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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
John C. Bogle and William Bernstein define “enough” and suggest another golden rule: never confuse your self-worth with your net worth.
Knowing Enough combines the penetrating insights into investing and life of John C. Bogle, the founder of Vanguard and the pioneer of index investing, and the priceless practical advice of William J. Bernstein, bestselling author of The Four Pillars of Investing and market historian. Their conversations were the centerpiece of Boglehead meetings until Bogle’s passing on January 19, 2019.
The book combines Bogle’s insights from his bestselling Enough and Bernstein’s practical how-to, If You Can. Their goal: to inspire you to lead a meaningful life that reaches well beyond your net worth to touch upon matters of self-worth, and to provide you with the means of doing so. You’ll also find:
- How to focus less on chasing financial success and more on living a meaningful life
- Insight into investing wisely and contributing to the common good
- Reflections on lessons learned from Bogle throughout his career
Written in the same conversational tone found between Bogle and Bernstein at Boglehead events, Knowing Enough challenges readers to rethink their relationship with money, business, and society.
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Veröffentlichungsjahr: 2025
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Table of Contents
Cover
Table of Contents
Title Page
Copyright
Preface to
Knowing Enough
Original Foreword to
Enough
Original Prologue to
Enough
John C. Bogle's Author's Note to
Enough
Causes of the Collapse
“A Failure of Capitalism”
The Story of
Enough
.
So What's to Be Done?
An Ethical Crisis
Public Acceptance
The Great Seduction
Original Introduction to
Enough
Growing Up
No Idle Hands
Blair Academy: “Come, Study, Learn”
Acres of Diamonds
Coming to Philadelphia
At Princeton, a Discovery
A Door Slams; a Window Opens
Complications
A Complete Firm Emerges
A Stunning Endorsement from the Court of Last Resort
A Change of Heart
Treasures False and True
Socrates’ Challenge
Notes
MONEY
Chapter 1: Too Much Cost, Not Enough Value
A Prophetic Forecast
Wresting a Living from Finance
Fortunes from Failure
Heads I Win; Tails You Lose
Brain Drain
The Drain of Costs and Taxes
The Wrong Kind of Wizardry
Costs Rear Their Ugly Head
Investors Get Precisely What They
Don't
Pay For
A Question So Important
Notes
Chapter 2: Too Much Speculation, Not Enough Investment
A Giant Distraction
A Loser's Game
Speculation Is in the Driver's Seat
Black Swans and Market Returns
Black Swans and Investment Returns
Tortoises Win
Hares Win ( But How Can That Be?)
The Perils of Market Timing
Striking a Balance
Notes
Chapter 3: Too Much Complexity, Not Enough Simplicity
Derivatives: Dancing to the Music
Marketers Win, Investors Lose
“Don't Just Stand There. Do Something!”
Mutual Funds: Lowering the Bar
Sometimes for Better, but Mostly for Worse
The Innovation Blunderbuss
Back to Basics
An All-Too-Predictable Outcome
Notes
BUSINESS
Chapter 4: Too Much Counting, Not Enough Trust
Government: Making the Numbers Fit
Finance: Attributing Certitude to History
The Experts Are Wrong … Again
Business: The Bias toward Optimism
The Real-World Consequences of Counting
Finance Calls the Tune for Business
“Rock, Scissors, Paper”
Giving Judgment a Chance
The Spirit of Trust
Measure First, Judge Later?
An Empty Exercise
Note
Chapter 5: Too Much Business Conduct, Not Enough Professional Conduct
Times Have Changed
Hammers and Nails
Capitalism Changes Its Values
Owners, Not Agents
CEO Compensation: How Much Is Enough?
A Lack of Accountability
Intrinsic Value, Not Stock Price
Performance, Not Peer Groups
Principals and Principles
“Only Capitalists Can Kill Capitalism”
Notes
Chapter 6: Too Much Salesmanship, Not Enough Stewardship
Investors Change Their Spots; So Do Managers
Good for Managers, Bad for Shareholders
Toward a Better World
Let's Dream Together
Of, By, and For the Shareholder
Note
Chapter 7: Too Much Management, Not Enough Leadership
Building a Great Organization
The Superior Company
Values and Profits
The Gale of Creative Destruction
Notes
LIFE
Chapter 8: Too Much Focus on Things, Not Enough Focus on Commitment
Boldness, Commitment, and Providence
Commitment to Family and Community
The Commitment to Citizenship
Note
Chapter 9: Too Many Twenty-First-Century Values, Not Enough Eighteenth-Century Values
The Age of Reason
The Prototypical Eighteenth-Century Man
Entrepreneurs and Capitalists
The Impartial Spectator
“The Moral History of U.S. Business”
A Merchant and a Man
Returning Stewardship to Capitalism
On Virtue
Notes
Chapter 10: Too Much “Success,” Not Enough Character
Flawed Measures of Wealth …
… and of Fame and Power
The Means, Not the End
A Special Burden
Competition for What?
