The Pomp Podcast - #1100 Eric Balchunas On The Greatest Investor You Never Heard Of

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Eric Balchunas is an ETF analyst at Bloomberg. He's also the author of a great book called The Bogle Effect, How John Bogle and Vanguard Turned Wall Street Inside Out and Saved Investors Trillions. In this conversation, we talk about Eric's view on why Bogle is the OG of DeFi, how he's the father of low-cost investing, how big Vanguard is today, why Vanguard is actually a populist uprising, what the mom test is, outsiders versus insiders, and what Eric's thoughts are on things like the Bitcoin ETF, direct indexing, and much more. I really enjoyed

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Starting point is 00:02:52 but only as an expression of his personal opinion. This podcast is for informational purposes only. All right, guys, bang, bang. I've got Eric here with me. Eric, I thought a great place to start would be, Bogle has become this like legend, built this massive business, still has a very material impact

Starting point is 00:03:10 in the financial markets today. But a lot of people don't remember before he had this idea. You wrote an entire book on it. Help us understand, like, what was the pre-Bogel financial markets like? Yeah, I mean, they were pretty archaic. And, you know, beyond the technology that has really, I think, helped investing, what Bogel really brought to investors is low cost.

Starting point is 00:03:32 I think that's the ultimate contribution. People call him the father of the index fund, but I don't think that's right. I think the father of low cost is a bigger deal. And I guess what I would say is this. Let me take you to the 60s. So the 60s were a decade almost like the last one where growth stocks were like really high-flying stocks were like what everybody wanted. It was they called the go-go 60s. Everybody was happy.

Starting point is 00:03:56 Everything was going great. But Bogle was at this company called Wellington, and he ran this balanced fund that was pretty boring, pretty conservative. And in an era like that, nobody wants that. They want the hot sauce, right? So he was losing customers. And so he was younger in his 30s and he thought, you know, he'd just been given reins of the company by his mentor. And he thought, well, look, everybody seems to want these donuts across the street. And I'm sitting here selling nutritious bagels. I better start selling donuts.

Starting point is 00:04:23 So he teamed up with this manager that was like an arc type manager, like Taki would like high flying growth manager. And it worked for a little while. They had the hot sauce and the boring stuff. But the problem is the market totally crashed in 72, 73. It was like a 2008 over those two years, right? Pretty bad. And they had real bad falling out. And so at the time, all people had were active mutual funds that charged, I don't know, 60 to 100 basis points, even more, right? So that was how people invested. Indexing really wasn't a thing at this time. So what happened was Bogle had a fight with his partners. And I won't go into all the details. I'd go into it in the book. But basically, a nasty issue with him and his partners, they call it the bifurcation

Starting point is 00:05:08 period. The partners wanted Bogle out, so they fired him. They had actual voting control. But Bogle was the chairman of the funds themselves, so he had some leverage. So they had this conflict, and they had to come up with resolutions. The resolution was, Bogle was like, look, I'll create this back office company where I'll just do all the boring administrative work. You guys can do your investing. That's what you like to do. And that way we can both survive. And part of what Vogel had to do was sell this

Starting point is 00:05:34 to the board. And part of what he did was he said, I'll make this back office company mutually owned. So the funds own the company, thus the investors own the funds. So the investor owned company, if you will. That's key, actually. Anyway, that company would be called Vanguard. And that's how Vanguard was born. And Vanguard is a company that's, again, like I said, mutually owned. That's so crucial because when Vanguard gets assets and makes more profits, because the investors own the company, they vote to lower the fees because that's what's in their best interest, right? So Vanguard had this structure that was highly unique. Nobody had really ever done this in the asset management world. Asset management world, typically, they want to make

Starting point is 00:06:15 a lot of money or there's a publicly traded stock. So the goal is to make more money from the investors, which mean higher fees. So Vanguard was the opposite tip. They're going for a structure that is incentivized to lower the fees over time. Anyway, early in Vanguard's days, Bogle read an article basically about somebody talking about indexing. And he said, you know, that's a pretty good idea. So he launched the first index fund and it charged 0.46%. So while it was a revolutionary idea at the time. It still was pretty expensive at 0.46. But over the next 45 years, because of that structure, the fee went down to 45, 44, 42, 40, 38. And as it got lower, more assets came in. As more assets came in, the fee would get voted lower until about the 2000s, where the fee passed

Starting point is 00:07:03 15 basis points. That's when indexing and index funds really kicked in. They were really not a big deal for 30 years. They're counterintuitive. It seems like average. Americans are all about the best, number one, top gun, that whole culture. Also, the internet kicked in, which I think helped get information out that was showing you that high-cost managers weren't able to beat the benchmark, but now you could actually just buy the benchmark. And so over time, through Bogle's work, the internet and the fee is getting lower to the point where they got under 20, under 10 basis points. That's when indexing really started to take off. And now it's gone from that gradually to suddenly point. The adoption rate is obscene almost. Vanguard has taken in a billion dollars

Starting point is 00:07:53 a day for a decade. Let me just say that again, a billion dollars a day for a decade, which is, again, not even close. Nobody's ever done anything quite like that. That's why I really wanted to study this as a data analyst and somebody studying the fund flows, I'm like, if anybody had this big of an effect on their industry, this deserves to be dissected and studied. What's going on here? I think that it's one of those things where Vanguard's private. So even people who work with me in research, like the woman who covers our asset management companies, she only covers BlackRock and Goldman and the ones that are publicly traded. Vanguard's private. So not a lot is known about them and their structure is totally unique. And in the 45 years since they

Starting point is 00:08:38 came out, nobody has copied that structure because there's really no economic incentive to turn over all the future profits to the customers. But that move was the single most impactful move in the financial services industry in the last 50 years and probably will continue to ripple out over the next 50. We see the money keep flowing to lower cost funds, to indexing, to simple, and this is spreading across the world. So in my opinion, what Bogle's decision to create that back office company as a mutually owned company, plus Bogle's unique structure himself, the guy was weird. Who would do that? Those two things are, in my opinion, the catalyst that set off everything we see today in quote passive. I think the index fund and indexing gets way too much credit for

Starting point is 00:09:25 this. It's only popular because it's dirt cheap. Mindex fund doesn't really make sense at 60, 70, 80 basis points. And without that Vanguard structure, index funds probably would exist, but they would not be two, three, four basis points like they are now. You basically can get free exposure to the whole stock market at one click of a button. And that is his biggest contribution. I frequently call that total return market, which covers 99% of the US stocks for three basis points. It's actually even cheaper because they do some securities lending and they actually give you back a basis point or two. So it's really one basis point for the entire US stock market. That's sort of Vogel's Mona Lisa, in a way. But of course, there's the S&P 500,

