This session, a moderator, to my left, the esteemed John Luskin, host of Twitter Live, and also runs our Bogle Heads Facebook page and Bogle Heads Twitter, is a fee-only advice-only certified financial planner from sunny San Diego, California. He helps a lot of do-it-yourself investors. He is a prolific writer with articles published in peer-reviewed journals and magazines. He's been published in the Journal of Financial Planning and others. He did his master's thesis on university endowment funds, where he showed that university endowment funds would do a much better job managing their endowments if all they used was a portfolio of passive index funds, which those very smart people don't really want to hear. But anyway, so he is recognized as one of the leading financial planners in the industry by Investment News Magazine. He's been featured in The New York Times, Wall Street Journals, and other publications. So I give you your moderator, John Luskin. And you're ready. Folks, welcome to Vanguard Deep Dive. As you know, I'm your host, John Luskin. And I'm joined by Alec Lucas and Ben Johnson, CFA. Alec is a strategist within manager research for Morningstar Research Services. Ben is head of client solutions at Morningstar Asset Management. Today, we're talking about Vanguard. I'll start by reviewing Vanguard's past, present, and future before opening up to audience questions. Let's start with the past. Alex, can you start us off by giving the audience a little bit of a refresher on the history of Vanguard, how it came to be, and the motivation behind it? Well, thank you for having me. We'll use the mic. It's probably a little easier to hear. Thanks for having me. Very excited to be at a Boglehead's conference. I expected to see bobblehead dolls on the tables. But they're very expensive. Inflation, inflation. There you go. There we go. In terms of Vanguard, I think that one of the themes I've noticed, so I started covering Vanguard in the... I started investing in Vanguard in the late 90s, but joined Morningstar in 2013 and then have been what's called the Vanguard parent lead since the first half of 2018. And I think one challenge that Vanguard sometimes faces is that there's a tendency to compare the new Vanguard with the old Vanguard. And I actually wrote a piece on this. And I think sometimes there is a tendency to gloss over some of the details about what happened early on in Vanguard's history. So as is probably well-known among this group, but perhaps not as well-known as it should be, is that there's a very close relationship between Vanguard and Wellington that persists to this day. But what became the Vanguard effect of lowering fees and promoting indexing, it arose in the midst of a very fierce battle that Jack Bogle had with four Boston-based rivals. And remember that Vanguard is based in Philadelphia, so there's probably some regional differences there. And initially, when Vanguard was founded in September of 1974, the first day of operating was May 1st, 1975. And after seven months of negotiation with his Boston-based rivals, Bogle said that he got one-third of what he called the fund loaf. Now, what did he mean by that? If you think about what a mutual fund does, it does fund administration, it does investment management, and it does distribution. So Vanguard at its inception only had a right to fund administration. But Bogle, being in some respects the perfect example of Adam Smith's invisible hand, his competitive zeal leading to the good for a lot of people, because what he essentially did is back then, you had a commission-based distribution system, so he went no-load. And then, because Wellington retained investment management rights, he launched the first retail index fund because he argued it was unmanaged, because it merely tracked an index. And so initially, this incredible innovation, the democratization of what we call now beta for your average retail investor, it was his only play to launch a new fund. And so there's this wonderful thread, if you kind of go throughout Vanguard's history, that a lot of these innovations were born in the midst of this career-defining conflict that led to Vanguard's founding. And there's other things we can go to, but I think that it's important to really understand the history that what became Vanguard in this playbook of low fees and indexing really emerged in the midst of that conflict. Fantastic. All right, let's bring it to Vanguard today. Now, Vanguard is moving into new spaces where it wasn't involved before. Advice with Vanguard's personal advisory services, including private equity and direct indexing. Ben, what should Boglehead's make of Vanguard moving into these new areas? Well, I think to pick up where Alec left off, like the Vanguard effect is pervasive now, right? We see it everywhere. We see it emblematic in the fact that market exposure, beta is free just about anywhere you can go. The entry point, in many cases, is as low as a single dollar. If you show up at Vanguard, if you show up at Schwab, if you show up at Fidelity with a dollar, you can get a zero-fee total stock market index fund today. So I think that is absolutely to be lauded, but what that creates is basically like a flat competitive space. So I always use the analogy of like competition between two corner gas stations, right? So what are they selling? They're selling something that's going to make you go at the end of the day. Market beta is going to make your portfolio go full stop. So you need that beta to lift your assets over time, ideally at a rate that outstrips inflation. Well, when that becomes a commodity, I pay nothing or effectively nothing for total stock market exposure, total bond market exposure, my three-front portfolio. It can be had for literally nothing. How do I differentiate? Well, we arrived here because one corner gas station was taking a penny off of the gallon of gas. The other one was, the other one was. It's free now. So what do we do? Oh, we've got these fancy new detergents in our gas that will extend your engine life. We call it smart beta. Cool. Is that really going to work? Maybe it does. Maybe it doesn't. But for the time being, it's a way for us to differentiate our gasoline from the person kitty corner from us. Well, that's not really working. So what do we do now? Well, if you fill up here, I'll give you a car wash for $3.99. Okay, that's a differentiator. Well, if you fill up here, I'll give you a car wash and a pizza. So what you see, not just at Vanguard, but really across the tier one asset management industry, is an expansion of the breadth of their offering because they have to, because their core offering at the end of the day has become what's effectively a public utility. It's just market exposure. Awesome. I can't underscore how awesome that is, that that is free, that that is investable to anyone at a minimum investment of a few bucks. Fantastic. Let's celebrate that. But now we've got to move on and say, well, how are we going to differentiate? We're going to differentiate along the axis of how do we package different investment strategies and what are the different types of investment strategies that we offer. So in the packaging, what we've seen is ETFs have become the choice of a new generation. The investment vehicle that literally the founder refused has really become the cornerstone now of this organization. You see differentiation along the lines of strategies. So you've got at the core low cost beta humming along. You've seen an effort that's had not so much success in factors. You see concentrated discretionary active portfolios coming to play. And that is all to compete. That is all to ultimately serve different needs across a massive client base. There are some 30 million different investors that Vanguard's serving around the world today that don't necessarily just want a tank of gas, but might want to carwash a pizza, a different detergent in their gas that's going to extend their engine life. And that's, I think, just part of a natural evolution. And to the extent that they've done it in a way that resonates with their past, focus on the investor, focus on bringing down costs in this space. You see that in the advice offering. I think that resonates, right? That's true to their legacy. But that's not to say that there might not be missteps at some point along the way. And for those who aren't investment nerds, beta just means we're investing in the Vanguard total or other low cost total stock market index fund. Yeah, I would add to the differentiator point that I think Ben is exactly right on. There is also, I think, an altruistic element to it. Vanguard does see itself as trying to democratize asset classes. And so I think that the private equity efforts can be seen in that light as well, even as it is to also serve institutional clients. And I think it's something that's perhaps unrecognized, but if you think about indexing when Vanguard launched the first index fund, at the time it was an institutional strategy. It actually wasn't working too well. So it's quite fascinating that Bogle launched what became the Vanguard 500 as early as he did. The first effort at indexing, if you've read Robin Wigglesworth's book, and it's also covered in Peter Bernstein's Capital Ideas, the first effort at indexing occurred with the Samsonite Pension Fund, I believe it was 1971. And they tried to equal weight the New York Stock Exchange. It was a disaster. In 1973 there was a sampling approach to the S&P 500. Those were institutional portfolios. Bogle in 1976 launches the first retail index fund. Think about computing power back at that point. It's much less robust. So if you have an institutional accounts, the money flows are much more predictable and they're bigger. And so that's why sort of understanding the origin of Vanguard and what it did, it's this tremendous revolution that at the time had no guarantee of success and was slow going in the early days. And so I think there's a lot of insight to be gleaned from understanding Vanguard's present in light of its past. Ben, I know you have a lot of expertise in index fund investing and ETFs. Tell us your thoughts on Vanguard moving into direct indexing. Yeah, direct indexing I think fits within this idea of expanding choice for the end client along the dimension of sort of delivery. So direct indexing, I don't know if anybody remembers the old Mike Myers skit where he played Linda Richmond in Coffee Talk on Saturday Night Live. Direct indexing is neither direct nor indexing. So let's discuss that. So what direct indexing is really is a way to optimize first and foremost for tax considerations. So people who are in high tax brackets who have a lot of money, oftentimes who are bringing like a concentrated stock position to bear, look at direct indexing as a way to build a portfolio around that concentrated stock position that brings in diversification that keeps the tax man at bay as long as humanly possible. Pretty cut and dried, it makes sense in those use cases. But that's not everyone. That's not me. I don't have that problem. And I would argue most investors don't have that problem. But for those investors that are looking to achieve something very specific, it