#58 John Bogle: Enough: True Measures of Money, Business, and Life

What I learned from reading Enough: True Measures of Money, Business, and Life by John Bogle ---- Gentlemen, cut your costs. [4:00] the benefits of being forced to work early on in life [7:00] I'll never forget the inspiration when I read this quote: The force of his mind overcame his every impediment. [9:30] the traits he needed to found Vanguard [12:00] what John thinks we should be doing better [13:30] create things that help other people/Charlie Munger [17:30] When a business fails people want to know their revenue. I want to know their costs [19:30] the past is not a prologue in the financial markets... please, please, please don't count on it. [23:00] Einstein well understood the limits of quantification / the way we act and the way we measure are in conflict [26:00] Show me the incentive and I will show you the outcome. –Charlie Munger / If you get the incentives right when you start the company you will grow. [35:00] A rule of life: Press On, Regardless [39:00] 10 reasons why I bother to battle [44:00] ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  True Story, Word of Honor. Joseph Heller, an important and funny writer, now dead, and I were at a party given by a billionaire on Shelter Island. I said, "Joe, how does it make you feel to know that our host, only yesterday, may have made more money than your novel, Catch 22, has earned in its entire history?" And Joe said, "I've got something he can never have." And I said, "What on earth could that be, Joe?" And Joe said, "The knowledge that I've got enough. Not bad. Rest in peace." So that was a poem, published in 2005 in New Yorker by the writer Kurt Vonnegut, that

• 0:41David Senra?

  John Bogle read and, two years later, used for the basis of his commencement address that he gave to Georgetown. And then, two years after that, used as the basis for the book that I am holding in my hand and the one that I want to talk to you about today, which is Enough: True Measures of Money, Business, and Life, by John Bogle, the founder of Vanguard. And this is one of the most widely acclaimed books that I've read for the podcast. Anyone from Tom Peters to Warren Buffett, to Bill Clinton, to David Swensen, all have blurbed and talked about this book. If the book we covered last week, Stay the Course, was about the founding history of

• 1:25David Senra?

  Vanguard, this book is more about his philosophy on life. And just two quick things before I jump back into the book. If you want access to my private podcast feed, all you have to do is leave a review anywhere you listen to this podcast. Take a screenshot of your review and email it to me at [email protected]. Then I'll reply back to your email with a private podcast link. I actually just recorded another podcast for that feed this week. It's on the founder of Seagram's. And he founded the company in... The 1800s, and it actually lasted, the company was around for I think 137 or 140

• 2:10David Senra?

  years, basically. So I just did, he wrote a book called From Little Acorns, so I did a podcast about that. If you want to access that, leave a review, take a screenshot, email it to me at [email protected]. If you're listening to me on an app like Overcast or Breaker where they don't have reviews, but they do have the ability to press a star to recommend or a heart to recommend, you can just do that, find whatever episode of this podcast that you like, press the star, press the heart, take screenshot, send it my way, and I will reply back and give you that access to that private podcast feed. Not only will you get the one I did this week, but you also get, I've done four total now, so you have four podcasts. And then, as a thank you for leaving a review and spreading the word, I'll continue to update that feed rather regularly now. I've

• 2:54David Senra?

  done two podcasts in the last about 10 days. I just started reading another book that I think is going to be eligible for, to turn into a podcast on that feed as well. So hopefully I have that done another seven or 14 days. The second thing is, once I get going, I don't interrupt our time together with ads. Founders is ad-free and independent, so I do rely on the support of people that give value out of my work. If you want to support Founders, the best way to do that is subscribe to Founders Notes by pressing the link in the show notes, right, available right on your podcast player or founderspodcast.com. And what that allows you to do is, just like I take notes and highlights for the books that I read and I turn them into podcasts, I take notes when entrepreneurs are on podcasts. I always say that I don't really view, when an entrepreneur goes and talks about how

• 3:38David Senra?

  they started their business and what they've learned on a podcast, I really view that as a lecture on entrepreneurship. Therefore, I take the notes, I write down their key ideas, and I email them to you every Sunday. So if you'll, if you sign up for that, you can unlock, I think I've done a hun, as of the time I'm recording this, my archive is a hun, there's a notes on 139 different founders. So my goal there is to build the world's largest repository of information on, from company builders, for company builders, that are delivered through talks, which I think is extremely valuable. Okay, so let me go ahead and jump right into this book. He's gonna tell us a little bit more about his upbringing than he did in Stay the Course.

• 4:23David Senra?

  And turns out, he's very much like his great-grandfather. I would describe almost like a crusader against the industry that he operates in. Definitely wants to change. And John Vogel, obviously, is credited with probably just a single... He probably made the most change of anybody, any other single person in the finance industry in history. Okay, so it says, "Perhaps the best place to begin is with my heritage, heavily Scottish, which may be enough to explain my apparently legendary thriftiness. I've always thought of my great-grandfather, Philander Bannister Armstrong, as my spiritual progenitor.

• 5:04David Senra?

  He was an industry leader, but did his best to reform first the fire insurance industry, and then the life insurance industry. In an 1868 speech in St. Louis, he implored, 'Gentlemen, cut your costs.'" That sounds very familiar. It's exactly, I mean, that's basically the thesis behind John Vogel's entire career. His spirited 1917 diatribe, which was 250 pages long, was entitled, "A License to Steal: How the Life Insurance Industry Robs Our Own People of Billions." The final sentence was, "The patient," which is the insurance industry, "has cancer. The virus is in the blood.

• 5:49David Senra?

