Don't Count on It!

Praise for Don't Count On It! "This collection of Jack Bogle's writings couldn't be more timely. The clarity of his thinking—and his insistence on the relevance of ethical standards—are totally relevant as we strive to rebuild a broken financial system. For too many years, his strong voice has been lost amid the cacophony of competing self-interests, misdirected complexity, and unbounded greed. Read, learn, and support Jack's mission to reform the industry that has been his life's work." —PAUL VOLCKER, Chairman of the President's Economic Recovery Advisory Board and former Chairman of the Federal Reserve (1979–1987) "Jack Bogle has given investors throughout the world more wisdom and plain financial 'horse sense' than any person in the history of markets. This compendium of his best writings, particularly his post-crisis guidance, is absolutely essential reading for investors and those who care about the future of our society." —ARTHUR LEVITT, former Chairman, U.S. Securities and Exchange Commission "Jack Bogle is one of the most lucid men in finance." —NASSIM N.TALEB, PhD, author of The Black Swan "Jack Bogle is one of the financial wise men whose experience spans the post–World War II years. This book, encompassing his insights on financial behavior, pitfalls, and remedies, with a special focus on mutual funds, is an essential read. We can only benefit from his observations." —HENRY KAUFMAN, President, Henry Kaufman & Company, Inc. "It was not an easy sell. The joke at first was that only finance professors invested in Vanguard's original index fund. But what a triumph it has been. And what a focused and passionate drive it took: it is a zero-sum game and only costs are certain. Thank you, Jack." —JEREMY GRANTHAM, Cofounder and Chairman, GMO "On finance, Jack Bogle thinks unconventionally. So, this sound rebel turns out to be right most of the time. Meanwhile, many of us sometimes engage in self-deception. So, this book will set us straight. And in the last few pages, Jack writes, and I agree, that Peter Bernstein was a giant. So is Jack Bogle." —JEAN-MARIE EVEILLARD, Senior Adviser, First Eagle Investment Management Insights into investing and leadership from the founder of The Vanguard Group Throughout his legendary career, John Bogle-founder of the Vanguard mutual fund group and creator of the first index mutual fund-has helped investors build wealth the right way, while, at the same time, leading a tireless campaign to restore common sense to the investment world. A collection of essays based on speeches delivered to professional groups and college students in recent years, in Don't Count on It is organized around eight themes Illusion versus reality in investing Indexing to market returns Failures of capitalism The flawed structure of the mutual fund industry The spirit of entrepreneurship What is enough in business, and in life Advice to America's future leaders The unforgettable characters who have shaped his career Widely acclaimed for his role as the conscience of the mutual fund industry and a relentless advocate for individual investors, in Don't Count on It, Bogle continues to inspire, while pushing the mutual fund industry to measure up to their promise.

Foreword xi Introduction xv A Note to the Reader xxxi Part One. Investment Illusions 1 Chapter 1 Don’t Count on It! The Perils of Numeracy 5 Chapter 2 The Relentless Rules of Humble Arithmetic 25 Chapter 3 The Telltale Chart 49 Chapter 4 A Question So Important That It Should Be Hard to Think about Anything Else 71 Chapter 5 The Uncanny Ability to Recognize the Obvious 87 Part Two. The Failure of Capitalism 97 Chapter 6 What Went Wrong in Corporate America? 101 Chapter 7 Fixing a Broken Financial System 123 Chapter 8 Vanishing Treasures: Business Values and Investment Values 137 Chapter 9 A Crisis of Ethic Proportions 157 Chapter 10 Black Monday and Black Swans 161 Chapter 11 The Go-Go Years 187 Part Three. What’s Wrong with “Mutual” Funds 203 Chapter 12 Re-Mutualizing the Mutual Fund Industry: The Alpha and the Omega 207 Chapter 13 A New Order of Things: Bringing Mutuality to the “Mutual” Fund 237 Chapter 14 The Fiduciary Principle: No Man Can Serve Two Masters 273 Chapter 15 Mutual Funds at the Millennium: Fund Directors and Fund Myths 297 Chapter 16 “High Standards of Commercial Honor . . . Just and Equitable Principles of Trade . . . Fair Dealing with Investors” 317 Part Four. What’s Right with Indexing 347 Chapter 17 Success in Investment Management: What Can We Learn from Indexing? 351 Chapter 18 As the Index Fund Moves from Heresy to Dogma, What More Do We Need to Know? 369 Chapter 19 “The Chief Cornerstone” 393 Chapter 20 Convergence! The Great Paradox: Just as Active Fund Management Becomes More and More Like Passive Indexing, So Passive Indexing Becomes More and More Like Active Fund Management 409 Part Five. Entrepreneurship and Innovation 435 Chapter 21 Capitalism, Entrepreneurship, and Investing: The 18th Century versus the 21st Century 439 Chapter 22 Seventeen Rules of Entrepreneurship 455 Chapter 23 “Vanguard: Saga of Heroes” 469 Chapter 24 When Does Innovation Go Too Far? 493 Part Six. Idealism and the New Generation 507 Chapter 25 Business as a Calling 511 Chapter 26 The Right Kind of Success 517 Chapter 27 “This Above All: To Thine Own Self Be True” 521 Chapter 28 “Enough” 529 Chapter 29 If You Can Trust Yourself . . . 535 Chapter 30 The Fifth “Never” 543 Chapter 31 “When a Man Comes to Himself ” 549 Part Seven. Heroes and Mentors 557 Chapter 32 Walter L. Morgan 563 Chapter 33 Paul A. Samuelson 569 Chapter 34 Peter L. Bernstein 575 Chapter 35 Bernard Lown, MD 581 Index 587