is a very good tool to do exactly that. And it's also something where Vanguard's got an offering, BlackRock's got an offering, JP Morgan's got an offering. So it's emblematic of the level of competition right now among the large asset managers for your money. They want your money because that's how they make money. And if they don't have like the shiny new toy that their friend across the street has, like they're at risk of either losing your money or getting tough questions from you. Like, you know, hey, like BlackRock has a perio. Like, you know, what do you have to offer me? So it's, I think important to understand a lot of this in the context of like competition among these large asset management firms. And, you know, Vanguard like is, you know, one of the three now 900 pound gorillas in this space operating not just here in the U.S. but globally against chiefly BlackRock and in State Street. Earlier beforehand, we were rehearsing for our talk today and I mentioned Vanguard has higher fee active funds in their personal advisory service offering. And then, Alec, you mentioned relatively yes but compared to some of the other funds that are out there, compared to other funds, it's still relatively low cost. Can you tell us more about your thoughts on Vanguard making this move? Yeah, so as a number of you probably know, Vanguard launched some advice select funds in 2019, late 2019. And so they're only for personal advisor services clients. And this was a subject of considerable discussion at Morningstar, especially between John Reagenthaler and myself. You know, it reminded, it certainly reminds some people to kind of the old wirehouse approach where, you know, you sort of have this proprietary product and you're trying to get it to investors. But if you think about the simple fact of sort of democratizing investing and the playbook that Vanguard has followed very well is in indexing, if you had a very simple model of indexing, you invest in the index fund, you get the market average, and then you beat most people because you have lower fees, right?  And so what Vanguard did is it launched these high conviction active strategies and it's priced them pretty competitively for actively managed funds, but even if you include the 30 basis point charge for personal advisor services, it still falls below the active median. And there are clones of those strategies. Don Kilbride has run one. He manages Vanguard Dividend Growth, which is a fund that's done very well. The more concentrated version of the fund, he's run as a separate account since 2008, and it has actually beaten, even if you add in the fees, it's outperformed the slightly more diversified Vanguard Dividend Growth fund. But I think it's important that they're offering things that are price point that is competitive and it is selective, but not everyone can outperform. Is it Lake Wobegon, where everybody's above average? Yeah, that's not going to happen, right? But everyone can be averaged through indexing.  Just today, ESG investing. So earlier on the panel, I got quotes from the panel on that subject, and these are shortened because I put on Twitter, and as you guys may know, there's some pretty limited character accounts there. So here's from Dr. Jim Dolly on ESG investing. There are better ways to make a difference. Jason Zweig, you should be skeptical. Dr. Bill Bernstein, cut from a much longer quote, ESG is a scam. And then lastly, if you want to make a difference, you want to own the stock, and that's from Rick Ferry. So naturally, Vanguard's moving into ESG investing as well. Ben, I'd be curious to hear your thoughts on that. Yeah, so I planted a tree in my backyard a few weeks ago, and that tree over the past two weeks has already sequestered more carbon than every ESG fund under the sun ever will. So you have to understand what is the transmission mechanism between your investment capital and the cause that you believe in. And in the case of public markets, as a public equity investor, unless you're participating in new share issuance, there's no direct connectivity. You're passing shares back and forth to one another. And if anything, by virtue of not owning the shares, and I think this probably came up too earlier, I sorry, your tweet, you forfeit the only connectivity you have, which is either directly or indirectly to vote proxy to try to effect change at the level of that corporation. So the link there is tenuous at best. That said, it's a real choice. It's a real preference, and I don't think you can discount that. I think you've seen, again, Vanguard and all of its competitors position themselves to expand, again, along this axis of choice that is the investment strategy. Does it incorporate ESG criteria or does it not? More choice for people who want that choice. That's great. But to do that at scale is exceedingly difficult because ESG considerations are inherently personal. We heard Bernie Malkiel talk about the disagreement even among ESG ratings providers. And it's going to differ if we go around the room here. My ESG emits the stock of the guy who, the company who has a CEO that stuffed me in a garbage can in high school. That's my ESG criteria. That's going to be different if I ask somebody else in the audience. That would be G for governance. It's difficult to do for scale. It is in theory, you know, potential use case for something like direct indexing, which we were talking about before, that allows people to kind of go up and down, starting from an index portfolio, and apply those sliders that say, you know, I want to, you know, not own companies that don't take into consideration animal welfare, like whatever the case might be. But it's, you know, at the end of the day, like exceedingly difficult. What we've seen is, you know, more and more asset managers have tried to compete on this vector and, you know, get into this like, you know, old school, like Mr. Olympia ESG green muscles flex off, right? Like kind of hulking out on ESG is that there's been blowback. And there's been blowback for all the reasons that I've just described, because there's fundamental disagreement on what is ESG good? What is ESG bad? And we could both take like very different sides of the exact same coin. So, you know, I think it's going to continue to be out there. I think investors continue to need, like, true, like, you know, direction in terms of like, who is actually like walking the talk. But, you know, it's, again, a dimension of preference. It's a strategy type.  You know, there's a saying in Spanish. This is my first ever panel response where I will try my hand at speaking in Spanish. But, Senor Marth, my sophomore high school Spanish teacher, was always fond of saying por todos sus colores y sus sabores. So, everyone has their own different colors, their different flavors. ESG is one of those flavors. Wonderful. Yeah. All right. Let's bring it to growing pains. Alec, looking at Vanguard, they're not in Melbourne anymore. What does Vanguard's geographic expansion mean for their investor owners? Well, I think, you know, Vanguard opened up its first global office in, it was in Melbourne in 1996. So, they have a history of being overseas, but growth has been slow. I just talked to a Melbourne-based reporter. They're trying to revivify an attempt at launching a platform for Australia's superannuation retirement funds, basically. Apparently, they had done that in years past and had not worked. So, it's been pretty slow going, I think. They've been in Canada, for example, since December 2011, and only in May of 2018 launched their first active funds. So, what is Vanguard's playbook overseas? What you find when you talk to Vanguard, and I'm not an entire expert on Vanguard's entire non-U.S. operations, but my understanding is that in a lot of these countries, it's an oligopoly in terms of distribution, and it's been hard to break in. So, 95% of Vanguard's overseas assets are in passive strategies, and they've been trying to basically grow their business to exchange traded funds and more recently through advice. And in its early days, I think they did use U.S. investor assets to subsidize their expansion efforts overseas. They would argue that that's also helped their investing to have more of a global firm. But it's been slow going. The last number I heard, this was in 2020, so it's quite dated, but it was, I think it had $550 billion overseas by contrast until the market downturn. I think they had about $8 trillion in assets globally. So, at that point, probably under $1 trillion of that is overseas. But taking a measured approach, and I think trying to grow overseas, and I think Vanguard does harken back to how long it took, for example, indexing to take off. If you look at Vanguard's assets and you look at the division of active and passive, it is not until in the aftermath of the global financial crisis that AUM indexed assets take off relative to active and Vanguard. So, if you think about Vanguard, what built Vanguard is actually the Wellington Fund, is what subsidized a lot of its early efforts at indexing. Yeah, indexing is like the overnight success that's been decades in the making, right? And internationally, what you see, I think, which is most interesting is we talked about the Vanguard effect before. The Vanguard effect almost unfast-forward in certain markets and notably when they first listed their FTSE 100 ETF in the UK, this was years ago, BlackRock was already present there, had a multi-billion-dollar competitive offering, tracking the exact same underlying index and said, we're holding the line on fees even though the Vanguard ETF was charging a tiny fraction of what the iShares ETF was charging. We have superior liquidity or clients worry about ETF liquidity, not fees. They held out for, I think it was all of like 18 to 24 months before finally they cried uncle and had to cut their fee to, I don't remember if they matched or undercut the Vanguard ETF because they were losing share because people saw Vanguard coming and knew exactly what the Vanguard playbook was and quickly their competition had to respond. You've seen that happen in Canada too where they've launched single-ticket like ETF allocation portfolios and it's a market that's very difficult for outsiders to penetrate because so much of asset management product is distributed through bank branches in Canada. So I show up to a BMO branch in Canada. When I'm 16, I open my checking account. I do all my business with them until the day I die. My heirs come and walk away with my assets after I've expired. Well, Vanguard has forced competitors in there to launch nearly identical product at nearly identical or lower fees just by virtue of their presence in some cases. So the Vanguard effect is the real deal and it's replicating itself in all these new markets where they show up and build a presence. And even at $550 billion or so overseas that's like a top 25 asset manager in the U.S. so it's a significant footprint. As much as we talk about Vanguard as being this indexing behemoth they're also one of the largest active managers in the world and even what is a relatively small in Vanguard terms foot side the U.S. would be a pretty big U.S.