Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

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chance
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Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by chance »

Has anyone read this new book by Financial Times columnist Robin Wigglesworth? I just downloaded the sample on my Kindle last night. Looks like something that might be of interest to Bogleheads.

Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever
Random House wrote:From the Financial Times’s global finance correspondent, the incredible true story of the iconoclastic geeks who defied conventional wisdom and endured Wall Street’s scorn to launch the index fund revolution, democratizing investing and saving hundreds of billions of dollars in fees that would have otherwise lined fat cats’ pockets.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by mikejuss »

It got a good review in last weekend's FT. I may pick it up.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by JoMoney »

chance wrote: Tue Oct 19, 2021 10:20 pm...
Random House wrote:... democratizing investing ...
Index funds are great, and have certainly saved people lots of money over conventional mutual funds.
I wonder how they believe that was "democratizing" it. It's not like stock investing (and for sure mutual funds) weren't widely available and used by people. In some manner it may be un-democratizing investing as many otherwise low-expense seeking buy and hold investors that owned shares directly moved to the convenience of broad market index funds but at the same time abdicated their ability to vote those shares to the fund companies :annoyed
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by mikejuss »

JoMoney wrote: Tue Oct 19, 2021 10:28 pm
chance wrote: Tue Oct 19, 2021 10:20 pm...
Random House wrote:... democratizing investing ...
Index funds are great, and have certainly saved people lots of money over conventional mutual funds.
I wonder how they believe that was "democratizing" it. It's not like stock investing (and for sure mutual funds) weren't widely available and used by people. In some manner it may be un-democratizing investing as many otherwise low-expense seeking buy and hold investors that owned shares directly moved to the convenience of broad market index funds but at the same time abdicated their ability to vote those shares to the fund companies :annoyed
It's my understanding that index-like funds were available mainly to institutions before they became more widely available to the masses. Perhaps that's what's being suggested by the term "democratizing."
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by obafgkm »

The author was interviewed on the podcast "Jill on Money" on two successive episodes: October 16 and 17, 2021.

One thing I found interesting is that index funds were not invented by John Bogle. Perhaps that is widely known here, but I didn't know that.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by nisiprius »

Oh, the McQuown-origin story. I'll probably read the book at some point. It sounds interesting. But probably tendentious. I guess I'd say there's a dispute about credit. I've read more about Bogle's side of the story. DFA and the Chicago Booth people tend to support a University-of-Chicago origin story.
mikejuss wrote: Tue Oct 19, 2021 10:36 pm...It's my understanding that index-like funds were available mainly to institutions before they became more widely available to the masses. Perhaps that's what's being suggested by the term "democratizing."...
The idea that they were available before the Vanguard 500 Index Fund is a little dubious. They weren't common, or widely available, or anything like that. It is true that there were some, the most-often-mentioned one being the Samsonite Luggage Fund.

It is not as if lots of people were using index funds and that all that Bogle did was make them available in mutual-fund form. I'm sure the book has more details on just how widespread any of it was before 1976.

I tend to file the Samsonite Luggage Fund story under Friese-Greene's invention of motion pictures, Meucci's invention of the telephone, and Santos-Dumont's invention of the airplane. That is, they all almost certainly did lab work and public demos and so forth, but it didn't lead to anything and their early work isn't truly ancestry of the devices we use today. As the cranky philosopher Charles Fort wrote, "A social growth cannot find out the use of steam engines, until comes steam-engine-time." The 1970s were obviously index-fund-time.

The Wayback Machine has this capture of a defunct (why?) web page from the Chicago Booth school, which tells the John Andrew McQuown/Fama/French site of the story: The Origin of the First Index Fund

