The Virtuous Leader
Is Machiavelli right? What about in today's business environment? John Bogle makes the case that it is time for a change.
John Bogle attended Princeton. His thesis described a mutual fund system characterized by low fees, benevolent management, forward thinking and stewardship. After a series of difficult maneuvers with the management of funds he started out with, Mr. Bogle was able to start the Vanguard Funds (some might call his maneuvers Machiavellian, but that is another topic) and to split the new fund off from the older Wellington Funds. The focus of Vanguard funds from the start was simple, low cost funds (Bogle, 15). The fund, initially called First Index Investment Trust and later called the Vanguard 500 fund, essentially mimics in its holdings the Stand & Poor's (S&P) 500 Stock Index. The idea - a totally new one, a truly disruptive strategy for its time - is that you buy every one of the stocks in the index and hold them. If people buy more shares in the fund, the managers just buy more stocks, but always in the same ration. Why? When you do it this way, expenses are greatly reduced because trading fees are greatly reduced. You buy the pool of stocks and hold them. You don't know which ones will go up or down, but the net result always will parallel the S&P 500. This was an admirable goal, as most funds were targeted at beating the S&P 500, but most never were able to. Their fees for trading and management were too high.Bogle makes points that are worth discussing. They support his thesis that too much money is made managing and trading with no thought to the customers need for a fair return without exorbitant fees. We have all come to realize in the recent bust that managers – and CEOs for that matter – were worried more about their bonus checks than their stockholders. They focused their efforts on the stock price, necessitating a short term focus, and not the future worth of their companies based upon sound business decisions. Commitment to the material things in life misses the more important commitment to what is right. Bogle points out that Benjamin Franklin was offered a patent on his stove. Refusing it, Franklin explained that his invention was free for everyone to use. He wasn't worried about his return on invention, but rather is his return on investment for his fellow man. Everyone's life was improved by his invention; that was good. When you read more about Franklin, you realize that he was one of the richest men of his time, and the most respected at the Courts of Europe. He played a diplomatic role in fostering the eventual success of the American Revolution. Now it would be nice to say that he was a perfect embodiment of the enlightenment. Let's just say that he was human, but he remembered his humanness and gave as much as he got, an attitude that Bogle feels that is forgotten in today's society.
Bogle questions the three attributes of success usually known as wealth, fame, and power (Bogle, 213). Successful people are "ill-measured" by "mere dollars", "public accolades", and "control over others". He mentions all the "dedicated souls" who "earn our respect because they serve our society knowing that accumulating great wealth is almost out of the question, that great fame is rare, and that great power-at least temporal power-is conspicuous by its absence (Bogle, 218)." He quotes Helen Keller, "I long to accomplish a great and noble task, but is my chief duty to accomplish humble tasks as though they were great and noble (Bogle, 220)."Machiavelli says, basically, it is all right to break the rules, especially if you do so to reach your ends. Bogle says that the ends aren't your ends, they're society's. Character and courage don't count for much if they are all about you, instead of us.
There is another point of view here. Ronald Reagan saw how to mix Machiavelli and Bogel in an interesting way. “Reagan believed in work and wealth, and he had no trouble whatsoever with the thought that an excessive pursuit of material pleasure might jeopardize the political principle of civic virtue or the religious principles of charity and benevolence. In always looking ahead, Reagan left behind both the worry of liberals and the wisdom of the conservatives (Diggins[1], 16-17).” Honestly, I hadn’t expected to end up quoting research about Reagan here, but when you consider two Reagan wins, one against inflation early in his term and the other, later, during the dismantling of the Russian “empire,” if you squint your eyes a bit, you can see that Reagan’s point-of-view may prove useful to us again, especially as we tackle one of the toughest periods in recent economic history.
Bogle, John C. Enough. True Measures of Money, Business, and Life. John Wiley & Sons, Inc. 2009.Diggins, John Patrick. Ronald Reagan. Fate, Freedom, and the Making of History. W. W. Norton & Company. 2007.
Skinner, Quentin. Machiavelli. Hill and Wang. 1981.