  He is not only sick unto death, but he is dangerous to the community. Call in the undertaker." So, after reading now the second book on John Vogel, and then listening to a bunch of his speeches on YouTube, it's very clear that he is very much his great-grandfather's great-grandson, because this idea, I mean, you could even say a lot of John Vogel's books, and I think he wrote close to 15 of them. He does feel that... There's plenty of opportunity to add value and be fairly compensated as an entrepreneur, as an investor, but in large part, he feels the industry which he worked in for 60-plus

• 6:31David Senra?

  years only extracts value and doesn't actually provide value. And not only is this book lays out his philosophy very straightforwardly, but so did stay the course. I feel like he made a pretty convincing indictment against a lot of the practices in his industry. So he has some more stories from his youth, and he firmly believes that being forced to work when he was younger was for the best, and it's not only for the best for him, but for the best of most people. His family began, you know, not wealthy, but they were rather well-to-do, and they wind up losing that money. And as a result, he had to work from a very young age and help support the family, and this is what he's gonna tell us about that.

• 7:16David Senra?

  "So when my family began with enough, in fact, much more than enough, we soon were in difficult financial straits." And he says something rather damaging about his father. "My father, having grown up surrounded by the good things of the era, lacked the determination of his father and struggled to hold a job. From an early age, all three boys," so he had a twin brother and another brother, "had to earn what they got. How well I remember the constant refrain, 'idle hands are tools of the devil.'" I don't know where this came from, but I've heard that phrase multiple times, that idleness is something to be avoided, and is usually tied into the way he said it, having to do

• 8:01David Senra?

  with even being devilish. "I've often thought that we three brothers had the perfect growing-up environment," and he's describing that environment now, "which is the need to take responsibility for our own spending money and even help fund the family. We had the initiative to get jobs and the discipline of working for others. While we had wonderful friends who had more than enough and who played while we worked, we learned early on the joy of accepting responsibility, of using our wits, and of engagement with the people whom we served in our various jobs, winter, summer, spring, and fall."

• 8:40David Senra?

  I think that's just pretty straightforward knowledge. The sooner that you have to be, you're forced to work, the sooner you're forced to actually provide for yourself, the better you're actually gonna get at it. So, he turned a negative, which is his father losing his money, into a positive, which gives him tools that he used throughout his life. Something I really love about the way John writes is, first of all, it's very, very straightforward, right to the point, but he also, and I'll be sharing a bunch of them in this podcast, he pulls on a lot of the stuff he reads and learns, inspires them, and then he kind of passes that knowledge down to us, the reader, and I guess in this case, the listener. So this is something that he found inspiration with, that he was in a bad situation, but he knew that through force of will, he could make his situation better.

• 9:25David Senra?

  So he says, "I'll never forget the inspiration that I received, when in my junior year, I read this sentence in an essay on Samuel Johnson." And now, this is the writer Thomas Macaulay describing Samuel Johnson, and it says, "The force of his mind overcame every impediment." On the very next page, he goes into this story, well, let me just read it. He talks about that most of us have enough, that they're diamonds in our own backyard, metaphorically speaking. All you have to do is dig for them. And he sets up that story with this, I guess it's a fable? And it talks, well, let me just read it to you.

• 10:07David Senra?

  "In ancient Persia, a wealthy farmer leaves his home to seek even greater wealth, and spends his life in a fruitless search for a perhaps mythical diamond mine. Finally, as age and years of frustration take their toll, he throws himself into the sea and dies, an unhappy pauper far from home. Meanwhile, back at his estate, the new owner, surveying his vast acreage, sees something in a stream, something bright and glistening in the sunlight. It is a large diamond, and it turns out to rest atop the fabulous diamond mine." And he's gonna lay out the moral right here.

• 10:48David Senra?

  "The moral of the story: Your diamonds are not in far distant mountains, are in yonder seas. They're in your own backyard, if you but dig for them."

• 11:02David Senra?

  And he applies this lesson, he gets into Princeton. He gets a scholarship, but he has to work to support himself. And he says, "With a series of summer jobs, I was able to earn the remaining money I needed. I worked very hard and the hours were long, but I loved hard work then and I still do. I grew up with the priceless advantage of having to work for what I got." And all this is still coming from the introduction of the book, which is kind of like a pre-sumery of his life. So, fast forwarding, he's out of college. This is how he describes himself when he became CEO at 35. I mentioned last week that he's kind of, he seems honest about, not only he's got some

• 11:45David Senra?

  good ideas that he's passing down to us that hopefully we can use in our lives, but he's far from perfect. Even in this book, he talks about how big his ego is and all kinds of stuff. But, this is how he describes himself when he became CEO of Wellington at 35. "Headstrong, impulsive, and naive." So, last week I talked about all that happened to him before, all that had happened to him before he was able to start Vanguard. So, I'm gonna skip over that, but he talks a little bit about the traits needed to found Vanguard. Like, why would you go through being so difficult? And he says, "Pulling off this trick was not easy," meaning, starting Vanguard. "And in fact, I might not have tried doing so if I hadn't the two characteristics that

• 12:29David Senra?

  someone else attributed to me. The stubbornness of an idealist and the soul of a street fighter." And on the very next page, he just talks about that the company was actually founded on a very, very simple idea. And he says, "The idea was simple. Why should our mutual funds retain an outside company to manage their affairs, the modus operandi of our industry then and now, when they could manage themselves and save a small fortune in fees?" And if you remember in the last podcast, the calculation up until, I think, 2018 of what was the actual result of this simple idea from 1974 all the way to 2018 in actual dollars?

• 13:09David Senra?

  And the estimate is about, he saved his customers about 217 billion, almost a quarter trillion in fees, just by this very simple idea applied doggedly over a very long time period. And so, towards the end here of the introduction, he's gonna lay out what he feels like we should be doing better. And this is, I would say, like, his summation of the book. And he says, "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.