Starting point is 00:10:08 which they have for three basis points. There's the total bond market. Now you can even get a Vanguard small cap value fund for under 10 basis points. So they have basically taken all these different areas of the financial world and just commoditized them to almost free exposure. And so this is a massive change. And so what we're seeing now is investors, you know, you're waking up today and you're an investor, you're like, boy, do I have it good. I can basically invest in anything I want. I can even go pretty specific and pretty custom for almost no cost. So it's really a heaven for investors now. But I don't think we're anywhere near this had it not been for that decision to set up a company that's essentially owned by the customers, which, again, is highly

Starting point is 00:10:56 weird to any industry. I actually, I looked around, I couldn't find any real metaphors for this, what he did. But I did, you know, I did at the beginning talk a little bit about how I think there's a populism here that he was all about, but the structure backed it up. And I think, in any business or in crypto in particular, if you are a revolutionary, if you are a populist, I think it's important that the structure that's behind you and how money is moving around is also backing that up to a degree. And I think Bogle set a very good example. And it doesn't mean he didn't have to live in the woods and eat bugs. He was pretty wealthy. He ended his life with $80 million. But $80 million for what he did is ridiculously small. He wouldn't even make the

Starting point is 00:11:44 top 1000 of Forbes richest people, right? So I think he is an inspirational guy, a different guy, a weird guy. I don't know if I could have done it. I know many of us probably couldn't have done it. The industry couldn't do it. I mean, they saw him having success and nobody copied that structure. But what's interesting is, and the reason I call it the Bogle effect, is that everybody has to copy it now. Yes, you're not copying Vanguard structure, but everybody now has to have near free index funds to sell. So Fidelity has them. Goldman has them. BlackRock has them. Schwab has them. So that's why I use the Bogle effect, because it's not just Vanguard and Bogle. It's the effect across the whole spectrum. So today, it's not just the billion dollars to

Starting point is 00:12:30 Vanguard. Another billion or two goes into cheap index funds that were people just copying him. So that's the real power. It's almost what he did is sort of commandeering almost every dollar invested today. So what's fascinating about this is he not only structured it this way, but he also just had the idea of like, Hey, rather than gouge the customer, I'm going to fight for the customer, right? I'm just going to go low cost. And I thought it was interesting that you said, uh, he's considered the father of indexing, but you really think of him as the father of low cost. Why is the low cost component? Like, why do you say that's actually what he did rather than the father of indexing?

Starting point is 00:13:07 Because I think that'll surprise people. Yeah, for one, if an index fund charges, say, 0.80% or 80 basis points, it's way easier to beat that if you're an active manager, right? What's hard for active to beat is the index itself. So it's not the index minus 80, it's the index pure. And so by being able to buy the benchmark, most active cannot beat the benchmark because some can do it grossly, but net of fees, they can't.

Starting point is 00:13:34 Once you factor in the fees, it's just too much. And Bogle had a really good chart showing, and this is one of the charts he used in the 70s and 80s when he was out in oblivion trying to sell indexing to the public. The other thing he didn't do is, real quick, he would not pay brokers. Back in the day, the way you sold a mutual fund is you would have a load or a distribution fee, which was essentially a kickback to a broker who would then put someone like my mom in this sort mutual fund because he got a kickback and Bogle wouldn't do that. So he essentially set this company up and these index funds outside of the whole distribution system, which again, prolonged the time it took for success, which as I mentioned in our pre-talk is why I sort of call

Starting point is 00:14:16 him the OG of DeFi. He just stuck a flag outside of the whole industry and said, I'm not paying anybody. You're going to have to come to me and believe me, you'll like it when you do, because you're going to make more money at the end of your investment period. And so one chart he used was the growth of $10,000 over 50 years. If you get 5% annually on that, you end up with about $180,000. If you get 7% annually, you end up with $340,000, almost double. That 2% essentially is what he was saying you miss out on if you go with an active mutual fund, because they got a 1% fee plus 1% trading costs, right? So that's 2%. So if you wipe out all that, right, and you kill all that friction, you now get the 7% minus a basis point or two or a couple of basis points. And that

Starting point is 00:15:07 seems like no big deal year to year or in your mind, but over 50 years, 40 years, 30 years, it's a major deal. It's literally, I think the number he used was over that 50 years, the asset management industry takes 60% of your gains. You get 40%. With the index fund, you get like 95, 98. You know what I mean? So this is powerful stuff because we're talking a lot of dollars and cents. And this is why a lot of advisors who were in that system of distribution, they left the whole system and became RIAs in order to use Vanguard and go with cheap index funds because the system they were in would not use Vanguard because they wouldn't pay them. So this is also an interesting part of the story. And again, something that I

Starting point is 00:15:50 think is within the spirit of crypto and DeFi is this guy was like real punk rock. I mean, he was like, I'm not paying you. I'm going to go cheap. I'm going to, you know, again, turn over the profits to the customer. I mean, the problem is he looked like your grandfather. So a lot of people just didn't really, maybe it just didn't click. Like a lot of the crypto world is young and they sort of have a more edgy vibe. Vogel had like wear a sweater vest, but he was total punk behind all that. And these actions he took were enormously risky. And he's raising a family. He had a lot of responsibilities. It would be much easier to take the money or take more money or go to work for somebody else instead of go through all of this. And so that's why I think

Starting point is 00:16:37 low cost is the thing. A pricey index fund really wouldn't do much. So in my book, I premise that without Bogle and the mutual ownership structure Vanguard, index funds would have 5% of the assets they have today. So of the 15 trillion they have, they would only have 5% of that if he and that structure didn't exist. Some people disagree with me. Some people said, oh, no, somebody would come out with a free index fund. But my thing on that is this. Yes, you might have had somebody in a gimmick kind of way say, oh, yeah, our index funds, we'll do it for free. And like a loss leader at a food store just to draw you in. Well, you know, they're going to upsell you on stuff or use your money to do something else. So one way in the asset management industry is they upsell you

Starting point is 00:17:22 on other things or they take the cash you have lying around and make more money on it than they give you an interest, right? They pocket that difference. In Robinhood's case, they sell your order flow. They have to make money some other way. With Vanguard, that low cost was totally organic. There is no catch. And that's why it's so powerful and permanent. You just said that Bogle was the OG of DeFi. And we kind of glossed over that for a second. Let's go back. Bogle being the OG of DeFi will absolutely set off half of the crypto industry and say, what the hell are these guys talking about? The other half will say, tell me more. Why do you think that he's the OG of decentralized finance?

Starting point is 00:18:04 Yeah, so James Seifert on my team does not agree. I know you know him very well. He's more into crypto than I am. He's much more well-versed, and I've been learning a lot from him. He doesn't totally agree. He does agree, though, that Vogel's spirit was DeFi. Here's what I mean by OG of DeFi, which is that at the time, again, investors got very little of their money because all the middlemen took so much.

