Vanguard, every mention

Vanguard: The communist capitalist who saved investors a trillion dollars (Audio) · Acquired May 18, 2026 · 100 mentions

• ▶ 2:18:37 David Rosenthal Warren Buffett implicitly endorsed Jack and Vanguard in the 1996 Berkshire annual shareholder letter where he wrote, the best way to own common stocks is through an index fund that charges minimal fees.
• ▶ 2:20:24 Ben Gilbert And so to hear Warren saying, actually, what most people should do is buy low-cost index funds like Vanguard.
• ▶ 2:21:03 David Rosenthal Malvern, Pennsylvania, where Vanguard is located, you know, are strong.
• ▶ 2:21:21 Ben Gilbert Weren't your grandparents some of the first Vanguard investors nearby?
• ▶ 2:21:32 David Rosenthal Very, very first fund holders in Vanguard.
• ▶ 2:21:36 David Rosenthal I, I couldn't find the exact date, but I believe my grandparents must have become Vanguard clients either in the late seventies or early eighties when like nobody was a Vanguard client.
• ▶ 2:22:01 David Rosenthal I mean, they set up Vanguard accounts for me, like, the day I was born.
• ▶ 2:24:24 David Rosenthal Indexing and vanguards.
• ▶ 2:26:40 David Rosenthal So John Reckenthaler wrote on Morningstar in a retrospective on the financial crisis years later, active managers had long promised that when a bear market finally arrived, that they would outperform Vanguard's fully invested index funds.
• ▶ 2:27:55 David Rosenthal Wall Street and active management in not just a major way, but arguably a permanent way, and who is there as the hero of Main Street, the little guys, but Malvern, Pennsylvania-based Jack Bogle and Vanguard, which makes no profits, has no…
• ▶ 2:28:24 David Rosenthal I mean, you could not draw up a better marketing event for Vanguard than the financial crisis.
• ▶ 2:28:53 Ben Gilbert I mean, Vanguard makes you no promises.
• ▶ 2:29:31 David Rosenthal Well, and the one explicit promise that Vanguard does make to you is we will not profit from you.
• ▶ 2:29:45 Ben Gilbert Did you see, you know, what's interesting is Vanguard actually raised their fees in 2008.
• ▶ 2:29:58 Ben Gilbert First of all, you should know Vanguard did not lay anyone off during the financial crisis, which is kind of unbelievable.
• ▶ 2:30:03 Ben Gilbert So they have a fixed cost base that they have to cover, and now their AUM is lower.
• ▶ 2:31:55 Ben Gilbert It's good for Vanguard.
• ▶ 2:35:44 David Rosenthal But thinking about today, now that indexing is so much bigger, if there ever were to be a problem or a failure of one of the big indexing players, Vanguard or BlackRock or Fidelity or State Street, like,
• ▶ 2:36:14 David Rosenthal Anyway, after 2008, as you would expect, Vanguard's share of mutual fund flows just skyrockets.
• ▶ 2:36:23 David Rosenthal So before the financial crisis, Vanguard received
• ▶ 2:36:41 David Rosenthal Vanguard just starts gobbling up the industry.
• ▶ 2:36:44 David Rosenthal On the back of this, in September, 2010, Vanguard passes Fidelity to become the world's largest mutual fund manager, and
• ▶ 2:36:57 David Rosenthal So from 2014 to 2019, Vanguard takes in 1.2 trillion in cash inflows versus five hundred billion for the whole rest of the industry combined.
• ▶ 2:37:12 David Rosenthal Over twice as much of all the dollars flowing into all of their competitors flow into Vanguard during that
• ▶ 2:37:21 David Rosenthal This is when they also add their advisory products, and we were talking about advisory earlier.
• ▶ 2:37:25 David Rosenthal Vanguard decides under Bill McNabb, the CEO after Brennan, that we need to offer an advisory product to our clients too, but they want to actually talk to people, and we have an advantage here because of our, you know, profitless strategy…
• ▶ 2:37:54 David Rosenthal So this is a huge win for Vanguard.
• ▶ 2:38:04 David Rosenthal And again, isn't a profit driver for Vanguard because it doesn't need to be.
• ▶ 2:38:08 Ben Gilbert And it's, to your point, the lowest, I think they charge somewhere from five to 30 basis points for this service.
• ▶ 2:38:14 Ben Gilbert They now have over a thousand CFPs on staff.
• ▶ 2:38:42 David Rosenthal It's, you know, Vanguard clients who are using Vanguard funds to
• ▶ 2:39:27 David Rosenthal At the time of his death, Vanguard
• ▶ 2:39:48 David Rosenthal Vanguard in 2019 is the number one mutual fund company with 25% market share.
