Jack Bogle: Has capitalism lost its soul?

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Stryker
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Jack Bogle: Has capitalism lost its soul?

Post by Stryker »

Jack Bogle: Has capitalism lost its soul?

By Eleanor Bloxham, CEO of The Value Alliance July 24, 2012: 10:24 AM ET

Vanguard Group founder Jack Bogle describes what he sees as the primary problems at money management firms and public companies today and what it will take to set things right.
SP-diceman
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Re: Jack Bogle: Has capitalism lost its soul?

Post by SP-diceman »

Capitalism is fine, its “people” I don’t trust. :)

:)
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Dave76 »

Capitalism is the worst system, except for all the others that have been tried.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by chaz »

Capitalism is the best system ever devised IMO.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by sschullo »

Here we go again! :annoyed
Never in the history of market day-traders’ has the obsession with so much massive, sophisticated, & powerful statistical machinery used by the brightest people on earth with such useless results.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by hazlitt777 »

Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
Capitalism presumes a certain level of ethics and honesty: enforcement of contracts, sound money, no fraud, no theft, no violence and respect of property rights. I think Mr. Bogle is very concerned about how these ethical issues are not being lived by those participating in the capitalistic system. Therefore, one could question whether it is capitalism anymore. Maybe it should be called "crony capitalism."

Regardless, this is just another risk in the system. Therefore we on this forum should ask ourselves how we as investors can diversify to protect ourselves at least a little from such risk.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by nisiprius »

It says a lot about John C. Bogle that

a) he believes that capitalism has a "soul,"

and that

b) he believes that capitalism should have a "soul."

I hope he's right.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Dave76 »

hazlitt777 wrote:
Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
Capitalism presumes a certain level of ethics and honesty: enforcement of contracts, sound money, no fraud, no theft, no violence and respect of property rights.
Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by hazlitt777 »

Dave76 wrote:
hazlitt777 wrote:
Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
Capitalism presumes a certain level of ethics and honesty: enforcement of contracts, sound money, no fraud, no theft, no violence and respect of property rights.
Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.
I suppose I could argue there are some economic social designs that are inherently better than others. I won't go there.

But like you seem to imply, then the issue remains, how well is it executed/lived. That plays a big part in it.

But what I was implying was that a certain level of ethics is part of the design. I don't think you can separate this out. So maybe speaking of the soul of capitalism is fitting, just like one could speak of the soul of communism etc.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by pkcrafter »

Again, Bogle stands alone in his quest for fairness and the individual investor.
We must have index owners act in a way they aren't right now, to encourage and push corporate directors to consider shareholder interests, and to use their votes to do that.
Do you hear that, Vanguard?

Paul
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Re: Jack Bogle: Has capitalism lost its soul?

Post by hazlitt777 »

.....
Last edited by hazlitt777 on Thu Jul 26, 2012 1:08 pm, edited 1 time in total.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by pkcrafter »

haslitt, I was referring to the earlier comments that sounded like we were headed down the political road and leading to lock. I hope not because Bogle is again right on and it's a worthy discussion. I edited my post to support his comment on voting for shareholder interest.

Paul
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Stryker »

A few points for investors I especially liked from Jack Bogle:

"Long-term investment is being crowded out by short-term speculation. Instead of owners, we have renters of capitalism in the driver's seat. And individual investors don't speak up for themselves. Seventy percent of the market is owned by agents [those who invest other people's money]. And the agency system is not working well."

"Honestly, we are having a revolution going on in the fund industry. Index funds are dominating. In the five years through May, there has been a $600 billion inflow into index funds and $400 billion lost to funds that are actively invested. Index funds make up 28% of industry assets."

"We need to turn back to long-term investing. The market is made up of speculators that don't vote proxies. Governance means nothing if you are a renter, a short-termer."

"In 1951, when I began in the business, the culture at mutual funds was stewardship versus salesmanship. Those who ran mutual funds used to be professionals who acted in the best interest of owners. Today, they are businesses that act in the interest of themselves. In that time, the funds have grown from $2 billion to the $12 trillion we see today. And rather than 15-16% turnover, these funds now are running at 100%."
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Re: Jack Bogle: Has capitalism lost its soul?

Post by bottlecap »

My problem is that it's just a catchy title. Corporations, CEO's, Boards of Directors and stockholders - all of which Mr. Bogle addresses - are not "Capitalism". "Capitalism" can, and has, existed without all of them.

Regardless of whether you agree with Mr. Bogle, the whole notion is therefore very misleading.

JT
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Re: Jack Bogle: Has capitalism lost its soul?

Post by abuss368 »

SP-diceman wrote:Capitalism is fine, its “people” I don’t trust. :)

:)
Hi SP-diceman,

I could not have said it better myself.

Best.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by HomerJ »

Capitalism will not work without rule of law, including property rights.

Also, enough corruption (where's the line?) will destroy capitalism.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by 3CT_Paddler »

I agree with his take, I just wonder about how ethical investment managers really were at that time?

Based on reading recounts of trading in the US during the the late 1800's, its much more transparent, ethical now than it was then. You could probably include the roaring 20's as a time of loose ethics and speculation.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by SamGamgee »

Dave76 wrote:
hazlitt777 wrote:
Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
Capitalism presumes a certain level of ethics and honesty: enforcement of contracts, sound money, no fraud, no theft, no violence and respect of property rights.
Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.
Nuns and monks share what they have [ahem] voluntarily. As do most families. I would not call either case "Communism".
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Re: Jack Bogle: Has capitalism lost its soul?

Post by tetractys »

People are people. Some have an emotion to do what is right, and others are missing that piece entirely. So it comes with the territory of capitalism that the people void of the do right emotion have to be regulated. Not surprisingly, it's the folks needing regulation the most that are the biggest kick and screamers. -- Tet
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Re: Jack Bogle: Has capitalism lost its soul?

