> “Jack could have been a multibillionaire on a par with Gates and Buffett,” said William Bernstein, an Oregon investment manager and author of 12 books on finance and economic history. Instead, he turned his company into one owned by its mutual funds, and in turn their investors "that exists to provide its customers the lowest price. He basically chose to forgo an enormous fortune to do something right for millions of people. I don’t know any other story like it in American business history.”
Bogle could certainly have been a multi-billionaire. He could have founded Vanguard as a for-profit company and charged high fees. However, that wouldn't be like Buffett. Berkshire Hathaway doesn't operate on a percentage of the company's value going to Buffett every year.
In fact, Bogle took a similar path to Buffett: an investor-friendly path that meant little salary or fees going to them, but a great value for investors. It seems like the difference between them would be attributed to difference in starting point and differences in returns. Since 1964 (when Buffett took over Berkshire Hathaway) through 2017, Berkshire had an overall gain of 2,404,748%. By contrast, the S&P 500 only hit 15,508%. If Buffett and Bogle both started out with $1,000,000, Buffett would have ended up with $24B while Bogle ended up with $155M.
I don't think Bogle could have been a multibillionaire like Buffett unless he either 1) charged a lot of fees for Vanguard; or 2) actively managed his money to do significantly better than the S&P 500.
Don't get me wrong: Bogle has done amazing things for society by pioneering low-cost index funds and offering investors the investor-owned Vanguard. I just think it's fair to point out that Buffett's billions don't come off the back of fees or salary. The thing that made Buffett richer was the fact that Berkshire Hathaway has hugely outperformed the S&P 500. If Berkshire had gotten the returns of Bogle's S&P 500 index fund, Buffett would be rich (as Bogle was), but not a multibillionaire.
As you point out, Gates and Buffett became wealthy due to their ownership in their respective companies. I don't know how much Bogle "owned" of Vanguard - but I suspect the structure he set up made his ownership no larger than his actual investment in Vanguard mutual funds and ETFs.
Probably not good to compare Bogle to Gates or Buffet. Better to compare him to Larry Fink of Blackrock or Charles Schwab. Blackrock manages slightly more assets - around $6.5tr vs $5 for Vanguard. Blackrock is a $65bn market cap company. Point is, as a founder of a comparably large asset manager, he didnt leave this earth as a billionaire. All the better, you can't take it with you.
I thought this was a great point, and makes the comparisons to Gates and Buffett look really lazy. (The connection is...they are famous wealthy dudes.) For others wondering, Larry Fink has a net worth of about ~$1B versus Bogle's ~$80M. Vanguard is a bit older than Blackrock (1974 vs 1988), but I also think Vanguard would have been less successful, counterfactually, if it had charged higher fees that would have enriched Bogle. The low fees were part of what made it possible. So it's almost certainly true that Bogle left money on the table in order to make the world a better, but he probably left a factor of ~5x rather than 50x or something.
If you are ever confused about what firm should manage your money, remember this posting.
The current Chairman and CEO, Tim Buckley would be close to being a Billionaire right now if he was running any other firm, he does very well, but he makes a fraction of what SVP’s make at other firms.
I'm sorry but your comment didn't clarify this question for me. Do you mean I should invest in Vanguard because the money isn't all going to rich folks at the top, or I should invest in Fidelity because the wealth at the top is indicative is correlated to success for customers?
I noticed awhile back that a lot of my funds were very Apple heavy, and so not as well diversified as I would have hoped (index funds included). They disclose this, mind you, but you have to read what you are buying. Anyways, I moved more money towards international and mid-caps to try and offset risk. Index funds have a way of being frustratingly constrained. It's not a silver bullet is all I'm saying.
Don't get me started on bond funds. Total, total crap the last few years. REITs same way.
The only really decently reliable returns I have gotten were from my own portfolio of stocks (not a fund) and some high-dividend yield funds. But even dividend paying stocks nosedived last quarter (Q4 2018), which I attribute directly to the FEDERAL RESERVE and its fuckery with the funds rate.
Everything is manipulated one way or another, never forget that. It's hard to be a small investor with others moving billions around all the time.
If you're still reading, I ditched a lot of bond funds in 2018 and went towards shorter term individually purchased bonds and even brokered CDs until interest rates settle back down.
Vanguard's bond funds are just kind of trash and don't do what they are purported to do for your portfolio which is try to solve the ever-elusive correlation problem. Many times, I've watched bond funds move in lockstep with equities because the Fed is king. Not a safe haven during a big drop, just smaller losses?