-based asset manager. So beforehand we asked for questions on the various Bogle Ads communities including the Bogle Ads forums and one topic came up multiple times and I'm sure a lot of folks are going to be able to guess what this is and that is going to be growing pains and customer service. So here is one question from Makephile from the Bogle Ads forums who writes it'll be interesting to hear from the Morningstar analysts whether they think Vanguard's current cost structure and ultra-low expense ratios would even allow for Vanguard to return to a higher level of service. Okay, I'm prepared for this question. I have a prop. I feel like as a rite of passage if you're going to be in Bogle Ads you need to read Character Counts by John Bogle or his thesis. I've read both. I think I would not say the thesis is a page-turner. So this is a compilation of his speeches. It is not indexed. I came from academia. I am used to indexes. I made my own. The right-hand column because early on in my Vanguard lead days at Morningstar guess what topic kept coming up? Customer service. So I have a personal index of every reference to customer service problems throughout his speeches. Let me give you a small selection. Service quality not uniformly high. That's page 69. Processing traumas. Page 73. Service problems. 107. Learning from service setbacks. Processing overload. Shareholder complaint letters. And perfection as a goal and so forth. So I think that the way to think about Vanguard is it has a frugal culture and high-touch customer service is probably never going to be at strength. Anecdotally, we have heard that investors who pay the 30 basis point charge for personal advisor services are for the most part fairly satisfied with the services. But I myself have experienced long-hold wait times and some of my own disasters from customer service standpoint, including when we changed over our money market account. I rarely wrote checks for my money market account. So I wrote earnest money for our housing down payment.  So I was like, we're going to make it up by buying a short sale. So you can imagine you want the earnest money check to cash, right? On a basic level. I happened to also, out of the same money market account, write a check to the home inspector. It bounced. And the home inspector got back to me luckily in time to wire money and replace what then subsequently bounced as the money market account. But what happened, they changed the brokerage platform circa 2016 and didn't let me know or at least didn't make it clear enough that you needed to re-register for check writing privileges and all your old checks wouldn't work. And I got Vanguard to pay me back the money I got charged for bouncing that check. And they did. But I think that a theme throughout Vanguard's history is, if you sort of think of the field of dreams, quote, if we build it, they will come. Well, indexing really did take off, especially in the aftermath of the financial crisis and Vanguard's growth has been phenomenal and there are challenges. I well say anecdotally, we get lots of complaints from customers and I have duly passed those on to Vanguard myself and said I'd like to talk to Tim Buckley about how they're handling this. Because my impression is you have a lot of the people that helped make Vanguard what it is today whose financial needs have gotten more complicated to very long wait times on the telephone. And I think it's unfortunate and I think they could do a better job with it to be quite blunt about it. So those are my initial thoughts on customer service, but a point Ben has often made is if you think about having 30 million investors, you could satisfy the lion's share of them, but still just on an absolute basis have quite a few missteps. And anecdotally, there is a morning story analyst who had a family member pass away and had to like deal with all these accounts and said the people that ended up being the most helpful were Vanguard. We don't get written to about that, right? So I do think you have to keep in mind how many customers it is they serve as well as the challenge of keeping up with the growth they've experienced. I would just add that despite that it's interesting like if everybody gets real quiet, you can actually hear money headed to Malvern right now. So like through the end of September, I just did the map based on our flows data, something like 300 million dollars a day, you know, flowing into Vanguard funds.  And as Vanguard clients or otherwise consuming Vanguard product through other platforms, right? You can be a Schwab client and buy Vanguard asset management products. I'm a Schwab client that buys Vanguard asset management products. The other thing you have to look at too, and you mentioned Thrift, Alec, I just looked back at the envelope, the number of employees per investor served, this is just based on the public data out there. Fidelity has nearly three times as many employees per investor as Vanguard does. And they have three times as many employees per investor as Vanguard does because they're monetizing their investors in different ways that Vanguard hasn't historically monetized their investors, earning interest spreads on cash sweep accounts in a number of different ways. So, you know, foundationally, I think I can credit David Booth with saying that the product of the asset management and wealth industries at the end of the day boils down to trust. And I don't think there's any more trusted brand in this industry, probably than Vanguard, that shows up in survey work that's been done. But as a result, you know, they're under the microscope, and this is, I think, something that's not going away, barring probably more significant investment in something we've talked about them with them for years and obviously something, you know, that shows up in the Bogleheads forum. In addition to, like, which composite, like, fiberboard you can build your deck out of that is least likely to burn your feet in the summer. So, like, credit to the Bogleheads forum, I love this place.  Like, that's amazing. It's like the ultimate hitchhiker's guide to the universe. Before bringing it to the audience, let's talk about the future. Eric Bolchino's keynote speaker for this year's conference takes a stab at dispelling many of the myths of index-funded investing and how it could distort markets in his book, The Bogle Effect, yet with massive fund flows, Vanguard receives daily 300 million. How big is too big for Vanguard? I, when I came here and registered, I saw that they were offering, I don't know if it was good, I have it and have read it, the last book at Bogle Road, the 2019, Stay the Course. You know, towards the end of that book, he does mention this question of size and if you think about, especially Vanguard in relation to Black Rock and then State Street and the growth of passive assets, there's real questions about size that they take very seriously. I actually was visiting with Black Rock in New York the other week and to bring it back to the topic of ESG, they were talking about how they're trying to, and Vanguard's doing the same thing, they're trying to take a very serious approach to voting proxies. And then they will get kind of very silly proposals from say an overly zealous environmental group that will say put on, try and put a proposal for a natural, for an oil company or a gas company, you know, I'll stop drilling, this is an exaggeration, but it's not far off, you know, we'll stop drilling entirely and plant trees and they will not support the proposal and then they will, the next year, reward the proposal to say something like we would like you to stop drilling and consider planting trees. And so they're just complaining about all these proposals that aren't that helpful and I said, well, have you ever talked to Vanguard to try and sort of band together and get it so that there aren't so many silly proposals that you're essentially having to vet and vote against and the answer essentially was that there would be real concern about the perception of collaborating given the amount of stock owned in public companies between just those two firms. So I don't, the basic answer to the question is I don't know how big is too big, but it is a real issue going forward and one that I think Bogo was rightly concerned about. And that issue like has a few different facets so one of those is, you know, the growth of indexing and what does that mean for market efficiency like price discovery, you name it, if there's just $380 billion, like plus, you know, $380 million, sorry, going towards Malvern, going into index funds incessantly, like what does that mean for like finding two sides to agree on like, you know, what the price of Apple stock is at the end of the day, like these concerns are as old as time. I don't know if anybody ever read, what is it, I'm going to get its name wrong, John Brooks Business Adventures is the book anyway. So if you go back to like the go-go years of the 60s, people were worried about the quote unquote mutual fund situation. So retail mutual funds were just becoming like truly a thing being made widely available and incumbents were worried that, you know, once the you know what hit the fan that all these new mutual fund investors would go flocking towards the exits at the same time and markets would, you know, be upended cats and dogs would live together, whatever, like that didn't pan out. So like, these are just like, it just feels like the same fears keep getting recycled and like new clothing. I would apply that to the growth of indexing, you know, where it becomes potentially more concerning, I think is around common ownership. So, you know, Vanguard, BlackRock, State Street, Odin, ever larger amount of an ever larger number of companies, not just in the US, but globally, like what are the implications for corporate governance and something that, you know, Bogle wrote about in his last op-ed in the Wall Street Journal, you're already seeing the industry like try to move to cut that off at the past BlackRock announced earlier this year that it is handing over the ability to vote proxies like based on certain policies to some of its institutional investors. Just this morning, Charles Schwab announced that it's going to pilot for three of its index portfolios to ETFs and in index mutual fund, a survey of investors in those funds based on like their preferences as to how they might vote the proxies for the firms that are owned in those portfolios. At the end of the day, it's the investor's asset, right? That vote. So it's incumbent upon the asset manager has a fiduciary obligation to vote those proxies in a way that's sensible. I think that proxy voting is going to come ever closer to the end investor now or most investors are going to know what to do with it or care to do anything with it. Probably not.  