All right, well next We have our keynote speaker Eric Balchunis Is senior ETF analyst at Bloomberg intelligence where he leads the ETF and passive fund research and Contributes to Bloomberg opinion. He is a frequent speaker at industry events and conferences as well as public events now and conferences and and Is also the co-creator of the Bloomberg podcast trillions and Bloomberg's TVs ETF IQ. He's the author of two books the first was the institutional ETF toolbox and the second Is this one the bogal effect? Fantastic book. I think he really captures everything here. So not only what Jack Did for all of us, but what he's doing for the entire Industry not only here in the United States, but all over the world. So with no further ado, let me introduce Eric Balchunis Thank You Rick Tough act to follow. I got to say I think that should have been the headliner. I Will do my best So as as Rick said, I'm an E. I'm an analyst, right? So this presentation is gonna contain a lot of data what I did in my book was try to trace out The immense impact that this one individual and company have had Before I go into that in my PowerPoint, I just want to give a few thanks First of all to Rick ferry Christine Benz and Jim Wyant for inviting me here I've been communicating with them for a while and I'm honored to be here Obviously, this is like a home game. I guess for this book So I'm gonna be preaching to the choir up here when I give this presentation to the industry not everything goes over so well Also shout out to Jim and Connor for pulling all that tech off. I saw all that that is not easy Seriously that's like high level right there you could do a rock concert next I Want to thank the Bogle heads all of you. I've been meeting a lot of you. It's been great and the Bogle heads forum I have a funny story about that. I when I was writing the book I wanted to interview some individual Vanguard investors And so I went on the Bogle heads or create an account and put a post up that said Hey, if anybody wants to be interviewed for this book about Jack Bogle, you know, let me know and so a couple days I don't see any replies. I'm like, oh, okay. I guess nobody cared then I get an email from Lady Geek over there saying I had been banned I Was like really and she's like, yeah, well you can't solicit anything other if we let you do this There's gonna be a hundred people and as I said in the book, I actually respected that I think keeping the purity of that forum is unusual. There's so much advertising all over this event And that forum have a purity that you don't see very often and you have to work pretty hard to keep that going So thank you for that. Let me get going with the PowerPoint here Okay, so there's the book I spent about two years research researching this book It wasn't easy when you write a book you have to want to say it You have to really want to say it almost like if you don't say it You're gonna be carrying around a weight and that is what I felt with this because you're gonna have to live on the Planet of that topic. So I was like on Planet Bogle for two years And just exploring it and as an analyst it made me better I really learned a lot in the process and I interviewed 50 people for this book I wanted it to appear like a semi-documentary and bring in voices to the book such as Michael Lewis Jason's why Gus Souter Even Warren Buffett participated which was a shocker because I I was trying to get ahold of Warren Buffett's email Which isn't easy and I go to Bloomberg TV and I'm like, can I get Warren Buffett's email? They're like, uh, no, so I Then went to an anchor who I know well She got it for me on the down low and she sent me the file that they keep on Buffett and all the notes are it's for like Reporters who want to email him. It's like he will never get back to you. You are nothing. You should not even ask And I was like, oh This is this is not gonna go well So I emailed the email and I said hi Warren. I'm writing this book on Jack Bogle. Here's my five questions He replied within like I don't know eight nine hours like within that day. I was stunned. I was like wow And obviously it wasn't because of me He said and I quote I'm very swamped, but I'll always help out on a couple items for Jack So that was nice because I got to put Buffett on the liner of the book Which hopefully helps up sell a few copies I have a quote from him in the book, which I'll show you in a minute Okay, the reason I wrote the book was because I wanted to but also this picture. This is a picture of my desk So on the left side, there's this cup that is my son made in like when he was in second grade In that cup is pens pencils and a dictaphone for anybody here under 40, which there aren't many That's what we used to record people on that joke goes over better at different places. I Didn't think that through okay That's an accumulator joke, okay All right So anyway, I'm looking at that dick to or the dictaphone's looking at me And it's just bothering me because I know I have three and a half hours of Jack Bogle interview Just he and I I interviewed him three times each time I walked in it was like an instant debate This guy was fired up feisty and papers flying all over his office He wanted to talk about how ETFs suck and like he had all these points to make and I looked at it And he in the last interview he said a lot of things about the future He was very prophetic and I thought yeah, I got to get this on paper plus I had been in the data Seeing how intense Vanguard's impact has been over the last seven eight years in particular and where I work in research The people who cover asset managers only cover publicly traded ones like BlackRock and Goldman They don't cover Vanguard because they're private So I always amazed at how little people in my industry actually know About this company and how unique it is So I thought it was also a good vehicle to explore different areas like funds ETFs advisory business trading behavior The Bogle effect is way bigger than it looks and so I try to capture it in the book Here's a picture of me and Jack. I like this picture because it's with Jack and I'm 20 pounds later This was before the COVID-19 pounds that I developed I'm trying to get back there But I like going to his office when I went into his office I was I felt like I was in my grandmother grandfather's house. He had oil paintings the vibe in there was very World War two generation and you know back to Taylor You know I actually dedicated the book to my grandparents and the World War two generation Because I feel like that character is very present in Bogle's life and the story and just felt right to do and so we had we had you know a lot of good debates a lot of rich Material that I tried to marry with the data so without further ado Let's go over ten takeaways from my book These are things that I discovered or big points I tried to make throughout the book the first one is that indexing needed Vanguard way more than Vanguard needed indexing Index funds get way too much credit for the index fund revolution in my opinion. I Basically estimate that if Bogle and Vanguard had not happened Index funds would exist as you know, he didn't invent them, right? They were gonna happen the one way or another, but they would have five percent of the assets they have today They're only a big hit because they're cheap and they're only cheap because of the mutual ownership structure The mutual ownership structure is the thing that is the change agent that structure plus Bogle structure to me Are the two things that combine to create the explosion that we're seeing rippling through markets index funds got lucky They got lucky that this happened right as they were coming out that said they were a match made in heaven, right? And here's a quote from one of Jack's books where he talks about meeting John Lovelace in the airport right after forming Vanguard in 74 Lovelace says this this is two years before the index fund comes out from Vanguard and Actually three or four months before Bogle even reads the article that gave him the idea for the index fund This is purely based on the structure Because Lovelace knew that if if you have a mutual structure You will be bringing a gun to a knife fight because you'll constantly be able to lower fees and that's a major advantage So that's I think one proof point another one is if you look at this chart. This is the chart of the Active fees over time and the Vanguard fee over time. They both kind of started from the same spot The active one went up because the normal gravity in this industry is to make money. It's a business I don't fault people. I would have done the same thing. I said it over in the book Bogle was just weird. That's what the whole that's That's why this book is about this guy. Everybody else would have done the same thing, right? But you notice when it comes down, that's when Vanguard started to get popular So they only