This web page specifically quote McQuown:
John Bogle says he got the Vanguard S&P 500 index fund started because of us. Fouse and I were the ones who influenced Bogle.
and
And as for who influenced McQuown? “It’s all thanks to Jim Lorie, Gene [Fama], and Merton [Miller]. The economic wealth of the McQuown family can be directly traced back to those individuals. It’s funny—when the index fund came along Dick Cooley said, ‘What a great idea—I mean, why the hell hasn’t anybody else figured this out?’
And I said, ‘Well, it’s the Chicago guys. They did.’”
Now, Bogle himself has flatly denied such an influence:
All these years later, the distinctly different intellectual approaches of the EMH and the CMH illuminate the history of indexing. The Quantitative School, led by masters of mathematics such as Harry Markowitz, William Fouse, John McQuown, Eugene Fama, and William F. Sharpe did complex equations and conducted exhaustive research on the financial markets to reach the conclusions that led to the EMH. In essence, the “Modern Portfolio Theory” developed by the Quantitative School showed that a fully-diversified, unmanaged equity portfolio was the surest route to investment success, a conclusion that lead to the formation of the first index pension account (for the Samsonite Corporation), formed by Wells Fargo Bank in 1971. That tiny $6 million account was invested in an equal-weighted index of New York Stock Exchange equities. Alas, its implementation proved to be a nightmare, and in 1976 it was replaced with the market-capitalization-weighted Standard & Poor’s 500 Common Stock Price Index, which remains the principal standard for pension fund indexing to this day.

While the Quantitative School developed its profound theories, what I’ll call the Pragmatic School simply looked at the evidence. In 1974, the Journal of Portfolio Management published an article by Dr. Samuelson entitled “Challenge to Judgment.” It noted that academics had been unable to identify any consistently excellent investment managers, challenged those who disagreed to produce “brute evidence to the contrary,” and pleaded for someone, somewhere to start an index fund. A year later, in an article entitled The Loser’s Game, Charles D. Ellis argued that, because of fees and transaction costs, 85% of pension accounts had underperformed the stock market. “If you can’t beat the market, you should certainly consider joining it,” Ellis concluded. “An index fund is one way.”

In mid-1975, I was both blissfully unaware of the work the quants were doing and profoundly inspired by the pragmatism of Samuelson and Ellis. I had just started a tiny company called Vanguard, and was determined to start the first index mutual fund.
I hope the new book explains why the Samsonite Luggage Fund tried to equal-weight the whole market.

I'm not sure I take Bogle's account at face value. It might be a left-handed way of crediting-but-minimizing the Chicago people It also fails to explain the self-interested career reasons why Vanguard created an index fund (was to circumvent a restriction in the terms of its agreement with Wellington that seemed to prevent them from creating a mutual fund at all).

But it was, too, Edison, and Bell, and the Wright Brothers; and not Friese-Greene, and Meucci, and Santos-Dumont.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by alex_686 »

nisiprius wrote: Wed Oct 20, 2021 6:42 am Oh, the McQuown-origin story. I'll probably read the book at some point. It sounds interesting. But probably tendentious. I guess I'd say there's a dispute about credit. I've read more about Bogle's side of the story. DFA and the Chicago Booth people tend to support a University-of-Chicago origin story.
mikejuss wrote: Tue Oct 19, 2021 10:36 pm It is not as if lots of people were using index funds and that all that Bogle did was make them available in mutual-fund form. I'm sure the book has more details on just how widespread any of it was before 1976.
I tend to file the Samsonite Luggage Fund story under Friese-Greene's invention of motion pictures, Meucci's invention of the telephone, and Santos-Dumont's invention of the airplane. That is, they all almost certainly did lab work and public demos and so forth, but it didn't lead to anything and their early work isn't truly ancestry of the devices we use today. As the cranky philosopher Charles Fort wrote, "A social growth cannot find out the use of steam engines, until comes steam-engine-time." The 1970s were obviously index-fund-time.

...

I'm not sure I take Bogle's account at face value. It might be a left-handed way of crediting-but-minimizing the Chicago people It also fails to explain the self-interested career reasons why Vanguard created an index fund (was to circumvent a restriction in the terms of its agreement with Wellington that seemed to prevent them from creating a mutual fund at all).

But it was, too, Edison, and Bell, and the Wright Brothers; and not Friese-Greene, and Meucci, and Santos-Dumont.
The Samsonite Luggage pension fund was equally weighted to reduce commission costs and complexity.

I think a better example would be Karl Benz of Mercedes Benz. He invented the car but Ford mastered its mass production. The Wells Fargo group that managed the Samsonite fund would latter morph into Blackrock.

I do think that Edison is a good example. A person who transformed the world by their vision but kept getting the basic theory wrong. Edison kept getting the math behind electricity wrong even after they figured it out. Bogle was never strong on theory.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by nisiprius »

Thank you, thank you, thank you! I misplaced my copy and every time I try to find it online I end up with a strange little two-page version on the johncbogle.com website, with the same title but which is not at all the same.