• 13:50David Senra?

  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 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 trustyship 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.

• 14:34David Senra?

  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. Admist the 21st-century pressures of immediate satisfaction and amassing information on demand, we've forgotten the enlightened values of the 18th 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." And I love this because on the very next page, I wrote, "This idea is not new."

• 15:18David Senra?

  And he says, "This message is nothing new. Consider that 2,500 years ago, Socrates had much the same message to deliver in his challenge to the citizens of Athens." And he's gonna quote Socrates here. "I honor and love you, but why do you, who are citizens of..." This great and mighty nation cares so much about laying up the greatest amount of money, and honor, and reputation, and so little about wisdom, and truth, and the greatest improvement of the soul. Are you not ashamed of this? I do nothing but go about persuading you all, not to take thought for your persons and your properties, but first and chiefly to care about the greatest improvements of the soul.

• 16:00David Senra?

  I tell you that virtue is not given by money, but that from virtue comes money and every other good of man. And now we're back to the writing of John. "I hardly have the standing to compete with Socrates, but over the course of these remarkably blessed seventy-nine years of life that I've enjoyed to the fullest, I have, like Socrates, arrived at some strong opinions on money, on what we should be proud of and ashamed of in our business and professional callings, and on what are the false and true treasures in our lives. I offer those opinions here in the hope that, to borrow one of Kurt Vonnegut's favorite lines, 'I might poison your minds, dear readers, with a little humanity.'"

• 16:44David Senra?

  So right there, we have John Bogle making our case for why you'd want to read the book. And like I said, that's a really good summary of, so now he's going to go into deeper, each of those opinions he was sharing with us in the introduction, he elaborates into entire chapters and then builds a rather compelling case. Okay, so there's a lot of quotes from Charlie Munger and Warren Buffett in this book, and like I said last week, I've started to do some preliminary research on them, and I'll wind up probably doing a few multi-part series on both of them, because they have a, I mean, I think Charlie Munger's ninety-five, and I think Warren Buffett's eighty-seven, something like that, so they have a lifetime of knowledge that we can all learn from and hopefully use to improve our lives.

• 17:29David Senra?

  All right. So this is Charlie Munger basically telling us, hey, make things that help other people. Says Warren Buffett's wise partner Charlie Munger lays it out, lays it on the line. "Most money-making activity contains profoundly antisocial effects. As high-cost modalities become even more popular, the activity exacerbates the current harmful trend in which ever more of the nation's young brainpower is attracted into lucrative money management and its attendant modern frictions, as distinguished from work providing much more value to others. I share Mr. Munger's concern about the flood of young talent into a field that inevitably

• 18:12David Senra?

  subtracts so much value from society." So he's saying, instead of working in the finance industry, well, there's not much you can do that actually adds value to people, make things that actually help people. Don't waste, um, don't waste your talents, don't waste your life. And so they say this, but they also know, both Charlie Munger and John Bogle know the power of incentives and they even say in, in the book and in some speeches that, "Hey, I could tell you this, but you're most likely not going to listen." Uh, because so much of today's wealth, at least in America, is generated in this industry. I think, uh, on a job basis, it's something like 8% of all jobs, but it's like 40% of the, of profits. So it has a, an outsized effect.

• 18:55David Senra?

  And so, uh, anytime you see that, that kind of, um, imbalance, like you're going to have a lot of smart people realize, "Oh, that's where all the money is. Let me go there." And they're incentivized to do so. Okay. So it says, um, he continues, uh, his crusade against costs. And he says, "Let's start with the costs. Over the past 50 years, the nominal gross return on stocks has averaged 11% per year. So $1,000 invested in stocks at the outset today would have a value of $184,000. So in 50 years, that thousands into 184,000, right? But then he's like, that's not the true story because a good estimate of these costs is at least 2% per year.

• 19:40David Senra?

  And that these costs that he's talking about is the ones that the reason that he started the world's first index fund, the reason that Vanguard exists is because, he calls it the tyranny of costs, I think. I think we're going to get there. So he's like, okay, that's nice. You think you're gonna make 184,000, but when you factor in just a small cost of 2% a year, the net return drops to just $74,000. And then when you factor in taxes, that drops by another one half. So that 184,000, actually, the actual return to the customer after inflation is $37,000. And so his summary here is clearly the wonderful magic of compounding returns has been overwhelmed by the powerful tyranny of compounding costs.

• 20:24David Senra?

  And so my point here is that not only does this apply to investment returns, but it applies to your company's expenses too. And I saw somebody wrote one time, usually when a business goes, wow, so when a business fails, somebody wrote, when a business fails, people want to see their revenue. I want to see their costs. Because I think there's, especially people that have run successful companies for a long time, understand what he's talking about, the powerful tyranny of compounding costs. And so a short while later, he's making the case that the future is not predictable and that most of what you're calling investing is actually speculation. And he uses the term that speculation is a loser's game. So you shouldn't even, and he makes the case,

• 21:08David Senra?

  he provides the math that makes a really compelling, a compelling argument that he's actually correct on this. So he's just gonna use some historical data and then see how when you go back and you control and you try to use the past to predict the future, that it winds up being unsuccessful. So he says, "On a single day, which became to known as Black Monday, the Dow Jones Industrial Average dropped, an astonishing one-day decline of 508 points or almost 25%." So that was in 1987. "There had never been such a precipitous decline. Indeed, the drop was nearly twice the largest previous daily decline of 13%, which took place on Black Thursday, which happened in 1929, a distant early warning that the Great Depression laid ahead."

