Speak Louder than Words.
Rule 6: Don't Overmanage.
Rule 7: Recognize Individual Achievement.
Rule 8: A Reminder -- Loyalty is a Two-Way Street.
Rule 9: Lead and Manage for the Long Term.
Rule 10: Press On, Regardless.