changed when Vanguard got something going and the fees coming down. You notice it happened inch by inch It's not like it came out at ten basis points, right? And this is important because some people some people say well What about what if Vanguard never existed Schwab would have had a free index fund? Don't you think? I'm like, yeah, maybe somebody would have come out with like a gimmicky free index fund But they would have got you somewhere else They would have upsold you on something or used your money in a cash account and made more money on it Pay for order flow. They would have had to made money somewhere else What makes Vanguard unique is there is no other thing. It's just an organic low cost But it took a long time, but it paid off in the end and here's another chart that I think proves this is there are plenty of index funds That are not cheap, right? Here's a list of index funds that have pretty high fees like 25 to 80 basis points And the one I highlight there is the Wells Fargo fund Which Bogle hated that was the second one launched which some people said was the first Even said even our damn lawyers say that's the first one Yeah No, like I said, I was I was shocked at how fired up he was when I met him in his 80s So that Wells Fargo fund was the second one and it's 44 basis points and that's with Vanguard So you could imagine it's probably 80 or 90 My theory is that index funds would have been something for institutions or fans of the efficient market hypothesis The big thing in what's sweeping over the nation and taking in all the flows is low cost That's really he should be the father of low-cost investing in my opinion I think index funds not quite accurate and let's say in here's another chart This is amazing. So Vanguard is the third biggest active fund manager with 1.2 trillion This was mentioned on the panel earlier with Alec Lucas and Ben Johnson This is with Bogle dumping on active for like 40 years Think about that. That's despite that, right? So you realize the reason that's biggest because they're so low cost So imagine if there were no indexing and Bogle was positive towards active, but they were low cost I think they'd be the biggest active manager six times over if indexing wasn't a concept Because as the studies show the cheaper active is the more it outperforms over long term This is a great Morningstar study that clearly shows that correlation, right?  I guess Taylor's age So they're they're you know 9495 anyway, there's 12 of them that came out and Only half of them exist today and the one the Wellington fund has 90 percent of the assets So that's I think a big foreshadow for what would have happened again if no indexing and I think it foreshadows Vanguard staying power because if Wellington is the last man standing after 90 years It's pretty good sign for again the power of low cost And I think also the trust the trust factor which was also mentioned in that panel is an underrated part of this People just trust Vanguard way more than other companies Okay, number two Bogle's mission not yet realized So this was I read a lot of Bogle's books I read the rest of them researching this book and I knew all I knew a lot of his famous quotes Right, but I there was a quote in a book called character counts, which again was mentioned on the panel earlier It's one of his most underrated books. It's all the speeches. He gave the crew Basically in one book and here's the quote that I was just like what? The first sign of vanguards mission has created a better world for the investor will be when our market share begins to erode Okay, I've asked many people this have you ever heard of a CEO rooting for their market share to erode like that has to be Unprecedented it speaks to the different trip this guy was on and I think I Mean truly this is not normal. That's why I tell people vanguards Bogle was weird That's why I put abnormal up there in fact the first time I walked into his office I'll just take a little side story here. I was Mike Regan wrote an article about him for Bloomberg markets And I wanted to interview him for my first book and Mike says, oh, here's his email. He'll get right back to you I'm like really I wrote him. He got right back to me. He said come on over. I walk in and I said Hey, it's really abnormal for someone of your stature to be so easy to get a hold of and meet with and he goes I'm abnormal in that in more ways my friend So this I think would qualify as abnormal But here's the thing and he also said it in 91 when they had very little market share think about the vision and Foresight to know they would gather a lot of assets But of course this really is him saying I want my competitors to get cheap because everybody will get a better deal And the thing is it hasn't happened yet, right vanguards market share continues to grow It's well above 25% of all US fund assets And it's gonna grow faster in a bear market So this year the market share is gonna keep going up because there's no asset or market appreciation to lift others Assets, it's only flows. So I I don't know where this will end. I mean at some point it will plateau We'll see I think regulation may be the one thing that can stop them the line below is also interesting That is the share of revenue that vanguard makes up. It's only 5% So that gap is extraordinary. I I don't know if that exists in any other industry But that 5% gap is obviously why people love vanguard and this came up on the panel yesterday the customer service I think is part of why you the customer service is difficult because you're only making five billion on $8 trillion in assets with 30 million investors. It's not a lot of money and if all the industry earned that five billion that Revenue would go from like 140 billion to 20 billion. That's an 80% decline So I do call this the scariest chart on Wall Street because it foreshadows, you know some pain I don't think it'll be that bad I just think there is some reckoning coming for sure Here's a look at vanguards flows. This is sort of why I want to write the book the flows into vanguard are absurd So they take in almost a billion a day for the past decade. That's 2.4 trillion 2,600 business days 920 million a day the next Closest is black rock with half of that and black rock We know is is also, you know a huge cash getter Then you need binoculars to see third place and most people have seen outflows So this deserves to be studied. I thought you I really need to it's I was talking to my colleagues Like you guys really need to know about this But it's also just a fascinating business story This is a company that's just come into its own and it's just completely dominating and if you look at the top 15 biggest mutual funds in the US or ETFs mutual funds together The top 10 are now all passive in fact the top 11 are passive eight of those 11 are vanguards And the other three are fidelity. I shares and State Street who just copied them So that is sort of the vanguard effect or the bogal effect in that even the ones they got cheap or rising So I guess in bogals mission He would like to see more non vanguard funds up there on that list, but my guess is they'll have to get cheap to Get up there This slide is just something When you go and you're an analyst and you go into different asset classes like bonds equities and then you go even further munis Smart beta. It's stunning how much vanguard dominates these these subcategories. So in bonds They have double the bond fund assets of anybody else And they've got more active bond fund assets. They now manage more active bond fund money than PIMCO So, you know, there's some extraordinary numbers here. I think that I wanted to just point out But again, we need the competitors to get going there. I mean, they all have cheap funds But they're not quite seeing the flows that match vanguards. Okay vanguard wouldn't exist If not for a ton of serendipity this I love stories of serendipity. I love business stories like shoe dog The Nike story. I love reading about the fledgling part of a business and bogal you get a ton of that There's so many points where something happened where you're like, wow, it could have gone the other way The first one is this one. So he's looking for a thesis to write you guys all know this I'm like sort of preaching gospel here, but he is Picks a ghost of the library picks up fortune. There's an article on mutual funds in there. Okay, I'll write about that Well, I went and searched for what other magazines might be lying around the library in December 1949 So time magazine was probably there and on the cover of that was Conrad Hilton So you have to wonder what if he picked up this magazine will we have low-cost hotels? The hotel industry dodged a real bullet there, okay another one When the 60s were booming Wellington was not see it was seeing outflows and it was struggling because it was a boring fun It was very conservative It was like the era of the