• 21:53David Senra?

  Okay, so the two single biggest, the two instances of the largest single-day drops, what follows them is vastly different. So he talks about Black Thursday, 1929, that gave a warning for a depression that lasted almost nine years. So we're going to get to what happens after Black Monday, which happened in 87. So it says, "So not only is speculation a loser's game, it's a game whose outcome cannot be predicted with any kind of confidence. The laws of probability don't apply to our financial markets. For in the speculation-driven financial markets, there is no reason whatsoever to expect that just because an event has never happened before, it can't happen in the future." And I would say that applies to almost everything in life.

• 22:37David Senra?

  "Metaphorically speaking, the fact that only swans we humans have ever observed are white doesn't mean that no black swans exist. For evidence, look no further than the Black Monday I just mentioned. Not only was its occurrence utterly unpredictable and beyond all historical experience, but its consequences were too. Far from being an omen of dire days ahead," like the drop on Black Thursday 1929, "it proved to be a harbinger of the greatest bull market in recorded history. So one never knows." He's going to reference one of my favorite books of all time. Nassim Taleb captures this idea with great insight in his book, The Black Swan. Taleb confirms what we already know.

• 23:21David Senra?

  "In the financial markets, the improbable is, in fact, highly probable." Or as Taleb also notes, "The highly probable is utterly improbable. Yet far too many of us, amateurs and professionals alike, investors and advisors and managers, continue to look ahead with apparent confidence that the past is prologue in the financial markets, based on our assumptions that the probabilities established by history will endure." And he summarizes his point of this entire section here. "Please, please, please, don't count on it."

• 24:00David Senra?

  And he's gonna make a point here. This comes from the chapter "Too Much Complexity, Not Enough Simplicity." Something that, this has been on my mind a lot, based on the books that I've been reading lately about, as cliché as it sounds, like, I don't think, um, well, I'm not gonna speak for other people. I definitely, like, I understand that, like, what's a Leonardo da Vinci quote? "Simplicity is the ultimate form of sophistication." And you hear that the, the, there's like a, you know, it's almost like a cliché to talk about how powerful the idea of simplicity is, yet even after hearing all that, I still don't think that it's registering enough for me, and that keep, keep harping on that idea even more can lead to such great benefits. And he's like, "My entire career has been based on something unbelievably simple."

• 24:44David Senra?

  And he says, "My career has been a monument, not to brilliance or complexity, but to common sense and simplicity. The uncanny ability," as one observer has said of me, "to recognize the obvious." He also goes on to talk, to talk about his love of the time-honored wisdom of Occam's razor, which, uh, and just in case you don't know, I know, I know it's bandied about on the internet a lot. So Occam's razor is the problem-solving principle that essentially states that simpler solutions are more likely to be correct than complex ones. But in a footnote here, he, he talks about one of the, uh, the translations from the original Latin is actually, uh, the one he uses, which is, "Plurality ought never be posited without necessity."

• 25:30David Senra?

  I like the way that's phrased more than I've ever heard it phrased any other way. So now it gets to this point where I wasn't actually understanding, um, what he meant by that until towards the end of the chapter. Let me start out first where he's, he's talking about Einstein. He says, um, "This is the idea that there's too much counting and not enough trust." So he says, "Einstein well understood the limits of quantification and the flaws inherent in thinking that counting alone could advance our understanding of how the world works. A sign that hung in his, in his office is as applicable to all other human pursuits as it is to science." And now this is the sign. It says, "Not everything that counts can be counted, and not everything that can..." ...be counted counts. That rule also applies to the conduct of business affairs.

• 26:14David Senra?

  No business can trust everything and count nothing. Nor can any business count everything and trust nothing. It's all a question of balance, although my own instincts lead me toward far less reliance on counting and far more reliance on trusting. Statistics in charts, graphs, and tables can be used to prove almost anything in business. But unquantifiable values have a way of holding steady as a rock. So he continues along in this vein in a few pages. And then this smacks me in the face. I'm like, "Oh, okay." And I realize his main point here. The way we act and the way we measure things are in conflict. And that's when it finally clicked for me.

• 26:57David Senra?

  So he's gonna go into a little bit here. He says, "But it's not just our capital markets that have been corrupted by the perils of relying so heavily on the apparent certitude of numbers. Our businesses too have much to answer for. And indeed, the economic consequences of managing corporations by the numbers are both extensive and profound." And what does he mean by that? Well, he's gonna talk about this, the track record of CEOs. "The terrible track record of CEOs in predicting growth for their own firms is a well-established fact." Now, that sentence made sense to me, although before reading this, I didn't know that was a well-established fact. He lays out the numbers, and it turns out he's right. He says, "But their bias toward optimism and their use, or rather abuse, of numbers

• 27:42David Senra?

  to support optimistic assumptions at least has the excuse of self-interest. Security analysts are supposed to bring a more objective eye to such numbers, but time and time again, they too uncritically put on rose-colored glasses and go along for the ride." And he talks about the reason they do this, is because they're paid by the people they're supposed to be monitoring. There's a lot of information in this book about some of the corruption that occurred during the financial crisis where...

• 28:10David Senra?

  Basically, their incentives were not aligned to actually verify that the numbers that they're supposed to be reporting on, like they use the the accounting firm Arthur Andersen and their well-known client Enron as an example. So, more important, if you want to figure out what's going on, think about what humans are incentivized and think about how they're prone to act, not just numbers as an answer. Like, I like numbers, to me, like, I'm almost in conflict with how I live my life because I feel numbers gives like a grounding to a very like fuzzy reality. But he does make a good point that if you cook the books, he actually uses that.