“Without Character and Courage, Nothing Else Lasts”
Wondering about the Rabbit We Chase
Note
KNOWING ENOUGH (IF YOU CAN)
What's Enough For Me? For You? For America?
Enough for Me?
Enough for You?
Enough for America?
My Own Exciting Odyssey
Notes
Bonus Content from
If You Can
But You're Still Screwed
How to Read This Guide
Hurdle Number One: Even If You Can Invest Like Warren Buffett, If You Can't Save, You'll Die Poor
Hurdle Number Two: Finance Isn't Rocket Science, But You'd Better Understand it Clearly
Hurdle Number Three (With Apologies to George Santayana): Those Who Ignore Financial History Are Condemned to Repeat It
Hurdle Number Four (With Apologies to Walt Kelly, Creator of the
Pogo
Cartoon): We Have Met the Enemy and He Is Us
Hurdle Number Five: The Financial Services Industry Wants to Make You Poor and Stupid
What About the Nuts and Bolts?
Bonus Content from
Stay the Course
Stay the Course
Notes
John C. Bogle's Afterword to
Enough
: A Personal Note about My CareerJohn C. Bogle's Afterword to
Enough
Author's Acknowledgments
Notes
Index
End User License Agreement
Guide
Cover
Title Page
Copyright
Preface to Knowing Enough
Original Foreword to Enough
Original Prologue to Enough
John C. Bogle's Author's Note to Enough
Original Introduction to Enough
Table of Contents
Begin Reading
John C. Bogle's Afterword to Enough
Author's Acknowledgments
Notes
Index
End User License Agreement
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Praise for Enough
“Jack Bogle's passionate cry of Enough. contains a thought-provoking litany of life lessons regarding our individual roles in commerce and society. Employing a seamless mix of personal anecdotes, hard evidence, and all-too-often-underrated subjective admonitions, Bogle challenges each of us to aspire to become better members of our families, our professions, and our communities. Rarely do so few pages provoke so much thought. Read this book.”
—David F. SwensenChief Investment OfficerYale University
“Enough. gives new meaning to the words ‘commitment,’ ‘accountability,’ and ‘stewardship.’ Bogle writes with clarity and passion, and his standards make him a role model for all of us. Enough. is must reading for millions of U.S. investors disenchanted by today's culture of greed, accounting distortions, corporate malfeasance, and oversight failure.”
—Arthur LevittFormer ChairmanU.S. Securities and Exchange Commission
“Jack Bogle's wonderful, thoughtful, helpful, and fun-filled little book inspired me to create my own title: Never Enough of Jack Bogle! ”
—The late Peter L. BernsteinAuthor of Capital Ideas Evolving and Against the Gods
“Jack Bogle, the ‘conscience of Wall Street,’ single-handedly founded the Vanguard Group—still the nation's only mutual mutual fund organization—and then grew it into the gentle giant that funds the retirements, educations, and philanthropic goals of millions of Americans. Now, in Enough., he distills his half-century of observations on the capital markets, and on life in general, into a few hundred entertaining pages—required reading for those concerned about their own future, their family's future, and the nation's future.”
—William J. BernsteinAuthor of A Splendid Exchange and The Four Pillars of Investing
“This is an impressive message from a distinguished businessman. It will challenge all decision makers to consider the sufficiency and direction of their lives and work. What do we mean by Enough? Enough of what? Enough for what purpose? Feast here and reflect.”
—Robert F. BrunerDean and Charles C. Abbott Professor of Business Administration,Darden Graduate School of Business, University of Virginia
“From one ‘battler’ to another: Thank you for putting in one little book the premise for an active, long life. A primer for those who will abjure complacency and just wanting more, who'd rather focus on the joy of trying to move some ball downfield.”
—Ira MillsteinSenior Partner, Weil Gotshal & Manges LLP
“What went wrong? What can, and should, go right? The great Jack Bogle has the answers. Enough. will leave you hungry for more.”
—James GrantEditor of Grant's Interest Rate Observer
“The balances one must create in investing, in running a business, and in life more generally are simply and clearly stated in Jack's most recent book, Enough. Unfortunately there are not enough Jack Bogles around in today's world of instant gratification. Enough. should be must reading for business students and corporate board members.”
—David L. SokolChairman, MidAmerican Energy Holdings Company
“One Jack Bogle has more horse sense than the entire Wall Street herd. If you open this book, you'll be hooked after the first paragraph, as I was. But keep on reading. This small book pays huge dividends.”