The people on Bogleheads will hate me for saying this stuff. If you're new to investing or naive or don't care, just do a 2-fund portfolio with total stock and total bond and call it a day. There.
This is how capitalism is supposed to work from the ground floor. Toiling away 25 years in a cubicle eschewing social responsibilities like the FIRE subreddit ought to be morally reprehensible - that’s how strongly I feel about it (I’m active in two businesses I’ve co-founded and have enjoyed seeing economic theory from the ground up).
>For more than 20 years, he donated half his annual income to philanthropic causes, particularly those institutions that helped develop his mind and form his character.
Everything I've read about the guy says he was a stand up guy that put a real dent in the world.
I hope his legacy lives on and his mission continues to be carried out.
Index funds are slowly consuming more and more capital. To achieve democratic socialism smoothly, all we have to do is set up state-owned index funds, and let them keep growing until they've accumulated all of the capital.
Voila, full democratic ownership of the means of production!
Basically you are saying the state should just slowly buy stock in every company until it owns every company.
> Basically you are saying the state should just slowly buy stock in every company until it owns every company.
That's right. The goal is full public ownership of the means of production.
Because of short-selling, index funds could own all the market or more and active funds could still exist. For example we could imagine that index funds grow until they're 105% of the market, and active funds own 5% of the market long and 10% of it short. That adds up: 105% + 5% - 10% = 100%. And the active funds would still be doing all the price discovery. Of course the index funds wouldn't have all the assets-under-management, those would be split in the ratio 105:15 (with 10 of that 15 being collateral for the shorts).
In other words: it doesn't matter if index funds own all the shares, active funds can just make side bets with each other.
With the progress AI is making, I predict a future where humans-run firms will mostly go out of business. What will emerge are companies that are great at training models that then act as active investors. These models bet against each other and some emerge as winners.
Ultimately, the models that make the most bank (sorry couldn't resist) will be the ones smart enough to make its decisions based on public data from companies, social media etc.
This is already happening, HFT, Two Sigma Investments, many hedge funds. And they don't just use public data, they work really hard to get as much proprietary information as they can. Just one example: https://www.cnbc.com/id/38722872
If that’s a strange thought, consider that the Bank Of Japan is a significant owner of equities on the Nikkei.
Disclaimer: Vanguard customer
I'm interested in this question: would the US economy be where it is today without index funds? Or is it the index funds like Vanguard that allowed millions of Americans a cheap, safe way to predictably grow their wealth?
The reason I ask is that throughout American history, its the banking sector that was responsible for financial crises and a loss of wealth for most Americans. Have index funds plugged this hole and allowed the US to grow?
Yeah yeah I know about 2008 etc. but that _was_ caused mostly by active investors.
You could out public funds into any investment and end up with all the capital.
The way index mutual funds work is to distribute returns to everyone according to how much capital they have contributed.
The socialist version would be a find that everyone is required to contribute all their capital too. And then each citizen receives an equal share of the returns.
(The company is actually named after Lord Nelson's flagship at the Nile, but who's counting?)
a group of people leading the way in new developments or ideas.
Unlike most firms, Vanguard's funds own the firm, rather than the other way around. The funds are owned by Vanguard's customers, who transitively own the company. Vanguard "pays cost" for all the work its management and staff performs.
To illustrate how powerful this structure is, see Matt Levine's writing about "the fake moon landing of financial news stories": a claim by a former Vanguard insider that the savings accrued to the funds (and thus customers) as its result constitute billions of dollars of taxable income (under the IRS whistleblower rules, some percentage of those taxes would go to the insider!):
Bogle is a giant and a good guy in a field not packed full of good guys. RIP.
The Vanguard Group is a mutual fund company whose adviser is owned by the funds, rather than being an independent profit-seeking corporation, so it can charge its funds lower advisory fees than its competitors do. (Disclosure: I am a Vanguard investor.) But the adviser is a taxable corporation, while the funds themselves are not taxable (they just pass through taxes to investors). There is a theory that the adviser should be charging Vanguard higher management fees, to reflect the "arm's length" prices that an independent adviser would charge, rather than the "at-cost" prices that it does in fact charge. Or rather, there is a theory that Vanguard owes taxes on the fees that the adviser should have charged, which would have been profit to the taxable corporation.
Why is there any fee that "should" be charged? The premise seems flawed that fees need to anything more than cover costs to pay the employees to do their work.