• 28:55David Senra?

  He uses that phrase on the next page when talking about government, not where a lot of the, a lot of the numbers that we're getting from our government, like GDP and inflation, he gives examples of why they're actually cooking the books, they're actually not giving us the right information, and then using that as just an end-all be-all and not analyzing like the broader way humans interact with one another in terms of commerce can actually lead you to make drastically disastrous decisions, such as the decisions that Arthur Andersen made or some of the banks did in the financial crisis.

• 29:30David Senra?

  And he's going to tell us the difference here, he's going to tell us the difference between companies that trust and companies that count. Lest I be accused of innumeracy, please be clear that I'm not saying that numbers don't matter. Measurement standards, counting if you will, are essential to the communication of financial goals and achievements. I know that. But going, but for going on four decades, I've been engaged in building an enterprise and a finance, and a financial institution at that, based far more on the sound implementation of a few common sense investment ideas, an enlightened sense of human values and ethical standards, and the bond of trust between our firm and its clients.

• 30:13David Senra?

  We did our best to avoid measurement with quantitative goals and statistical achievements. Vanguard's market share, as I've said countless times, must be a measure, not an objective. It must be earned, not bought. Our strategy arose from a conviction that the best corporate growth comes from putting the horse of doing things for clients ahead of the cart of earnings targets. Growth must be organic rather than forced. No company, of course, and certainly not one as huge as Vanguard, can ignore numbers altogether. But I've often noted the extremes in management style between companies that trust and companies that count.

• 30:55David Senra?

  And I fervently hope that anyone who has ever worked for Vanguard includes our company among the former. For my part, I've tried to reinforce the point over the decades with an aphorism that I've seen posted on countless desks throughout our now seemingly countless buildings. And this is the aphorism. "For God's sake, let's always keep Vanguard a place where judgment has at least a fighting chance to triumph over process." I think that's a good example of where knowledge and education are two vastly different things. Knowledge comes from experience. He's got, in this case, what, 40 something years of building a company, living in the real world, having to survive.

• 31:38David Senra?

  And education, I feel like going to business school over 10 years ago, like I feel like they very much lean heavily on measurement. And not, I mean, that idea that, I really like that idea, your market share, if that's even important to you, should be a measure, not an objective. That's powerful. And it only comes from experience. All right, so, oh, he continues this. There's something wonderfully, like, he's wonderfully consistent. And after reading his writing and hearing him speak a bunch, like, he basically has a very few simple ideas, but he kind of understands, like, the need for repetition to get these ideas into our brain, because there's even times where I'm reading this, I'm like, wait, I don't understand what you're saying here.

• 32:23David Senra?

  And then, you know, it can finally click after he repeats it to me a few times. And he says, "Agree with me or not, but at least I'm consistent. In 1972, nearly 40 years ago, I closed my annual message to my employees with this quotation from Daniel Yankelovich about giving too much credence to counting numbers."

• 32:47David Senra?

  So this is the quote that he gives to his employees 40 years ago. "The first step is to measure what can be easily measured. That is okay as far as it goes. The second step is to disregard that which cannot be measured or give it an arbitrary quantitative value. This is artificial and misleading. The third step is to presume that what cannot be measured really is not very important. This is blindness. The fourth step is to say that what cannot be measured does not really exist. This is suicide." And the guy he was quoting in the footnotes, it talks about he founded one of the premier marketing research firms of its day.

• 33:32David Senra?

  So I looked him up on Amazon. He's written a bunch of books, so he might actually appear. You know this idea, we always talk about how books are the original hyperlinks and they lead you from one idea to another. I've definitely used that for this podcast where I learned about a ton of other founders and people that I didn't know about by reading, you know, the stories of other founders because they inevitably talk about who influenced them. And that's something I talked about where the podcast I just did for the reviewers, for the people that left reviews, that Samuel Bravman guy, he actually founded Seagram's. I found out about him because I read Michael Ovitz's book a few weeks ago and his dad, Michael Ovitz's dad, worked for Samuel Bravman and kind of always would tell Michael when he was younger how much he respected him.

• 34:17David Senra?

  And then in a twist of fate, Michael winds up meeting the CEO of Seagram's at the time, which is the grandson of Samuel Bravman. And Michael talks about this in great length in the book. He's actually brokers the deal for the Bravman family to buy MCA. Okay, so, okay, so I was just mentioning this idea of the importance of incentives. There's a bunch of Charlie Munger quotes in here. I want to read two of them to you because it talks about...

• 34:52David Senra?

  It talks about, well, this is where John Bogle talks about some stuff, uh, the, like, what, when you, what happens when you have a misalignment of incentives? So the first Charlie Munger quote is, "I've been in the top 5% of my age cohort all of my life in understanding the power of incentives, and all of my life, I've underestimated it." And his second quote is, "Show me the incentive, and I will show you the outcome." So, first, we need to define, uh, this is the definition that, uh, John Bogle uses for somebody that, that, uh, conducts themselves like a true professional. And he says, "I will create value for society, rather than extract it." And he says, "Plenty of members of our economy do exactly that, they create value."

• 35:35David Senra?