Starting point is 00:18:27 As I just said, 60% of your gains went to the industry. um so again by by going outside of the whole system right remember no he's not paying anybody and by lowering fees to almost nothing if somebody goes into an index fund now nobody gets paid right so there is a defy quality to that because there's no turnover index funds don't trade a lot so the market makers aren't making money this is something that the reddit Robinhood crowd, or I guess the meme stock crowd, misses entirely. They trade these meme stocks, but the volume and the spreads on these stocks are pretty high. So Citadel, which is their enemy, apparently, makes a ton of money off of them. So I told them, if your goal is to stick it to the man

Starting point is 00:19:10 and the Wall Street people, you should go into an index fund, even though that hurts my bottom line. I'm just being honest. That would be the best way to do it. So I always say, money that goes into a cheap index fund leaves the system. Nobody gets paid. Now, it's at Vanguard. That is a financial company so in one regard i guess it's not truly defy but in in spiritually i would argue it's defy when you see what defy is doing now would john bogle be building defy is that like your general thought process is because the spirit was there because it was outside the system because it was basically fucking with uh kind of the legacy folks and he wasn't paying them and all this stuff that you think he would have been interested in this yeah i i think so i think you

Starting point is 00:19:58 know the he you know he had really interesting quotes like one of the quotes he told uh in one of his books he's like i've done nothing but fight for the nine decades of my life you know i've done nothing but battle he has that in his last book which he wrote six months before dying he has that quote from um the poet dylan thomas you know rage until the dying of the light like This guy would have probably been somewhere doing something like that, I presume. I think the difference, and this is something that I'd love to get your opinion on, which is that there's DeFi and there's crypto, which is, again, it is outside of the system, right? But then the companies themselves, some of them, make a ton of money where they're minting these billionaires who have so much money. They're hiring movie stars for commercials.

Starting point is 00:20:46 Bogle would have never done any of that. He hated advertising. He thought some of the pay of CEOs was obscene. One of his big things was he wanted Vanguard to vote to lower all these CEO salaries of these big companies. He thought they were just way overpaid. And the average worker-to-employee, worker-to-CEO gap was growing, and it keeps growing. And it was just so bad.

Starting point is 00:21:08 So Vogel hated all that greed. So I think there's two elements to this situation, which is the companies themselves might be structured more like normal Wall Street companies, yet they're engaged in DeFi or crypto. Whereas Bogle, you could say, well, he was in the financial world, but his structure was more DeFi in a way. So you see how there's a couple elements to your question. I don't know if you want to unpack that a little bit, or I would like to get your take on that. Yeah, there's definitely different buckets. So you have like Bitcoin, which I think is trying to be decentralized electronic cash, right? And And that is very different and distinct than Coinbase, which is a centralized exchange where you can come in and buy and sell these different assets, which is different and distinct from centralized asset managers, decentralized asset managers that are popping up and kind of trying to figure out how to do that.

Starting point is 00:22:01 And then you have the attempts at other types of decentralized financial services, whether this is decentralized stable coins or insurance or lending or trading and all these different kind of aspects. and then you also just get the difference of like public company versus private company right and kind of how that works and so i think uh it is um naive to just label crypto and it's all kind of the same thing uh and i think actually one of the big questions which i don't have the answer to is where is the line going to get drawn by the market and by regulators in terms of what's allowed and what's not and it ultimately gets at this question of like decentralization and what is fascinating about Vanguard is the creation of it, kept in mind the incentives, and understood it appears very well, if we create the right incentive structure, that will dictate what

Starting point is 00:22:56 people do. And if we're able to correctly dictate what people do, that will continue to reinforce lower and lower fees, which is what's played out over the last, you know, 40 50 years. And therefore that will be incredibly valuable to the market and to investors. I think that that is a very big part of kind of what crypto has kind of made more popular. So if you look at Bitcoin specifically, the incentive system there is very unique. And it has allowed for without a CEO, without a marketing department, a corporation, all these different things, 150 plus million people come in and adopted all these miners, the nodes, like the system is beautifully designed from an incentive standpoint. And I think the rest of the industry is trying to figure out, hey, what are other ways

Starting point is 00:23:38 do this, whether they're successful or not, I think, is where a lot of debate, controversy, and frankly, regulators scrutiny currently exist. And so we know, on the Bitcoin and crypto side, like we know how big these things can get, right? Bitcoin was over a trillion dollar market cap, it's come down significantly. I think most people think it'll get back there at some point, maybe it'll take 50 years, maybe it'll take five months, who knows? How big is Vanguard today? Like when we think about, okay, they've had 40, 50 years to do this, the incentives work, How big has it gotten? Yeah, so Vanguard has $7.2 trillion in assets. They were up to $8.3, but they came down because the market obviously is down a little bit. But it's amazing that they've

Starting point is 00:24:20 taken money this year and every year that it's bad. They've still taken money, even if the value of all of their investments went down a little bit. So $7.3 trillion, I'll put that into context. if you take the whole US fund industry, that's about a 27% market share of assets. That's double any other high watermark. Fidelity, I think, was the last to hold it at 14%. So that's one thing. And what's astonishing is they only account for 5% of the industry revenue. So they count the 27% of the assets, 5% of the revenue. That chart looks like an alligator. And I frequently refer to it as scariest chart on wall street because the five percent is where everybody's going right so and this chart is why people like vanguard vanguard isn't a thing that's like looking to like take

Starting point is 00:25:04 over the world it's 30 million people it is a populist uprising in a way and so that is why they're so popular and what's crazy about bogle and i didn't know this before i read it and this quote blew me away because i knew some of his quotes obviously but not all of them in one of his books, he has a speech he gave in 1991, where he says, although Vanguard's mission is beginning to become complete, or beginning to make a difference when our market share begins to erode. And again, I was like, what, like, what CEO is ever rooted for their market share to erode? But the reason he said that is because he knew, if everybody else was going cheap, it would eventually lure investors over to them. And more people would win out.

Starting point is 00:25:46 So it's like the market share would shrink, but the overall market would increase. And so even if he had a smaller market share, he would still have more assets. Well, I would say, no, I would say the overall, his market, he knew in 1991, this is when they only had like, I don't know, a couple percent market share, that Vanguard's deal was so good that they were going to draw all these people. And that it wouldn't until the rest of the industry copied them, got cheap and better stewards, that they could actually hold their own. And so he was saying that when our market share begins to erode, the only way that's going to happen is if everybody else elevates their game and gets lower costs. And that has started to happen, but it hasn't happened fast enough or strong enough to get their market share to go down.

