The Economy: This Too Shall Pass
Bogle: You know, it’s the successful entrepreneur, the person who figures out something that other people haven’t figured out yet, that makes American capitalism. And in that sense, from what I read about the bank you created and built, it’s very much like the Vanguard model — pooling the resources of relatively smaller depositors and then just trying to keep it nice and simple. With 19 million shareholders, Vanguard can’t give personal service. So we try to give virtual service — helping you set up your own estate, allocate your assets, choose your funds, things of that nature.
Hill: All great businesses have this common element. Certainly Vanguard does, and I hope we did. This idea that we’re building fans, that your customers become your fans … think of Apple computer. They had five percent of the computer business, and they created this legion of fans. Great companies all have customers who go out and bring in more customers.
Bogle: One of our competitors did a poll, and there at the top of the list was Vanguard. I can’t remember the precise grading system —
Hill: It was probably the net promoter score. We were all using it. I mean, we knew at Commerce that 42 percent of our customers said that they would recommend us to a friend. That’s a gigantic number.
Bogle: I’m not sure it was exactly the same question, but we were up around 55 percent. The average mutual fund had more detractors than advocates.
PM: As you guys talk about what you built, it’s clear that the Wall Street firms you talked about earlier never really built businesses. They moved money around.
Hill: Maybe there are some examples that Jack knows, but great companies are not usually built by doing acquisitions. They’re usually built by an entrepreneur coming up with an idea, just like Jack did.
Bogle: Oh, sure, that’s true. And I never heard of a committee building a great company. An awful lot of people have said I’m somewhat tyrannical, dictatorial —
Hill: [Smiling] I’ve been called that, too, Jack.
Bogle: You know what you want, and it has to be delivered.
Hill: We had the vision. Steve Jobs at Apple — I mean, there’s a guy who has the vision. Jack, you had the vision. You have to have this vision, and passion to drive it. I would never buy banks, because I thought I could never convert banks to our model and culture. Did you ever buy companies?
Bogle: Never. Not once.
PM: So let’s talk about the future. Where’s all this going?
Bogle: I think we are in for some difficult economic times. We’re in recession, and it’s probably going to take a while, one to two years, to get over that.
Hill: I agree we’re in a recession now. It’s going to be a protracted recession, but I would also add that the American banking system — not this shadow banking system — is basically sound.