I know we've got super duper sample bias here too because these are like some of the keenest investors in the planet. Yeah, but absolutely. And Jim's point up front is if there were an easier way to engage and be more uptake, I don't disagree with that and engage in a way that says broad spectrum, these are the things I believe in or believe against. Apply that across a thousand stocks and the Schwab 1000 ETF go. But I think that's where it becomes potentially more concerning and you start to bump up against even just ownership constraints that are real and regulatory. And anytime you put that question across to the asset managers, it just mums the word because this represents at some level of growth like real enterprise risk and the potential of like even bringing up like antitrust conversations. Just to add one other thing, I think it was in 2018 that Vanguard changed it so that the sub-advisors, the external sub-advisors it hires to manage its equity assets can vote proxies. So previously Vanguard voted those proxies. They did that more to help the managers in that case influence the companies they were investing in, but it also has the effect of decentralizing the voting and I think Ben's right on. It is the proxy voting and the ability to vote proxies that I think is the biggest concern about size. Folks, if you want to ask your question to the panelists, go ahead and step up front or raise a hand and okay great, I'm going to hand you the mic, wonderful. Hi there. A question on your Vanguard inflows, data you're in support of the customer service, does your data, I just don't understand the little clarification. When you do your fund inflow data, are you measuring funds flows into the funds themselves regardless of where the trade was executed? Because I think that's what the issue is, Vanguard the company as my trading platform and customer service versus fidelity or Schwab is my trading platform, because Vanguard funds at Fidelity. So that's what I'm trying to clarify because the customer support is a company versus the Vanguard branded fund which can be traded anywhere. That is a measure irrespective of the origin of that money. Irrespective of whether it came from a Fidelity client or Schwab client or an advisor or an individual, that's just we know that that money has wound up in Malvern. We don't know how it got there. We just know it's being managed there today. So that's a good question. I think part of it too is I'm very fond of the bogalism, you get what you don't pay for, yes in investing, but I think even Jack, maybe this was when he had heart surgery and relented that sometimes you do get what you pay for and when it comes to someone operating on you, that's the case. I would say when it comes to service offerings in general, that's also the case. You can't show up to McDonald's and expect like white tablecloths and a major D. I think you've got to take the good with the bad at the end of the day. So probably it's similar to this. Could you explain Vanguard now moving accounts from mutual fund accounts to brokerage accounts and why is that such a complicated thing and why do they have to do it? I'm not sure I can answer that in every respect, but I know they started that initiative in 2016 and as I explained earlier, I experienced my own hiccup with that. I think that it was much more about expanding the brokerage platform and just the technology of it is my basic understanding and I know that I believe it was this year. They sent a notice to legacy investors on their old platform that it was time to move. So I think it's just about updating technology and if you think about it if you just think about where the asset management industry is today, I have a two and a half year old her grandparents great grandparents give her more money than she needs as a two and a half year old so I take that money and she now has a globally diversified portfolio and also because I will say that my children love McDonald's I do not love McDonald's myself but they each own one share of McDonald's and so the point being that if you think about where investors are to open a brokerage account and get a diversified global portfolio in 20 minutes well that takes a certain amount of technology and so I think it was about transferring their investors to more technology enabled platform and they did that did take years for them to do that I would just add in a related vein you've seen a similar shift you know sometimes there's a carrot sometimes there's a stick away from legacy mutual fund share classes into the ETF share class where the ETF share class has been appended to the mutual fund and part of that is just trying to address the issue of like individual shareholder record keeping which exists and can be costly in the case of say the admiral share but exists does not exist in the case of the ETF where shareholder record keeping takes place at like an omnibus account level so you've seen that even just in the way that the ETF share class in many instances was repriced the basis point lower than the admiral share and yeah that repricing is reflective of the cost savings on Vanguard's end you have servicing a client that's an investor in the admiral share versus the ETF share so I think it's similar I'd like to hear your thoughts on the debacle with the target retirement funds capital gains distribution does anybody at Vanguard care do they what do they think about these lawsuits that are now being launched because of this issue is this sort of thing going to happen again what are your thoughts on that debacle yeah so that was a subject of considerable discussion for those of you that don't know Vanguard opened up a cheaper version of a target date fund and investors instead of lowering the cost of the current fund and institutional money sort of flocked to the new fund and caused a huge capital gains distribution now if you're investing in say 401k or Roth IRA if your money's through that route the capital gains distribution does not matter for you but if you took and in some cases there was some criticism of Morningstar as well for not making it clear that investing in a target date fund and the glide path can be an inefficient thing to do if it's taxable money so I think that that was a reminder to Vanguard that you know sometimes I think this is the disadvantage of their size you know the vast vast vast majority of their target date assets are in retirement accounts so it didn't matter however you know when you're talking the huge asset bases that are in some of those funds even if it's a few basis points it's still a lot of money and it's a big deal to a lot of people I actually had an hour long call with somebody based in Pittsburgh to talk about that because he was so frustrated both at Vanguard and at Morningstar because he felt like we could have done a better job of warning investors about that potential and I think he was right you know it's something to be aware of and it's something that we need to be as thoughtful as we can be about the you know the positives as well as the potential negatives for investing money especially when you segmented it into tax advantaged and taxable accounts so I do think that Vanguard got the point but it is an illustration of some of the collateral the way that I phrased it when I wrote about it is this is a collateral effect of the fee war you know Vanguard basically is the reason we have fee compression in the asset management industry and some of their biggest rivals and so there's been you know I think it's especially between Vanguard and Fidelity in lowering their target date fees one will lower and then the other will lower so I think their competitive Zeal got the best of them we've talked about ESG investing and Ben you mentioned how with the traditional approach to ESG investing you are giving up one means of influencing those companies and then we've also kind of tangentially talked about proxy voting what do you think about the other newer approach to ESG investing like engine number one's vote ETF yeah so there's engine number one and now there's even like anti-engine number one so there's another you know firm out there that is like trying to vote Contra the way engine number one might vote you know I think it's interesting but again it's difficult to scale it assumes alignment at the level of the end investor like certainly there's there's a market for that we see that hundreds of millions of dollars in VOT's the tier of the engine number one fund but there's also you know tens of millions of dollars in the Contra fund I think at the end of the day like the scalable solve is as I mentioned before to like get more of the vote as close to the end investor as possible in a way that overly burdens them you know and doesn't make things incrementally more complicated that's ultimately my take as it pertains to proxy voting the other element that we didn't touch on is like you know more impact oriented like thematic you know portfolios that look to invest in companies that are going to capitalize on like the energy transition or even you know certain fixed income managers for example PIMCO does like direct placement so like they will have like a firm that is doing a green project issue them a bond they will own that bond in their portfolios like that linkage as I described it before between capital and causes immediate it's direct there you know whether that green project winds up being not green like XPOST like at some point in time somebody thought asbestos was a great green building material right like wow was that wrong so you know there's still going to be a bit of uncertainty did that get to your question hopefully okay thank you and I would just add on the impact front Vanguard co-opted essentially a Bailey Gifford positive impact fund I think it was last year I don't think it was this year I think maybe it actually changed it got rebranded as a Vanguard fund this year so they have that as part of their offering and I would say one thing to think about Vanguard with respect to ESG is an important development is a guy named Dan Newhall who for many years oversaw Vanguard's manager search and oversight committee which evaluates all the sub-advisors they hire both internal and external so if you put your money in actively managed assets that group is the one that picks those sub-advisors and it will also be Vanguard's own in-house investment capabilities have to compete with those external managers so a big question we've had is what is the role of ESG when they evaluate those managers well a guy named Matt Piro took over as head of that group and he had recently been appointed head of their global ESG product lineup so I think that there's going to be a bit more of a consistent vetting of managers from the standpoint of ESG on a go-forward basis but I think Vanguard will always make room for a firm like Prime Cap Prime Cap is one of their longest sub-advisors as you may know and they came out with a statement a couple years ago on their approach to ESG and they said it took them forever to come up with it and it's maybe four or five sentences and the key line is they struggle with the idea that definitive objective rationales exist by which you can vet these companies that said Prime Cap's next analyst I hired is somebody with tremendous ESG experience so there is something to be said for active managers paying attention to risks from the lens of ESG but I think Vanguard will always leave room for managers that are not necessarily leading with ESG but see it as one Wellington manager one Wellington management manager put it in the heart