Starting point is 00:26:25 So that's why I have one of my research themes is Bogle's dream is not yet realized, which is insane considering everything he did. But until that number goes off and plateaus and goes down, his vision isn't complete. But I asked around, I couldn't find a CEO in any business that has rooted for their market share to go down. But I do think that that's how that's why he's so interesting and why I wanted to write about this guy. He was on a completely different trip. And I know, you know, two things. One, I think we all can identify with wanting to change the world. And but I try to unpack. It took a long time.

Starting point is 00:27:04 He was in oblivion for about 25 years trying to get this going. So Vanguard's market share was under 10% for 25 years. So I did an interview. I interviewed 50 people for the book. One of the people I interviewed was Brad Kusiyama, who was from the Flash Boys book, who basically saw something shady in the exchanges and set up a cleaner one. And when I told him it took 25 years to get 10% market share for Vanguard, he said that made his day.

Starting point is 00:27:29 Because if you do something that's outside of the system, it can take a long time. And I think crypto probably can understand this. And Bogle also went through two or three bear markets before that 10%. So when the bear market came, he had to sit through that too for a while. So there was a lot of patience and just grinding away for him and for this idea and this concept. But once it hit, it really took off pretty quickly. And what's also interesting, this stat is mind-blowing. 97% of Vanguard's assets today came after he stepped down as CEO.

Starting point is 00:28:02 So he laid the foundation only. And so, again, I just a fascinating guy and study, considering how potent and powerful his idea. And I also think one thing that's what's interesting is it's rare that there's multiple things in one person, meaning you have a vision. you're an idea guy you're a little bit you're a thinker but you're also somebody who can manage people and build a company that's a different skill set for many people he also was a very good communicator and he was frequently go up and make some really controversial shocking presentations he would he would give presentations that were antagonistic to the audience he was in front of. And so he had a lot of different elements in one human. And usually, like a Steve Jobs or somebody like that, those are usually the people who can change the world. But it was that ability to organize an entire company that was also interesting, because he was, I think, a natural

Starting point is 00:29:03 writer, academic thinker type, but he was a man of action as well. So the idea that he could introduce this tool into the marketplace, you know, he could say all this and say, this is how what should be, but to introduce the tool that made it possible, which was the structure and the funds, that was ultimately the practical part of the, of the vision that, that, that he contributed, which I think is maybe underrated because it's easy to have these, it's easy to lay something out. It's, it's harder to execute it and it's harder to execute it when nobody cares for a while, you know, when you are, you know, or you have a dark couple of years and to hang in there. And I think he did many things to keep the faith, but I try to lay some of those things out

Starting point is 00:29:46 in the book, but it was a long haul. It was not overnight at all. Talk to me about the beginning of the company itself. So the idea is super powerful. We know where it eventually gets to. Do we have any insight into what some of those first couple of months or maybe in the first couple of years, what was the obstacles he had to go through? Who were the people that he was able to recruit to help him? Kind of what were the beginning of Vanguard actually like? This episode is brought to you by Valor, which represents what's next in the digital economy. They provide simplified trusted access in crypto, decentralized finance and Web3 investment opportunities. Institutions and investors can gain diversified, secure, compliant and easily

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Starting point is 00:32:19 As he likes to quote Les Mis, no, what's the Saigon show? The Broadway show, Miss Saigon. I think it was like born in strife and I forget. I'm butchering this quote. If we edit this out, that's fine. If you leave it, it's fine. I'm a human being. I just can't remember the quote, but it was something about being born in hell, right? So Vanguard was born in the middle of bear market. And for the next four years, the companies Vanguard did back office work for saw outflows. So Vanguard saw 80 months of straight outflows right after birth, which again, 80 months, first of all, they haven't seen a month of outflow in like forever. Like it's highly rare.

Starting point is 00:32:56 So 80 months for them is just hard. It's almost unfathomable. But, you know, he stuck with this idea. The first couple of years, he had a staff of 27 to start out. He had two really smart people working with him who were his right hand right hand men. and they you know when they started developing the index they had to they didn't have really great computer power so that was an obstacle they had to work on with you know data that was fed and faxes and all this stuff and so it was a little archaic it took a while and when they first launched the S&P 500 index fund it was not good not only did it charge 46 basis points which I said is harder to sell than three but it didn't track well there was a huge gap between the index and the index performance and the fund itself. And that gap is because the portfolio managers weren't as sophisticated yet.

Starting point is 00:33:47 So that had to be tightened. So they hired this one guy, Gus Sautter, who came in in 88, I believe, or in the 80s. He was a good interview for the book. And he was able to get that tracking down to almost nothing. He had to do a couple of things there, increase the technology, get in touch with better brokers for better execution. So there were a lot of these hurdles. One of the stories at the beginning was when the index fund started, the S&P 500 index fund, which is close to a trillion today, the first portfolio manager was this woman who had a part-time job at a furniture store, which is so weird to think about considering how big of a deal that fund is today.

Starting point is 00:34:28 Right. Like, you know, there are major institutions and people who invest in that thing now. But in the early days, you know, this was all something that took a while to play out. But the thing is, nobody cared when they first launched it. I think it had 11 million dollars and most of that was friends and family. So nobody noticed or cared for a long time because, again, this is a idea that's counterintuitive to most. It seems like it would not make sense to just take the stocks by size and rank them. and then invest that way. And it seems like they're just settling for average.

Starting point is 00:35:02 But that is something that I think they had to overcome and they had to staff people, grow the business. But I will say Vogel, I think, was good at hiring people. You know, I've met a bunch of people from there and they're really smart. They're nice. I think he had to get people to buy into the mission as well because you can get talented people

Starting point is 00:35:21 who could probably make more elsewhere, right? Let's face it, you have a mutually owned company. You're just not gonna be able to pay as much as say golden sacks or a big company in new york and this is a and you got to have them relocate out to the malvern pennsylvania so um he did but once they got there i think if they bought in and you know i heard about like the kool-aid and stuff and they bought in they got into it they settled down they have a life it was harder for them to get poached over time by the bigger company so some of the people i interviewed with were there for like 20 30 years and they really

Starting point is 00:35:52 enjoyed it they got psychic income which people i think is an underrated thing which is um and And maybe not something most people over at Wall Street care about, but psychic income, meaning just the idea that you did something good today, can actually complement maybe a lower salary. People in public service point to psychic income, and I think the psychic income was pretty high there. But he had to constantly address the employees who would start to get anxious and frustrated by Fogel's messages about how we're lowering fees and we're doing good for the investors. And they'd be like, well, what about my paycheck? Which is a natural reaction if you're not the founder with this vision. You'd be a normal person working there. So he came up with a partnership plan. There were several things he had to put in place, which again, this is the roll your sleeves up managerial work that I think is underrated or undercredited in his story, but it's not easy. You got to retain people, have them do a good job because he could not do all this himself. So I think those are some points I would give you from the early days. One of the things he did that I thought was really fascinating was when Vanguard first set up the index fund, started to get a little bit popular in the 80s.

