"The Clash of the Cultures" -- A Gem

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Taylor Larimore
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"The Clash of the Cultures" -- A Gem

Post by Taylor Larimore »

The Clash of the Cultures is Mr. Bogle's 10th book. It is mostly about the big picture of "Investment vs. Speculation" at the corporate and government level. . However, Mr. Bogle also offers his usual sound advice for individual investors. These are excerpts:
"Jack Bogle is brilliant and persuasive, and his ability to get to the heart of often complex issues of finance and markets is one of his greatest gifts." -- Forward by Arthur Levett

"My primary purpose in writing this book is to sound the alarm about the shocking change in the culture of finance that I have witnessed firsthand during my now 60-year career in the financial field."

"I'm one of the rare persons, if not the only one, alive today to have observed firsthand the sea change in the industry's business model."

"I am deeply concerned with today's ascendance of a culture of speculation over a culture of investment in our financial markets."

"Some of my opinions may not represent the opinions of Vanguard's present management. Sometime reasonable people can disagree!"

"While unit-trading costs have plummeted, trading volumes have soared, and total costs of the financial system continue to rise."

"In 1950, individual investors held 92% of U.S. stocks and institutional investors held 8%. The roles have flipped with institutions now holding 70%.

"A profession once focused largely on investing became a business largely focused on marketing."

"The ETF is surely the greatest marketing idea in finance so far in the twenty-first century. Whether it proves to be a great--or even a good--idea for investors remains to be seen."

"Some ETFs, used properly, are good for investors, while others are not."

"The only advice I have for short-term speculators is this warning: Stop!"

"When the stock market takes on the attitude of a casino, the job [of capitalism] is likely to be ill-done." -- John Maynard Keynes

"Investing is not a science. It is a human activity that involves both emotional as well as rational behavior."

"Modern information and communications technology provided by our financial institutions make it increasingly easy for shareholders to engage in frequent and rapid movement of their investment assets."

"If beating the market is a zero-sum game before costs, it is a loser's game after costs are deducted."

"We get precisely what we don't pay for."

"When I entered this business in 1951 turnover averaged about 15%. In 2008, stock turnover soared to the remarkable level of 280%. The turnover of all-stock-market index funds is about 7%.

"It becomes increasingly clear that a strategy of staying the course is inevitably far more productive than marking timing, or hopping from one stock--or a particular mutual fund--to another."

"We Americans like to buy things--in abundance--before we have the cash to pay for them."

"In the stock market, the more elaborate and abstruse the mathematics, the more uncertain and speculative are the conclusions we draw therefrom."

"In finance, as in all human endeavors, history has valuable lessons to teach." -- Henry Kaufman

"We've had too much crime and not enough punishment in our financial sector."

"Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs."

"The financial system; the trader, the brokers, the investment bankers, the money managers, the middlemen, 'Wall Street,' as it were--takes a cut of all this frinzied activity."

"It would seem obvious that the successful strategy is to buy stocks and hold them, and never again enter the casino."

"We must seek an investment sector in which the culture of stewardship and longer-term thinking dominates a culture of speculation, short-term trading, salesmanship and marketing."

"Free market capitalism is the best system ever devised for the allocation of economic resources, risks, and rewards."

"The Thrift Savings Plan, the defined-contribution (DC) pension fund created for federal employees, is now the largest pension plan in the nation. -- Mutual funds are by far the largest holder of U.S. stocks."

"The median compensation for the 100 highest paid CEO's was $14.4 million, 320 time the average American salary of $45,230."

"Most mutual funds have failed to live up to their responsibilities of corporate citizenship. -- When they vote (proxies) they usually do just as they are asked; they support management's recommendations."

"In 2010, Morningstar, the respected provider of fund analysis services, conceded that fund costs were a more significant factor in predicting fund performance than its own sophisticated rating system."

Vanguard has become the largest fund complex in the world, now overseeing $1.8 trillion in fund assets. Perhaps you will wonder--as I do--why, 37 years later, Vanguard remains the only mutual mutual fund complex in our nation.

"Vanguard does no advertising of fund performance."

"In this business, it is easy to bury our mistakes."

"The Investment Company Institute, purport to represent mutual fund shareholders. But in fact they represent the management companies that operate the funds."

"Higher turnover correlates with lower returns."

"Fund marketers favor the fads that are in the momentary limelight, with the expectation that investors will take the bait."

"To earn their keep, advisers should focus their clients not on "picking winners" but on factors such as sound asset allocation, broad diversification, low-cost, tax-efficiency, simplicity, and even estate planning."