of the mosaic my question is more about Morningstar than about Vanguard I'm wondering what's going on with your accounts I've always for a while I was a paying customer and then I learned that I could use what I really want and use a lot as the watch list and and now I've discovered all of a sudden I've been lured into being a subscriber again to Morningstar it arose out of a frustration I've had with Vanguard's reporting if I try to list all my funds on one page okay so it's more than four the easiest way I found to do that was using a watch list that I would keep from month to month and update I think that's a great question for Bendy answer I was actually looking down at Christine oh sorry we got two minutes so is your question as it pertains to that like watch list function where it exists because I know we've had some changes to our it seems to be it seems to be changing with relation to the free accounts versus the paid subscription 200 dollars a year we're going to meet once I get off stage and we will figure this out for you great thank you you're on the fly I'm sorry I have a simple question won't take very long every time that I call Vanguard and I get a rep who doesn't really seem to understand the simplest question or every time they bounce one of my checks I wonder about the opacity of the compensation structure of the executives at Vanguard and I'm wondering if anyone in your shop has discussed that I've asked Tim that directly as you may know some of you may be familiar with Dan Wiener who runs the Vanguard independence I'm like on the exact terminology but he famously reconstructed Bogle salary and published it which made Bogle quite angry I think though that Vanguard there's certain things Vanguard could improve in and I think transparency is one of them in certain respects and one of them would be compensation for executives they have said to me basically they don't want to disclose it because of competitive pressures but you know if you think about your average well every publicly traded company you want to find out what the CEO makes you can you know Bogle has made much out of you can't serve two masters and being very critical of publicly traded asset managers but that's one respect in which publicly traded asset managers have a leg up and it's been raised is what I can say and I'd like to see him do it folks that is going to be it for our time today thank you for Ben Johnson and Alec Lucas for joining us today we will see everyone at 630 down in the banquet hall downstairs same spot as last night until then enjoy your break


Why you going silent? All right, I won't go silent Raid was afraid of the video Don't be afraid Roger. We have three minutes to show time three So are there any awesome do you live? Like in the Portland suburb or actually in the city of Portland. I Am in the city of Portland. I'm in the southeast and It's kind of the east kind of the awesome part of Portland Right the best part. It is really is so you have um south beast The southeast is awesome. It's very neighborhoody But there are these cool strips of and I live off of one that reminds me a lot of like a mix between Kind of brooklyn and hate ashbury. Oh, okay So it's like you find a lot of thrift stores here and kind of punky smoke shops and they're cool You know grungy kids selling crystals on the street Yeah, right. Yeah, but then, you know, you have nice restaurants and other stuff and hate it would actually crystal Right exactly We have that it's funny. We have a very similar neighborhood here in LA We're we've got like a strip that's a block down of restaurants and thrift stores and there's a crystal shop and Yeah We're in an ethnically portland neighborhood. There we go. The various crystals must align Yeah, it's where it's it's probably where uh the portlandia Kids hang out when when they're not here. Yeah when they come here All right, you get really ready to do this show Yeah, let's do it then Okay, here we go Daily tech news show is powered by its audience not outside organizations to find out more Head to daily tech news show dot com slash support This is the daily tech news for thursday october 6th 2016 i'm tom mary very pleased to be joined today by dr Kirsten sanford aka dr kiki host of this week in science the longest running show in the world It seems like it right? It's been around forever. Yeah, man. It's a great show. It deserves to have its its long run You've been doing it since the literally the 90s, right? Yeah, I was like 98 99. Yeah. Yeah, it's inception. Yes I am a big fan and a supporter on patreon of this week in science. Uh, so um, it's been too long since we podcasted together Thanks for coming back today. I know i'm so excited. I got the email from roger and you and I was like Yay, let's make this happen Oh very good and we used to do uh tech news on tech news today on thursdays So it's appropriate to be back on a thursday. That's right tech science Yeah, yeah, and we've got that feel today because we've got a little nanotech for you later on in the show That's right. So we're gonna talk about Uh, wall street journal says snap, which is the new name of snapchat the parent company of snapchat Is preparing for a public stock offering or as those vc types like to call it an ipo The valuing of the company is rumored to be at 25 billion dollars or more and they're targeting march 2017 So those of you who uh can buy stock without conflict get your pens ready and here are some more top stories Uh oculus made several announcements that oculus connects thursday will move through these fairly swiftly Oculus lowered the specs required for the oculus rift vr headset You now Can get a because of a new software api called asynchronous space warp. That's just the name of the api You can run the rift on a machine with an nvidia 960 before you needed a 970 And an intel i 360 100 or an amd fx 43 50 or greater So that brings down the cost Of getting an oculus because you don't need quite as powerful machine at the base level Which is fantastic because then you get more people possibly getting into the oculus universe, which is what they want They have to bring the cost down for adoption Yeah, and it also means that those of us who do have a an nvidia 970 who are maybe worried like I wonder if the next version of oculus vr is going to run on my machine Well, probably will because you know the floor comes up oculus also announced they're developing a prototype of a standalone vr headset So like the gear vr, but with the phone built in Uh, we've seen a few of these out in the marketplace oculus is working on one mark zuckerberg was on stage Called it a standalone virtual reality product category that is high quality And affordable and that you can bring with you out into the world That was the part that got me kiki is like because they shot a picture of it like it doesn't have It doesn't it's not it's not glasses. It's it's not ar. It's not ar.   Maybe it'll be a little lightweight But it isn't I think it is interesting that they're working on something that sort of bridges the gap between like the htc Vive and the oculus vr And then on the other hand the daydream vr the the gear vr Oculus is also going to cover unreal engine license fees for any developers apps sold through the oculus store for up to the first 5 million dollars in gross revenue So that helps out revenue for or that helps out app developers a lot And oculus is developing something called react vr for developing virtual reality websites And then they're creating a vr browser called called carmel I was all excited about this until they said and carmel will work on any oculus rift So I can't view it if i'm in an htc 5 and suddenly it's not a cross platform Not across nope Oculus will sell earphones designed for virtual reality for 49 dollars shipping later this year They're supposed to be a little nicer than the ones that come with the rift Oculus touch controllers that was the big thing everybody was waiting for will be available for pre-order october 10th For 199 dollars shipping december 6th. They're going to be bundled with an extra sensor and The games vr sports challenge and unspoken so you'll get two games the uh the the extra sensor and the controllers available for 199 dollars And if you want to do room scale with oculus rift which htc vibe does out of the box You can buy a third camera sensor for 79 dollars shipping december 6th And the verge did the math real quick. It would cost 880 dollars To get the controllers and the camera sensors required to mimic what the htc vibe does for 800 dollars It's getting there it's becoming competitive I mean some people are going to want the oculus environment And they're maybe going to be willing to pay that 80 dollars extra Yeah, I think if you've started in the oculus environment and you're like I wish I had room scale then Yeah, you'll then you're going to add to it. You're going to keep adding to whatever system you have as opposed to plunking down another 800 dollars For a new system unless that you know, that's what you do That's like when I had my ti 99 for a in 1982 and it was actually cheaper to buy an ibm pc But because we already had the ti 99 for a I could add things to it like extra memory extra, you know Uh and and it would end up costing more, but you'd already started with one So at that point it would be more expensive to switch Yeah, uh, and then the final feature they announced was the ability to broadcast your vr gameplay to facebook from the oculus rift So people can watch in 2d what you're playing in 3d Wow I mean, I guess you can pan around like a 360 degree video a little bit Yeah, maybe that's one aspect of it and um, I mean Hopefully they've got this vr Social aspect that they're developing and they talked about the vr avatars and how you can hang out and play cards with your friends or You know get on a messenger call or You know do any number of social things within the environment. So maybe Because it's facebook, maybe they'll set it up so people can have their own headsets and watch you play in 3d through their oculus Headsets live. Maybe that'll be some future down the road stuff Absolutely that is going that is going to be a feature Uh of facebook that they will promote at a facebook announcement soon saying hey remember when we said you can do this? Well, guess what I can look at facebook in your rift because you can you can already view facebook in the rift So they just need to connect that dot Reuters sources and we're off the oculus announcements now Reuters sources say that twitter has informed potential buyers that it will conclude sale negotiations by october 27th The day the company reports third quarter earnings, so they want to wrap this up before the earnings call Uh sources told recode that google apple and disney have decided not to bid for the company Leaving sales force as the only company rumored to still be considering a purchase twitter sales force ceo mark benioff did not remark On the sale itself did not make any comment about twitter, but did tell cmbc These things happen all the time the reality is we have to look at everything But we're going to pass on most things so very much a signal like We're probably going to pass too