• ▶ 2:40:03 David Rosenthal The compounding advantage of Vanguard is just humming.
• ▶ 2:40:06 David Rosenthal They manage in 2019 13 of the 15 largest individual funds in the entire world.
• ▶ 2:40:28 David Rosenthal For reference, the Johnson family, as we said from Fidelity, is worth about 40 or fifty billion dollars through the, you know, estimated 40% that they still own of Vanguard or Larry Fink over at BlackRock.
• ▶ 2:40:58 David Rosenthal I mean, Vanguard's bigger than Fidelity at this point, so maybe hundred billion dollar delta that Jack leaves on the table just goes right back to the American investing public.
• ▶ 2:41:09 Ben Gilbert I mean, the only way that Vanguard would exist is by not taking profits.
• ▶ 2:41:53 Ben Gilbert BlackRock is the largest AUM asset manager in the world with, uh, more international and institutional client base than Vanguard's US individual approach.
• ▶ 2:42:06 David Rosenthal Each of them in different ways, and they both come back to ETFs and really validate how important that was and frankly how wrong a decision it was of Vanguard not to get into it in the early days.
• ▶ 2:42:26 Ben Gilbert They're like a brokerage that has funds, and Vanguard is like a set of funds that happens to have a brokerage.
• ▶ 2:42:40 Ben Gilbert I have a Fidelity brokerage where I own mostly Vanguard funds.
• ▶ 2:42:52 David Rosenthal So, as we said throughout the story, Fidelity has always been very happy to experiment and invest in lots and lots of different things, and they have hit on two, like, real home run platforms in recent years, both of which are weak spots…
• ▶ 2:43:47 David Rosenthal So it all, I think stems from a strategy that they realized a number of years ago, they don't necessarily have to compete with Vanguard anymore in the funds business.
• ▶ 2:43:57 David Rosenthal So even though Fidelity and Wellington slash Vanguard all started in the same business as fund managers, Fidelity realized, Hey,
• ▶ 2:44:24 David Rosenthal Do what you do of just hold the Vanguard funds through ETFs.
• ▶ 2:44:30 David Rosenthal And I think Jack kind of foresaw this is why I didn't like the, the, the business opened up the Vanguard funds to being on all the other platforms.
• ▶ 2:44:47 Ben Gilbert Vulnerability for Vanguard, which is so many of their customers, of their AUM, don't actually have a relationship with the company.
• ▶ 2:44:56 Ben Gilbert They are invested in Vanguard ETFs via their direct relationship with a different brokerage, primarily Fidelity.
• ▶ 2:45:17 Ben Gilbert So Fidelity doesn't have a huge incentive to say you should come buy my two basis point fund over here instead of your three basis point fund over at Vanguard.
• ▶ 2:45:52 David Rosenthal They could even like really undercut Vanguard on, um,
• ▶ 2:45:56 David Rosenthal Fund costs and say like, this is going to be a total loss leader because we're just going to profit in these other areas that Vanguard won't do.
• ▶ 2:46:04 Ben Gilbert This is like Vanguard is Microsoft and Fidelity is Google, and they could launch Gmail and say that thing, that's your primary business.
• ▶ 2:46:59 David Rosenthal Fidelity is just a better product and product experience than Vanguard.
• ▶ 2:47:03 David Rosenthal So during the pandemic especially, it exposed that Vanguard's customer service and technology is like jank.
• ▶ 2:47:21 David Rosenthal I mean, Vanguard, the downside of its structure is that there are no excess profits that can be invested for the long term in things like technology and things like customer service.
• ▶ 2:47:33 David Rosenthal Whereas Fidelity, as they started to realize that this strategy is going to work for them, they said, oh, this is going to be a weak spot for Vanguard.
• ▶ 2:47:48 David Rosenthal Vastly superior to what Vanguard offers.
• ▶ 2:49:16 David Rosenthal Retail investors decided they liked even more than the Vanguard story and the simplicity and the folksiness of the Vanguard index mutual funds.
• ▶ 2:49:38 Ben Gilbert That's right, because even Vanguard only has a few hundred funds and ETFs today, whereas
• ▶ 2:50:02 Ben Gilbert Across a bunch of different strategies and sectors and stuff that Vanguard has always been religiously against.
• ▶ 2:50:12 David Rosenthal uh, Vanguard is today the number two player in ETFs, but smaller, both number of funds and, and assets under management and BlackRock continues to kind of accelerate away from them, which again, right now the ETF market is smaller than the…
• ▶ 2:50:40 Ben Gilbert Vanguard is a competitor with a slice of their business, but they're just in so many different sectors.
• ▶ 2:50:48 Ben Gilbert BlackRock is way more international than Vanguard is in terms of the client base that they work with.