"Morningstar reports that the typical portfolio manager runs a fund for only five years."

"Ideas are a dime a dozen; implementation is everything."

"The first index mutual fund was referred to as 'Bogle's Folly.'"

"The CMH--the Cost Matters Hypothesis--is all that is needed to explain why indexing must and will work.

"My thinking has long been informed by a fifteenth-century maxim know as Occam's Razor: When there are multiple solutions to a problem, pick the simplest one."

"I rank this Bogle invention (index fund) along with the invention of the wheel, the alphabet, Gutenberg printing, and wine and cheese: a mutual fund that never made Bogle rich but elevated the long-term returns of the mutual-fund owners." -- Nobel Laureate Paul Samuelson

"What commends the index fund to institutional investors and individual investors alike is its simplicity."

"Of the 360 equity mutual funds in existence in 1976, only about 135 remain. Some 225 have vanished from the scene."

"For the 20-year period 1990-2010, Vanguard found that 72% of actively managed U.S. equity funds failed to beat the S&P 500."

Vanguard Total Bond Market index Fund has emerged as the second-largest bond fund in the industry. It's now 24-year lifetime rate of annual return averaged 6.9%, a nice margin of 1.2% over its taxable peers."

"Daily liquidity, along with professional management, diversification, convenience, and shareholder service were the key to the fund industry's enormous growth."

"We Americans suffer from a glut of spending and a paucity of savings. -- Our beleaguered pension system is but one reflection of that shortfall."

"The Pension Benefit Guaranty Corporation responsible for guaranteeing the pension benefits of failing corporate sponsors is itself faltering."

"Defined Contributions Plans are gradually replacing Defined Benefit plans; a massive transfer of investment risk and return as well as longevity risk of retirement funding from business enterprises to their employees."

"If we abandon our inevitably futile attempts to obtain an edge over other market participants and all simply hold our share of the market portfolio, we win."

"Speculation has come to seriously challenge the original investment concept of the index fund--the total-stock-market-based fund, designed to be bought and held, well, forever."

"My conviction remains that broad market indexing in stocks and bonds is the only sure way for you to capture your fair share of the returns of the stock market and/or the bond markets.

"In the world of investing, the past is rarely, if ever, prologue."

TEN SIMPLE RULES FOR INVESTMENT SUCCESS:

1. Remember Reversion to the Mean
2. Time is Your Friend, Impulse is Your Enemy
3. Buy Right and Hold Tight
4. Have Realistic Expectations
5. Forget the Needle, Buy the Haystack (total market index funds)
6. Minimize the Croupier's Take (costs)
7. There's No Escaping Risk
8. Beware of Fighting the Last War (trends don't last forever)
9.The Hedgehog Beats the Fox (simplicity beats complexity)
10. Stay the Course!

Read my blog at http://www.johncbogle.com
Thank you, Jack Bogle. You are the investor's best friend.

MORE INVESTMENT GEMS

Best wishes.
Taylor

Note: Discussions about Politics and Economic Policy are prohibited on the Bogleheads Forum.
"Simplicity is the master key to financial success." -- Jack Bogle
dharrythomas
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Re: "The Clash of the Cultures" -- A Gem

Post by dharrythomas »

Taylor,

Thanks. A nice list of important points.

Harry
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Re: "The Clash of the Cultures" -- A Gem

Post by Woodshark »

Thank you Jack. It seems so simple, yet simple is not always easy.....

What's the line.... don't do something, just sit there?
TEN SIMPLE RULES FOR INVESTMENT SUCCESS:

1. Remember Reversion to the Mean
2. Time is Your Friend, Impulse is Your Enemy
3. Buy Right and Hold Tight
4. Have Realistic Expectations
5. Forget the Needle, Buy the Haystack (total market funds)
6. Minimize the Croupier's Take (costs)
7. There's No Escaping Risk
8. Beware of Fighting the Last War (trends don't last forever)
9.The Hedgehog Beats the Fox (simplicity beats complexity)
10. Stay the Course!
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Re: "The Clash of the Cultures" -- A Gem

Post by abuss368 »

Thanks Taylor!

Does Mr. Bogle plan to write any more books?
John C. Bogle: “Simplicity is the master key to financial success."
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Re: "The Clash of the Cultures" -- A Gem

Post by Bruce »

Taylor,
Thanks so much for taking the time to sort through the material and investing your efforts putting together these excellent short summaries.

It is appreciated.

best regards,
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."
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Taylor Larimore
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Re: "The Clash of the Cultures" -- A Gem

Post by Taylor Larimore »

abuss368 wrote:Thanks Taylor!