—Alan S. BlinderCo-Director, Princeton University Center forEconomic Policy Studies, and Former Vice Chairman,Board of Governors of the Federal Reserve System
“Although Enough. is presented in a small volume, John Bogle's wisdom is writ large and profound. The messages are particularly meaningful as we all reel from the moral, economic, and financial meltdown that confronts us today.”
—William H. DonaldsonFormer Chairman, U.S. Securities and Exchange Commission
“This is the book that all current Bogle enthusiasts have awaited and one that will inspire countless future Bogle enthusiasts. It offers both mesmerizingly candid autobiographical insight from one of the nation's most pioneering financiers and a wise handbook of life perspectives and savvy investment. These personal reflections eschew technical financial jargon and provide the path to escape the desperate chase for ‘more’ regardless of ‘meaning.’ Terms like trust, value, success, satisfaction, stewardship, character, and contribution are woven together into a life tapestry that reminds experienced readers how they can master the treadmill of their lives and guides young readers in how to control their destiny from the start of their careers. When Jack Bogle speaks, CEOs, scholars, and the rest of us all listen … or should listen.”
—Professor Jeffrey SonnenfeldSenior Associate Dean, Yale School of Management
Knowing Enough.
A CONVERSATION ABOUT MONEY AND LIFE
—AND FIGURING OUT WHAT TO DO WITH YOURS
John C. Bogle
William J. Bernstein
Foreword by William Jefferson Clinton
Prologue by Tom Peters, In Search of Excellence
Copyright © 2025 by John C. Bogle and William J. Bernstein. All rights reserved.
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Preface to Knowing Enough
No one, and I mean no one, did more for investors than Jack Bogle. My fellow Boglehead Taylor Larimore likes to say that he lives in “the house that Jack built.” Count me, and many thousands more, in that happy group.
And millions more, whether they know it or not, sleep well at night without money worries because of the at-cost mutual funds that Jack invented at the Vanguard Group.
A quarter of a century ago, a few dozen people met at Taylor's “house that Jack built” (actually, a condominium overlooking Biscayne Bay) to chat with Jack. He was in town for the Miami Herald's March 2000 Making Money Seminar, which wouldn't make time for the group to talk to Jack. It seems that the Herald did not let Muhammad come to the mountain, so the mountain came to Muhammad; Jack went to Taylor's place for a meetup with this little group. (The Herald, realizing their mistake, sent a reporter and photographer to Taylor's place and splashed out a front-page story in the following Sunday Business section.)
The attendees by that point had already been cyberbuddies on the Morningstar forum devoted to Vanguard funds. Every year thereafter, save during Covid, the Bogleheads have gathered for an annual fall meeting. As one attendee at the 2001 meeting in Chicago put it, “I told my kids, ‘I'm going off to spend the weekend with 50 people I don't know, and I met them on the Internet.’” When journalist Jason Zweig asked the other attendees what their friends and family thought about that, most replied. “They think I'm nuts.” I attended my first meeting in 2002, and, to be honest, as I flew out for it the following year I recall asking myself, “Exactly why am I doing this?” As soon as I arrived, I got reminded of the answer: The Bogleheads are the sweetest, best-informed bunch of folks you'd ever want to hang out with.
As educational and enjoyable the annual meetings are, the conference facilities allow for only a few hundred attendees. The bogleheads.com forum, in contrast, has 120,000 registered users, and many more visitors. (Morningstar graciously hosted it initially, after which it became an independent organization.) For my money, it's the single best source of both general and personalized financial advice on the web.
Early on, one contributor to another Morningstar forum posted that he had a rapidly progressive cancer with a fatal prognosis and needed financial advice for his wife and young children. Within days, the Bogleheads offered solid direction about how to handle Social Security, probate, and 401(k) rollovers. As I'm typing this, a fast look at the bogleheads.org home page features posts about how to handle a teenager's first investment account, student loan forgiveness, paying off a mortgage, and more than a dozen threads about asset allocation, as well as one on the choice between a ¼-inch and a ⅜-inch socket wrench set.
Most famously, the Bogleheads epitomize Jack's focus on what he calls “The Majesty of Simplicity,” which they formulated as their patented “three-fund portfolio”: stone-simple mixes of total U.S. stock market, total international stock market, and total bond market, a portfolio that can now be put together at a cost of just a few one-hundredths of a percent per year.