Starting point is 00:37:02 They'd sometimes have a big institution who wanted to come in and just sort of put their money there for like a month or six months and then take it out to do something else. Because this is a good deal even for an institution. But Bogle said no. He would not let – he turned down money early on because if you were going to come in short term, you were going to create costs for the people who were there, the little guy. And so he denied them, and so that prolonged their success. But it was a fiduciary move or a steward move for the people in the fund. And this is stuff that people do and no one's looking, no one cares, that I give them credit for doing and sort of walking the walk the whole time. But in the end, by really protecting his clients to the death and really sculpting who the clients were, they are the best behaved investors in finance. If you look at any bear market, Vanguard takes in money no matter how bad it gets because they came to him, they trust them, they know they got a good deal.

Starting point is 00:38:00 So like in 2008, Vanguard took in money every month. It's crazy, right? Even in October when the market was down 17%, they took in money in 2018. they're taking in money this year. Um, so this is part of the, again, all these things that were hard choices early paid big dividends later. Yeah. It's fascinating that up or down markets assets still come in. And as those assets come in, it makes it cheaper as it gets cheaper and incentivizes for more and more assets to come in. Right. Like, like it is just a perfect kind of structure. Why has no one else done it? Is it just greed and capitalism? And they're like, Hey, look, we're not going to make any money doing that. So like, let's all hold on to the current system

Starting point is 00:38:43 or is there some other reason why no one's followed? Pretty much summed it up. I mean, I asked people, I interviewed 50 people, right? Again, like I said, I asked them all, how come nobody's copied this? And everybody's answer was virtually the same. Well, there's no economic incentive to hand over the future profits.

Starting point is 00:39:00 Nobody goes to Wall Street to drive a Volvo. It just doesn't happen. And in particular, somebody who would work as hard as Volvo, I mean, he worked very hard. So if you're going to work that hard and lay yourself out that much, and you're the kind of person attracted to Wall Street, you probably have the fire in the belly type deal, you're probably going to want to keep a lot or at least more of that money. So there's just no incentive to do it. So then I said, well, why did he do it? And everybody's answer was the same.

Starting point is 00:39:28 That's a good question. So that led me to a whole chapter called Explaining Bogle, where I try to deconstruct what went into the character, both environmental and genetic, that would produce somebody who would do this on purpose because nobody has copied it. And I did my best to try to break down the things that went into like the Bogle stew. And I think, you know, one of those things was the the way he broke up with his partners was a freak accident. It was just such an unusual situation. So that circumstance was huge. but still he and the human had to decide to set it up as a mutual so it came out of his brain and you know he was um in his Princeton thesis he had some some seeds of this idea of being a good steward and doing right for clients and he came from the great depression and so he had a

Starting point is 00:40:14 family that was rich and lost it all so he had seen that and I know um one of the things one of the reasons I enjoyed spending time with him in his office I had several interviews with him before passed away was he was from the world war ii generation and i don't know if you know anybody like your grandparents mine are both passed away but they they were just different you know they would save everything they wouldn't use electricity in the room they weren't in they had a different mindset they you know his son told me he had the same cactus for 45 years so he didn't really need things and so the the lack of need and greed was really an unusual it was world war ii ish but also unusual for this industry. So I almost think sometimes he was miscast in this industry.

Starting point is 00:40:56 The way he even got into this industry was he was looking for a thesis and went into the library at Princeton and just happened to pick up Fortune magazine and read an article on mutual funds and said, oh, I'll do my thesis on that. And the thesis got him hired at Wellington, which is his first company. So it was a little bit of dumb luck that he got into this industry. But I will say he wrote a book called Enough, which is all about greed and how you don't need that much. And if you can just like learn to be happy with what you have you'll be much happier and you can do more things that are good for people and so i think he had uh this enough he had an immunity to greed but i will say his son and some other people as i was interviewing people around him he could never get enough

Starting point is 00:41:37 adulation he loved being called saint jack he loved this idea of being like sort of a savior of investors um and so that that really filled him up um and so but people who want to be filled up by phrase tend to go into other industries, not finance, right? So people who want money go into this industry. So in a way, there might have been a different type of need that was filled that normally would have gone into a different profession. I don't know totally how to explain this. I did my best to try to understand this. But to your point, nobody copying it, this whole thing and him sort of become like an anomaly in physics, right? It just, he and it broke all the laws of wall street physics and he's trying to just unpack why perhaps we'll never know but it

Starting point is 00:42:22 just um that's why i was so fascinated by this you know i took a risk you know it was a lot of time to do this right there's a lot of time spent i was like people know who he is generally they know vanguard what am i going to be adding anything and i thought you know i have all these interviews and he and i would debate and had really interesting discussions and i see the data and i'm like i i just this really has to get out there this is just a very unusual anomaly type story i feel like i'm maybe a gen xer i can put a little more edge into the story and try to show younger people because sometimes um i'll be at like a family gathering or a party and you know you know i some of my more liberal or populist friends you know i think they think wall street

Starting point is 00:43:04 like sucks so i try to explain not all of it sucks like like this guy for example you would love this guy they don't know who he is and so i um i try to write a book a little bit for them to like people to just be like hey this is this is a really fascinating story and actually it's a kind of a happy ending it's not most of the stories on wall street are about people who rip people off or arise in a fall um those tend to be uh very better selling books probably because they're more interesting so this book doesn't really have that kind of an arc but i will say what i lack in dramatic arc i make up for an impact you know i really trace out the impact here. And I, I hope I did a good job. It's, it's pretty astonishing. Yeah. When you think of Bogle,

Starting point is 00:43:48 did people like him at the time or was he seen as like enemy number one from other folks on wall street? Half and half. Um, you know, on one hand he would, um, this is why I have a little section of the book where I compare him to a punk rocker. Uh, he would go right on stage at Morningstar and tell all these active managers, you got to lower your fees. You suck. You go to the etf conference and say etf's trade they suck and he would crap on audiences left and right then he'd crap on his own company and he was just and he'd go and see nbc and say trading is for losers i'm like the whole thing's set up to keep people trading and i was like man this guy is punk rock um i also think his addition by subtraction was was a sort of that's what sort of how i think

Starting point is 00:44:29 punk was birthed you're removing things from music they didn't like and just giving you bam this straight song. But yes, this is what made him a little controversial in the industry. He was shunned at ICI meetings. I'm not sure how people did to his face, but behind in the back areas and the hallways, people, I think, tried to avoid him. It was uncomfortable what he was saying for everybody. People want to feel like they're doing good for people. And here's a guy saying, no, you're actually basically extracting value from society. You're not giving it. And these are hurtful words if you're in the industry. So he did have some enemies. That said, on the flip side, he had a lot of friends inactive, like Cliff Asness is a good example, the head of iShares, who I interviewed, who I thought would hate Bogle because you're running iShares in 2000, year 2000, and here comes Vanguard with cheap ETS. you'd be like, oh, shit. But he ended up becoming friends with Vogel. Vogel did, I think, in World

Starting point is 00:45:28 War II style, he had a good knack for separating your job from the person you were. And so he would get along. He got along with the guy who started ETS. He hated ETS. He got along with some active managers. And it's because I think he understood there's a difference. You could be a great person and yet he could criticize your job or your product you're selling or whatever. But I opened the book by saying, look, if you're in the industry, there will be times you feel judged and even attacked in this book. But my whole life was around ETFs, and he crapped on ETFs maybe the most. So I said he was equal opportunity. At the end of the day, he really started to get into this idea that you just need a total market index fund.