It's that's what it sounds like it sounds like we're not going to put up a bid yeah, and What we've heard is that jack dorsi doesn't really want to sell other board members like ed williams do want to sell And it looks like dorsi was able to get them to put a deadline on it saying fine If you can't but if you can't find anybody by october 27th Then we're not going to sell uh and at this point it looks like they won't Yeah, unless unless somebody comes out of the woodwork in the next couple of weeks But with contracts and all the paperwork that's involved that is not likely. Yeah Uh, which may or may not be good news for twitter I mean, I know that jack dorsi believes that they can make this work on their own But I think most shareholders in twitter and a lot of spectators Uh, we're expecting that this would be the thing to save twitter that that that would make sure you know That it would ensure that it would last Into the future. So yeah, what is surprising is that uh that google completely went out of the you know out of the running They said the absolutely not we're gonna do it Because twitter really would and with periscope and the video Aspects that it could give to youtube twitter could be a good Buy for google, but they're just they're not going there I guess, you know google's very much into focus like they're they're cutting programs and consolidating things and Simplifying and maybe they just didn't see an easy way to to fold twitter into all of that LinkedIn is still in the process of being acquired by microsoft But they're rolling out new features announced a new feature called open candidates The feature lets you signal to recruiters Who are paying $8,000 for the premium service of linkedin that you are open to changing jobs It'll only be visible to recruiters from outside your current place of employment So this is a way to kind of subtly Just tell recruiters because they have to pay this you know company Fee this $8,000 that hey i'm open to a job But not give yourself away to the place you're working from new feature rolls out first in canada australia the united states in the UK with more markets to follow this year i'm my my question here People are going to pay $8,000 to use linkedin If you're a company right because it makes no sense if you're thinking of it as a person like Like like us like like if you and i were recruiting for our shows we would not pay $8,000 for this But if you're a you know multi-million dollar company and you're like we need to get on linkedin and find the best people You know you could write off $8,000 as a business expense. No problem. And especially because you're hiring tons and tons of people Yeah It's probably like it's a bargain for some. Yeah, but and it will be a good service that people will probably really use Yeah, so you're going to make sure that only big companies are going to see it So it may not be great for freelancers, but if you're the kind of person who's like well My job is really only available at large companies then this is going to work And if you're in a company that I mean, it's illegal for them to be punitive about you searching for a job But maybe you just rather they didn't know this could Keep them from knowing although people talk right so I wonder what the first person who's going to use this that gets outed at their company is going to be That's a good question. Just remember people even on the internet loose lips sink ships Yeah, or there's just a bug in the system and it it doesn't show it Like your recruiters are listed as a company subsidiary So it doesn't think it's the same company and you get listed or something, right? Yeah Yeah, uh samsung acquired viv viv is a company that makes ai software powering a virtual assistant We've talked about it on the show before Viv was founded in 2012 by dog kit loss adam chair and chris brigham If those names sound familiar, it's because they also developed siri and sold that to apple Unlike siri viv was going is is going to continue as an independent company under samsung after the acquisition is finished Viv wants to support better interconnectivity between apps The way a lot of the assistants work is you talk to me as an app and that's it and viv wants to bridge the gap And let apps actually talk to each other directly They also are pioneering and a lot of companies are doing this now But they were one of the first to do dynamically written new code Where viv can actually do a little coding of its own Uh when you ask it to do something and it didn't have code to execute that it can write Code to accomplish your task kilas says he is committed to keeping the platform open Though obviously those millions of samsung devices will be the main platform Yeah, that's this is a Really cool development. I mean using I use a samsung galaxy and to have some of the apps and some of the Things within my device work better together would make me a very very happy happy user Yeah, and we you know, it's become clear They said this in the announcement the other day But it's only become nailed down the last couple of days that people realize that google assistant Is only going to be on the pixel phones If you're getting a samsung galaxy, you're just going to get google now Yeah, you don't get out. You don't get an actual virtual assistant You just you just get what you have already So samsung's going to want to put this on their phones and it sounds like viv will be allowed to be an independent Company that can contract with other phone makers as well And I would feel a lot better asking my phone It's like viv is like vivian or you know So short for that as opposed to hello google You know or having my child ask my phone and get Inclicated into the branding of the google behemoth, you know, yeah I I would like these assistants to be nameable. I would like to be able to personalizable, right? Yeah, I don't want to have to call my amazon echo Alexa, I would like to to you know, first of all Eileen hates At the the amazon echo because she doesn't like the tone of voice or personality Like so I wish I could just change it to be like. Oh now it sounds like luke cage. You're gonna now you'll use it all the time Yeah, well driving assistants, you know the the voices for gps units for years They've they've known that and they have added multiple voices. You can choose accents or different male or female tonalities and That's good Yeah, these these personal assistants and the devices need to figure that out as well W scottis one in our chat says I thought you could change the name of the echo only to echo you get it You could get a choice of two names You can call it echo oralex Uh, but yeah, I I think what viv has been doing is is really interesting because they've been trying to really push the envelope and What they gave to apple under siri was more capable than what apple was able to implement in ios Uh for lots of reasons I'm not criticizing apple was just when they were an independent app They were able to do a lot of interesting things now There's also things that siri can do now that they couldn't do as an independent app Uh, but but viv is them kind of picking up that ball and saying, okay, we learned a lot doing that Let's let's run with that. Let's let's push the the boundaries and having samsung come in and give them financial stability And a huge platform, but still let them be an open platform that that is independent. I think it's huge Yeah, financial stability as samsung deals with melting phones And melting finances as a result of that granted Samsung's mobile division, which viv is a part of certainly has its challenges right now But it is a huge enough company that They'll probably whether it As long as more note 7s don't burn up on planes in the next Don't don't cancel more flights. Come on. Yeah, come on The u.s fcc chairman tom wheeler has revised Policy policies being proposed for us internet providers We told you about the previous proposal that imposed opt-in Requirements for isps to collect information about customers that was more stringent than what you know google or facebook Have to deal with and the isps complained They said look just because we are regulated by the fcc instead of the ftc Doesn't mean we should have to play on stricter rules. So The fcc has revised the policies the new fcc proposal is similar to the ftc rules It means isps will only have to get you to opt in for sensitive data things like location or financial info however The fcc still went one more step than the ftc and said we are going to include your browsing history Under sensitive information the fcc does not define that as sensitive information So we can guess the isps are going to complain about that the fcc is going to vote on the new proposal october 27th Do you do feel like This is important to you kiki I think it I think it's very important to me I think it's important to everybody who Uh who uses isps or uses uh services that rely on isps. I mean if you use the internet This is going to affect you in some way at some some point down the road. Um But I think that it's gotten so mired in The policy jargon and the it's it just seems like companies fighting each other as opposed to Something that is really can be really boiled down to The end user Thanks to all those who participate in our subreddit You can submit stories and vote on them at daily tech news show dot reddit dot com. That is a look at our top stories If you were listening to daily tech headlines yesterday daily tech headlines dot com You heard this story the 2016 Nobel prize for chemistry was awarded to three scientists Jean-Pierre savage Sir frazier stoddert and bernard faringa in recognition of their work designing and synthesizing nano scale machine So little tiny molecular machines Savage led a group that first made a molecule rotate around another in a controlled manner Like the barest definition of a machine But he was the first his team was the first one to do that stoddert led a group that first threaded a molecular ring Onto a rod so you could make an axle Which is a really important thing if you want to have Machines that are rolling around like cars and then faringa's team was the first to make a molecular motor That would continue to run in one direction So you could move that rod and those developments have led to nano versions of elevators. They've simulated muscles There's even four-wheel drive nano cars. I know imagine someday little robotic nano cars Zipping down the freeway of your arteries But but and and fighting crimes or fighting blockages fighting blockages and infections You know, yeah And that's one of the the directions this is going and it's just so fascinating to watch No, there's there's a so many things in nanotechnology that are fascinating Some of them just on the face of what we can do some of them for the medical implications or the technological implications, but These as most Nobel prizes Are our research research advances that took place as far back as the 80s the 90s What has nanotechnology done for us lately dr. Kiki? Well, the most recent uh report comes out of uh Lawrence Berkeley laboratory and it is it has to do with Transistors and we all have you heard of moors law? Ah, yes moors law. Let