Does Mr. Bogle plan to write any more books?
Abuss:

Sorry, I don't know. It would be a good question to ask him at the Boglehead Conference in October.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Taylor Larimore
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Re: "The Clash of the Cultures" -- A Gem

Post by Taylor Larimore »

Bruce wrote:Taylor,
Thanks so much for taking the time to sort through the material and investing your efforts putting together these excellent short summaries.

It is appreciated.

best regards,
Thank you, Bruce. The Bogleheads are worth it -- and I learn a lot doing it.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "The Clash of the Cultures" -- A Gem

Post by baw703916 »

"In 1950, individual investors held 92% of U.S. stocks and institutional investors held 8%. The roles have flipped with institutions now holding 70%
On the bright side, individual investors are exposing themselves to much less unsystematic risk than in 1950. ;) If everyone were Bogleheads, 100% of stocks would be held by institutions. Admittedly, that's probably not what's happening...

Brad
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Re: "The Clash of the Cultures" -- A Gem

Post by Redstorm »

Got the book on Kindle along with the Bogleheads, Second Grade Investor, Millionaire Teacher, The Investment Answer and a few more good reads
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Re: "The Clash of the Cultures" -- A Gem

Post by CABob »

"In 1950, individual investors held 92% of U.S. stocks and institutional investors held 8%. The roles have flipped with institutions now holding 70%.
I find this interesting. What were institutional investors doing in 1950? Certainly there were institutions investing. Did they have most of their funds in fixed income?
Bob
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Re: "The Clash of the Cultures" -- A Gem

Post by nedsaid »

I have read that this is Mr. Bogle's last book. But you never know.
A fool and his money are good for business.
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Re: "The Clash of the Cultures" -- A Gem

Post by Fallible »

Taylor Larimore wrote:The Clash of the Cultures is Mr. Bogle's 10th book. It is mostly about the big picture of "Investment vs. Speculation" at the corporate and government level. . However, Mr. Bogle also offers his usual sound advice for individual investors. These are excerpts:
...
"My primary purpose in writing this book is to sound the alarm about the shocking change in the culture of finance that I have witnessed firsthand during my now 60-year career in the financial field."

"I'm one of the rare persons, if not the only one, alive today to have observed firsthand the sea change in the industry's business model."
...
We all can and have read about this "sea change," but John Bogle has witnessed and lived it and I think that is what comes out so strongly in this book.

Thanks, Taylor, for these "gems."
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: "The Clash of the Cultures" -- A Gem

Post by steve roy »

I really appreciate you taking the time to cut and polish your Gems, Taylor. It's a lot of work and I'm grateful.

I've learned a hell of a lot from hanging around here the last couple of years. (If only everyone who invests for retirement would hang out. They'd have a lot more money and numerous financial advisors would be looking for other work.)

Many, many thanks.
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Re: "The Clash of the Cultures" -- A Gem

Post by IlliniDave »

Taylor Larimore wrote:
abuss368 wrote:Thanks Taylor!

Does Mr. Bogle plan to write any more books?
Abuss:

Sorry, I don't know. It would be a good question to ask him at the Boglehead Conference in October.

Best wishes.
Taylor
Sorry I don't have a link, but i saw a video of an interview with Mr. Bogle uploaded on Youtube where he stated pretty directly that Clash of the Cultures would be his last book. Hopefully he's changed his mind.

That was the first of Bogle's books that I read, and it set me on a mission of sorts. I've always been somewhat suspect of the financial industry, but it's almost stunning to learn how widespread it is, and how it's inherent to the foundation of the industry. Had I made a list of "gems" it would likely have included a phrase of his that struck me from his discussion of fund management firms owned by publicly traded corporations (or that are publicly traded themselves): "results follow structure".

Thanks, btw Taylor, for the many "gems" lists. I enjoy them immensely.
Don't do something. Just stand there!
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Re: "The Clash of the Cultures" -- A Gem

Post by jackholloway »

TEN SIMPLE RULES FOR INVESTMENT SUCCESS:

1. Remember Reversion to the Mean
2. Time is Your Friend, Impulse is Your Enemy
3. Buy Right and Hold Tight
4. Have Realistic Expectations
5. Forget the Needle, Buy the Haystack (total market funds)
6. Minimize the Croupier's Take (costs)
7. There's No Escaping Risk
8. Beware of Fighting the Last War (trends don't last forever)
9.The Hedgehog Beats the Fox (simplicity beats complexity)
10. Stay the Course!
Investors could do worse than rereading this every morning before looking at market news.
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