“Success is not the key to happiness. Happiness is the key to success.” – Albert Schweitzer
John C. Bogle, the late founder of the Vanguard Mutual Fund Group and creator of the first index mutual fund, in Enough: True Measures of Money, Business, and Life, examines what it truly means to have “enough” in a world increasingly focused on status and score-keeping. The book is divided into three sections: Money, Business, and Life.
The book begins with a great story that summarizes the theme of the book:
At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds,“Yes, but I have something he will never have . . . enough.
“ The great game of life is not about money; it is about doing your best to join the battle to build anew ourselves, our communities, our nation, and our world.”
Discovery of Mutual Fund
At Princeton, this callow, idealistic young kid with a crew cut had determined to write his economics department senior thesis on a subject on which no earlier thesis had been written. Not John Maynard Keynes, not Adam Smith, not Karl Marx, but a subject fresh and new. What but fate can account for the fact that in December 1949, searching for my topic, I opened Fortune magazine to page 116 and read an article (“Big Money in Boston”) about a financial instrument that I had never heard of before: the mutual fund. When the article described the industry as “tiny but contentious,” I knew that I had found my topic and, though I couldn’t know it at the time, another diamond as well.
After a year of intense study of the mutual fund industry, I completed my thesis and sent it to several industry leaders. One was Walter L. Morgan, mutual fund pioneer, the founder of the Philadelphia-based Wellington Fund and member of Princeton’s class of 1920. He read my thesis and liked it sufficiently that he would soon write: “A pretty good piece of work for a fellow in college without any practical experience in business life. Largely as a result of this thesis, we have added Mr. Bogle to our Wellington organization.” I started right after my 1951 graduation (magna cum laude, thanks largely to my thesis) and never looked back. I have worked there—one way or another, as you will soon see—ever since.
A Door Slams; a Window Opens – Getting Fired
By late 1974, as the bear market took its toll and large numbers of our shareholders took flight, the assets under our management had plunged from $3 billion to $1.3 billion. Not surprisingly, my partners and I had a falling out. But my adversaries had more votes on the company board than I did, and it was they who fired me from what I had considered my company. What’s more, they intended to move all of Wellington to Boston. I wasn’t about to let that happen.
Never Enough – Money, Business, and Life.
In our financial system, we focus our expectations on the returns that the financial markets may deliver, ignoring the exorbitant costs extracted by our financial system, the excessive taxes engendered by record levels of speculative trading, and inflation borne of a government that spends (our) money beyond its means, grossly devastating these returns. We engage in the folly of short-term speculation and eschew the wisdom of long-term investing. We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity.
In business, we place too much emphasis on what can be counted and not nearly enough on trusting and being trusted. When we should be doing exactly the opposite, we allow—indeed we almost force—our professions to behave more like businesses. Rather, we ought to be encouraging companies and corporations (the enterprises that create products and services) to regain the professional values that so many of them have cast aside. We have more than enough of the fool’s gold of marketing and salesmanship and not enough of the real gold of trusteeship and stewardship. And we think more like managers, whose task is to do things right, than as leaders, whose task is to do the right thing.
In life, we too often allow the illusory to triumph over the real. We focus too much on things and not enough on the intangibles that make things worthwhile; too much on success (a word I’ve never liked) and not enough on character, without which success is meaningless. Amidst the twenty-first-century pressures for immediate satisfaction and amassing information on demand, we’ve forgotten the enlightened values of the eighteenth century. We let false notions of personal satisfaction blind us to the real sense of calling that gives work meaning for ourselves, our communities, and our society.
Chapter 1: Too Much Cost, Not Enough Value
Some men wrest a living from nature and with their hands; this is called work.
Some men wrest a living from those who wrest a living from nature and with their hands; this is called trade.
Some men wrest a living from those who wrest a living from those who wrest a living from nature and with their hands; this is called finance.
We have moved to a world where far too many of us seemingly no longer make anything; we’re merely trading pieces of paper, swapping stocks and bonds back and forth with one another, and paying our financial croupiers a veritable fortune. In the process, we have inevitably added even more costs by creating ever more complex financial derivatives in which huge and unfathomable risks have been built into the financial system.
Chapter 2: Too Much Speculation, Not Enough Investment
Investing is all about the long-term ownership of businesses. Business focuses on the gradual accumulation of intrinsic value, derived from the ability of our publicly owned corporations to produce the goods and services that our consumers and savers demand, to compete effectively, to thrive on entrepreneurship, and to capitalize on change. Business adds value to our society, and to the wealth of our investors.
Speculation is precisely the opposite. It is all about the short-term trading, not long-term holding, of financial instruments—pieces of paper, not businesses—largely focused on the belief that their prices, as distinct from their intrinsic values, will rise; indeed, an expectation that the prices of the stocks that are selected will rise more than other stocks, as the expectations of other investors rise to match one’s own. A line representing the path of stock prices over the same period is significantly more jagged and spasmodic than the line showing investment returns.
Change is Inevitable
“Changes in the nature and structure of our financial markets—and a radical shift in its participants—are making shocking and unexpected market aberrations ever more probable. The amazing market swings we have witnessed in the past few years tend to confirm that likelihood. In the 1950s and 1960s, the daily changes in the level of stock prices typically exceeded 2 percent only three or four times per year. But in the year ended July 30, 2008, we’ve witnessed 35 such moves—14 were up, and 21 were down. Based on past experience, the probability of that scenario was . . . zero.”
Chapter 3: Too Much Complexity, Not Enough Simplicity
“There are three i’s in every cycle: first the innovator, then the imitator, and finally the idiot.”
“Back to Basics
So mark me down as a believer in innovation that is based on clarity, consistency, predictability relative to the market, and low cost; innovation that will serve investors over the long term; innovation that provides an optimal opportunity that it will work tomorrow rather than innovation based on what worked yesterday; innovation that not only minimizes the risks of ownership but clearly explains the nature and extent of those risks.