Post by hazlitt777 »

tetractys wrote:People are people. Some have an emotion to do what is right, and others are missing that piece entirely. So it comes with the territory of capitalism that the people void of the do right emotion have to be regulated. Not surprisingly, it's the folks needing regulation the most that are the biggest kick and screamers. -- Tet
Perhaps the discussion should steer toward the issues of what investments are the best amongst stocks, bonds and commodities to protect one from dishonest behavior. Anybody with input on this? This could help protect the "soul of capitalism."
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Re: Jack Bogle: Has capitalism lost its soul?

Post by tetractys »

SamGamgee wrote:
Dave76 wrote:
hazlitt777 wrote:
Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
Capitalism presumes a certain level of ethics and honesty: enforcement of contracts, sound money, no fraud, no theft, no violence and respect of property rights.
Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.
Nuns and monks share what they have [ahem] voluntarily. As do most families. I would not call either case "Communism".
Well, that is what "communism" is meant to be--communal. Unfortunately it doesn't always work out that way, and very likely for the same reason capitalism has its ugly moments as well. In light of this whole conversation, I guess we can say that when things go bad, there's a missing SOUL. -- Tet
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Re: Jack Bogle: Has capitalism lost its soul?

Post by chaz »

Too much corruption - pervasive. We learn a lot from Mr. Bogle.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by GregLee »

Capitalism never had a soul, and we don't want it to grow one. It's works pretty well in face of fact that businessmen are mostly thieves -- that's its strength. What we have to watch out for is gangs.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Karamatsu »

Ultimately of course the problem is people, but I think Mr. Bogle is correctly focusing his attentions on the segment of society where he has the most influence. Improvement ethics in finance and economic affairs would have very far-reaching effects and are probably the most effective ways for him to have an influence on people, including us.

I take him at is word when he says that, back in the day, mutual fund management had a different ethic and "fiduciary duty" really meant something. It usually is like that with the pioneers, but what always happens if such an enterprise becomes economically viable is that it starts attracting predators, who will eventually take it over. They walk in the door with suitcases full of money and no idea at all what you are doing, yet one look at the financials and they know they want to own it. I remember distinctly when this happened in the Japanese Internet industry. It was 1994.

It's not a question of capitalism versus another economic system, though. There is no solution that way, and obviously Mr. Bogle is not suggesting some other system. People have knee-jerk reactions that cause the real issue to be ignored. In the end the conflict is between freedom and order. You need freedom to achieve health and progress, but unconstrained freedom leads to chaos. You need order to prevent chaos, but too much order chokes off freedom, leading to stagnation, decay, and death. So you need a balance, but it's hard to do that from the outside. Imposing order requires power, and power automatically gives one group (the powerful) privileges that the others (the powerless) do not. Those people then use their power to maximize their own benefits at the expense of others, and all you end up with is more of the same.

The answer is ethics, but to take that further would only end up violating the forum guidelines, so I'll make an ethical decision not to go there.

But as for what we could do, my first suggestion is to investigate. Ask Vanguard to be transparent about how it votes the shares it holds. The worst-case scenario is that they simply vote with management at every turn, seeing that as "politically neutral." Obviously in today's polarized, jingoist society taking any kind of stand at all will be seen as political, and so cost them some segment of the market, but it seems like a stand worth taking... a stand that Mr. Bogle would approve of. Otherwise even though it may seem "neutral," in reality it's a 100% total alliance with one side: the side that isn't their customers. But better to find out for sure than to speculate. Maybe Vanguard (I single them out only because they're our default here, and Mr. Bogle's home ground) do have a policy to govern how they vote. It would be very good to know, and to know what that is.

Find that out first, then if it's not to your liking, let them know.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Dead Man Walking »

I suggest that Bogleheads read The Battle for the Soul of Capitalism by John C. Bogle. It may be his most significant book. It should be required reading for those running for political office, working for the SEC, or earning an MBA.

DMW
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Mitchell777 »

I believe capitalism works very well but requires oversight. Most of that oversight comes from politicians/government and when they do not do their job, for one reason or another, capitalism has many more flaws than necessary
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Carl53 »

Dead Man Walking wrote:I suggest that Bogleheads read The Battle for the Soul of Capitalism by John C. Bogle. It may be his most significant book. It should be required reading for those running for political office, working for the SEC, or earning an MBA.

DMW
Just ordered from the library, though I'm not in any of your suggested target audience.
Mitchell777 wrote:I believe capitalism works very well but requires oversight. Most of that oversight comes from politicians/government and when they do not do their job, for one reason or another, capitalism has many more flaws than necessary
I certainly agree that lax oversight by the government has allowed the cozy directors/management/wall street symbiotic relationship to flourish. Our mutual funds contribute to the problem by not insisting on low costs and long term investments by the companies they invest in as well as their customers.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by carolinaman »

abuss368 wrote:
SP-diceman wrote:Capitalism is fine, its “people” I don’t trust. :)

:)
Hi SP-diceman,

I could not have said it better myself.

Best.
I agree. However, capitalism requires a level of trust and integrity to be successful. We seem to be in short supply of both today.
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Re: Jack Bogle: Has capitalism lost its soul?

Post by bottlecap »

johnep wrote:However, capitalism requires a level of trust and integrity to be successful. We seem to be in short supply of both today.
On the contrary, everything but capitalism requires a level of trust and integrity. That's why everything else is so dangerous.

JT
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Re: Jack Bogle: Has capitalism lost its soul?

Post by Taylor Larimore »

Economic policy is a prohibited topic. Locked.
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