last decade where the arcs of the world were doing well And he wanted to team up with a more inequity manager to give the firm some edge, right? We all know the story when he went to do this. He was seeking a middle-of-the-road partner So capital group they said no Incorporated investors said no Franklin said no so he had a lot of knows then he finds this this other company up in Boston Thorndike They say yes, and you can see Buggles quote. It wasn't his first choice, but he was desperate wanted to do something to turn it around As you know when the 60s fell and the 70s Bear market came they had a huge fight. I mean they hated each other I won't go into all the details. You know the story probably most of you But you have to wonder and it was that bifurcation and that constant fighting that they had to come up with a solution and The solution arguably led to vanguard the back office company But you have to wonder if he's with capital group They're probably not going to have that bitter bitter fight and you probably get no vanguard So I guess the moral of the story is if somebody says no it might not be that bad Like it might be leading to something better I think that what's the quote when one door opens another or one door closes another one opens But again major serendipity to get To this point now, obviously this is an uncomfortable situation, but I don't think you see you have vanguard without that The final one there's three of them is just reading the Journal of Portfolio Management and having a back office company and Dr. Paul Samuelson basically saying can somebody please launch an index fund and he's like sure I'll do it and then obviously he tells the board this isn't managing money because he wasn't allowed to do that yet and As he told Mike Regan, they actually bought it So he got that past the board got that out and there it goes the first index fund So this is an amazing amount of serendipity But a lot of it was you know done by somebody who was always fighting and struggling So I think that's there's a lot of lessons in this book that are beyond just fund and fund investing I think anybody in business can really get a lot out of this Okay, let's have a little fun. Okay. I Think Bogle had a kinship with punk rock Okay before I interviewed him I would see him on CNBC or Bloomberg TV and He'd be he'd be pouring cold water on on the show like Like the whole thing is designed around trading and he'd say trading is for losers There's all these active managers who think they found a strategy Like there's no there there. It doesn't exist There's no way around the fact that the index fund wins. It's like oh gee welcome.  I? Was like man this guy's kind of punk So that wouldn't be enough for me to make the metaphor that I made in the book I have a little fun with it in the book There's another layer to this metaphor that get takes it to another level and it's this quote from Johnny Ramon I read a book about the history of punk rock and the Ramones are largely considered with birthing punk Ironically about two weeks after vanguard was formed. They're both like fall of 1974 Anyway, you can see he says what we did was we take everything out. We didn't like about rock and roll So it's this addition by subtraction So I think Bogle's life work could be summed up by addition by subtraction I almost named the book Addition by subtraction because he spent 40 years taking out the things that you don't need to get in the way Right so management fees The expenses threat transaction cost brokers human bias right emotion And he just given you frictionless exposure and like punk which if you listen to the first Ramones album Again, it sounds exactly the same as it did when you first heard it It's it's got a timeless quality to it because there's no fat and I do think index funds are a bit like that If you look at this chart Which I think Bogle used very well to sell indexing to a country that is used to Wanting winners so he had to be very creative in selling it and this is a chart showing the growth of $10,000 if you Get 7% or 5% and the 2% would be the fees and all the friction in between and the difference over 50 years is Astronomical right so to me this was his big I think life's work is to slowly and methodically move remove all of that stuff So that you can have frictionless exposure Another punk thing he did was not paying brokers it was mentioned earlier on the panel as well It reminded me of Michael Corleone and the godfather when the senator comes for a handout For like a licensing fee or something and he's like my offer is this nothing This was really ballsy in the 70s I mean now it's there's a lot of no-load funds, but to not pay a broker at that time was hugely It's just going to delay your growth and I found this over and over in Bogle story They wouldn't take short-term money that he did things constantly that would push back the growth And I give him credit for that he had a very long-term vision that is very rare And vanguards flows in that time did were not good right wellingtons funds were all seeing outflows It probably would have been easier to just pay brokers get with the program and get these flows back So the 80 straight months of outflows before finally in 1979 seeing some inflows now They probably haven't seen a quarter of outflows since But again, I find that to be you know just a really brave move And that move is why this chart is just shocking 97 percent of vanguards assets came after Bogle stepped down as CEO Uh, you know, I looked at apple 83 of apples market cap came after steve jobs left So 97 percent is pretty unprecedented But it speaks the fact that all these hard choices to delay the growth Once the once that fund got below 10 bits And the internet hit and a bunch of other catalysts came around It just shot off like a cannon, but he really toiled around an obscurity This is a chart I show I interviewed brat kutsuyama. He's the flash boys guy And he's uh, he's struggling I mean he's trying to do something that doesn't involve kickbacks and it's taking him a long time And when I I showed him this he said it made his day Because he's also struggling to get going with his IX, but he believes in it So I also think that if you know, somebody who's in business Um, it was said earlier, you know, it's okay if it takes a while. Sometimes it could be worth it Okay, number five Active funds root problem isn't under performance If you really dig under performance is a symptom of a bigger problem and the bigger problem Is not sharing economies of scale Not throwing a bone to your own investors And so if you look at this chart, I showed it earlier When when the active when vanguard finally and passive started to see inflows That's when active started to come down But during that time they took in a ton of money and it probably would have been A good time to give a little back now again. I wouldn't have done it I admit that I would have sponsored the sport stadium give myself a raise hired a bunch of new people expanded overseas Uh, I would have had a big great christmas party. I would have done these things I'm human. Um, again, that's why the book isn't isn't on me. Uh So this is a fascinating thing. This is a little wonky, but percent fee versus dollar fee This is the most under reported story in the entire financial world Percent fees can never change and you're like, well, they've always at least they didn't raise fees or they lower them a little But if the more assets you get the dollar fees are ridiculous It's almost I'm almost surprised. This is legal So even bogel said it's okay if you charge one percent if you're starting out You need to keep the lights on right one percent of say, uh, 10 million dollars is a hundred thousand dollars Okay, how about one percent of five billion? That's 50 million. Okay But then you get to a 50 a 40 75 billion. You're now making 750 million or a billion per year per fund And do you really need to do that is the fund really requiring that much extra money Pimp go got sued for this and the whole lawsuit was about dollar fees That's when bill grows got the payout of like 275 million dollars in just for one year and they sued him and in that lawsuit I really enlightened me to dollar fees Bogel really made the case for dollar fees But it it didn't really work that said putting a cheap index fund on the market Help people kind of figure it out, but I'm still surprised. This isn't a bigger deal And the problem is the steve jobs rule I think in general in business If active had just cannibalized themselves a little bit, they'd be in much better shape They wouldn't have got so utterly disrupted steve jobs came out with the ipod in 2001 I think it was 400 bucks held a thousand songs Then the next one comes out. It's cheaper and holds more songs and it's even smaller And that's why apple rules, right? They kept doing the steve jobs rule So I think this is something that vanguard did