Jack's great rival in the fund business, Fidelity's Edward C. Johnson III, once derided Vanguard's index funds, opining, “I can't believe that the great mass of investors are going to be satisfied with just receiving average returns.” The joke was on him; it turned out that investors increasingly cottoned to the simple arithmetic of mutual fund investing: Because of their low expenses, index funds routinely waxed actively managed ones. Johnson couldn't have been more wrong: Investors were happy with “average” returns. As Vanguard's assets swelled, the resultant increase in economy of scale increased that advantage even more, a “flywheel” that lost Fidelity so much business that it had to bring out its own index funds, and eventually, wait for it, a family of zero-cost funds. (There's no free lunch here, of course; once you purchase Fidelity's zero-cost funds, their shares cannot be transferred out of their platform.)
In 2007 Jack asked me to join him on the conference stage for what became a high point on my personal calendar, a nearly hour-long “fireside chat” during which I'd fire questions at him and, on occasion, educate him about Yiddish expressions. The last of these was in October 2018, shortly before he passed away.
In 2023, Bill Falloon of John Wiley & Sons approached me about a “last fireside chat” memorial volume that combined two books, Jack's Enough and my If You Can, with all royalties going to the Boglehead charitable arm, the John C. Bogle for Financial Literacy. The two books dovetail nicely: Enough is a meditation on the meaning of money and on the ethics of the money management, both of which matter a great deal to the individual investor.
The book's title derives from a conversation between novelists Joseph Heller and Kurt Vonnegut at a soiree thrown by a wealthy financier. Vonnegut remarks that their host undoubtedly made more in a day than Heller had made from his runaway bestseller Catch 22. “Yes,” replies Heller, “but I have something he will never have … enough.”
Enough's other central passage recounts a mythical dialogue between a preacher and a recently retired greyhound racing dog:
Are you still racing?
No.
Well, what was the matter? Did you get too old to race?”
No, I still had some race in me.
Well, what then? Did you not win?
I won over a million dollars for my owner.
Well, what was it, bad treatment?
Oh no. The treated us royally when we were racing.
Did you get crippled?
No.
Then why? Why?
I quit.
You quit?
Yes, I quit.
Why did you quit?
I just quit because after all that running and running and running, I found out that the rabbit I was chasing wasn't even real.
If You Can came from the same place. In 2014, in the spirit of the Bogleheads, I decided to make it available as a free download (just google “if you can” and my name). Nearly all of my financial writing is aimed at older individuals, most of whom are, or soon will be, fairly prosperous. Both writing about and practicing finance have been good to me; If You Can seemed a good way to pay forward some of that to young people just starting out on that journey.
The two books fit together; Jack's describes the zen of personal finance, while mine is the Boglehead three-fund nuts and bolts version. Wiley first published Enough in 2009; both books are now more than a decade old, and upon rereading them I'm pleased at how well the two have held up.
The one part of Enough that needs only the slightest revision is the few pages on exchange traded funds (ETFs). Because they're so easy to speculate with, Jack didn't like them, and their champion at Vanguard, Gus Sauter, nearly had to step over Jack's metaphorical dead body to debut Vanguard's.
Jack's criticisms of ETFs are even more valid now than they were then: It seems not a day goes by that an investment company doesn't bring out one bit of speculative toxic sludge or another packaged in an ETF wrapper—leveraged funds, inverse leveraged funds, hyper-narrow sector funds, and the like.
But there's also no denying that because anyone's ETFs can be bought on anyone else's brokerage platform—even on those of the bad old “full-service” wirehouses—they've greatly expanded the investing public's access to low-cost vehicles.
Mr. Sauter also realized before Jack did that ETFs treated investors more fairly than the traditional open-end mutual funds, which penalize long-term buy and hold investors with the trading costs of short-term speculators. Mutual funds trade enormous dollar amounts of stocks and bonds when investors purchase or redeem their shares, and these large trading volumes can incur considerable “transactional costs.” By “externalizing” those trading costs with the small bid/ask spreads incurred when individuals buy and sell ETFs, this shifts the high costs of rapid trading to ETF speculators, leaving the buy-and-hold investors nearly untouched.
The improvements in ETFs, as well as the increased ease of trading them, also have also negated one of the major recommendations in If You Can, which was its emphasis on dealing, wherever possible, with the Vanguard Group. Since then, two things have rendered that recommendation obsolete. First, in 2013, the online platform Robinhood fired the brokerage shot heard round the world when it debuted its commission-free trading phone app for stocks and ETFs. Over the next several years, the big discount brokerage houses—Fidelity, Schwab, TD Ameritrade, and E*Trade—followed suit. So it's possible to buy Vanguard ETFs at any of these brokerage houses commission free; this is even possible, though I don't recommend it, at some of the old wirehouses. Moreover, over the past decade both open-end funds and ETFs from both Schwab and Fidelity have matched Vanguard's low-cost structure, so investors can even purchase, for example, a Schwab ETF on the Vanguard platform.