me see if I can mangle it for everyone Because there's like an infinite number of ways of expressing it But one of the ways is that it is a doubling of computing power Every so often so people say two years some people say 18 months It was originally just doubling the number of transistors on a die I think or something close to that but it has come to be used that like that increasing computer power that we've all gotten used to Yeah, increasing computer power, but you're right in the doubling or the increasing of the numbers of transistors on a chip and the way that we do that is miniaturization so things have to get smaller and smaller and smaller and um It's that's just physics that You're not supposed to get down below Five nanometers for the size of the gate in the transistor now a transistor is set up where it has a source and it has a gate and then it has Um, and then it has the drain from which current flows So current comes in through the source the transistor gate Which is the actual transistor part that opens and closes to turn flow on and off and then the current flows out the drain because of the size of Electrons and the flow of electrons through material using silicon Five nanometers is the smallest you can get because below five nanometers You start getting into quantum effects like quantum tunneling where once you take the gate smaller and smaller using silicon Those electrons are like I don't even care about your freaking gate Like all that crazy is nothing to me All that crazy quantum mechanics theory you hear about of like cats being both dead and alive And you know particles being in superposition in two different parts of the world at the same time That actually affects transistors at that scale is what you're saying exactly and so that puts an absolute or has put an absolute dead stop On how small transistors can become However at laurence berkeley-livermore laboratory. They decided they're like maybe we'll just get rid of the silicon and we will use molybdenum disulfide mos2 And molybdenum disulfide is also used as an engine lubricant Um, you can get it at an auto parts shop. So it's really common It's used it's it's got potential for use in all sorts of things leds lasers nanoscale transistors And what they've done here is they've been able to use carbon nanotubes and molybdenum disulfide. I love saying molybdenum molybdenum And they have been able to shrink the size of the gate to one nanometer Now let me put that in perspective for people if you're buying a computer today It's probably got a 20 nanometer Finfet processor that's probably built a processor made on a 20 nanometer process It might if it's newer have been made on a 14 nanometer process the ones in the pipeline Uh, and we've talked about these being delayed by intel are on the 10 nanometer process And five as kiki mentioned is is where the dead stop was expected to happen. These guys are saying, hey Uh, we think we figured out one nanometer process over here. So We figured this out exactly And you know, there are a lot of caveats to this, you know, this is just an laboratory. It's proof of concept They haven't done it billions of times. They haven't they don't know how well they can scale manufacturing and production whether they'll be able to have the kind of Certainty and accuracy in the in the scale and production as it scales up But they've been able to do it and being able to do it Gives a direction to go so Maybe Moore's law is broken for now It's still living uh And as I understand it the molybdenum Molybdenum disulfide is heavier Or denser I guess then silicon and that's why the quantum tunneling effects don't cause a problem Yeah, so that's exactly it. It's you can say denser or heavier, but really what it is is it Creates more resistance For the electron flow So it keeps those electrons in line.  Yeah So so the question isn't Can they do this they've done it the question is how easy is it to do At the scale you would need to make this workable in consumer electronics Exactly. Yeah, because what as I said what they've done is they've had to Switch from silicon, which is a proven material for chips to work to this molybdenum sulfide And you know, we don't know how easily tractable that will be to chip production on a large scale And and and you're yeah, you're you're dealing with a With a different lithography A different way of etching the transistors. Yeah, all sorts of things will have to be different for it So they're yeah, so the question is how easily will it work in the future? We don't know but The fact that they've done this is I mean it's actually there it's there It's like this is this is huge. It has huge implications for worse case Yeah, worst-case scenario is morse law gets stretched And this doesn't happen for longer than morse law usually allows the process to go and It's expensive and it can only be done in in really, you know limited cases But even then that means you could still have some pretty powerful computers. They're just only be Affordable by governments or something right government and large multinational corporations, right? What could go wrong? So, you know the the ai that takes over the world, you know, it might happen Sooner on one nanometer On this one nanometer processor. That's the worst case in here facebook. Yeah, we're not saying that's what's going to happen Just you could just put on your portable facebook vr headset and ignore the whole thing. It'll be fine. Leave me alone I'm just gonna be in my simulated world for a while Well, this is cool. I'm glad you found this because it's it's hope for morse law It's hope for, you know smaller more powerful processors Um and and processing power isn't the be all end all of what we can do with computers anymore But it's certainly we certainly have it exhausted The amount of power we can get Out of a processor yet and we want to be able to make things more energy efficient and smaller and things like that. So This is a really cool story. You can find more stuff like this on this week in science kids. Go check it out Let's get to our messages of the day Regarding pixel support We had a question yesterday on the show of from an emailer who wanted to know how long is google going to support the pixel because You know like the nexus 7 only lasted for a few years And and whereas the iphone they they do tend to provide support and provide patches and updates longer Into the life. I think you know four or five years. Anyway Well rich joffolino who is a writer and sometimes host of daily tech headlines and listener andy wilson Both pointed out that google on their store page states at least two years at least Two years of os updates and three years of security patches. So Your minimum is not going to be what our emailer yesterday wanted, but they may go longer We will see Then add tom mox in our slack today Pointed out a waste of time that is really fun If he wrote has anyone gone to citymapper.com and opened their console and what he means is in chrome you can go to view developer Javascript console and you get a javascript console that you can use for lots of things But if you do it while you're looking at citymapper.com you get a text-based adventure game Oh, how fun So let me see if I go to citymapper.com And I hope I go to file view Javascript console Wow, it's taking along the load. Everybody's going to it. Everyone's look what you did tom. Yeah. Yeah It says you are in a town square paths lead to the north south east and west And I'll I'll try to Try to show this on the video for the folks watching the video as well But you just get the console over there and then you can type in like, okay I want to go east you walk carefully along the path you can move east and west and then you write east again There is a house So people have said that you had to be careful the house fell on someone Oh, no, but it's yeah, it's a real text-based adventure game. So Uh, it's it's a little fun. Good good work citymapper.com. Does this explain the clowns? I don't think it does. We were just talking about the clowns this morning Eileen is very much worried about the clowns. She's like, I don't like this I don't like this trend and I'm like, they're just clowns not all clowns are bad I just I just got an email from the portland public school system That there had been threats to the portland public schools for of attacks by clowns. My child is in a kindergarten And he could be attacked by clowns. I am terrified. I used to call The social media fail clown.  No Well, as I mentioned folks, uh, dr. Kiki sanford is the host of the amazing this weekend science Where can people go if they would like to subscribe which they totally should You should go to twist.org and in uh on our website. There is a link for subscribing and finding various ways to subscribe Uh, you can also find us on youtube We are this weekend science on youtube So you you can go to twist.org slash youtube if you want to find us on youtube and you can subscribe there Yeah, you get all the great science news of the week. You get poetic disclaimers You get animal corners. It's true All the good stuff. Yeah last night we talked about We talked with uh, two volcanologists Oh About the reality of alien life the volkens. I said, oh, do you Volcanoes, there we go. Yeah, we have a lot of volcanoes going off lately. I know it's just like statistical randomness, but Still what unless they said it was the moleman. Did they say it was the moleman? I guess I'll have to tune in and find you have to tune in You know tune in to find out if the molemen are behind the volcanic eruptions Volcanoes Check it out twist.org twis.org Big thanks to everybody who supports this show. You're the only way uh that we are able to do the show And so we thank every single one of you who supports the show daily tech news show dot com slash support Is the place you can go to find out more if you'd like to become one of the people who supports the show And a big welcome to brand new patron Steven Kuznarovis who I totally butchered your name and I apologize, but thank you Steven Uh, steve rather for for joining the patron support Welcome him fellow patrons and a big thanks to lauren lang who just upped her pledge at patreon.com slash dtns Yay Our email addresses feedback at daily tech news show dot com.  