"If this structure were different, they'd charge more and make a profit and pay tax" ... But it's not different, so it doesn't make a profit, so it doesn't pay tax. Pretty simple.
If I do that on behalf of a company by selling THEIR house, I'm either incompetent or embezzling money. If it turns out I sold it to a friend, it's clear I was embezzling. If I don't know the person (i.e. "arms length") I'm just incompetent.
In this case there is a market price for advisory services that you can figure out by looking at all the other similar advisers out there. You could make the argument that there are not enough similar advisers to establish what the price "should" be, or that it's not sufficiently below them to establish how much of a discount there is.
But mainly no one cares to go after the 401(k) balances of millions of middle class Americans on a technicality, so it's a non-starter.
It seems as though that case is still pending resolution.
> "More formally, in owner-occupancy, the landlord–tenant relationship is short-circuited. Consider a model: two people, A and B, each of whom owns property. If A lives in B's property, and B lives in A's, two financial transactions take place: each pays rent to the other. But if A and B are both owner-occupiers, no money changes hands even though the same economic relationships exists; there are still two owners and two occupiers, but the transactions between them no longer go through the market. The amount that would have changed hands had the owner and occupier been different persons is the imputed rent."
> "The government loses the opportunity to tax the transaction. Sometimes, governments have attempted to tax the imputed rent (Schedule A of United Kingdom's income tax used to do that), but it tends to be unpopular. Some countries still tax the imputed rent, such as Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland. The absence of taxes on imputed rents is also referred to as Home-Ownership Bias."
The Bogleheads Wiki has great resources on topics related to savings, retirement and investing. Here are a couple entry points into what Bogle's method looks like:
Bill Fouse at Wells Fargo got a rather clunky version of an index fund started in 1971, based on equal weighting of all NYSE shares. It took a couple more years for various people, including Dean LeBaron (later of Batterymarch) and John Bogle to get everything working the right way with timely capitalization weighting and rebalancing. That's when the S&P 500 became the index of choice.
Getting index funds to track consistently over time takes a fair amount of market monitoring plus basic computing power. (Reinvesting dividends brings one set of headaches; so does adjusting specific stocks' weightings as individual companies either shrink their float by buying back stock or expand it by issuing new shares.)
All these calculations seem trivial today, but back in the 1970s, we didn't have up-to-the-minute electronic Edgar filings at the SEC. Or abundant computer power on everyone's desks.
The small tax advantage is that you can sell individual stocks for tax-loss harvesting. Fisher advisors also offers this for HNW folks.
This article criticizes this as a lock-in for wealthfront, unlike funds which can be easily transferred to brokerage "in-kind" (without 500 separate securities, or selling as a taxable event)
RIP Bogle, making the world a fairer place rather than being a billionaire. I'd like to bike from Philadelphia to Valley Forge again to make pilgrimage.
> Warren Buffett, the most famous investor in the world, had this to say recently: “If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.”
Though apparently the space in front of the bull has opened up again:
The rest of the book is good, too, but you can just read If You Can instead.
I don't generally like the idea of having personal heroes, but John Bogle would be on the short list.
Also, I appreciated that he was willing to grow, even into his old age, regarding his thinking on asset allocation. For example, his stance on holding an international stock index changed over time (from "unnecessary because most S&P 500 companies are multinational" to "there is some value to allocate a percentage of one's account to a broader international index").
Additionally, he wasn't afraid to completely go or say something against Vanguard after retiring. He stuck to his beliefs and was willing to challenge the company he started (and, albeit, was forced to retire from). For example, he was not supportive of Vanguard's deep foray into ETFs as he viewed them as encouraging short-term trading.
All-in-all, he seemed like a wonderful person and the investment industry (and many other realms) are better because of him.
- Became wealthy without exploiting his clients, foregoing millions, possibly billions
- Got a heart transplant at 65 and lived to 89
- Even in his recent interviews his voice always struck me as the voice of someone much younger, and he sounded very sharp mentally despite his age
It is a happy realization, though, to recognize how simple it really is.
(Bogleheads have a handful of short phrases that describe the simple foundations of Bogle's investment philosophy. As you say, it's simple but takes time.)
I call it "get rich slow."
(But if your money trickles in monthly, you might as well buy monthly if there are extra transaction fees.)
Can you summarize the biggest thing you learned from it?
I like Bogle's "Little Book of Common Sense Investing" a little more than the Bogleheads Guide, but they're both good :)
The bonds are going to really drag on your returns and since bonds don’t seem correlated with equities anymore, they might not even be an equity hedge. Risk parity portfolios are designed to solve this problem through leverage.