Second, and sad to say, since Jack's passing customer service at Vanguard has deteriorated, with long hold times, an outdated website, and often clueless offshore phone support. That said, Vanguard still possesses two advantages over other brokerage firms. First, because its money market funds have lower expenses than those of other firms, your cash balances there earn a higher return than elsewhere. Second, because Vanguard is owned by its customers, its incentive structure and corporate culture will always be more customer-oriented than those of its competitors. These two reasons are, in my opinion, enough to stick with Vanguard, despite their recent customer service problems. (The low cash balance interest rate at Schwab is a problem that requires constant attention from their customers, who must be on the lookout for accumulated cash needing to be manually swept into Treasury bills or money market/short-term bond funds. This gets old fast.)
Any other founder of a large investment company would have used his or her great good fortune to make billions by shaving off just a few basis points of the firm's managed assets. That Jack didn't spend his life chasing after the mechanical rabbit of wealth is testament to both his intelligence and character. My hope is that this small volume will help you on your own voyage to Enough.
Original Foreword to Enough
My professor of ancient civilizations at Georgetown taught us that the United States became the greatest nation in history because our people had always believed in the two main pillars of Western civilization: that tomorrow can be better than today, and that we all have a personal moral obligation to make it so. He called it “future preference.”
In recent years, some American finance leaders have strayed from these beliefs, making vast wealth in the moment without regard to its consequences for the future. In the United States and around the globe, we are still living with the repercussions of this business conduct, some of it illegal, all of it fruitless. We cannot continue on the same road we followed before the recent financial crises—not if we want to build a better tomorrow.
In Enough., John C. Bogle offers a compelling account of what went wrong and some clear advice on how we can restore our financial system and create a more prosperous and equitable world. His book is an important call to action, to bring moral principles and integrity back into our financial affairs in a way that will support, not undermine, long-term economic growth.
With his own impeccable credentials in finance, Bogle reminds us that the United States was built upon a tradition of hard work, temperance, and duty, and shows why sacrificing these values in the pursuit of success sooner or later breeds destruction that harms many innocent people. In this meditation on ambition and society, Bogle argues that we cannot measure the meaning of our lives by quick profits. Instead, real worth comes in making long-term contributions to the larger communities of which even the most powerful financiers are simply facilitators, with a duty to help others build their dreams.
In our fast-moving digital age, with more than $2 trillion crossing borders every day before the current crisis, Bogle's analysis and argument seem, at first glance, strikingly old-fashioned. But our pervasive interdependence makes Enough. more relevant than ever. Our actions have profound consequences both within and beyond our borders. It is wrong to ignore them in pursuit of purely personal advantage. Future preference still matters. We have to get it back.
John Bogle is a brilliant and good man, and every concerned citizen can learn and benefit from the important lessons he shares in Enough. It is a reminder that what Alexis de Tocqueville said about our nation so long ago remains true: America is great because America is good, and if she ever ceases to be good, she will no longer be great. Enough. is about reclaiming both.
WILLIAM JEFFERSON CLINTON
March 2010
Original Prologue to Enough
In the late 1970s, I began a journey with Bob Waterman examining how good companies were managed that led to the publication of In Search of Excellence. Along the way we met an extraordinary cast of characters. There was Jim Burke, CEO of Johnson & Johnson, who when beset with the infamous Tylenol crisis in 1982 turned to J&J's quasi-religious “Credo.” With the guidance of core values, the company handled the crisis with integrity and transparency that stands to this day as a memorial to the power of values-based organizations.
And then there was Delta Airlines, mired in crisis courtesy of the recession of the early 1980s—the company's balance sheet was helped enormously by the decision of Delta employees to buy their employer an airplane! There was McDonald's, living with rigor in the early 1980s on the bedrock established by founder Ray Kroc called QSC&V, or quality, service, cleanliness, and value. And then there was John Young of Hewlett-Packard, who managed by wandering around (MBWA), engaging with line employees on project specifics.
The key concept of our book was captured in six words: “Hard is soft. Soft is hard.” As engineers, MBAs, and McKinsey consultants, we were firmly rooted in the virtues of measurement and metrics—but we also damn well knew how easy the numbers are to fudge! Purportedly hard numbers turn out again and again to be soft. Enron, circa 2000, masterminded by a Harvard Business School–McKinsey grad, and the derivatives, super-derivatives, and credit default swaps of the 2000s, masterminded by PhDs, came about by numbers that were so soft they deflated.
What matters? What is really “hard”? Integrity. Trust. Values that last (like J&J's Credo). Deep-rooted relationships. Good corporate citizenship. Listening—to the customer and to the front-line employee—and acting on what they tell us. Matchless quality, the bugbear of those early 1980s. And, yes, excellence. Those are the things they mostly didn't and don't teach in business schools, but which are the bedrock of effective enterprise.