  So he, he very much, um, evangelizes like entrepreneurship, making products, making people's lives better, and then making money from that, not extracting it, uh, as he feels the finance industry does. And he says, "As we learned earlier, money managers, or, excuse me, money management extracts value." So he, he feels that they shouldn't exist. And this idea of, um, of incentives, he's, he's talking about here, "Other examples of the harsh consequences of this move away from professional conduct are easy to come by. In public accounting, our once Big Eight, now known as the Final Four, uh, firms gradually came to provide hugely profitable consulting services to their audit clients." So they developed these products, uh, next to, as a way to make more money, uh, from

• 36:20David Senra?

  what should have been their primary, primary business, which is auditing. "Making them business partners of management, rather than independent and professional evaluators of generally accepted accounting principles." So when this happens, the, the outcome, according to Charlie Munger, is completely predictable. And it says, "The 2003 failure of the Arthur, of Arthur Andersen, and the earlier bankruptcy of its, of its client Enron, was but one dramatic example of the consequence of this conflict-riddled relationship." So after reading that, I realized, the, the larger idea here, is that if you get the incentives right when you start the company, you'll grow. Because your incentives are completely aligned with your customers. There's no, what he says, conflict-riddled relationship.

• 37:05David Senra?

  That's exactly the blueprint that Vanguard is laying out with us. From the very beginning, their incentive was to reduce costs for their customers. And they did so 200 times over the career of John Bogle. And I think that's part of the reason why they exist today and Arthur Andersen does not.

• 37:26David Senra?

  And he's going to quote, there's a 200-plus-year-old quote from Adam Smith. And in this case, he's talking about his industry. But I think this same principle applies to companies. And he says, "Managers of other people's money rarely watch over it with the same anxious diligence with which they watch over their own. They very easily give themselves a dispensation. Negligence and profusion must always prevail." And that's something that Adam Smith wrote over 200 years ago. Very much so, I think, describes what we talk about all the time, the difference between founders and CEOs.

• 38:07David Senra?

  John Bogle goes into great detail, it's actually in the chapter that I'm quoting from right now, about the misalignment of incentives for professional CEOs. How they can make small fortunes by optimizing for the long term, even if it puts the overall firm at risk, just because the way that their compensation is calculated. It's based on what you're making now, not how that can affect the company a year, two, five years down the line. And I think that's the difference between the founders that are still in charge of their company. They very much care because they're still the owner of that company.

• 38:47David Senra?

  A simple heuristic I have in my life is if I can spend money with a company that's still led by the founder, I try to. I feel that's just a good rule of thumb, not only to make sure I support them, but to get, usually I find founder-led companies actually put customers first because they know that they rely on it. So this is something, I love this idea about a family motto. He's gonna tell us his family motto and then he's gonna quote Calvin Coolidge here. And so it says, "If there was a single phrase that best articulates the attitude of business leaders and managers who both deserve and reward a great workforce, it would be 'Press on regardless.'

• 39:31David Senra?

  It is a rule of life that has been a motto of my family for as long as I can remember, and has sustained me through times thick, uh, two times thick and times thin alike." And he talks about, his uncle even had a boat named Press On. And in that boat, he had a little framed copy of a quote from Calvin Coolidge. And this is the quote. And it says, "Nothing in the world can take the place of persistence. Talent will not. Nothing is more common than unsuccessful men with talent. Genius will not. Unrewarded genius is almost a proverb. Education will not. The world is full of educated derelicts.

• 40:15David Senra?

  Persistence and determination alone are omnipotent. The slogan 'Press on' has solved, and always will solve, the problems of the human race." So I love that idea. It's funny how life works out sometimes. The day I'm reading this, a few hours later, um, so I have a, my, my little girl, my daughter is six years old, and my wife comes in, she said, "Did you see her progress report?" And I was like, "No, let me see it." And she got all straight A's, she's killing first grade right now. And, um, but she's like, "Look at the teacher comments." And in the teacher comments, it said, "Always puts forth maximum effort." And I was like, "That's our family motto."

• 41:00David Senra?

  Like, and I told her about John Borgo's family motto, I was like, "That should be our family. We need a family motto, and I can't think of a better family motto than 'Always puts forth maximum effort.'" I love that. Um, okay, so- Like I said, he uses, he quotes quite a bit from people that influenced him, books he read, poems, etc., etc. And he comes across something in a book about this idea of a superior company. And I just want to pull a quote out of here because I love this. And he's quoting, the guy's name is Robert Greenleaf, and he says, "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.

• 41:44David Senra?

  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," meaning the superior company does. "The company's unconventional thinking about its dream is often born of a liberating vision." So we've talked about this idea many times, how like you have to know why you're doing what you were doing, or this idea that missionaries make the best products, they make the best, they create the best companies. I've never heard of it in the sense that like, what is your company's dream? I like that a lot. And the company's unconventional thinking about its dream. I like that.

• 42:26David Senra?

  So what this business wants to be, and then you organize, from there, if you know that, it's very easy because then you could set your priorities, it makes, you kind of have like a north star, like a guiding, guiding light, if you will.

• 42:38David Senra?

  Okay. So now, I'm going to jump to the end of the book. Like I said, the book is really short, you could probably, I bet you could probably read it, I mean, it's probably about a five hour read, so maybe two days, something like that? Okay, so first, before I get to this part where I love, he makes this like top 10 list that I'm going to read to you. It's a, it's a personal note, and I think that's a good way to close. But before that, he's just got some old school advice for us on life. And he's talking about like what, like, what, first he has a quote, he's like, "Success is not the key to happiness, happiness is the key to success." So then he's like, "Okay, well, what makes happiness?" And he talks about money, like having a certain amount of money is needed, but you realize that money provides what he calls "a transitory sort of happiness."

• 43:25David Senra?

  And so he's like, listen, this is what determined, in his opinion, determines our happiness. It's the presence of some combinations of these three attributes, and he's going to go into that now. One, autonomy, the extent to which we have the ability to control our own lives, also known as to do our own thing. Number two, maintaining connectiveness with other human beings in the form of love of our families, pleasure in our friends and colleagues, and an openness with those we meet in all walks of life. And number three, exercising competence, which means using our talents, being inspired, and striving to learn. And now, this is the last part, which I think is valuable for all of us to hear.