This is "The First Index Mutual Fund," which is John C. Bogle's thirty-page account of the history of index funds... again tracing his own involvement to Paul Samuelson and Charles D. Ellis, and not to three pioneering efforts/experiments/prototypes

1969-1971, McQuown and Fouse, Samsonite Luggage fund
1971, Batterymarch Financial Management, Jeremy Grantham and Dean LeBaron
1974, American National Bank in Chicago
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by JBTX »

nisiprius wrote: Wed Oct 20, 2021 4:45 pm
Thank you, thank you, thank you! I misplaced my copy and every time I try to find it online I end up with a strange little two-page version on the johncbogle.com website, with the same title but which is not at all the same.

This is "The First Index Mutual Fund," which is John C. Bogle's thirty-page account of the history of index funds... again tracing his own involvement to Paul Samuelson and Charles D. Ellis, and not to three pioneering efforts/experiments/prototypes

1969-1971, McQuown and Fouse, Samsonite Luggage fund
1971, Batterymarch Financial Management, Jeremy Grantham and Dean LeBaron
1974, American National Bank in Chicago

I found it in the Jeremy Grantham wiki - as I knew he had one of the actual first index funds. It was a footnote



https://en.m.wikipedia.org/wiki/Jeremy_Grantham
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Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by BeachPerson »

[Thread merged into here --admin LadyGeek]

The WSJ has a good article today on Robin Wiggleworth of Financial Times book on the history of indexing. I will get it.

Story on indexing

A good video with the author on CNBC.

Robin Wigglesworth on CNBC
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Artful Dodger »

I just started this morning. I’m 15 pages in and so far a good read. Starts with Buffett’s bet before going back into the history. Lots of familiar names and I’m looking forward to reading it.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by LadyGeek »

I merged BeachPerson's thread into a similar discussion.

(Thanks to the member who reported the post and provided a link to this thread.)
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Artful Dodger »

nisiprius wrote: Wed Oct 20, 2021 4:45 pm
Thank you, thank you, thank you! I misplaced my copy and every time I try to find it online I end up with a strange little two-page version on the johncbogle.com website, with the same title but which is not at all the same.

This is "The First Index Mutual Fund," which is John C. Bogle's thirty-page account of the history of index funds... again tracing his own involvement to Paul Samuelson and Charles D. Ellis, and not to three pioneering efforts/experiments/prototypes

1969-1971, McQuown and Fouse, Samsonite Luggage fund
1971, Batterymarch Financial Management, Jeremy Grantham and Dean LeBaron
1974, American National Bank in Chicago
That was a helpful read. Right now I'm about a little over 100 pages into the Trillions book and it covers the history of indexing with many of the same names in the Bogle article and the three early efforts (Samsonite, Batterymarch, and Sinquefield's ANB fund), but it is clear these three were aimed at institutional investors and pension funds, and the first fund geared for individual investors was Vanguard's. The first chapter, before going back into the history all the way to Louis Bachelier in 1900, opens with the invite of Bogle to Berkshire's 2017 meeting and Buffett's statement...

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. For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of
added value.

In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Volando »

JoMoney wrote: Tue Oct 19, 2021 10:28 pm
chance wrote: Tue Oct 19, 2021 10:20 pm...
Random House wrote:... democratizing investing ...
Index funds are great, and have certainly saved people lots of money over conventional mutual funds.
I wonder how they believe that was "democratizing" it. It's not like stock investing (and for sure mutual funds) weren't widely available and used by people. In some manner it may be un-democratizing investing as many otherwise low-expense seeking buy and hold investors that owned shares directly moved to the convenience of broad market index funds but at the same time abdicated their ability to vote those shares to the fund companies :annoyed
As far as I can tell that's become a meaningless buzzword these days. Robin hood making it easier for people to go wild on gamestop was also considered to be "democratizing" finance. Its a strange way of stating that it lets smaller investors in on the action, whether good or bad.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by sleepysurf »

Here's a great interview with the author... https://youtu.be/FW4HQCnW4co

The term "Boglehead" even gets mentioned!
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by nisiprius »

I'm about halfway through. Bought it because I got tired of waiting for it at the library. It's great. Everyone should read it. I've only read half of it so I may end up with egg on my face from writing about it before finishing it.