It was memories of that startling journey that explained why, in the middle of the Great Recession of 200711, I picked up, for no particular reason, Jack Bogle's book, Enough. I quickly found, while standing in the bookstore in fact, that I couldn't put it down. It explains why I have now read it through four times; why I have bent some 57 pages to return to again and again; why I have given away over 50 copies to friends and associates; and why, I'm almost embarrassed to admit, I carry it with me as I travel from Angola to Abu Dhabi to China to Chicago—Enough. has taken on totemic significance. As I prepare a seminar in, say, Novosibirsk, Siberia, I thumb through the book and check myself as to whether I may have gone soaring off into some obscure theoretical corner and forgotten the lesson of the likes of Bill Hewlett's supposedly old-fashioned MBWA as practiced by John Young.
The Australian writer Peter Temple's thriller The Broken Shore won a bushel of prestigious global awards. Several prominent reviewers struck the same chord. In effect, “This is not a great thriller—this is a great novel.” That's precisely what I feel about Enough. It is not a great finance book. It is not a great business book. It is a great book. Period.
Jack Bogle writes in plain English, and his reasoning is straightforward and based on a staggering sum of observations. Though he is a finance guy, not a single equation is unfurled as he takes us through finance, business, and life itself. It is not hyperbole to say, with some certainty at age 67, that this is clearly the best business book I've ever read, and as good a primer on life as I've read as well, save perhaps the works of Bogle's fellow Philadelphian, wise old Ben Franklin!
Jack Bogle and the organization he founded in 1974, The Vanguard Group, have been recognized far and wide and again and again for the sort of excellence that lit so bright and true a lamp for Bob Waterman and me in the 1980s. Jack Bogle is one the great financiers of our times and perhaps all times. He and Vanguard have contributed to the financial well-being and security of millions upon millions of people. His secret is a carefully formed belief that you will not, over the long haul, beat the market, and a belief that the best performance will therefore come from index funds that return their enhanced value, virtually in full, to investor-owners. His life and his life's work are built on a bedrock of integrity, transparency, simplicity, and value.
Interestingly, I've never met Jack, and, alas, have not invested with Vanguard, which is to say that I have no vested interest whatsoever in making these remarks—and singling this book out as the matchless, perhaps life-changing gem that I think it unequivocally is. I have devoted my adult life to trying to help people manage organizations as effectively as possible, and have discovered, as Jack Bogle has, that being straightforward is best and that character and integrity and common sense and decency are the keys to running enterprises of all sorts—not to mention the life well lived in service to others.
I will not reprise the best of the book in this Prologue. I tried to do so in a first draft, but was flummoxed by those 57 bent pages—each of abiding personal importance. Jack's straight talk is offered in spare and lucid prose that puts me to shame. However, I can give you a flavor of what is to follow by simply offering up the chapter titles (I was totally hooked on the book by the time I'd perused the Contents page):
“Too Much Cost, Not Enough Value”
“Too Much Speculation, Not Enough Investment”
“Too Much Complexity, Not Enough Simplicity”
“Too Much Counting, Not Enough Trust”
“Too Much Business Conduct, Not Enough Professional Conduct”
“Too Much Salesmanship, Not Enough Stewardship”
“Too Much Management, Not Enough Leadership”
“Too Much Focus on Things, Not Enough Focus on Commitment”
“Too Many Twenty-First Century Values, Not Enough Eighteenth-Century Values”
“Too Much ‘Success,’ Not Enough Character”
I'm inclined to hijack these chapter titles and make them my Ten Commandments. The concerns encapsulate, better than anything I've come across before, the life I hope I lead, the life I would surely like to lead—and the sorts of things I'd pray people might say about my endeavors when I check out.
I begin my lectures these days with two PowerPoint slides. The first recalls a celebration honoring the peerless hotelier Conrad Hilton. After a roast of sorts, Mr. Hilton was called to the podium and asked to share the secrets of his magnificent career. He faced the crowd, as the story is told, paused, and said, “Don't forget to tuck the shower curtain into the bathtub.”
And with that he returned to his seat.
The second slide recalls a conference near Monterey, California, perhaps 20 years ago, during which I was chatting with the president of a very successful Midwestern community bank. As the financial crisis of 2007 engulfed us, I recalled his words clearly: “Tom, let me describe to you a successful lending officer. On Sunday after church, driving his family home, he takes a little detour to drive past a factory or distribution center he's lent money to. He doesn't go in or any such thing, just drives by, eyeballs the place, and continues home.”
The shower curtain.
The simple drive by a business.
Enough.