So while they all made money, the three portfolio made the least money. Unfortunately the Vanguard ETFs don't go back before the last recession, otherwise it would be interesting to see how the numbers invert.
You can backtest it there.
BTW 100% stock will likely beat the stock+fund, but at the cost of higher volatility (which can be an issue if you need the money eg during retirement)
When people go all VTI, they tend to freak out when the market goes down, sell near the bottom and forget about it, only to buy it again after the value goes up.
In my case, I believe we're in a rising rate environment, therefore I'd rather not hold bonds; I'm realistically investing for my kids' consumption rather than our own (we have the basics well-covered already); VTSAX holds companies that have substantial outside the US exposure and most of my future expenses are tightly tied to the fortunes of the US economy.
If your timeline is > 35 years, you're in the US, and intending to stay in the US, I could argue that pure VTSAX is better. Any of them are better than a "professional" financial advisor, IMO.
If you put $10,000 in in 2012, and just invested in the S&P500, you'd have $23,046. If you just did VTI (Vanguard Total Stock Market), you'd have $22,754 (and VTSAX would be $22,731). If you did the recommended 3 stock portfolio (VTI 42%, VXUS 18%, and BND 40%) you'd have $16,668.
So while they all made money, the three stock portfolio made the least money. Unfortunately the Vanguard ETFs don't go back before the last recession, otherwise it would be interesting to see how the numbers invert, or if they do.
Looking at mutual funds over a period of years showed that very few of them even out-performed the market.
Almost all of those that did out-perform the market actually still lost out when the fund manager's percentage was figured in.
Fidelity Magellan Fund managed by Peter Lynch is one of the few exceptions where the fund not only outperformed the market but still did so after the fees.
(But then that is why you have heard of Fidelity Magellan Fund and Peter Lynch.)
Furthermore, as everyone jumped on Fidelity Magellan Fund it became too big and moved the market when it moved — and not in a beneficial way for the fund investors.
tl;dr: a monkey throwing a dart (assuming he charges a fee below 1%) will outperform most of the Wallstreet fund managers. Put your money in an index fund, let the algorithm spread your money/risk out and wait a few decades.
not to nitpick too much, but the top 10% own 84% of stock  so the investment class hasn't reached very far down to the common person, who own most of their wealth in their homes (why the housing crisis disproportionately hit the bottom 80%).
with that said, if there's one social program that could reduce wealth inequality, it would be manadatory retirement savings accounts for all and invested in (vanguard) index funds (and probably diversified into bonds at least). it could be employer funded, or even funded by lotteries or sin taxes for the bottom 80%.
Whenever anyone brings up privatization of social security, everyone freaks out because the big money bags will steal it and the common man will be left with nothing...unfortunately they are kind of right. Intense lobbying every time privatization has had consideration makes it so those index funds are high expense, not optimal, and little choice. Goldman Sachs is writing the rules and doing so to benefit themselves. The exact opposite that Bogle stood for. If we were to stop that somehow then this would be fantastic.
What you’re saying though was brought up seriously in the tax bill discussions. They are already making it such that every small business gets a 401k option for employees. Not just tax breaks but forcing them to offer one with expenses covered by the state. That’s a good first step. I forget if it was California that is starting that 2020 or the country. The next step is what you’re saying, 1% tax employer funded. That would be extremely popular legislation and help people far more than a pseduotax break and cost a fraction of the price. In fact it will be a net positive if people were to save more. I think that has a great chance of becoming a reality. The correct way to privatize social security with maybe a cushion in case there’s a disaster would be far more reaching and better but anything that helps the middle class save is imperative.
That works fine until a) you pick the wrong index fund (and most people don’t know anything about finance) or b) the US hits a japan level stagnation and you can’t retire at all.
The point of Social security is to be a safety net (that’s also why as a rich person you get less benefits from it).
The irony of this posted in a Bogle thread is hilarious. Bogle subscribes to the research done in a Random Walk Down Wall Street.
Take all of the people who know the most about finance in the world (run the best funds) and they have a ~50% chance of beating the broad based index (S&P 500) any given year; If you expand that 10 years, the number of funds approaches 0. If you include the fees, it's ~42% beating the market any given year.
The "secret" and why bogleheads work is there is no picking. You pick the total stock market. But, if SS has regulatory concerns, it'll do just fine in VOO, representing the S&P 500.
SS assets are invested daily by law into safe securities (special US bonds) and the cash is immediately put back to use in capital markets. Here  you can look through the data to grasp the scale of it.