perfectly now This is partially the mutual ownership structure doing it, but I'd say I might call it the jack bogel rule But either way they both were aligned on that It reminds me the music industry the music industry is a great book called how music got free If you're interested if you replace cd with mutual fund And mp3 with cheap index fund their book almost reads exactly like this industry The the mp3 came the cds were as you know, remember you suspend so much money on cds They were all like 1699 well over time they got cheaper to make They got to the point where there are 50 cents to make but they kept the charging 1699 So the mp3 comes out and everybody's like oh my god, I'll go to napster I'm never paying you again like there was no love for the music industry And you can see the revenue was cut in half in no time. I mean the mp3 messed them up Now they are coming back a little bit They're trying to figure out new ways to make money with music and some of it's working That's what's going to happen here a bear market will really cut revenue But then it'll evolve they're going to figure out new new ways to service you some of those I'll go over in a minute and it's interesting that active didn't realize this because All their whole job is to study companies businesses trends disruption And this is like something that they would probably not invest in but they didn't totally apply it To themselves. So in my opinion had they lowered fees They would have banked will And their beat rates would have gone up We know because if it's cheaper and they would have fended off the boggle effect big time But they didn't and they just got totally plowed especially in 2008 on it's kind of like game over Here's the thing though that's different about asset management versus say uh music or any industry You can make more money and lose customers. It is a really good deal So here's a chart showing the active passive market share and you can see that passive was a blip in 1993 It was like 2% Now it's 40% But the pie itself has grown like 10 fold So the if as long as the pie itself oversees your share shrinking you make more money So that's why jack said the index revolution has claimed no victims and this is something I try to warn my colleagues about I'm like there is a you know to quote bob dillon a hard rain is going to come here Because even though you have all these assets they're hollow assets a lot of the customers are gone So it's the hollowing out that once we have a bear market and people are in there stuck in there for tax reasons We're going to see trillions usher out of these funds quickly this year We could see a trillion out of active right now. I think it's 700 billion year to date But as I said in the book there will be blood And I think what's going to happen is there'll be a huge consolidation This is the banking industry looks like an nc double a march madness chart, right? Uh a lot of consolidation. I mean look at that. So they went from like 30 to 4 I think we're going to see something similar with fund companies and asset managers I think it's going to be like the airlines They'll be black rock vanguard and then like a collection of like state street invest go and like 10 other companies And they'll do like 70 of all the service Uh for for investors and then there'll be like hundreds of companies that just do specialty work and make up the other 25 I could be wrong. That's my prediction Now I brought this up in my last interview with jack And he went even further he said there'll be a mass mutualization of the whole industry In other words, all these companies are going to be forced so desperate somehow that they're going to convert to vanguard structure Of the 50 people I interviewed nobody agreed to that That said if I asked you about stuff in 1991, I don't think anybody would have agreed that we'd get here So I put it in the book. I don't know if I agree with it, but it's something to think about Uh number six the bigger passive gets the more active active will become This is a byproduct the bogel effect that bogel would not have liked Okay so Portfolios are changing The core has now been totally taken over by cheap beta and kicked out all of the closet indexing active funds from the 90s So you have 85 cheap beta, but then people are a little bored by that frankly I know i'm in the bogelheads and probably half of you here are fine being bored But a lot of people want to have a little something exciting to lay on top like hot sauce This is where you have firms like arc thematic ETFs Uh crypto call options These are things that kind of distract yourself while the 85 percent grows like a tree And so what we find is when you look at the ETF flows Most of it goes to dirt cheap beta But there's a good chunk that goes to shiny objects The middle is where there's it's a no man's land now and that's where a lot of those legacy active funds live um, so ironically Kathy wood is is somewhat a byproduct of bogel's life work, which i know, um, you know, that is weird to say But i know bogel would hate that i i know that he he In one of his books he spends like a whole chapter just bashing High flying mutual funds one after another He's like look at this look at this and it's all this once it went up and came down Arc probably would have made that chapter if it if it had existed then that said arc isn't seeing outflows Why is that and that is a big study of ours because i think People who own arc they actually want a little crazy What if she's right, you know, what if there's robo taxes all over i don't want to miss out Plus i already got all the serious investor stocks covered So that's why the fundamental analysts who see things like theme ETFs and kathy wood They get they drives them crazy. They're like i i got my cfa How is this person getting more flows than me? She doesn't know anything And i'm like well the problem is the stuff you the funds you sell people use vanguard for Your competitor is vanguard not kathy wood Her competitor is crypto, you know lottery tickets options um And this is why we see The number of holdings in new ETFs has plummeted They are all being designed for max pop potential So what i think is going to happen to active is they're all going to slowly shift over to the best 20 ideas The best 30 ideas and that's going to be a compliment to the cheap beta Anything trying to replace cheap beta i'm bearish of i'm bearish on esg. I'm bearish on di direct indexing But i am bullish on some of this wacky stuff which puts me at odds with some of my fellow analysts for this reason But i do think some of uh, some maybe portfolio managers would be even happier Just giving 30 stocks instead of deciding whether amazon should be 2 or 3 weight today They can just pick their 20 30 best ideas. I think they're going to have more fun doing that. Anyway, I think it's a good Uh evolution, but if you have cheap beta covered it gives you more Patience for the volatile stuff, which you do need to be patient with so it's interesting dynamic. We're seeing shift And again, this is part of the bogel effect Um, and this is why we have our this is just a fun little side shoot We have our three c's for etf success. This is uh cheap. So you got to be cheap This explains basically 99 of all the flows cheap creative, right high, you know concentration active or You know outcomes like option overlay strategies So you got to do something different put some legwork into it or cabernet This is the cabernet lane. This is used by a few companies. This is like basically whining and dining advisors It's an old school lane, but it still works. There's still a chunk of money that is basically allocated this way I think this lane will will slowly die away But it still exists and that's those people we study because they have an immunity to the vanguard effect It's like it's like a special power. And so we obviously look to see how they can do that Okay, number seven bogel's relationship to etf was complicated my metaphor for bogel and etfs is See the index mutual fund was like his firstborn daughter And the etf is like the tatted up bad boy that she married He doesn't like it, but he has to deal with it And that's I know every time I met with him and he was on our show and stuff He just he couldn't help it even if he he didn't say stuff like well, the broad ones are okay But and then dot dot dot and he'd go right in for the kill um So he he'd throw a bone now and then to etfs, but he just couldn't get comfortable with them But what's interesting about bogel is that he had such a profound positive effect on etfs He's half the reason they're so popular And I found this over and over bogel would kind of crap on things that he had such an effect on like smart beta He launched the first growth in value and he'd say oh, it's awful and etfs, you know International right so bogel sort of honed in on like oh, you just need a total market fund Everything else