Starting point is 00:46:13 So one fund, basically, maybe have a little bit of bonds, and that's it. So he actually started to trash funds he launched, like the growth fund, the growth index fund, the value index fund, the international funds. So he launched a lot of funds that he would ultimately later go to trash his own work. So, I mean, this guy was pretty much trashed everything. And he got, yeah, it made for some uncomfortable situations. But beyond the industry, he had fights with his own company constantly. And so I have a chapter called Vogel versus Vanguard because when he stepped down as CEO, he kept an office on campus for 20 years, and he would take shots at management constantly for their expansion into this or that. And so this is why I was so interested.

Starting point is 00:46:55 I was like, who does that? It's just so – it's just the guy was just a pretty pure. He was like a Puritan. This is what you need. Anything else is a distraction, and I'm going to trash it. And I don't think anybody will ever be as pure as him or should be even. But I think just – I don't take sides with him or Vanguard. I just try to show you the big picture because I think it's tough to live up to what he was saying to do.

Starting point is 00:47:20 I think people are just human. They're more human than he was sort of advocating for. It's just very difficult. Some Bogleheads I think are really good at owning two funds, and that's it. But I think other people, they want to invest in some different things, try some different things. It's fine. I tried to be too judgmental in the book. I sort of just was more fascinated by somebody who lived life in constant friction with the industry, with his own company, and with his own funds that he launched. i mean it's just it's just it's just a really interesting uh for me it's fascinating um so

Starting point is 00:47:57 yes i would say that but overall when i interviewed people for the book and i said something about what he said about their world that was negative they'd kind of laugh and be like you know it's just jack being jack he's wild um and then they'd pivot to their point they never said oh he's an asshole you know it wasn't like that i also think in general what bogle did for the whole industry is he made it better for everybody. I think he increased the amount of I'm doing good for my client, whether that's brokers moving to the RIA side of the coin, where they get paid as a percent of assets instead of getting kickbacks, or fund companies like a BlackRock or Fidelity lowering their fees. I think ultimately, he helped push people towards a better Wall Street. Do you know

Starting point is 00:48:42 what I mean? And I think generally, it may hurt in the short term, but I think people overall, they feel better about what they're doing. So I give him credit for that. And I think some people have awakened to that to a degree. In the subtitle of your book, it's how Bogle and Vanguard turned Wall Street inside out and saved investors trillions. Talk about the saved investors trillions. Because when people see that, they're like, wait a minute, they have trillions of dollars in assets. How did they save investors trillions? Talk a little bit more about the actual math and kind of like what the impact on the individual investor has been by bogle's kind of big idea yeah sure no the the assets they have is separate than the savings

Starting point is 00:49:21 so it's pretty simple math it's back of the envelope if you take vanguards if you take a chart like this you take vanguards asset weighted average fee it goes down over time as i said went from 46 basis points to like 10 this is all their funds combined over 50 years 45 years active went up actually for a while into year 2000 then when passive got popular it's like oh shit. We got to lower our fees. So they started going down like this. So all I did was take the asset weighted average fee and then the assets in each area and say, well, if the money here was there, what would the difference be? So that was part one of the equation that gets you a couple hundred billion. Then you get another couple hundred billion from the fact that the active

Starting point is 00:50:05 side, they trade a lot. So whenever they trade and they buy this stock, sell this stock, they're giving money to the market makers. That could be another, I think I calculated 50, 60 basis points that you wouldn't get if you were down here, right? So you add that in, then you get the money that is saved from the people who copied Vanguard, which I would call the Vanguard effect or the Vogel effect. So if you look at all the money in passive, Vanguard has half of it only. The other half is from Fidelity, BlackRock, Goldman, et cetera, et cetera. That money I counted as well in a similar vein? What if it was in an active fund instead? And then you get to the idea that all that money is reinvested. So you add the reinvestment to that as well. There are actually

Starting point is 00:50:49 some other things you could do, like the behavior. He got people to behave way better because a cheap index fund makes it easy to behave. You could just resign. Oh, I'm not going to sell because what am I going to go into? This is the best deal I have. That you could say is more. I didn't count that, but you could actually fold that into the number as well. But the things I just gave you get to roughly a trillion. But that number grows by, I believe, 150 billion a year. And the 150 billion a year grows, because now you've got to add in some international, right? This is not a trend just in the US, it's spreading overseas. And the numbers get bigger, and the costs get lower. So this trend, that trillion will probably be three or four by the end of this decade.

Starting point is 00:51:31 So as we see this play out, what do you expect the impact to continue to be? Obviously, there will continue to be assets flowing in. We assume there continues to be very low fees. We assume. Are there other aspects of impact that you're paying attention to or you think are worth noting? Yeah. And this is a big one that I talked a lot in my book tour when I would go to like different, we did some Bloomberg, I did some on the road. And I feel like just talking about like the savings and Vogel is not necessarily useful information for the industry. So one chapter I have is called the fall and rise of active. And in this chapter, I look at how doing stock picking with a portfolio that looks like the index, like, oh, should I do 3% of

Starting point is 00:52:14 Amazon today or 2%? We call that closet indexing. Charging 80 basis points for closet indexing is probably going to die. It just doesn't make sense. You can get the same stocks roughly for eight times cheaper, even more. So that's probably the fall of active right there. That's probably going to go extinct. But what's birthing in its place is all these new evolutions of active. And so this is what I used on the tour. This is the panel discussion we had, because this is a big tent concept. So the Bogle effect isn't just, oh, I lowered fees. He's actually changed how active and the whole financial industry is now going to deliver active. So let me give you a few examples. The more people go to cheap beta in the core of the portfolio, we'll call that the

Starting point is 00:52:53 60-40. You're paying five basis points for both of it. It makes up 75, 80% of your portfolio. Some people go 100. They'll call those the Bogleheads. Those are the Puritans. Not everybody's like that. Most people have a slice for what I call hot sauce. They want things that are very different because they've got all the serious, fundamentally sound stocks covered in their core. So they want stuff that's a little wild, a little crazy.