It's full of fascinating tidbits like:
Trusts have a finite life span, which was initially supposed to be twenty-five years for SPDR. But they can also be tied to the longevity of individual people, so it was later amended and pegged to eleven children born around 1990–93, such as Weber’s daughter Emily, who was born on the same day that SPDR was established.35 As a result, SPDR will expire either on January 22, 2118, or twenty years after the death of the last survivor of the eleven people mentioned in the trust, whichever occurs first.
What follows is just my opinionated $0.02.

If there is a widespread belief that Bogle deserves the lion's share of the credit for the innovation of the index fund, then there is a definite "mythbusting" flavor to the book.

This is a book that puts its weight on the side of giving most of the credit to McQuown, Fouse, the Samsonite Luggage fund, Batterymarch, the quantitative academic theorists, etc. and somewhat downplays Bogle's contribution. The most explicit such remark I've found so far is on p.107:
Bogle would later claim that he was ignorant of academic ideas like Markowitz’s modern portfolio theory and Fama’s efficient-markets hypothesis, and was at the time unfamiliar with the pioneering efforts of Wells Fargo, American National Bank, and Batterymarch. Given the coverage that they received in the industry press and Bogle’s wide-ranging intellect, voracious news consumption, and visits to Chicago, this simply isn’t credible.
Well, maybe it isn't. Quite possibly Bogle did some mythmaking. Anyway, in Wigglesworth's telling, it was others that did the heavy lifting and deserve the credit, in the same way as you might give Xerox PARC the credit for all the important work that later inspired Microsoft and Apple to recreate them as Windows and the Mac. Bill Gates and Steve Jobs are more famous than Adele Goldberg, Douglas Engelbart, Butler Lampson...

The other thing that can be said is that Wigglesworth's point of view, right or wrong, is pro-factor-investing, pro-ETF, and so on. For example,
Whatever the reason, the existence of some persistent investment factors is today accepted by almost every (if not all) financial economist and investor.
As part of the process of telling the story of the people who developed these, it is necessary for him to present them as Good Things.

Thus, here's a curious detail. He confirms my impression that Dimensional Fund Advisors was created specifically to launch what's now called the DFA US Micro Cap Portfolio, DFSCX:
Over the Thanksgiving weekend of 1980 at McQuown’s house in Mill Valley, a scenic town in the foothills of California’s Mount Tamalpais, they thrashed out the details of a new business that would sell a small-stocks index fund to pension funds.
What he doesn't mention is that from inception to date, DFSCX has underperformed the S&P 500. He writes from the unstated point of view that the "small firm effect" and the small-cap premium must be real, because they are part of the story of why DFA was created.

The section on ETF's is very interesting because it explains how the structure of ETFs, the creation units and so on, were a clever invention that needed to be invented in order to make ETFs possible under existing securities regulations.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Novice2020 »

sleepysurf wrote: Tue Dec 07, 2021 7:05 pm Here's a great interview with the author... https://youtu.be/FW4HQCnW4co

The term "Boglehead" even gets mentioned!
Not in the way most of us use it, I think. Was Jack Bogle that opposed to ETFs versus mutual funds?
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by alex_686 »

nisiprius wrote: Sun Jan 02, 2022 1:12 pm It's full of fascinating tidbits like:
For a little context, SPDR was the first ETF launched. It was a pioneer doing things that nobody did before. As such it was, in retrospect, set up a bit oddly.

You mentioned the children. Then there is the issue that it can't reinvest its dividends.

ETFs that followed learned from this and are set up differently.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by chemocean »

Reading the last 40 pages before I have to return to the library next week because of the line waiting..
Good history of the birth of index mutual funds and their adult years, along with their brother (benchmarks) and their offspring (ETFs).
The last part of the book address the their excesses and criticism (sort of reflection of a mature adult)
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by PersonalFinanceJam »

Novice2020 wrote: Thu Jan 06, 2022 2:32 pm
sleepysurf wrote: Tue Dec 07, 2021 7:05 pm Here's a great interview with the author... https://youtu.be/FW4HQCnW4co

The term "Boglehead" even gets mentioned!
Not in the way most of us use it, I think. Was Jack Bogle that opposed to ETFs versus mutual funds?
I think it's like a lot of things, a viewpoint he moderated and refined over the years. I think in the beginning yes, he was very much against them because of the aspect of trading. Trading commissions were very much a thing when the SPDR launched. If your mantra is buy and hold, stay the course for low cost, then having someone come to you and say this great new idea would let someone buy the S&P 500 in the morning and then sell it in the afternoon is probably the wrong pitch. After reading the book, I came away wondering if things might have been different if instead the pitch had been, "here is a way to reach more investors than you can today and ensure if some of them trade excessively it won't negatively impact the others". It wasn't a given that trading commissions would essentially become nothing and spreads for the large funds would be quite small so some of this lack of seeing the "possibilities" is forgiven.