is sort of a distraction. So it put him at odds with everything But the etf industry is interesting not only here's a chart that shows The one of the big unknown things about why etfs are so popular They were really designed to be trading vehicles by nape most of the american stock exchange He went to see bogel and asked them can we use the vanguard 500 and have it trade? He's like no effing way He he didn't curse obviously, but Anyway, um, he told nape most they actually became friends. He said look, I will never do this But here's a couple tips on your design and you know have a you know good luck He goes up to state street sells this idea to state street So spy launches in 1993 Now spy comes out with an expense ratio of 0.20 percent That is exactly where that vanguard s and p 500 etf or index fund was remember they it went down slowly So in 93 it was 20 basis points. They launched spy to compete And so if they had launched at 80 etfs would still be a little trading tool That serves niche purposes But now it's major big business because it's cheap and it would reach advisors and retail And barkley's really saw that and then vanguard jumped in So now the etf is you know a phenomenon It's actually bigger in assets than index mutual funds or tiffs as a jack called them Traditional index funds. He tried to push that acronym. It wouldn't take though He tried so hard though. Anyway, it was it was cute But he you know, he just thought etfs traded too much that was his big problem And it's ironic is vanguard's etfs are now becoming a bigger part of their pie Index funds still have more money, but you can see how fast etfs are growing within vanguard So I think this is one of the things that put him in odds with his own company over the last 25 years They launched the etfs 10 years after he said no And they it got more growth and he just it wasn't his thing And he had a lot of you know, the first the second time I walked through his office First I walked right in and he goes did you read the article? And it was an ft column. He wrote trashing etfs and he goes that got me in a lot of trouble around here He goes Anyway, um I got like who who does that like he's on his own He's on vanguard's campus sort of dropping bombs on different areas of vanguard Oh, it's just classic Anyway, um It's like the founder got in trouble at his own company. I just the the whole dynamic was like dysfunctional in a way okay And now vanguard is poised to be the biggest etf issuer Um in the united states and thus the world well not the world black rock has a little more of a lead But this is the u.s So you can see they've gone from almost nothing to 30 market share and they're headed up quickly They've taken um almost 30 to 50 percent more than black rocks etfs every year now And so they're going to be the biggest but you have to think if they if vanguard didn't launch etfs You know not as many people might have low cost indexing. So I think you have to give the etf a little bit of credit Um, and I think I asked advisors. Are you ever tempted to trade just because you can trade? Do you and most of them say no, I'm okay I can control myself jack worry that could because you would could trade you would But I don't know if a lot of that's happening I think what he worried about was all the turnover in these etfs like if you take the assets and divide by the volume or vice versa You get how much it trades per asset And spider trades a lot and he's like, oh my god, everybody's trading But that isn't necessarily retail investors. That's a one like blunt number It could be like three big institutions and all the retail people are just sitting there And I would say this to him and he would somewhat admit it But he just again he thought these were trading tools and he as you could say he thinks three percent turnover is pushing the envelope By the way, he had this great One of his books I can't remember he had this like john lennon type quote Where he's like imagine a day when the stock market lay fallow silent all day long I mean, it sounds like a lyric it sounds I was thinking like him at a piano Um, and so I thought they should have a jack bogel day where the market's open, but nobody trades Um, but the truth is some etfs trade a lot some don't vanguards don't trade a lot He took some comfort in that I think and then like you look at the pro shares that turnover is 10 000 percent a year He saved his most colorful savagery language for leverage etfs and themes. It was great I put a medley of his greatest hits in the book And he was really bothered by all the launches one time I was in his office and he had the wall street journal You know where they list all the Stocks and etfs and he's looking all the etfs and he's like What in the hell's going on here? Because there was just so many etfs. He's like, how could there possibly be so many index funds? And it's true. They've taken the index and they've really mutated it as rick ferry calls it spin dexing And there's not I mean again, there's nothing he can do about it. This is the way the market's going That said I do think there's etfs are a big tent There are basically low cost low turnover etfs that taken a lot of money The shiny stuff gets a lot of press though, but you know, it does exist for the reason I mentioned And here's his um, you know, I love this quote He felt like dr. Frankenstein When he woke up in the morning and all these etfs launching. Um, I wonder He would have loved some of the recent ones the inverse jim kramer. Actually, he might have liked that one Um, um, okay This is funny. So in our podcast, we interviewed him about six months before he passed away. This is the last interview And he's 89 right and this is just a great story at the end of our podcast We ask all the guests. What's your favorite etf ticker that isn't your own or because the tickers are fun Right etf tickers are kind of cute and whatever So some people say like tan mu right bogele sits there for three seconds and goes crzy Which isn't a ticker.  I'll go through this pretty quickly. This is a little bit, you know, um Going into passive worries is a great way to look at the big picture Where all the money is what's going on? So I put this in here for that because it's an interesting study So this is a look at the ownership of the u.s. Stock market Yes vanguard takes in a lot of money, but etfs and mutual funds collectively own 40 of the stock market households own another 40 But of the etf and mutual fund 40 only halves passive. So you're only looking about 20 even less 18 percent Okay, maybe some institutions have passive smas. Let's go to 25. So we'll say 25 is passive I asked a lot of people. What do you think passive could get to before there's a problem? So like most people Like bogel said 75 roughly Gus Souter said 80 Bert malkiel when he said 95 He went all the way. He said as long as somebody is trading there will be a price and we're good So I don't know. I don't know where I stand on this, but I think 25 isn't that bad and look when you see Company news come out a lot of times stocks go up and down quickly right earnings This is a chart of ge after it had a bad earnings It went down like 50 percent over the next 18 months That's a chart of the flows into passive funds that own ge And so you can see it was able to go down even though the flows were there So I don't think passive is the tail wagging the dog at all That said would ge have gone down a little more if there wasn't the passive bid probably So I think passive could be a little buffer in sell-offs because the flows are always coming in Maybe that's a good thing. I don't know But anyway, as long as the stocks go up and down that passes my sniff test for an efficient market This is a chart showing the s&p 500 People think passive is like the static thing, but it's it's not really passive all these indexes There really is no such thing the s&p 500 has rules to get in and they they kick companies out. They let new ones in There's a human committee that can have overrule like oversight of everything So it's it's almost like just very low turnover active in a way So I think some active is more passive than it looks some passive more active I just think all this is about how are you going to own these big Blue chip companies and just do it an efficient way. I don't really think there's this black and white issue between active and passive So I think that that nuance is important and people forget that Now one of the biggest things that is legit Isn't passive or indexing growth, but it's the growth of two companies vanguard and black rock They have so much market share of passive and ETFs That they're slowly well not slowly, but they're already now the top owners of all the companies in america So we just ran a search before I did it this week vanguard is now the top owner of 69 of the s&p 500 companies And in the top three owners of the 99 So they're basically have a lot