TOM PETERS
Golden Bay, New Zealand
April 2010
John C. Bogle's Author's Note to Enough: A Crisis of Ethic Proportions
In early September 2008, just as the manuscript for Enough. was completed, the federal government decided against bailing out the investment banking firm of Lehman Brothers Holdings. The firm, whether it knew it or not, was bankrupt. Then–Treasury Secretary Henry Paulson later described a group of Lehman's toxic investments as being carried at $52 billion, but with an estimated value of (as little as) $27 billion, part of a huge capital hole that led inevitably to the firm's demise.
Powerful echoes from the government's decision to let Lehman fail quickly resounded. The stock market decline that began in mid-2007, when the Dow Jones Industrial Average had reached a high of 14,160, accelerated, with the Dow dropping 510 points to 10,910 when the market reopened after the Lehman collapse. That was only the beginning. Over the next six weeks, the Dow fell to 7,550. After a few months of consolidation, it tumbled again to a low of 6,550 in March 2009—a shocking decline of 54 percent from the high, equivalent to a $9 trillion drop in stock values, the largest drop since the 1930s.
The stock market, of course, was simply anticipating and then reflecting the reality of the economic crisis that followed. Banks wrote off trillions of dollars in the values at which they carried the toxic assets on their balance sheets. Business activity declined sharply, and our nation's economic production slumped. Unemployment soared; credit became scarce and often unattainable; and we entered into the deepest economic abyss since the Great Depression.
Causes of the Collapse
The causes of this collapse are no secret. While it is often claimed that “victory has a thousand fathers, but defeat is an orphan,” the defeat suffered by investors in our devastating financial crisis seems to have, figuratively speaking, a thousand fathers. The Federal Reserve kept interest rates too low for too long after the 2000–2002 stock market crash and failed to impose discipline on mortgage bankers. Not only did our deposit banks and investment banks design and sell trillions of dollars’ worth of incredibly complex and risky mortgage-backed bonds and tens of trillions of dollars’ worth of derivatives (largely credit default swaps) based on those bonds, but they were also left holding the bag, with many of these toxic derivatives held on balance sheets that were highly leveraged—sometimes by as much as 33 to 1 (or more). Just do the math; a mere 3 percent decline in asset value wipes out 100 percent of shareholders’ equity.
These institutions also brought us securitization, selling off loans as the backing for untested financial instruments, and severing the traditional link between borrower and lender. With that change, the incentive to demand creditworthiness on the part of those who borrow almost vanished as banks lent the money, only to sell the loans to the creators of these new financial instruments. In banking, we've come a long, long way from community lending built on financial probity and the character of the borrower, the kind of thing that we saw in It's a Wonderful Life. (Remember Jimmy Stewart as George Bailey and Lionel Barrymore's crusty Mr. Potter?)
Our market regulators, too, have a lot to answer for: The Securities and Exchange Commission was almost apathetic in its failure to recognize what was happening in the capital markets. The Commodity Futures Trading Commission (CFTC) allowed the trading and valuation of derivatives to proceed opaquely, without demanding the sunlight of full disclosure, and without concern for the ability of the counterparties to meet their financial obligations if their bets went sour.
And let's not forget Congress, which passed responsibility for regulation of the derivatives market to the CFTC almost as an afterthought. Congress also allowed—indeed encouraged—risk taking by our government-sponsored (now essentially government-owned) enterprises—Fannie Mae and Freddie Mac—enabling them to expand far beyond the capacity of their capital, and pushing them to lower their lending standards. Congress also gutted the Glass-Steagall Act of 1933, which had separated traditional deposit banking from the riskier business of investment banking, a separation that for more than 60 years well served our national interest.
Our professional security analysts also have much to answer for, especially in their almost universal failure to recognize the huge credit risks assumed by a new breed of bankers and investment bankers, far more interested in earnings growth for their institutions than in the sanctity of their balance sheets. So do our credit rating agencies, for bestowing AAA ratings on securitized loans in return for enormous fees—handsomely paid in return by the very issuers who demanded those ratings, allowing what proved to be largely junk bonds to be marketed as high-quality securities. (Yes, it's called conflict of interest.)
“A Failure of Capitalism”
But there was also something more fundamental taking place—a failure of capitalism. Capitalism simply hasn't worked the way it is supposed to. We've trusted in Adam Smith's “invisible hand,” in which pursuing our own self-interest ultimately leads to the good of society. But this free-market-based philosophy has failed. In an age of giant global corporations and giant (and independent) financial institutions, principles that applied in a world of smaller enterprises and more intimate communities simply lost their effectiveness.