He clarified his view much later in life in many interviews. Incidentally this is after ETFs really looked like they could become a force for low cost investing.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Bluemnatra »

I do not like what I've read so far. I especially don't care the gossip portion on Bogle. People will complain about everything and I just didn't care to hear people complain about how he said hello to them walking down the hall. I mean it comes off so petty and pointless. It has a bit of history sprinkled in around the gossip. It's a pass for me and I returned it.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Gaston »

mikejuss wrote: Tue Oct 19, 2021 10:36 pm It's my understanding that index-like funds were available mainly to institutions before they became more widely available to the masses. Perhaps that's what's being suggested by the term "democratizing."
I think you are correct. When John Bogle was interviewed in the In Pursuit of the Perfect Portfolio podcast, he mentioned a couple index funds that came before his. But they were available to pension funds, and they used price-weighted and equal-weighted indices. Mr. said he was the first to offer a cap-weighted mutual fund (not an ETF) to retail investors.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by jason2459 »

alex_686 wrote: Wed Oct 20, 2021 8:09 am
nisiprius wrote: Wed Oct 20, 2021 6:42 am Oh, the McQuown-origin story. I'll probably read the book at some point. It sounds interesting. But probably tendentious. I guess I'd say there's a dispute about credit. I've read more about Bogle's side of the story. DFA and the Chicago Booth people tend to support a University-of-Chicago origin story.
mikejuss wrote: Tue Oct 19, 2021 10:36 pm It is not as if lots of people were using index funds and that all that Bogle did was make them available in mutual-fund form. I'm sure the book has more details on just how widespread any of it was before 1976.
I tend to file the Samsonite Luggage Fund story under Friese-Greene's invention of motion pictures, Meucci's invention of the telephone, and Santos-Dumont's invention of the airplane. That is, they all almost certainly did lab work and public demos and so forth, but it didn't lead to anything and their early work isn't truly ancestry of the devices we use today. As the cranky philosopher Charles Fort wrote, "A social growth cannot find out the use of steam engines, until comes steam-engine-time." The 1970s were obviously index-fund-time.

...

I'm not sure I take Bogle's account at face value. It might be a left-handed way of crediting-but-minimizing the Chicago people It also fails to explain the self-interested career reasons why Vanguard created an index fund (was to circumvent a restriction in the terms of its agreement with Wellington that seemed to prevent them from creating a mutual fund at all).

But it was, too, Edison, and Bell, and the Wright Brothers; and not Friese-Greene, and Meucci, and Santos-Dumont.
The Samsonite Luggage pension fund was equally weighted to reduce commission costs and complexity.

I think a better example would be Karl Benz of Mercedes Benz. He invented the car but Ford mastered its mass production. The Wells Fargo group that managed the Samsonite fund would latter morph into Blackrock.

I do think that Edison is a good example. A person who transformed the world by their vision but kept getting the basic theory wrong. Edison kept getting the math behind electricity wrong even after they figured it out. Bogle was never strong on theory.
Seems like much of history can be written differently by different people.

It could be argued that Nicolas-Joseph Cugnot invented the first automobile and Olds established and patented the first automobile assembly line.
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Arbitrage-Free »

nisiprius wrote: Sun Jan 02, 2022 1:12 pm I'm about halfway through. Bought it because I got tired of waiting for it at the library. It's great. Everyone should read it. I've only read half of it so I may end up with egg on my face from writing about it before finishing it.

It's full of fascinating tidbits like:
Trusts have a finite life span, which was initially supposed to be twenty-five years for SPDR. But they can also be tied to the longevity of individual people, so it was later amended and pegged to eleven children born around 1990–93, such as Weber’s daughter Emily, who was born on the same day that SPDR was established.35 As a result, SPDR will expire either on January 22, 2118, or twenty years after the death of the last survivor of the eleven people mentioned in the trust, whichever occurs first.
What follows is just my opinionated $0.02.

If there is a widespread belief that Bogle deserves the lion's share of the credit for the innovation of the index fund, then there is a definite "mythbusting" flavor to the book.