Starting point is 00:53:15 So that's where ARK lives. I would argue for a lot of people, crypto lives there. It's like a call option in the future. What if these crypto people are right? What if Cathie Wood's right? I don't want to miss out. So that's a FOMO wedge. And so, ironically, the bigger passive gets, the crazier active it's going to get, and the more active it will have to be.

Starting point is 00:53:35 That's one way. The other way I think he impacted it was by an index fund that's market cap weighted. That was the first one. It's very simple, right? McDonald's, simple. Over the years, people said, what if we actually make an index fund, but we weight it by dividends, or we account for price to sales? And so you start using fundamentals to change the way the index works, but it's still rules-based and indexing and cheap. And we call that smart beta. And I think that's one of his way active is evolving. I think ESG is an evolution on active. I think it's an overrated, overhyped one that will eventually be very much smaller than people think. But essentially, what you're doing there is trying to reorganize stocks, kick some out, add some in the hopes of outperforming. That, I would argue, is an evolution of active.

Starting point is 00:54:16 I don't know if he's totally – you can't attribute that to him totally. And direct indexing is another one where they say, hey, stop using ETFs and funds altogether. Let us set an SMA up for you, a separately managed account, and we'll let you pick a couple of stocks you just hate. Maybe we'll add an ESG overlay. I also think that is overhyped and will only be a small part of the market. I don't know how many people need that level of customization beyond what ETFs or mutual funds can give you. But that's probably, those are some of the ways I think active is evolving. And one of the ways, the more, what people sometimes miss is it used to be active was,

Starting point is 00:54:51 hey, let me give this money manager my money or this broker, and they're going to pick good stocks and some bonds from me. What's happening now is the end investor or the advisor is the new active manager. So what I mean by that is an RAA is now the active manager because they have your portfolio And the way they decide what the 40 should be, should be 42, 38, how much bonds, how much stocks, do you want a little ESG, do you want an options overlay, what about your hot sauce bucket, that's all active decisions. But what they're doing is they're using low-cost passive products predominantly to do that. And then there's even people who trade ETFs all day long and sell that, like, hey, I'm an ETF picker, and that's called ETF model portfolios. And that's a little cottage industry that's growing that I would argue is a byproduct of this. So active is not dead at all. It's just evolving. And a large part is because cheap beta has completely kicked out traditional active from the core.

Starting point is 00:55:48 Yeah, it's fascinating. Some of these things that have gotten so much hype, so much attention, constantly talked about as innovative, new, can outperform, you know, whatever the kind of spin on it is. At the end of the day, it all drives back to just the benchmark is the benchmark. And most investors probably just want exposure to the benchmark when it's all said and done. Yeah. Because, look, I always have this, would I recommend my mom doing it? That's a question I have for myself. And if I wouldn't, I'll tend to write a little more critical of this thing that's coming out. And when it comes to cheap beta, like a Vanguard index fund or iShares ETF, I'd be fine if my mom was in that. I mean, I'd sleep fine. So it passes the mom test. It's just a good deal. And people want to get the most for their money. I mean, they want to put their money to work, right? That's the whole concept here. So I think this will be popular for a long time. You have to think of one thing people miss is what is the benchmark? What is an index? Essentially, it's all the trading of active, right? If five active managers think Amazon's good and four think it's bad, it's probably going to go up a few points, right? Because there's more people buying it than selling it. That's going to make its market cap at this point maybe a little higher. Index funds are just tracking all that active activity. So index funds essentially do

Starting point is 00:57:13 ride in the backseat of active. So you kind of get active's best ideas or their push and pull, but without their fees. So you have to admit, and sometimes people shy away from this, but they are freeloaders. Index funds are freeloading active. And we do need active to set these prices. How much active is a big debate. In 1993, it was 99% active, probably too much. But at what point do we need active there to set the prices so that we're not having, I don't know a reddit crowd making some stock the biggest stock in the world just because they want to so this will this is where the rise of vanguard and passive is ultimately probably going to end up in a regulatory issue at some point but it doesn't matter low cost is here to stay that

Starting point is 00:57:56 genie is out of the bottle and that ship has sailed but what's interesting and i'll bring back to crypto is that that hot sauce bucket i'd like to get your take on this i've always thought that crypto if i was inside the crypto industry and i had a fund or something and i was interested in promoting it, I would say this is a great compliment to Vanguard or cheap index fund. But I've seen some people in crypto go so outside the system. They're like, you got to get rid of all that. And these old boomers are leading these young people into the S&P, which is like a Ponzi scheme in itself. Some people get kind of weird about that. I can see what they're saying in a way. But for practical purposes, or if you're speaking to a

Starting point is 00:58:43 certain crowd, namely advisors who have $26 trillion in assets, I think the complementary tone is that I would go there. And I would say, just consider us a call option in the future. We may not be right, but we might be right. And you've seen some of the runs we've had in the past. And it's not going away. It's resilient. That, to me, is a very powerful point, in my opinion rather than sell everything you know come into crypto and we're gonna like basically up up in the system i don't know thoughts yeah um i think there are two very different approaches uh i always just go to like an extreme example are all companies going to zero there are some people who believe that i'm not one of them uh my guess is that the companies may change there's

Starting point is 00:59:29 different types of businesses uh but if these technologies are adopted on a global scale it will lead to more companies not less companies right and we've seen this over and over and over again in history and so um the more that you get into like this is a zero-sum game i think the less confidence i have in like that talk track uh the more that it is hey this is going to be really really powerful and valuable to a certain subset of the population and it'll be a one plus one equals three scenario that seems to me uh one it aligns with kind of how we know history usually works uh when it comes to technology uh but two is um it is a uh theory that probably is more likely to occur on a faster timeline because you forget if like if you're gonna blow up the whole legacy

Starting point is 01:00:21 system. Like that takes time, right? I get to do the demolition and you have to do the building in, uh, the scenario where, uh, it's like, look like the building kind of just like slowly recruits people. Right. And, uh, they swap out assets, they create new companies, like all that stuff. Like that just seems like a more efficient way to do it as well. Um, but with that said, I mean, there's certain parts and, you know, I'm sure you, myself and many others would agree there's bureaucratic parts, there's, you know, rent seeking, there's like things that naturally will die. Whether it's these set of technologies, or different technologies that haven't even invented yet, right? Or just, you know, artificial intelligence, machine learning,

Starting point is 01:01:01 like there's all these things that will eat away at some part of the industry. I think the question just comes down to, you know, which ones, when do they happen? And who are the winners on the other side? And the beauty of finance is that, like, it's very different than academia, where like there's less talking and more betting right of just like hey here here's where the money is uh let's see who's right and who's wrong and they'll and they'll be rewarded financially uh which i think is part of the beauty of uh of kind of all this and why so many people are interested in it is because there's people with real skin in the game who stand to make or lose a lot of money depending on how it plays out yeah no um i i agree i just uh one thing in bogel's