This is not just my view. It is also the view of some of the most intelligent and respected minds in the nation. For example, Judge Richard Posner of Chicago (and leader of the conservative “Chicago School” of economists) entitled his post-crisis book A Failure of Capitalism. Even more poignantly, the same view is held by former Federal Reserve Chairman Alan Greenspan, who was central to the development of the financial bubble and the burst that inevitably followed. He successfully urged his fellow Fed governors to continue to make easy credit available—even though the time to tighten credit had long since arrived—and to ignore the perils created by the growth of securitization, which severed the essential link between borrowers and lenders. Greenspan's intellectual analysis and his market-moving power, it turns out, had been based on a false premise.
To his credit, in his testimony before Congress in October 2008, Greenspan admitted his mistake. Hear the New Yorker's John Lanchester on the topic:
Greenspan acknowledged that the crisis was prompted by “a once-in-a-century credit tsunami,” which had arisen from the collapse of a “whole intellectual edifice.” “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity—myself especially—are in a state of shocked disbelief,” he said. This failure of self-interest to provide self-regulation was, he said, “a flaw in the model that I perceived as the critical functioning structure that defines how the world works.”
It's worth dwelling on that phrase: “the critical functioning structure that defines how the world works.” That's a hell of a big thing to find a flaw in. Here's another way of describing that flaw: the people in power thought they knew more than they did. The bankers evidently knew too much math and not enough history—or maybe they didn't know enough of either.
To which I would add, enough indeed!
The Story of Enough.
Many of these happenings were foreshadowed in the pages of Enough., which in retrospect seems weirdly prescient, even predictive. I first expressed the basic idea behind Enough. in a May 2007 commencement speech before MBA graduates at Georgetown University. You'll read more about that talk later in the book, but it's important to consider some of the context of my remarks:
“Money” has become increasingly important in our bottom-line society, the Great God of prestige, the Great Measure of the Man (and Woman). So this morning I have the temerity to ask you soon-to-be-minted MBA graduates, most of whom will enter the world of commerce, to consider with me the role of enough in business and entrepreneurship in our society, enough in the dominant role of the financial system in our economy, and enough in the values you will bring to the fields you choose for your careers.
Once a profession in which business was subservient, the field of money management—“Wall Street”—has become a business in which the profession is subservient. Harvard Business School Professor Rakesh Khurana was right when he defined the conduct of a true professional with these words: “I will create value for society, rather than extract it.” And yet money management, by definition, extracts value from the returns earned by our business enterprises.
If you enter the field of money management, do so with your eyes wide open, recognizing that any endeavor that extracts value from its clients may, in times more troubled than these, find that it has been hoist by its own petard. It is said on Wall Street, correctly, that “money has no conscience,” but don't allow that truism to let you ignore your own conscience, nor to alter your own conduct and character.
Now, three years after that commencement speech, the financial sector indeed has been “hoist by its own petard,” a Shakespearean phrase meaning “blown up by its own dynamite.” The economy has followed suit. Earnings of financial companies in 2006, cited in my Georgetown speech at $215 billion, plummeted to losses of $233 billion in 2008, a difference of almost a mere half-trillion dollars. (By 2009, profits had returned to the sector, but only to a measly $29 billion.)
So What's to Be Done?
We need to not only resolve the specific issues that have been brought into focus in the financial crisis, but take steps to preclude future crises, some of which could be the same, some inevitably different. Here is a summary of my ideas:
Deal with “too big to fail” by returning
moral hazard
to its rightful place in the banking system. Yes, a federal agency that monitors financial risk should happen, but the first step may well be “Let the bank fail!”
Lift the veil of secrecy surrounding derivatives by requiring open and transparent markets.
Raise bank capital requirements substantially (i.e., reduce leverage) and raise the quality of the investments on the balance sheet (i.e., reduce risk).
Establish an independent consumer protection agency.
Bring back the Glass-Steagall Act of 1933, separating commercial banking (deposit taking) and investment banking (underwriting, bridge loans, etc.).
Develop market-based incentives to reduce leverage among our financial institutions, corporations, and households, gradually phasing out interest as a tax-deductible expense.
Establish a federal standard of fiduciary duty for institutional money managers, who today control 70 percent of all shares of U.S. public corporations. By requiring those agents to serve solely the interests of their principals, they would come to act with due diligence in the selection of securities, and would assume the rights and responsibilities of participating in the governance of the corporations whose shares they hold.
An Ethical Crisis
But there is yet another factor underlying this crisis that is the broadest of all, pervasive throughout our society today. It was well expressed in a letter I received from a Vanguard shareholder who described the global financial crisis as “a crisis of ethic proportions.” Substituting ethic for epic is a fine turn of phrase, and it accurately places a heavy responsibility for the meltdown on a broad deterioration in our society's traditional ethical standards.