The rationale was stated quite frankly by FDR:
"We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."
He didn't anticipate an aging population, let alone index funds.
Social Security is a wealth transfer from one generation to another, so after a generation has paid out to their elders, they (not unreasonably) feel entitled to collect from it. Even if they were feeling generous, they've generally planned their finances around those benefits. That's why reforming the system has been politically intractable.
* You're taxed 6.2% and the employer is taxed 6.2%. When employers are budgeting for salaries they're going to consider the full 12.4%.
* * TSP is essentially the military's 401k with a group of very low cost funds, only here you would require the assets stay in the program until retirement.
Further, regarding investing in your home, since a home has a tangible value as well (you can live in it) no doubt the bottom 80% have first to invest in a home before they can have the "luxury" of investing in stocks.
(No doubt the top 10% own their homes as well.)
> with that said, if there's one social program that could reduce wealth inequality...
... it would be returning to a more progressive tax system, increasing inheritance tax, reducing regressive taxes like gasoline and sales taxes, etc.
Doesn't Australia's superannuation work something like this? If I understand it correctly, a chunk of your salary is set aside, but instead of going into a pool like Social Security, it goes into a fund. I could be (and probably am) wrong as to how it works. That being said, I would love it if we could implement something like this in the US.
Individuals are free to pick their own fund providers or even create their own superannuation funds (with some caveats).
This is purely for the pension; unemployment benefits are completely separate. You cannot access your super funds until you reach retirement age or become critically ill.
Singapore has something vaguely related https://en.wikipedia.org/wiki/Central_Provident_Fund
Granted, they carry some risks that index funds don’t (liquidity and market risk), but they provide many advantages (like taxes). They also can be repurposed for any kind of investment vehicle as they essentially are just an “API.”
Reaching 89 seems pretty good for someone who had his "first of a half-dozen heart attacks at age 31" and got a heart transplant at 65.
"If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle," billionaire investor Warren Buffett wrote in his annual letter in March 2017.
His first heart attack came at 31, he went on to have several more heart attacks. From his Wikipedia entry:
At age 31, Bogle suffered from his first of several heart attacks, and at age 38, he was diagnosed with the rare heart disease arrhythmogenic right ventricular dysplasia. He received a heart transplant in 1996 at age 65.
Aside from congenital issues, heart attacks at that age are typically complications of other issues.
Almost certainly. If your diet and lifestyle are even remotely healthy, and you don’t have a history of heart disease in your family, it’s very unlikely you have anything to worry about.
Otherwise, a visit to a cardiologist should put your mind at ease.
I'm 38 and equally paranoid :)
I found the clarity of his voice and the mental sharpness astonishing, given his age. Further, I wish information about index funds would be better explained in school.
"[Jack], the commonest pet-name for John, has caused a good deal of difficulty owing to the natural assumption that it must be derived from the French Jacques and should therefore logically represent James rather than John. The problem was cleared up by E. W. B. Nicholson in a little book entitled The Pedigree of Jack and of Various Allied Names (1892). He showed that there is no recorded instance of Jack, Jak, Jacke, or Jakke ever being used to represent Jacques or James, and that no statement in favor of the French connexion has been produced from any early writer. He then proceeded to elucidate and illustrate with examples the development of Johannes [the standard Latin nominative form] to Jehan [the standard Old and Middle French oblique form] and Jan [the standard Middle Dutch form], whence, by addition of the common suffix -kin [a uniquely English suffix], we get Jankin, which as a result of French nasalization becomes Jackin [this is the same nasalization that gets us Harry from Henry], and was finally shortened to Jack. There was a similar development from Jon to Jock (the Scottish form of the name)."
I think it's just a nickname, which does not necessarily mean shorter.
I'm curious what are the conditions for doing well with passive investing depending on your buy/sell strategy and times? I suspect it can't just be a long enough interval of holding the indexes, it also depends on when you retire, or at what rate you buy indexes over your lifetime, or some other things that perhaps is just dependent on your life schedule and not really under your control. This is what some traders tell me, and I've never done the work myself to prove them wrong. How much chance is there in doing well with passive investing over a whole lifetime?
This may change in the future, of course, but that's not really actionable knowledge.