Oh dear Ah, that was great. Thanks for explaining molybdenum. Um, I think if I had a super hero name it would be Malibu woman She with the power of heavy Dysulfides She slows down the evil quantum tunneling threats. That's right The threats to our On the basis of a comic here. We need someone out there. Someone out there is illustrating this for us right now I know it as we speak More than a woman Uh, so roger usually reads us our titles at showbot.tv But you can play along with us at home By going to showbot.tv roger cannot be heard though because gremlins have stolen his voice He'll be back in a moment though I like zipping down the freeway of your arteries That was a good one, right? Oh, there you are. I should just reboot right at the end. Like I guess well, it wasn't doing it for a while That's a regular. Yeah That's a regular thing It's uh, it's because I used to not silence my mic and but I would close it up on the headset Goldisator says I don't always tune in for dts live, but when I do dr. Kiki comes on the show Correlation does not imply causation. There we go. Maybe they should watch next time. See if she shows up We could try to repeat the results Zipping down the freeways of your arteries What has nano technology done for us lately? It was an awful lot of oculus Uh, dr. Kiki she blinded me with science Sirius series daughter v v effects to samsung Shane told a little story in that headlines and praises you could tell that guy's a documentary filmmaker. That was good. That's right Hi, Shane I saw you in the chat room See call me for that twitter in the window Call me echo or alexa, but don't call me early in the morning Don't call me late for dinner Uh in case the virtual reality science will never die That's uh Viva's v vla ai Viva That's working hard it's working hard. Yes Uh two chicken to buy twitter chicken Don't send in the clouds that's awful a lot of oculus Honey I shrunk the science beyond the rift Discover the nano science the tiniest transistor technology today The incredible shrinking tech I don't know. I don't know which one I like the most Do either of you have a favorite? No, I do not No, the ones at the top I think are pretty good though um What has nano technology done for us lately will fit the show description the most because it's the show description is about nano technology, but Uh zipping down the freeways of our arteries Is still on topic And pretty poetic And then of course there's you know The whole story of series daughter viv defects to samsung like I like that one too so Oh and shane likes his surely you're joking dr. Kiki Surely you must be joking Surely you must be joking Uh, well, what is that nano technology done for us lately is getting votes? Oh wait is arteries arteries just zipped ahead So it brings out to export the audio which is the point at which I need to decide on a title Something has to happen soon. Something is going to be decided in one second here um Do you do you have a preference whether I put like dr. Kiki or dr. Kier you like dr. Kiki, right? That's what Dr. Kiki like in meta tags and stuff. Okay. Mm-hmm. That's good for me All right, uh, wow, they're all tied uh zipping. Okay zipping just one Zipping down the freeways. That's our that's our title zippity do does it bitty a? My oh my what a wonderful art array That's where I was going kind of forcing it The two chicken to bite twitter comment though That's just reminding me we used to have the the penny saver when I was growing up. Oh, yeah Print advertisements and stuff and I just I used to read it on sundays when it came in with the newspaper And I remember this one ad Just was week after week And it was chicken two dollar you catch And that was wait say that again chicken two dollar you catch you catch I was like chicken two dollars wait, what you catch You what forever stuck with me. I love it so much That's so funny. Yeah, we have you catch There were there were communities around us had the actual penny saver like that was a franchise deal And that was what was up in champagne when I went to college, but we had the bond county shopper That was that we had our own independent version And the folks at the greenville advocate, which was the the newspaper Did not like when the shopper came on the scene No They were stealing those ad dollars Those ads should be ours. Yeah, they don't even put any content in there. It's just ads Yeah, there's there's uh, we have a little west side la newspaper called the argonaut covers like Santa Monica culver city and all that all those places um I wonder how long that that'll last, you know Yeah, I don't know I don't know. I think that that as long as there are people who You know Still do text and still pick things up when they're walking by a grocery store or a cafe or a mini mart or something My next door neighbor is in her 80s and she All right, she gives me the have you read the argonaut. Oh, no. I have her take mine She's a huge fan Oh mel says the penny saver went out of business in may 2015 Hmm Saved too many pennies penny penny wise pound foolish or did they become the quarter saver? The quarter saver Saving pennies When we're gonna get rid of pennies ever is that movement still? No any traction. No no Let the penny alone I like that in australia. I I And you've been to australia. Have you been to australia kiki? I never have I've spoken to many people So you're the control, you know Roger and I have both been to australia. I thought I would hate not having pennies because they don't have them in australia But it turned out like it didn't really matter. No, I have no I have no love Love nor loathing for the penny. I just think I think they're just valuable things to have around besides the monetary aspect Oh, I guess canada got rid of the pennies, but I guess I only ever use my credit card Go to canada because I never noticed. Oh, yeah. They also got rid of they also got rid of uh dollar bills And two dollar bills, right? I also got rid of the rudeness That's right and no they didn't there's no rudeness They just they're just rude in a slightly clever fashion. Yeah, they'll have workarounds. Yeah No, but it's pennies have so many uses I think you can't Without a penny. What other low denomination piece of change would you squash in the The rails of a streetcar or a train or something? Or if you have if you have two quarters In one of those cool crank machines at the arcade or the museum that puts a cool picture of a space shuttle on it Yeah, it stretches out the penny and then the engraves or bosses a new one I bet we could find I bet we could find a workaround for that without pennies What do you think do you think the the the crank the crank penny squash or lobby is what's keeping the penny alive It's probably it yeah that and uh parents trying to teach their children how to save money Piggy bank, well Piled and then we'll tell you know that what's it called the change the coin master at the grocery store Yeah, those things are awesome lobby. I love that so much I took I took a big jar of pennies dimes nickels and quarters And I and I traded in for $84 for the credit on amazon. Wow So you don't get cash from them. You only get gift cards. No you can get cash You can get cash, but they deduct Right, so so amazon gift card is if you use amazon anyway. Yeah, it gave me just a straight amount Okay, which is fine because I buy all sorts of stuff off amazon like amazon gift cards Like all those things you could otherwise pay for at the grocery store where the coin master is Yeah Well, I can't get actually I can't get a you know what you can't get have you guys seen tilex lately The cleaner. Yeah Yeah, great. I generally They don't have it at Ralph's or at bedbath and beyond near me Like maybe it was there a law passed against tilex Maybe you need to go to home depot Maybe You know Tom depot might not have it because I recently went there for cleaners I didn't have a good selection Well, california recently passed a law that banned my anti dandruff Shampoo from being sold in the state. I didn't notice Thank you I use the body shop ginger shampoo I am not afraid to admit it. I use it and uh, it's great because it's supposedly all natural But there is one carcinogenic ingredient and it would so it's banned It's great because it's all natural except for that cancer-causing ingredient Well, cancer-causing can be an all-natural It totally can that's what I natural doesn't mean. It's not gonna Spinite is found in apple seeds, right and people I mean, you have to get a lot of it, but uh, so I had what we should ban apples People have tried I know I know they have it's not an alar scandal in the late 80s Oh, yes. Oh no, all those Washington apples are sprayed with the pesticide alarna.    Like they would inject a little bit of the venom Oh, is that is that right? Well, I know they did. I know they did, um Vaccines that way So I was wondering does they do anti-venom that way? I mean, is it ever possible to do that with a person and just have like sal or something from like yonkers? And he's just the one dude that just Creates the anti-venom in his bloodstream It's a total awesome way to make a living right if we're going to an automated society Why not farm out your body as a machinery for pharmaceuticals? This sounds like a very interesting Direction to go. I want yeah, it's a career option. You could literally sleep through your job You're just your it's in my blood Literally, it's in my blood But you know, maybe we can start getting things like what is that? Pharmaceutical testing it's in your blood. What is it? What is the compound that we get from? From horseshoes horseshoe crabs Oh, oh, it's for uh for leukemia or whatever. It's not leukemia heiferin for is it heiferin for blood thinning? No But anyway, we we basically suck the blood out of the horseshoe crabs to isolate this compound that's used in medicine Why do we have to be affecting all these populations of horseshoe crabs when we could just take it from people?   I mean, they're really not even crab site lysate Bines and clots around fungi viruses and bacterial endotoxics supposedly the oldest I still can't find what we use species or They're a very old. They're a very long. Yeah, they're an old They haven't changed all that much. Yeah, they've been around for a long time.   Yeah Well, I just can't wait for the day and this is I've taken this from this past this week in science For the day that there can be a book called my two moms and dad Because I've got mitochondria for one and DNA from the other two. That's right That's fascinating. Talk when you Brad mentioned crisper made me think of that Yeah, and this this is something that we talked about it last week And it's definitely something the mitochondrial Transfer therapy for people who want to have kids but have mitochondrial disease I mean, this is people say it's genetic modification because it's potentially modifying the germline Because it's heritable. It's heritable in females, right? um Yeah, but It's something that could allow people to have kids who want to have kids and none of us have our dad's mitochondria That's true We all get our mitochondria from our mums Is that fair? Why don't we just build synthetic wombs? Look look it's not about fair Fairness is a fairness is a very subjective concept Which is why I get all the cake Is it fair that i'm eating this for you and possibly shortening my life in the process I like new jello m r. N. A. Am I right? m r. N. A. That's right Nice. All right. Well, we are published. Thanks everyone for watching. Thank you again, dr. Kiki. This was a blast Oh, it's so much fun. Thank you, tom And we will be back tomorrow with shannon and learn by everybody cool We are off live. That was great Super fun. Yeah Thanks for getting in touch tom and Send in emails and going hey, hey you.  It was a couple weeks ago, but um Yeah, so You know, I know I know you're busy too, but uh, whenever you want to come back. Let's do it. Okay. Yes Awesome. I want to get you on with aniline do it Oh, that would be a lot of fun. Yeah Oh, we're still we're still broadcasting on the video. Oh, no the secrets are out. Oh, no, we