Chapter 4: Too Much Counting, Not Enough Trust
Not everything that counts can be counted, and not everything that can be counted counts. – Albert Einstein
Numbers are not reality
Today, in our society, in economics, and in finance, we place far too much trust in numbers. Numbers are not reality. At best, they are a pale reflection of reality. At worst, they’re a gross distortion of the truths we seek to measure. But the damage doesn’t stop there. Not only do we rely too heavily on historic economic and market data; our optimistic bias also leads us to misinterpret the data and give them credence that they rarely merit. By worshipping at the altar of numbers and by discounting the immeasurable, we have in effect created a numeric economy that can easily undermine the real one.
Chapter 5: Too Much Business Conduct, Not Enough Professional Conduct
Among the most obvious, and troubling, manifestations of the change from the stern traditional values of yore to the, well, flexible values of our modern age—with its myriad numeric measures and its largely missing moral measures—is the gradual mutation of our professional associations into business enterprises. Even as power corrupts, so money corrupts the sound functioning of our national agenda.
A similar transition has taken place in the medical profession, where the human concerns of the caregiver and the human needs of the patient have been overwhelmed by the financial interests of commerce: our giant medical care complex of hospitals, insurance companies, drug manufacturers and marketers, and health maintenance organizations (HMOs).
“It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.” – Upton Sinclair
Chapter 6: Too Much Salesmanship, Not Enough Stewardship
During the 1950s and 1960s, some 240 new equity funds were formed, and during the 1970s and 1980s, about 650 were formed. But in the 1990s alone, 1,600 new equity funds were created. Most of them, alas, were technology, Internet, and telecommunications funds, and aggressive growth funds focused on these areas. It was such funds, of course, that then took the brunt of the 2000-2002 bear market. Such product proliferation has engendered the expected reaction: Funds are born to die. Whereas 13 percent of all funds failed during the 1950s, the failure rate for the present decade is running at near 60 percent.
Chapter 7: Too Much Management, Not Enough Leadership
10 rules for building a great organization,”
- Rule 1: Make Caring the Soul of the Organization
- Rule 2: Forget about Employees
- Rule 3: Set High Standards and Values—and Stick to Them
- Rule 4: Talk the Talk. Repeat the Values Endlessly.
- Rule 5: Walk the Walk. Actions Speak Louder than Words.
- Rule 6: Don’t Over manage
- Rule 7: Recognize Individual Achievement
- Rule 8: A Reminder—Loyalty Is a Two-Way Street
- Rule 9: Lead and Manage for the Long Term
- Rule 10: Press On, Regardless
What distinguishes a superior company from its competitors are not the dimensions that usually separate companies, such as superior technology, more astute market analysis, better financial base, etc.; it is unconventional thinking about its dream—what this business wants to be, how its priorities are set, and how it organizes to serve. It has a radical philosophy and self-image. The company’s unconventional thinking about its dream is [often] born of a liberating vision.
Chapter 8: Too Much Focus on Things, Not Enough Focus on Commitment
Boldness, Commitment, and Providence
Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative and creation, there is one elementary truth, the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves too. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamt would have come his way. Whatever you do, or dream you can, begin it. Boldness has genius, power, and magic in it. Begin it now.
It is all true, and my own life has been the proof of it, better than any dream. Whenever I have committed myself with boldness, providence has followed, whether it was the providence of stumbling on that Fortune magazine article on the mutual fund industry way back when I was searching for a topic for my senior thesis, and then committing myself wholeheartedly to the project; the providence (yes, the providence!) of being fired by my Wellington partners that demanded of me the commitment to recapture my career in the industry and gave me the opportunity to start Vanguard; the providence of receiving a new heart, just as mine was about to expire; and the commitment to making the most of my second chance at life; and the many other examples I’ve cited throughout this book—the “acres of diamonds” that were always providentially there, waiting to be discovered but requiring commitment to capitalize on their value.
“Commitment and boldness—these are among the things that truly matter, the things by which we can measure our lives, the things that help turn providence in our favor. Their reach goes far beyond how we earn our living, for never forget that none of us lives by bread alone.“
Chapter 9: Too Many Twenty-First-Century Values, Not Enough Eighteenth-Century Values
With Wikipedia at our fingertips and Google waiting online to serve us, we are surrounded by information, but increasingly cut off from knowledge. Facts (or, more often, factoids) are everywhere. But wisdom—the kind of wisdom that was rife in the age of this nation’s Founding Fathers—is in short supply.
T. S. Eliot had expressed the same ideas—much more poetically, of course—in The Rock (1934):
“Where is the Life we have lost in living?
Where is the wisdom we have lost in knowledge?
Where is the knowledge we have lost in information?
The cycles of Heaven in twenty centuries
Bring us farther from God and nearer to the Dust.“
“A man is incapable of comprehending any argument that interferes with his revenue.” – René Descartes
Chapter 10: Too Much “Success,” Not Enough Character
Success cannot be measured solely—or even primarily—in monetary terms, nor in terms of the amount of power one may exercise over others, nor in the illusory fame of inevitably transitory public notice. But it can be measured in our contributions to building a better world, in helping our fellow man, and in raising children who themselves become loving human beings and good citizens. Success, in short, can be measured not in what we attain for ourselves, but in what we contribute to our society.
No career is the right career if it is undertaken solely to get rich, or to gain public fame, or to throw one’s weight around. Nor is it the right career if it is undertaken to meet the expectations of others. And no success is the right success if it is achieved at society’s expense. The proper measure? Your own expectations, and making the most of your talents.
All the Best in your quest to get Better. Don’t Settle: Live with Passion.