of power and control And the question is how does this play out right now? They're at 15 percent But a company can own a lot the rule in the books is a fund can't own more than 10 percent But their biggest fund only owns two three percent So they they could start another one the rule was for when fund complexes didn't exist and a company had like one or two funds So this rule is is is dated. So vanguard and black rock could own 40 percent of companies Um, you know collectively together and that's a lot of ownership. So what do we do? Do we? Uh democratize the voting that's probably a good idea. I personally think vanguard will probably get regulated You know, I would note in a theme that I say which is the only thing that can stop vanguard at this point is regulation Even their customer service as as bad as some of the stories are I don't think that'll do it I think the government will probably come in at some point and say look you're gonna have to just stop But that's is why I called the book the bogal effect and not the vanguard effect Because even if vanguard goes away the ship is sailed you can get low cost funds now everywhere So you don't even really need vanguard like it's the training wheels could go off We're now in this like investor utopia. Everybody has low cost funds. So bogal is is having that this impact is a little bigger than vanguard and speaking of buffet I asked buffet this very question I said How big can passive get before you would worry about it? And his answer this is his exact email so you can see how he writes emails It's like everybody else I guess Um, maybe I'm just showing off that I got an email from Warren Buffett. That's probably more like it Index funds continue if index funds continue to grow there will be a public policy issues down the line But that's a subject for another day, but right above it. I asked him Do you still recommend to retail investors to use an index fund and he said absolutely So as long as he's going to continue to recommend and he says it's down the line I kind of fall in this camp But I do think this is probably the one legit issue of passive that will become a huge political football and ultimately regulated Okay, number nine cheap index a cheap index fund is way Undercredited for improving investor behavior So there's all this stuff on behavior and psychology There's books written on this stuff And it's all like teaching you about your brain and what you shouldn't do and it's really interesting stuff Don't get me wrong But it's easy to write this when you have a cheap index fund Imagine that didn't exist and you're only in a underperforming active manage fund that charges like 80 basis points Way harder to behave and we know this because we've seen the flows in other bear markets But index fund investors they never move and my theory on this and here's a chart showing the past Times we've had negative markets. You can see the flows into ETFs and index funds are positive. They're strong Active sees more outflows index fund investors in my opinion have just resigned That this is the best deal they could possibly get What am I going to do leave this and go to some fund who happened to do well in this market?  So just introducing a cheap index fund or something worth holding to I think doesn't get enough credit in the behavioral the study of behavioral finance Um and vanguards flows during 2008 show this this is amazing Every month they saw in flows Even october when the market was down another 17 percent And so this bodes well for their growth and this is part of what taking the hard road early by jack paid off he Purposely wanted the right investors didn't want short term money And so constantly Putting this off you you get investors also one other thing here By not paying brokers the people who would come to vanguard Would be kind of heads up people because you'd have to think this through and go actually this makes sense I'm going there right you had to actually go there So the core vanguard is very heads up astute educated smart investors like all of you Right and I actually think bogel might be under credited in starting the r.a. Movement Because you had to leave the brokerage to become an r.a. to use vanguard because they wouldn't pay the brokerage So the whole r.a. Movement is I think in concert with the rise of passive. They kind of feed off each other I think Um and michael louis who I interviewed I was surprised michael louis never wrote about this I read in an interview. He was a vanguard investor Since the 80s and I was like I can't he's interested in all these wall street tales and stories This is like the greatest story ever told and he just hasn't ever written about it. So I called him He took my call luckily And he was a great interview Halfway through he started asking me questions. I was like wait a second. Don't steal my idea This quote to me sums up the great resignation and the knockoff effect, which is Again, you can't measure this which is people get to just live their life now You don't have to be glued to your monitor He said it made him a better writer and he's a great writer So this is again these are again the residual effects are just astonishing when you start to Measure them out, but I think this is the mindset of your average vanguard investor right here Now it is hard to behave sometimes Let's this is a hard year to behave this year, right? The news loves to sell negativity. I know because I do it A negative headline gets like five times the reads is like, oh, it's okay So we definitely put out more negative headlines and that's just we have different Goals than than an investor does and you need to know that so here's a chart from the s&p and a bunch of negative headlines You can see it's very easy to do that but It this is how index fund investors have really been able to put this off And some of the advisors who I call big long advisors They've been very good about turning this stuff around and and doing judo on these negative headlines and really working their investors This they put and we've seen the residuals um The other thing that you see is fomo, right? CNBC does this thing where they'll just look at crypto or if you invested in this in like 1945 you would have been a millionaire um This is what I call the 95 five phenomenon, which is that 95 of the media coverage is on stuff that would make up 5 of your portfolio This is my e equals mc squared. Okay, so behold I'm proud of this Because I actually look vti is like the most popular etf, right? If you search news mentions, it's like a flat line and it's it's weird, isn't it? Um, um, but the stuff that comes out it's more flashy gets more of the press So people um again fomo is a big thing and now we have free trading So this is a chapter I did that was just looking at the art of doing nothing And behavior because it isn't easy to behave but an index fund is a great, uh weapon to behave better And now when trading's free You know, we saw what happened, right? We have the robin hood army And I've got to say I would love to hear boggles comments on the whole meme thing. Oh my god. They would have been epic His head might have exploded. I think though Um, so the you see the rise. This is the percent of all equity trading made up by retail investors Look at that spike. It went from 10 to 24 percent And then it went down. Why the market did stop working? They stopped being geniuses because now it's hard to make money, right? So I think that chart's going to go down further And those people are going to go to vanguard and cheap indexing I think the robin hood meme army thing is just young people with nothing to do and just wanting to have fun Um, and I I actually talked to some of the meme traders on this and I pushed them on this and they admit it They're like, yeah, I it's just for fun Anyway, I think they're going to grow up They're going to realize losing money is not that fun and they're going to ultimately go to what we all have right here So then the next generation will probably come in during a bull market and they'll go crazy. I'm gen X I went a little crazy in the late 90s and you know, then you get responsibilities You don't you just can't bet your money on all this stuff So I think they're going to discover what I what Dave native calls boggles hack Which really is sort of loosely, uh, you could use the metaphor from the movie war games Where the computer Kind of comes to the conclusion that nuclear war is a strange game The only winning move is not to play And I think that's what these younger investors will come to that conclusion Uh, because you play long enough you realize it's very difficult So I do think you're going to find that so I don't think that meme thing is really that big of a deal Um, all right number 10. Let's get on with this. Um, the boggle effect is much bigger than vanguard and it's only just beginning So again, I I probably could have sold more copies