• ▶ 2:51:13 David Rosenthal Does Vanguard's no-profit mutualized model
• ▶ 2:51:20 David Rosenthal Actually hold it back today, relative to Fidelity and BlackRock.
• ▶ 2:51:26 David Rosenthal When we started the process for this episode, Ben and I originally thought that the question of the episode was going to be, how do Fidelity and BlackRock continue to exist at all, despite Vanguard's, you know, obviously superior model?
• ▶ 2:51:45 Ben Gilbert With Vanguard undercutting them on price and being structurally incentivized by their shareholders to do so.
• ▶ 2:52:03 David Rosenthal That Vanguard's model is holding it back.
• ▶ 2:52:11 David Rosenthal In May of 2024, Vanguard made another big CEO announcement that they were bringing on the first outside CEO in the firm's entire 50 year history, Saleem Ramji, from BlackRock, where he was, until that point in time, head of the iShares…
• ▶ 2:52:40 David Rosenthal And the question is, can he fix the challenges that Vanguard is facing right now?
• ▶ 2:52:51 David Rosenthal And this situation where they've found themselves that because of ETFs, their competitors, or quote-unquote competitors, can access their funds to
• ▶ 2:53:15 Ben Gilbert I think like if you're Vanguard, you're delighted to get the business to have people buying Vanguard funds on Fidelity, but there is a vulnerability of you actually don't have a relationship with those customers, but, and they have a…
• ▶ 2:54:06 Ben Gilbert There is this interesting question, which is that they haven't really had any new innovations in a while, call it a decade, that
• ▶ 2:54:15 Ben Gilbert Have been really meaningful to the business and that they've continued to scale.
• ▶ 2:54:19 Ben Gilbert They did buy a direct indexing platform called Just Invest, but afterwards haven't done that much with it.
• ▶ 2:54:35 Ben Gilbert Yeah, or at least they haven't been putting out any press releases talking about how big it is getting.
• ▶ 2:55:01 Ben Gilbert Massive compression thanks to Vanguard, where you're seeing they used to charge one and a half, two percent, 5060 years ago, and now you are seeing the Vanguard effect.
• ▶ 2:55:12 Ben Gilbert You know, seven basis points at Vanguard and 40 basis points for the rest of the industry.
• ▶ 2:55:39 Ben Gilbert Well, what is your take on structurally why the Vanguard effect has not come to venture capital and private equity?
• ▶ 2:58:05 David Rosenthal But to keep it on Saleem and Vanguard today.
• ▶ 2:58:08 David Rosenthal They're entering private assets for the first time.
• ▶ 2:58:10 Ben Gilbert They are entering private assets.
• ▶ 2:58:31 Ben Gilbert And the question is, can they do it in a Vanguardy way?
• ▶ 2:58:34 Ben Gilbert Where they, they do it at, at cost or as close to at cost as possible.
• ▶ 2:59:29 Ben Gilbert The other thing that's happened is the success of the index fund has sort of created a barbell in a lot of people's portfolio where you kind of own Vanguard as your, like, 80%, your, your cheap beta for most of your net worth, and then you…
• ▶ 2:59:51 Ben Gilbert Does Vanguard want to play in that 20% at all?
• ▶ 2:59:53 Ben Gilbert Are they satisfied
• ▶ 2:59:59 David Rosenthal And it seems like Saleem is moving them in the direction of like, yes, private assets, crypto, etc.
• ▶ 3:00:35 Ben Gilbert Vanguard doesn't have that.
• ▶ 3:00:37 Ben Gilbert Their only charter is appease the needs of their current customers.
• ▶ 3:00:52 David Rosenthal With a structure like Vanguard.
• ▶ 3:01:14 Ben Gilbert The answer I suspect Vanguard leadership would give you is you do actually need to grow to stay competitive because you need to keep investing in the platform.
• ▶ 3:02:00 David Rosenthal Okay, so that's the last couple years in the new management at Vanguard.
• ▶ 3:02:22 Ben Gilbert And I think this is the DNA of Vanguard is
• ▶ 3:02:25 Ben Gilbert Can they figure out how to, using their mutual ownership structure, continue to enter more and more sectors where they can squash fees to zero or as near zero as possible, especially in these scenarios where they can get average returns at…
• ▶ 3:02:50 David Rosenthal You know, yeah, why can't Vanguard do the same?
• ▶ 3:02:53 Ben Gilbert As much as we've talked about the index fund as the central narrative of this story, Vanguard's AUM was mostly their active funds for the first 20 years.
• ▶ 3:03:04 Ben Gilbert By 1994, indexing was still only 15% of their total assets under management, and then as we talked about, they really took off in the nineties and 2000.
• ▶ 3:03:14 Ben Gilbert Today, 84% of their assets are