This is a book that puts its weight on the side of giving most of the credit to McQuown, Fouse, the Samsonite Luggage fund, Batterymarch, the quantitative academic theorists, etc. and somewhat downplays Bogle's contribution. The most explicit such remark I've found so far is on p.107:
Bogle would later claim that he was ignorant of academic ideas like Markowitz’s modern portfolio theory and Fama’s efficient-markets hypothesis, and was at the time unfamiliar with the pioneering efforts of Wells Fargo, American National Bank, and Batterymarch. Given the coverage that they received in the industry press and Bogle’s wide-ranging intellect, voracious news consumption, and visits to Chicago, this simply isn’t credible.
Well, maybe it isn't. Quite possibly Bogle did some mythmaking. Anyway, in Wigglesworth's telling, it was others that did the heavy lifting and deserve the credit, in the same way as you might give Xerox PARC the credit for all the important work that later inspired Microsoft and Apple to recreate them as Windows and the Mac. Bill Gates and Steve Jobs are more famous than Adele Goldberg, Douglas Engelbart, Butler Lampson...

The other thing that can be said is that Wigglesworth's point of view, right or wrong, is pro-factor-investing, pro-ETF, and so on. For example,
Whatever the reason, the existence of some persistent investment factors is today accepted by almost every (if not all) financial economist and investor.
As part of the process of telling the story of the people who developed these, it is necessary for him to present them as Good Things.

Thus, here's a curious detail. He confirms my impression that Dimensional Fund Advisors was created specifically to launch what's now called the DFA US Micro Cap Portfolio, DFSCX:
Over the Thanksgiving weekend of 1980 at McQuown’s house in Mill Valley, a scenic town in the foothills of California’s Mount Tamalpais, they thrashed out the details of a new business that would sell a small-stocks index fund to pension funds.
What he doesn't mention is that from inception to date, DFSCX has underperformed the S&P 500. He writes from the unstated point of view that the "small firm effect" and the small-cap premium must be real, because they are part of the story of why DFA was created.

The section on ETF's is very interesting because it explains how the structure of ETFs, the creation units and so on, were a clever invention that needed to be invented in order to make ETFs possible under existing securities regulations.
Mac McQuown was on the Rational Reminder podcast recently (https://rationalreminder.ca/podcast/182) and mentioned that the only reason Wells Fargo didn't launch an S&P 500 fund for retail investors before Vanguard is that Glass-Steagall prevent Wells Fargo from doing so. He also mentioned that he helped Bogle launch the first retail S&P 500 fund.

The modern view is that small caps have higher expected returns (note this means an arithmetic mean, not geometric) than large caps, but that this is entirely explained by their higher betas. The earlier findings that small caps earned CAPM alphas were due to data issues and liquidity issues. https://www.aqr.com/Insights/Perspectiv ... ly-Edition
Gaston
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by Gaston »

jason2459 wrote: Thu Jan 06, 2022 7:52 pm It could be argued that Nicolas-Joseph Cugnot invented the first automobile and Olds established and patented the first automobile assembly line.
I think you are correct. It’s often not the original inventor but the person who turned the idea into a successful product who is remembered.
“My opinions are just that - opinions.”
KarenC
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by KarenC »

FWIW, the author was also interviewed on Mornngstar’s podcast “The Long View”: https://www.morningstar.com/podcasts/the-long-view/136
"The first principle is that you must not fool yourself—and you are the easiest person to fool." — Richard P. Feynman
gtrplayer
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Re: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever

Post by gtrplayer »

JoMoney wrote: Tue Oct 19, 2021 10:28 pm
chance wrote: Tue Oct 19, 2021 10:20 pm...
Random House wrote:... democratizing investing ...
Index funds are great, and have certainly saved people lots of money over conventional mutual funds.
I wonder how they believe that was "democratizing" it. It's not like stock investing (and for sure mutual funds) weren't widely available and used by people. In some manner it may be un-democratizing investing as many otherwise low-expense seeking buy and hold investors that owned shares directly moved to the convenience of broad market index funds but at the same time abdicated their ability to vote those shares to the fund companies :annoyed
I’ve always thought the broad market index funds democratized investing by giving everyone the opportunity receive a part of the entire stock market’s gains and losses… I think Jack Bogle said it let people get “their share of the stock market gains.”

It’s not democratizing it in the sense people vote on it (the issue about losing voting shares is an important one), it’s democratizing it by letting everyone be a part of it.
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