if I called the vanguard effect So give me some props for taking the the harder road I even had a colleague who introduced me and he goes she goes This is in bloomberg. She goes author of the boggle effect And I was like no, I did not write a book about a board game But people don't know that name enough, but I thought you know, they should but really that the material dictated this and It's because again vanguard could go away. They could lose their they could lose They could be regulated. They could misstep who knows But the boggle heads, you know, this whole thing is is almost like bigger than that and I think that the name I'm happy I named it that um So look where the place is this is playing out equity mutual funds clearly The hurricane is right on top of them trillions just moving, right? So we'll say that's the first victim bond funds have been More they've held up better bond managers and active bond mutual funds. You can see Unlike equity, they've actually seen inflows most of the last 10 years This year seeing outflows, but largely because the market's so brutal But this come this is an interesting dynamic between bond managers and stock pickers and how they're viewed by advisors Here's the best metaphor I could come up with Some reason advisors think bond managers are like physicists, you know, they talk about duration and convexity They eat cereal for dinner, you know, they're like, oh my god, I gotta give this guy money But then they on stock pickers, they just think oh, this guy doesn't know anything There's all these people covering amazon So I do think over time part of the reason the bond managers are so Revealed and there's a mystique is their indexes their benchmarks are very bad. They're very easy to beat I think indexing will eventually grow and the benchmarks will get better and investable And we will see the bond funds start to grow more on the passive side So I think that's one other area we'll see this play out We'll also see a play out in the advisory space Now the advisory this is vanguard's advisory assets 250 billion a lot of that's vanguard investors But I would look out for this. This is also betterment, right low cost advice I sometimes wonder if advisors Some of them not all of them are making the same mistake that active fund managers did in the 90s With not sharing the economies of scale because remember if they get 1% They've seen their pie grow dramatically over 10 20 years So I would urge them to you know bank some goodwill now Before this freight train, you know comes close to you because vanguard. I mean even tim buckley said We are going after you. I mean he literally called a shot like bay ruth So I think you're gonna, you know see a lot of disruption in this area I asked bogel about the advisory business said what do you think is going to happen? He said it's going to get more professional. It's going to move to hourly and flat fee He thinks the whole percent fee is going to go away eventually But in his books, he's torn on advisors. He's like if you do planning and stuff I think that's a good idea if you use passive, but if you're picking active funds I don't think it's a good use so he was mixed on it But um, he also liked the fact that people went right to vanguard and didn't even use intermediary Um, okay international has been slower Uh, right now the passive boom is really more biggest in the u.s Japan's really big because that's because the bank of japan buying ETFs But the further right is the percent passive, right? We think that whole chart over the next 10 years will move to 70 percent So all of it's just going to go over that way As the plumbing and the architecture changes and the word gets out I think over time advisors are going to move more to fee based I I knew because I talked to international advisors all the time. There's a lot of them popping up I highlight a couple of them in the back of the book in the back of the book. I have a section called um I actually forget what I called it, but I think it's called carrying the torch because some I asked a lot of people I interviewed will there be another bogel or who is the next bogel? Every every single one said there will never be another bogel. I mean it was across the board So I said, okay, there's no new bogel Here's people doing bogelish things and I highlighted a lot of a couple international advisors because it's harder over there It's like it was here in the 90s Um, and then here's just a little shout out to the bogel heads This is from the first ever bogel heads podcast, which rick fairy did great podcast that first podcast is great I got a you know five or six juicy nuggets from my book from that one episode He loved the bogel heads. I just thought I'd show this to you because you're here and you know, this is why you're here And he thought it was a huge advantage to have the bogel heads and Obviously, you know, I talked to some people who are even using other services But again, the whole idea here is that bogelism is not exactly exactly the same as vanguard And that's just I think the point of you know, my book is that the bogel heads are almost like a They're all they have chapters. It's almost like a religion That's spreading which is why in the beginning of the book I sort of I was trying to think of who is who could I say bogel is like to somebody So in the beginning I say he's sort of like a combination of steve jobs and martin luther Not king jr. But martin luther the religious guy for the the protest Because I do think there's a product development thing he did He literally made products that are on the market that everybody loves that was a religious aspect that was sort of formed I think by his unique And a visionary look at low cost. So again, I know this is all preaching to the choir, but this is You know really interesting stuff when you dig into it And I certainly had a really interesting time and satisfying time writing this book The only thing left there's one big part of this that I had to mention at the end which is that Everything we just mentioned only helps half the country Right. So only half of americans are even invested So there's still half that aren't The so the big question going forward is how to get them invested The good news is they'll have these frictionless products Or funds to use to get into the market. So I think this is an interesting Sort of way to end it and bogel wrote about the wealth gap He was worried about it. And so in some of his books, he, you know, wondered what we should do. He had some solutions But anyway, I think that's the next step And with that, I will say thank you for your time That was wonderful. Thank you. We've got time for a few questions Anybody in the audience have a question and uh, we're gonna put the mic over here You can come on up and ask eric. We've got a few minutes So if if you've got some questions, come on up Yep, come on over We're competing with the bar We're at that time Thank you for your presentation You mentioned that you get pushback from non-bogelhead crowds. Which parts specifically are Received the most.  I don't like what this guy did It's you can just feel it. Um, this is not good. This is not fun information To share with the asset management industry That said, um, I would argue they probably made too much money over the years The market grew so much everybody became filthy rich And like I think you have to acknowledge that every industry gets disrupted So how do you move forward when we write about vanguard on the bloomberg terminal? Which you would think vanguard stories would only work for retail crowds The hits are amazing and I was like, why do people care when we write about vanguard? And really what they're what they're reading is they're scared shitless They they they realize very much that there's a company out there. That's like an amazon in their world And so that's another reason I know we definitely see a lot of interest there. I call it like fear reads Because they are worried, but yeah, it's not direct and one thing about bogel that I thought was interesting was He would pretty be pretty savage towards everything ETFs believe me my world. He was savage on pretty pretty heavily active managers But he would be friends with a lot of these people I think he did a good job separating what you do for a living with the person you are He became good friends with Nate most he's friends with cliff assness who's an active manager Um, so I think some people also might just feel that way too like yeah It might hurt my business, but I kind of respect what this guy's doing First of all, I love the punk rocker analogy So you put a ton of research and time into this book What was the most surprising conclusion or discovery that you made? It had to be I mean, I showed you I showed you all the all the really surprising stuff. It had to be the rooting for your market share to a road or the serendipity um, and really The I how