• 44:07David Senra?

  He's talking about, hey, listen, there's a leadership summit that I was going to give a talk at. I was going to be the old person among the group. So he's like, I needed to figure out what to talk about. He's like, I settled on a subject that I thought would be both retrospective and prospective. And that subject is, why do I bother to battle? Then he says, I decided to frame my talk as one of those inverse top 10 lists from The Late Show with David Letterman. As comedy, my list might be wanting, but as a summation of what has pushed me during my entire life, and what continues to push me on today, it's right on the mark. So I'm just going to read all of them to you, because I thought they were all fantastic.

• 44:49David Senra?

  Number 10, damned if I know why I bother to battle. I just do it, and I don't know how to stop. Number nine, because in nearly all the, in all the nearly nine decades of my life, I've never done anything but battle. As a boy delivering newspapers, then as a young man working as a waiter, a ticket seller, a mail clerk, a reporter, a runner for a brokerage firm, even a pin setter in a bowling alley, and as a man fighting the battle for personal advancement, for attention, for innovation, for progress, for service to society, and yes, even for power and the hope of being remembered. I might as well admit that. That's one reason why I write books, including this one.

• 45:35David Senra?

  Number eight, because the great battlers of history have always been my heroes. Think Alexander Hamilton, Teddy Roosevelt, Woodrow Wilson. Heck, think Philadelphia's own Rocky Balboa. Seven, because all those battlers finally lost their battles. I battle to be the exception. Number six, because in the mutual fund field, no one else in the system is battling to bring back our traditional values of trusteeship and our high promise of service to investors. Somebody's got to do it. By the process of elimination, I got the job.

• 46:16David Senra?

  Number five, because when the battler stands pretty much alone, he draws a lot more attention to the mission. If you have a large ego, and I do, that's a nice extra dividend, especially because those who are outside the system, exemplified by the Bogleheads on the internet, give me the strength to carry on. He kind of, uh, kind of does lead his own cult. So this entire website dedicated to the ideas of Jack, of John Bogle, and they call themselves Bogleheads. Number four, because sad to say, I no longer play squash and playing golf on grown-up courses is now something of a stretch. So what else can I do but transfer the spirit of the, of those old battles on the fields

• 47:00David Senra?

  of athletic combat, onto the fields of combat to improve our society at large? Number three, because what I'm battling for, building our nation's financial system anew in order to give our citizens and investors a fair shake, is right. Mathematically right, philosophically right, ethically right. Call it idealism, and it's as strong today as, maybe even stronger than it was when I wrote the idealistic Princeton thesis 57 years ago. How could an idealist fail to fight such a battle? Number two, because even as I battle, I love the give and take, the competition, the

• 47:43David Senra?

  intellectual challenge of my field, the burning desire to leave everything that I touch better than I found it. Using Robert Frost's formulation, my battle is a lover's quarrel with our financial world.

• 47:58David Senra?

  Number one, simply because I'm a battler by nature, born, bred, and raised to make my own way in life. Such a life demands the kind of passion invoked by the words of the great sculptor of Mount Rushmore. "Life is a kind of campaign. People have no idea what strength comes to one's soul and spirit through a good fight." While I simply can't imagine that my own soul and spirit will ever fade, I know deep down that time is not on my side. That's a, that's especially hit me considering he just died a few weeks ago. So I'll continue to fight the battle until my mind and strength at last begin to dull.

• 48:42David Senra?

  Only then, I hope many moons from now, will I take time to revel in the memories of all the wonderful battles I've fought during my long life. After all, paraphrasing Sophocles, "One must wait until the evening to appreciate the splendor of the day." And that is where I'll leave this story. If you want the full story, I'd recommend picking up the book. It's Enough: True Measures of Money, Business, and Life by John Bogl. I think it's one of those books that you just leave out in like your living room and just pick it up, read a chapter, put it down. You definitely don't have to read it all at once, even though it is a relatively easy read.

• 49:26David Senra?

  I just think he packs a lot of wisdom in a very, very small book. I don't know, it just gave me an unbelievably deeper understanding and appreciation for the work that he dedicated his life to. And just that really simple idea that you just put customers first and everything else takes care of itself. It's super obvious, but unfortunately, kind of rare.

• 49:50David Senra?

  So if you get value from the work I do, if you're learning from these podcasts, I would consider it a great favor. I'd really appreciate if you sign up to Founder's Notes. You can click the link in your podcast player or go to founderspodcast.com. You'll see a link in every single podcast I've ever made. You can sign up. It takes less than a minute. You'll get an email from me every Sunday. You'll unlock the archive, which I said before, has 139, I think. Basically, the best ideas about building companies from the people that are doing it right now. So for entrepreneurs or founders that are already running companies, it's a no-brainer for people that want to run a company or create anything new. I think it's definitely

• 50:33David Senra?

  a no-brainer. It's worth every penny and then some. So not only do you unlock the archive, but I take notes on podcasts every day. So every month, I do 30 more notes. So that archive is going to grow by 365 founders every year. So as I continue on with these projects, I hope, like I said, to make it the largest repository of knowledge about building companies from people that are actually doing it. So if you get work from this podcast, again, I don't put ads in it. I don't do anything else. So that's basically the only way you can support it. If for whatever reason, you cannot afford the small monthly fee at the moment, that's completely understandable.

• 51:17David Senra?

