9781118122778

How understanding the financial sector has moved from the realm of the humanities to the world of the sciences Major changes have taken place in the financial sector in recent years, changes that reflect two very different cultures that have existed in the world of capital formation and capital markets throughout history. The issue is, simply put, the ascendance of the culture of science (of instant measurement and quantification), over the culture of the humanities (of steady reason and rationality) in financial markets. Clash of the Cultures is John Bogle's assortment of what he deems his "Sophie's Choice" of speeches, guaranteed to excite, inspire, and motivate investors to rethink how they invest. Written by mutual fund pioneer John Bogle, former Vanguard Chief Executive and the "Father of Index Investing" Completes the trilogy of best selling books beginning with Bogle on Investing First 50 Years and Don't Count on It! Shows how long-term investing reflects the culture of the intellectual, the philosopher, and the historian, while short-term speculation reflects that of the statistician, the technician, and the alchemist, and how this is shifting Insightful advice on how the financial world has moved away from placing value in a proven record of shrewd management and investor activism, Clash of the Cultures is packed with industry-defining wisdom.

John C. Bogle is the founder of the Vanguard Group of mutual funds and President of its Bogle Financial Markets Research Center. He created Vanguard in 1974 and served as chairman and chief executive officer until 1996 and senior chairman until 2000. In 1999, Fortune magazine named Mr. Bogle as one of the four "Investment Giants" of the twentieth century. In 2004, Time magazine named him one of "the world's 100 most powerful and influential people," and Institutional Investor presented him with its Lifetime Achievement Award. In 2010, Forbes magazine described him as the person who "has done more good for investors than any other financier of the past century." In January 2012, some of the nation's most respected financial leaders celebrated his distinguished career at the John C. Bogle Legacy Forum, held at New York's Museum of American Finance.

Foreword By Arthur Levitt ix

Acknowledgments xiii

About This Book xv

Chapter 1 The Clash of the Cultures 1

Chapter 2 The Double-Agency Society and the Happy Conspiracy 29

Chapter 3 The Silence of the Funds: Why Mutual Funds Must Speak Out on the Governance of Our Nation’s Corporations 65

Chapter 4 The “Mutual” Fund Culture—Stewardship Gives Way to Salesmanship 103

Chapter 5 Are Fund Managers True Fiduciaries?: The “Stewardship Quotient” 139

Chapter 6 The Index Fund: The Rise of the Fortress of Long-Term Investing and Its Challenge

from Short-Term Speculation 167

Chapter 7 America’s Retirement System: Too Much Speculation, Too Little Investment 213

Chapter 8 The Rise, the Fall, and the Renaissance of Wellington Fund: A Case Study—Investment

Wins, Speculation Loses 251

Chapter 9 Ten Simple Rules for Investors and a Warning for Speculators 297

Appendix I: Performance Ranking of Major Mutual Fund Managers–March 2012 323

Appendix II: Annual Performance of Common Stock Funds versus S&P 500, 1945–1975 325

Appendix III: Growth in Index Funds—Number and Assets, 1976–2012 327

Appendix IV: Wellington Fund Record, 1929–2012 329

Appendix V: Wellington Fund Equity Ratio and Risk Exposure (Beta), 1929–2012 333

Appendix VI: Wellington Fund Performance versus Average Balanced Fund, 1929–2012 335

Appendix VII: Wellington Fund Expense Ratios, 1966–2011 337

Index 339

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The Clash of the Cultures Investment vs. Speculation

The Clash of the Cultures Investment vs. Speculation

1118122771

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