the vanguard mutual under ownership structure was birthed Was really hard to understand and then write I kept giving the book the early copy the book to my mom I give it to my colleagues But I also give it to my mom just to see if like a normal person Could just get through enough even though it's not totally a retail book And she got hung up on the mutual ownership structure story She was like what happened here who did what I was like So I had to go back many times and that really I think was it was shocking how How circumstantial and like hanging on by a thread I as I said in the book Nobody's copied the structure in 45 years even though it's been so successful for this company for this um company And I said because it's it's a freak accident. That's why no one's copied. There's no economic incentive to do it So it really drove home The circumstance and freak accident nature that had to it's almost as if the universe kind of wanted it to happen That's how against the odds it was and I think that was Really rich and interesting and somewhat surprising. I didn't know the depth of the story like that So Eric fascinating talk. Thank you for being here and sharing I have two questions for you. First thing is did lady geek allow you back on the forum? Yes, she said look, we'll give you a second chance. Just don't screw up this time That's great the second one is This is a great story Looking at it in hindsight that this was a freak idea whose time somehow managed to come in this world Did you do you see any other such ideas now that you might be willing to predict? Might happen in the financial world, you know crypto gets compared to this. Um I honestly think crypto and defi Are like really wall street all over again And I talked to my crypto. I said bogel was the og of defi And I try to explain this to my crypto friends. They don't buy it, but I'm like not really he he operated completely outside of the system So, you know ix the brad kutsuyama firm I would just say think of anybody who's just lonely outside of a system and refuses to play along That would be the that would be a metaphor for this But I I think the crypto community could really learn a lot from this because even though they sell populism They're all becoming billionaires and hiring movie stars to like do commercials I was like be careful. You don't Reveal how hypocritical that is And make sure maybe look at something, you know, I saw i'm also trying to sell books So i'm trying to sell the whole crypto world you should read this But I do think there's a good lesson For people who do want to be disruptors It's not that easy and this is a roadmap In my opinion for how to be a disruptor long term It it's it's really painstaking and I think crypto in particular gets pitched to something like this, but it really isn't in my opinion Thank you for writing such a great book and i'm a little bit biased, but I kind of like the title But my question for you is have you Heard of a firm yet that will just cap their fees that they're charging the sense of saying We're going to make our fees x until we make 20 million dollars in top line And then we're done and if asset goes up we're Giving it all back you mean like break evens Uh, we're like where they where they reach a certain point and they lower them No in the sense of they're saying uh It cost us to run 20 million dollars to run this business. Yeah, if we make 25 million we're giving 5 million back Oh, not really. Um, I mean if that exists, let me know because we are this interesting topic We think that would go a long way uh to develop goodwill with the investor base Um, I think more so what you're finding now is companies are just trying to come out cheap like Dfa and avantis and there's these new firms that are actually pricing their active funds pretty cheap That's one way to go Or again, you can charge more if you're in the shiny object lane because when you outperform you double or triple the market You don't just barely outperform and people are less sensitive to fees But no, I you know, I asked bogel a lot like what what should active do?  Look, I what could I mean? I'm just repeating what he said But if you're an investor out there, even people who you know, there's a great story from Jason's why that Most of the active management industry is in vanguard, which is to me the ultimate compliment So because they know it's a good deal. It's pretty obvious if you're around this industry So, yeah, I don't know.  Nobody really cares What you need is low cost and the brand name helps like so that's why It's really difficult out there. It's basically black rock vanguard and then like everybody fighting over the crumbs Yeah, I'm not sure. This is again part of the reason I explored this But uh, if I if I hear of that scenario or anybody else knows tell Andrew, but I haven't heard of it Thanks for presenting. Um, the case is so fundamental like logical rational factual objective Why do you think the quote unquote like I'll call them super smart money? So pensions and endowments foundations. Why aren't they doing more indexing? Okay, um my first book the institutional ETF toolbox available on Amazon. Um I interviewed a lot of Institutions and what I discovered There's there's a legit reason and there's a not legit reason the legit reason is institutions have different needs than you and me They have they have to sort of predict their returns and I give them that and some of them have access to some pretty cool Private equity and hedge funds, especially the yales and the harvards of the world But everybody else is a lot of its conflict of interest Institutions love the Yale model Because the Yale model is like all alternatives And you can hot and all these active managers They like to use consultants the consultant recommends the active manager Then when it doesn't work out they can blame the consultant who can blame the active manager and then they'll get a new one If the if the cio said let's just do like the vanguard model and do two ETFs They're lose their entire staff. They probably say what do we even need you for? So a lot of its job security, which is an illegitimate reason But we all you know, I can relate to that a little bit and a lot of it is David Swenson's book the Yale model really just You know got into their brains. They think it's like the cool way to invest They think um, it's an exclusive way to invest I talked to some institutions who were like they just like to basically go to these parties or the institutional events And brag about which p.e manager or hedge fund they got it wouldn't be as cool to say that I have like vti Right and so institutions are in my book. I mentioned here They're they've got a little bit of a muni to the vanguard effect Well, I understand the yales and the harvards what I think the vanguard model should really Penetrate is the smaller and mid-sized institutions who don't have access to this stuff They don't have really highly educated teams. You know what the firemen, you know The firemen's pension of cherry hill, new jersey messing with the Yale model So I think the the big Be outside of the big ones. They really should look to this There's been a couple pension and endowment people who have moved over And spearheaded it to become a political football a little bit Harvard wrote the the Harvard wrote their own University the class of 69 and said you got to get rid of these hedge funds. They're awful They're too much money just by index funds. So definitely they're it's starting to percolate, but that that area there's just a lot of Con there's just a lot of reasons that It's just hard to get a vti in there. It just That's the best answer I could give you someone else might have a different answer But that was my experience talking to them But what's interesting in my in that first book I mentioned I go over it, you know advantages of etfs And my final advantage is personal usage I talked to a lot of etf wholesalers who said they'd go to institutions And the the cio would call them back and get all this information And the etf person would go, okay, so are you going to invest like I didn't see the money in the fund Oh, no, it's from my personal account And so a lot of them admitted to being in vanguard in their personal account or in low-cost etfs the cios But then with the with the fund they'd buy all these high-cost hedge funds and alternatives so I don't know what to tell you like I think there's you know I don't want to bash them too much because like I said, they have different needs than you and I but I think they could benefit a lot Thank you so much Eric. It's been a wonderful presentation Really appreciate you coming out here Well, that concludes our program for tonight. We hope you have enjoyed it And we will see you tomorrow morning breakfast begins at seven o'clock upstairs and then the first session begins at eight a.m. So have a nice evening and we'll see you tomorrow