  There's plenty of other ways. Like, you could tell people about the podcast. You could send them the links for Founder's Notes for people that you think would benefit from it. You can leave reviews and ratings. That's another way to get extra podcasts from me. And I just feel like I've been talking about this lately, like, I didn't want, you know, I stopped doing the Misfit feed, which is the feed where if you donated to the podcast every month, that I would do extra podcasts. And I appreciate all the people who signed up. And it did hurt me financially, obviously, because I turned off, you know, I'm not accepting money from that anymore, since I'm not going to update it. I didn't feel that was right. But I feel like the short-term pain of losing that revenue source is, in the long term, you know, I'm going to feel, I feel

• 51:59David Senra?

  better. I feel the fact that every single podcast I ever do is available for free to anybody all around the world. And, I don't know, I like the idea of transferring the ideas from these books into making them readily available for everybody. I think that makes me feel good.

• 52:18David Senra?

  I'm just happy about it. So, and I know like the podcast will grow and more people will support by sending a founder's notes. So in the long run, we'll be fine. And I don't know, I like the idea of making every single podcast free to everybody and ad free. And the extra podcast I do for the reviewer only is like, that doesn't cost any money. It just costs about a minute or two of your time. And as I said, on the last reviewer only podcast, I did this podcast on, called Creative Selection, which is inside the Apple design process in the golden age of Steve Jobs. It's written by one of the programmers. He reported, he demoed to Steve Jobs multiple times. He was one of the initial people on the team that created Safari web browser. And then he's largely responsible for the keyboard on the

• 53:02David Senra?

  iPhone. And just goes into like, how Apple thinks about product design, how they actually do it. And I think it's valuable to not only for people, entrepreneurs, building products, but even individuals, product managers. It's just such a, such a good book. And so if you want to access that podcast and the three, and the four total ones I've done so far, just leave a review, take a screenshot, [email protected]. And usually within a few days, I reply, reply back with an email personally with the link to, to that private podcast feed. And the cool thing is, not only for, I think for a minute or two of your time, you're doing me a favor. And then I repay back, like I repay back in spades, because

• 53:44David Senra?

  I've already done four. But once you have that private RSS feed, as I update it, it'll automatically populate in your podcast player like any other podcast. So, and I'm going to be doing a lot of them. I set out the, I never finished my thought, just rambling again. What I was, the reason I brought up Creative Selection is because at the end of the podcast, I had in Creative Selection, I said that, listen, I'm a, I'm pretty damn determined to make sure that that podcast feed is so valuable that it's going to be the best one, like the best return on investment you ever get for one or two minutes of your time. Because not only do you get the four that I've already done at the time of this recording, but you'll get every single podcast reviewer on podcasting in the future. And so in addition to all the books that I read for the main podcast feed, like Enough, and

• 54:26David Senra?

  Stay the Course, and the 50 something other books I've read so far, I just read a lot. And sometimes they're not biographies on founders. So they don't make it, it doesn't make sense for me to put it on the main founders feed. But there are other books that I read that I think are still valuable to anybody working, whether it be in life, or valuable for how to approach life, or how to think about like the future of work. Like I'm reading this one book now on like, what is the internet doing to the optimal size, something I'm extremely interested in myself. And that's why I started reading the book, is like, what is the internet doing to the, like, what is it doing to the optimal size of companies? And it's something that's not

• 55:11David Senra?

  talked about as much as I think should be talked about personally, where the entire, the entire history of capitalism up to this part, you know, there's been, there's clearly been an incentive to scale, to that size was an advantage because of all the benefits from economies of scale. And the author in this book is making a very compelling case of something that I suspect is true, and I haven't been able, like, these thoughts have been running around in my head for quite some time, but I don't know if I'm able to, to like, put them into words like he's been doing so far, that the opposite

• 55:49David Senra?

  is actually true right now. That the optimal size of a company is drastically shrinking because of the leverage that technology gives, provides to us. So, I have a feeling that's going to be the next book I do for the reviewer only feed. So, and I'll tell you more about that as I continue to read through that book, because I think those ideas are powerful. And you see like anecdotal information, I've seen it expressed usually online, where like, they compare like revenues of like, let's say the top five tech companies in the world right now, compared to like, what the top five companies were, let's say, you know, back when GE was one of them. And it talks about, these are the revenues, these are the employee count, and you know, like, the employee count's usually like

• 56:32David Senra?

  a 10th or a 5th of what they were, and the revenues are about the same.

• 56:37David Senra?

  And it kind of, you know, Jeff Bezos has said stuff like this, like, hey, on the, in the age of the internet, you can either be really, really small or really, really large. But everything in the middle is going to get wiped out. And yet, I think like a large percentage of our economy is still in the middle.

• 56:54David Senra?

  And I think there are some, I don't know if it's social pressure, I don't know what the right word is, but there's a lot of, at least when I talk to other entrepreneurs, like, I feel like there's like vanity metrics where it's like, oh, this is the revenue, or this is how the headcount, or this is like the office, like what our office looks like. And it's just like, that might not be signaling what you think it's signaling. And so, I don't know, I'm looking forward to finishing that book and, and, and pulling out parts and making it into an engineering podcast, because it's something I'm predisposed to already believe in.

• 57:29David Senra?

  Yeah, that's just a stream of consciousness I wasn't expecting to talk about. But anyways, thank you very much for your support. Thank you for leaving reviews. Thank you for telling your friends and thank you for listening. I will be back next week with another podcast about another founder. I'm most likely, I have a stack of like, I don't know, 10 or 15 books, a lot of which I've gotten from Twitter, by the way. So I'm pretty sure I'm gonna finally get around to the personal notes of Howard Hughes and do that.

• 57:56David Senra?

  So that's probably what's gonna, we're gonna talk about next week. All right. Thank you very much. Talk to you later.