Jack Bogle: Has capitalism lost its soul?
Jack Bogle: Has capitalism lost its soul?
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.
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.
-
- Posts: 3968
- Joined: Sun Oct 05, 2008 9:17 am
Re: Jack Bogle: Has capitalism lost its soul?
Capitalism is fine, its “people” I don’t trust.
Re: Jack Bogle: Has capitalism lost its soul?
Capitalism is the worst system, except for all the others that have been tried.
Re: Jack Bogle: Has capitalism lost its soul?
Capitalism is the best system ever devised IMO.
Chaz |
|
“Money is better than poverty, if only for financial reasons." Woody Allen |
|
http://www.bogleheads.org/wiki/index.php/Main_Page
Re: Jack Bogle: Has capitalism lost its soul?
Here we go again!
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.
-
- Posts: 1033
- Joined: Fri Aug 12, 2011 4:10 am
- Location: Wisconsin
Re: Jack Bogle: Has capitalism lost its soul?
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."Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
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.
- nisiprius
- Advisory Board
- Posts: 52216
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: Jack Bogle: Has capitalism lost its soul?
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.
a) he believes that capitalism has a "soul,"
and that
b) he believes that capitalism should have a "soul."
I hope he's right.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Jack Bogle: Has capitalism lost its soul?
Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.hazlitt777 wrote: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.Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
-
- Posts: 1033
- Joined: Fri Aug 12, 2011 4:10 am
- Location: Wisconsin
Re: Jack Bogle: Has capitalism lost its soul?
I suppose I could argue there are some economic social designs that are inherently better than others. I won't go there.Dave76 wrote:Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.hazlitt777 wrote: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.Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
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.
Re: Jack Bogle: Has capitalism lost its soul?
Again, Bogle stands alone in his quest for fairness and the individual investor.
Paul
Do you hear that, Vanguard?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.
Paul
Last edited by pkcrafter on Thu Jul 26, 2012 11:42 am, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
-
- Posts: 1033
- Joined: Fri Aug 12, 2011 4:10 am
- Location: Wisconsin
Re: Jack Bogle: Has capitalism lost its soul?
.....
Last edited by hazlitt777 on Thu Jul 26, 2012 1:08 pm, edited 1 time in total.
Re: Jack Bogle: Has capitalism lost its soul?
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
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: Jack Bogle: Has capitalism lost its soul?
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%."
"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%."
Re: Jack Bogle: Has capitalism lost its soul?
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
Regardless of whether you agree with Mr. Bogle, the whole notion is therefore very misleading.
JT
- abuss368
- Posts: 27850
- Joined: Mon Aug 03, 2009 2:33 pm
- Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
- Contact:
Re: Jack Bogle: Has capitalism lost its soul?
Hi SP-diceman,SP-diceman wrote:Capitalism is fine, its “people” I don’t trust.
I could not have said it better myself.
Best.
John C. Bogle: “Simplicity is the master key to financial success."
Re: Jack Bogle: Has capitalism lost its soul?
Capitalism will not work without rule of law, including property rights.
Also, enough corruption (where's the line?) will destroy capitalism.
Also, enough corruption (where's the line?) will destroy capitalism.
- 3CT_Paddler
- Posts: 3485
- Joined: Wed Feb 04, 2009 4:28 pm
- Location: Marietta, GA
Re: Jack Bogle: Has capitalism lost its soul?
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.
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.
Re: Jack Bogle: Has capitalism lost its soul?
Nuns and monks share what they have [ahem] voluntarily. As do most families. I would not call either case "Communism".Dave76 wrote:Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.hazlitt777 wrote: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.Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
Re: Jack Bogle: Has capitalism lost its soul?
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
-
- Posts: 1033
- Joined: Fri Aug 12, 2011 4:10 am
- Location: Wisconsin
Re: Jack Bogle: Has capitalism lost its soul?
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."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
Re: Jack Bogle: Has capitalism lost its soul?
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. -- TetSamGamgee wrote:Nuns and monks share what they have [ahem] voluntarily. As do most families. I would not call either case "Communism".Dave76 wrote:Design is one thing, execution is another. Communism has been popular among dictators...and also with nuns and monks.hazlitt777 wrote: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.Dave76 wrote:Capitalism is the worst system, except for all the others that have been tried.
Re: Jack Bogle: Has capitalism lost its soul?
Too much corruption - pervasive. We learn a lot from Mr. Bogle.
Chaz |
|
“Money is better than poverty, if only for financial reasons." Woody Allen |
|
http://www.bogleheads.org/wiki/index.php/Main_Page
Re: Jack Bogle: Has capitalism lost its soul?
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.
Greg, retired 8/10.
Re: Jack Bogle: Has capitalism lost its soul?
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.
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.
-
- Posts: 1212
- Joined: Wed Nov 07, 2007 5:51 pm
Re: Jack Bogle: Has capitalism lost its soul?
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
DMW
-
- Posts: 1278
- Joined: Mon May 21, 2007 6:32 am
Re: Jack Bogle: Has capitalism lost its soul?
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
Re: Jack Bogle: Has capitalism lost its soul?
Just ordered from the library, though I'm not in any of your suggested target audience.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
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.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
-
- Posts: 5463
- Joined: Wed Dec 28, 2011 8:56 am
- Location: North Carolina
Re: Jack Bogle: Has capitalism lost its soul?
I agree. However, capitalism requires a level of trust and integrity to be successful. We seem to be in short supply of both today.abuss368 wrote:Hi SP-diceman,SP-diceman wrote:Capitalism is fine, its “people” I don’t trust.
I could not have said it better myself.
Best.
Re: Jack Bogle: Has capitalism lost its soul?
On the contrary, everything but capitalism requires a level of trust and integrity. That's why everything else is so dangerous.johnep wrote:However, capitalism requires a level of trust and integrity to be successful. We seem to be in short supply of both today.
JT
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Re: Jack Bogle: Has capitalism lost its soul?
Economic policy is a prohibited topic. Locked.
"Simplicity is the master key to financial success." -- Jack Bogle