What are best numerical values for lifetime, how slowly can you withdraw money when you retire, what are the best lengths of retirement etc. I want to see which passive investment strategies work. We can all think of examples where someone buys indexes over time, and then chooses to retire in the wrong decade. I want to know how many good and bad outcomes there are over our known historical data, and see what percentage of the time passive investing works. How much better fo some passive investors do versus others, how much luck is involved? If you must compare to say buying and holding a commodity like gold. But really I'm just interested in how varryingly successful passive investing strategies can be. I was hoping for code, just because I wanted millions of examples, not just a couple success and dud stories.
Google will help you better than I. Search for Boggleheads, passive index investing, etc. There's a nice book titled, "A Random Walk Down Wall Street."
Bogle spent a lot of time (and gave up the opportunity for a lot of money) preaching to people about how wealth can be accumulated. He really had a heart for helping people.
Watch some of his interviews on YouTube. He speaks very clearly, but it's easy to see he was a brilliant man.
Unless you're already a 'Boglehead': If you get ONE thing out of today's Hacker News, take an hour and learn the simple message John Bogle preached. Your future self will thank you profusely.
The first rudimentary ETF was probably Toronto 35 Index Participation Units (TIPs 35) traded on Toronto Stock Exchange. The first fully mature ETF was State Street Global Investors's S&P 500 Trust ETF (SPDR). State Street company is still a major player in the ETF space today.
This is not directly true. Vanguard mutual funds provide 0.05% annual fee rather than ~1% annual fee to access the average return of an index (whether the index is the S&P500, or every publicly listed company in the US). While the low-cost has empirically provided a better (compounding) return for investors over the decades, Silicon Valley angel investors and VCs have generated their wealth from their own businesses, and re-invest some portion of it directly into the next generation of unlisted companies. The extra 1% annual return gained by accepting the average stock market return (at exceptionally low cost) is not what's driving startup investment.
That said, the lower expected average market return (because the stock market being relatively highly valued, after the recovery from the 2008 crash, due to both record low interest rates, and to some degree a blind movement of capital towards index funds) may have some impact on temporarily increased VC dollars, trying to chase some kind of reasonable return.
And whereby there were previously only actively managed funds, the creation of that industry substantially lowered the cut money managers got from person wealth management.
Thereby leading to generations of people with more control over their money and willing to take risks, where a professional money manager would have little incentive to invest in startups with wealth locked up in their funds.
The move away from pensions could have been a veritable smorgasbord of fees for actively managed funds, but Vanguard provided broad access to something just as good (and more often than not, better).
That said, I think the discussion of a black bar every time someone dies is a little repetitive and kind of sours the process.
On a related note, I was looking for the list of people who got black bars, and I couldn't find one. Does anyone know if there's an (un)official list?
Gerald M. Weinberg
I seem to remember Terry Davis didn't, which disappointed me, but made sense as there was confusion around if he was dead at first.
This is done when someone passes who is considered especially (noteworthy|significant|involved|something) to/with the HN community. AFAIK there's no exact formula for determining who the mods deem worthy of that tribute, but I do know that they don't do it for everybody famous who dies. It's usually people who are particularly close to the HN world in some way.
It sounds crazy at first, but after reading it's hard not to come away agreeing with the thesis.
Perhaps the local soup kitchen is acting improperly when they don't charge retail rates and sales tax for the prepared meals they serve.
The remaining voters are already voting in the company's best interest. Index funds don't have a comparative advantage at making voting decisions, so they shouldn't pay people to do it.
If Vanguard had an option where I could control my share of shareholder votes then I might sometimes do that. I can imagine there being the occasional shareholder vote where I have different views or values than the rest of the shareholders, even after reflecting on the fact that they're thinking the same thing.
But I don't see why I should expect Vanguard to be systematically better than other investors. The same way that I don't allow Vanguard to vote for me in political elections.
Vanguard does not obligate themselves to follow ISS recommendations, but on the whole ISS advice/recommendations are/try to be pro-shareholder.
Leaving voting only to active shareholders doesn't seem to improve shareholder representation, IMO. I'm happier to have Vanguard vote my shares than to abstain as abstaining provides an excess of power to the inside shareholders and company execs.
No, even if everyone were right, that logic doesn't work, because interests simply aren't aligned. To make it really obvious: If Vanguard held 99% of company A while company B, a competitor of company A, held the other 1% of company A, and Vanguard abstained from voting, company B might simply vote to shut down their competitor.
But anyways, the issue isn't about the company vs the owners paying the taxes because in this case the owners are the company. The issue is that these owners are (via the company) are (perhaps illegally) manipulating how their earnings are counted to lower their tax rate.
A lot of American industry rail roads in particular was funded by British investment trusts.