Starting point is 01:01:40 books. And this is something that is, I think when you think about the S&P 500 and the companies in it, these are people who wake up every day, go to work at Google or Amazon, armies of people, and they create value, right? And that creates cashflow. And even if the price is lofty because the Fed or whatever, we'll call that speculative return, there's generally an investment return you get. I mean, the S&P typically will give you about 7%, 8% a year, maybe 9% on average because of the dividends that pays out in the cash flow. So I find that's a pretty eat your vegetables kind of argument. It's hard to think that's going to go away, but I guess it could. And I think that's where sometimes, especially in the advisory world, it's interesting

Starting point is 01:02:26 to see how crypto will fit in there. I think that advisors and the sort of mainstream investors, is I do think they bucket crypto with an ARK or a thematic ETF in that, look, I don't understand it totally. I don't even know if I want the system to be upended. But there's some smart people in this space. I like some of the upside volatility. And I want to just not have FOMO if it starts to take off. Let me give it 4% or 5% or something like that. So I think that's a really good lane. Because think about it, 4% or 5% of $26 trillion is a lot of money. And that's ultimately why I think you and I, last time you were kind enough to invite me on, we talked about the spot Bitcoin ETF and how major of an impact that could have because of that 26 trillion advisors who are

Starting point is 01:03:13 probably a little much more conservative when it comes to investing in the space of crypto. What's the latest on it? You think it's going to happen? We got three, four months left of the year. Unlikely? Oh yeah, unlikely. I mean, 1% chance. It's really, it's all about Gary Gensler's brain. It comes down to one man's brain. GBTC has just, they're suing the SEC. They've written so much on how ridiculous it is to not approve a spot Bitcoin ETF, how it's contradictory to approve the futures. Our team agrees with them. I think we're all on the same page here. But over the years, we've made written notes saying this. I've just become so numb and beaten down that I just can't. It's just so hard to even say this when it really comes down to one

Starting point is 01:04:01 man's point of view. And so long as Gensler sees the crypto world as the Wild West and not regulated enough, there will be no spot Bitcoin ETF. Now, what he would introduce that would satisfy him, we haven't seen it yet, but it's possible that happens. You have a midterm election coming up, So I wouldn't look for anything before that. So I don't know. Two years maybe if I had you had we had the ballpark of us Vegas and over under when a spot Bitcoin would be approved. I'd probably go two years over under. So what is depressing? You know, the stupid if he if he woke up, could he just say, like, all right, fine, approve it. And pretty much it would be done. Yeah. Yeah. I mean, because you could make the same arguments. GBTC has done a great job of basically bullet for bullet, and Wisdom Street too, a bunch of them have, explaining why the SEC's issues are not really warranted. The other thing is, the SEC, in my opinion, this is what Hester Peirce has been arguing.

Starting point is 01:05:02 She's a commissioner. If she was commissioner, it would be approved. See, that's how we know. What I think they miss is that the industry, the ETF industry, is such a massive, amazing ecosystem full of the richest market makers and the smartest market makers. They're not messing around. You introduce a spot Bitcoin ETF into that, they're not going to use shady exchanges. they're going to work for the sec in a way by making due diligence higher and making exchanges

Starting point is 01:05:34 really be very legit because nobody wants to you know at that level wants to mess with anybody shady so just by having an etf and the exchanges want the business from the market maker so they're going to make sure they're above board so i don't know why they don't see the etf as a force that will help them to make the crypto industry less wild west uh this is a point hester first makes our teammates constantly i i don't know i i guess there's a probably a pr risk in the back of genza's brain that some somewhere there's a hack and then somebody says why would you let middle america buy this through an etf you know and he gets in big trouble i think there's a cya kind of risk i think in the back of his head although i just don't think it's big enough or i something

Starting point is 01:06:22 like that happened i think uh you know the sec could get together with the issuers and probably find a solution for the investors who were in that particular fund at that time or with that exchange or something like that but that's probably ultimately what's dictating all this is that cya feeling and then a potential pr problem yeah it's uh it's fascinating to kind to watch and i think you and i've talked about it a couple times uh you know we will see i don't know two years is a pretty good guess in terms of over under because i'm sitting here like yeah uh the bull in me says under and uh the bear in me says over right like i don't know it's been filed for 10 years now the winklevoss ctf is i think i believe 2013 so we're over 10 years old

Starting point is 01:07:03 um it's crazy i had my my son was like my son's 11 now he was basically born right around the time And the first crypto ETF was filed. It's just crazy how much time has passed. So another two years. Anyway, and the rest of the world has evolved. I think crypto spot Bitcoin ETFs are now domiciled. I want to say seven or eight countries. It's just not, I don't know.

Starting point is 01:07:27 It's just us. We have this, again, it's a, it's, I will say, you know, Gensler is a Democrat. There tend to be more interregulation as well. I think that's probably also part of it. But then again, the last guy under Trump had similar issues. So who knows? Again, I hope it's sooner. We all do.

Starting point is 01:07:49 I think it'd be good for both the crypto world and for investors. I think ETS helped usher in a lot of transparency and a little price competition. And so it would benefit everybody. It's just stunning they don't see that. But my opinion doesn't matter. Mine doesn't either, my friend. Mine does not either. Where can we send people to find the book, The Bogle Effect?

Starting point is 01:08:09 oh just amazon i would say um you know it's probably easiest so uh and uh if you do check it out i i thank you and uh you know hopefully get draw some inspiration from it this guy he was a different dude special guy i uh uh i'm fascinated by him i think the uh uh the parallels that you draw also is the og a defy is uh is quite interesting where can people yeah look if you read the book and you and you don't agree with me feel free to hit me up on twitter and call me out but i read it first and then you decide if you agree or not. All right. What, uh, what's your Twitter account for people who want to do that? Um, at Eric Valchunas. So it's just my name. Shockingly, that was available. So that's the good thing about having a name like mine. I don't have

Starting point is 01:08:54 any numbers on my Gmail account on my Twitter. It's clean. Yeah. Yeah. That, that is a, that is one advantage for sure. Uh, I appreciate your time. Uh, the book is a fantastic. Anyone who has not got it yet, I highly suggest you do. And we'll do this again at some point in the future, Eric. Thank you very much. I appreciate it. Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry, we've got you covered. Head over to thecryptoacademy.io. My team and I have been

Starting point is 01:09:29 working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events. We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies. Go to thecryptoacademy.io to learn more.

Starting point is 01:09:49 Again, that's thecryptoacademy.io. If you enjoyed today's episode, make sure you share it with your friends and I'll see you all for the next episode. you you Thank you.

The Pomp Podcast - #1100 Eric Balchunas On The Greatest Investor You Never Heard Of

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