John C. Bogle 
Don’t Count on It! 
Reflections on Investment Illusions, Capitalism, ‘Mutual’ Funds, Indexing, Entrepreneurship, Idealism, and Heroes

Praise for Don’t Count On It!

‘This collection of Jack Bogle’s writings couldn’t be more
timely. The clarity of his thinking–and his insistence on the
relevance of ethical standards–are totally relevant as we
strive to rebuild a broken financial system. For too many years,
his strong voice has been lost amid the cacophony of competing
self-interests, misdirected complexity, and unbounded greed. Read,
learn, and support Jack’s mission to reform the industry that has
been his life’s work.’

–PAUL VOLCKER, Chairman of the President’s Economic
Recovery Advisory Board and former Chairman of the Federal Reserve
(1979-1987)

‘Jack Bogle has given investors throughout the world more wisdom
and plain financial ‘horse sense’ than any person in the history of
markets. This compendium of his best writings, particularly his
post-crisis guidance, is absolutely essential reading for investors
and those who care about the future of our society.’

–ARTHUR LEVITT, former Chairman, U.S. Securities and
Exchange Commission

‘Jack Bogle is one of the most lucid men in finance.’

–NASSIM N.TALEB, Ph D, author of The Black Swan

‘Jack Bogle is one of the financial wise men whose experience
spans the post-World War II years. This book, encompassing
his insights on financial behavior, pitfalls, and remedies, with a
special focus on mutual funds, is an essential read. We can only
benefit from his observations.’

–HENRY KAUFMAN, President, Henry Kaufman &
Company, Inc.

‘It was not an easy sell. The joke at first was that only
finance professors invested in Vanguard’s original index fund. But
what a triumph it has been. And what a focused and passionate drive
it took: it is a zero-sum game and only costs are certain. Thank
you, Jack.’

–JEREMY GRANTHAM, Cofounder and Chairman, GMO

‘On finance, Jack Bogle thinks unconventionally. So, this sound
rebel turns out to be right most of the time. Meanwhile, many of us
sometimes engage in self-deception. So, this book will set us
straight. And in the last few pages, Jack writes, and I agree, that
Peter Bernstein was a giant. So is Jack Bogle.’

–JEAN-MARIE EVEILLARD, Senior Adviser, First Eagle
Investment Management

Insights into investing and leadership from the founder of
The Vanguard Group

Throughout his legendary career, John Bogle-founder of the
Vanguard mutual fund group and creator of the first index mutual
fund-has helped investors build wealth the right way, while, at the
same time, leading a tireless campaign to restore common sense to
the investment world.

A collection of essays based on speeches delivered to
professional groups and college students in recent years, in
Don’t Count on It is organized around eight themes

* Illusion versus reality in investing

* Indexing to market returns

* Failures of capitalism

* The flawed structure of the mutual fund industry

* The spirit of entrepreneurship

* What is enough in business, and in life

* Advice to America’s future leaders

* The unforgettable characters who have shaped his career

Widely acclaimed for his role as the conscience of the mutual
fund industry and a relentless advocate for individual investors,
in Don’t Count on It, Bogle continues to inspire, while
pushing the mutual fund industry to measure up to their
promise.

Table of Content

Foreword xi

Introduction xv

A Note to the Reader xxxi

Part One. Investment Illusions 1

Chapter 1 Don’t Count on It! The Perils of Numeracy 5

Chapter 2 The Relentless Rules of Humble Arithmetic 25

Chapter 3 The Telltale Chart 49

Chapter 4 A Question So Important That It Should Be Hard to Think about Anything Else 71

Chapter 5 The Uncanny Ability to Recognize the Obvious 87

Part Two. The Failure of Capitalism 97

Chapter 6 What Went Wrong in Corporate America? 101

Chapter 7 Fixing a Broken Financial System 123

Chapter 8 Vanishing Treasures: Business Values and Investment Values 137

Chapter 9 A Crisis of Ethic Proportions 157

Chapter 10 Black Monday and Black Swans 161

Chapter 11 The Go-Go Years 187

Part Three. What’s Wrong with ‘Mutual’ Funds 203

Chapter 12 Re-Mutualizing the Mutual Fund Industry: The Alpha and the Omega 207

Chapter 13 A New Order of Things: Bringing Mutuality to the ‘Mutual’ Fund 237

Chapter 14 The Fiduciary Principle: No Man Can Serve Two Masters 273

Chapter 15 Mutual Funds at the Millennium: Fund Directors and Fund Myths 297

Chapter 16 ‘High Standards of Commercial Honor . . . Just and Equitable Principles of Trade . . . Fair Dealing with Investors’ 317

Part Four. What’s Right with Indexing 347

Chapter 17 Success in Investment Management: What Can We Learn from Indexing? 351

Chapter 18 As the Index Fund Moves from Heresy to Dogma, What More Do We Need to Know? 369

Chapter 19 ‘The Chief Cornerstone’ 393

Chapter 20 Convergence! The Great Paradox: Just as Active Fund Management Becomes More and More Like Passive Indexing, So Passive Indexing Becomes More and More Like Active Fund Management 409

Part Five. Entrepreneurship and Innovation 435

Chapter 21 Capitalism, Entrepreneurship, and Investing: The 18th Century versus the 21st Century 439

Chapter 22 Seventeen Rules of Entrepreneurship 455

Chapter 23 ‘Vanguard: Saga of Heroes’ 469

Chapter 24 When Does Innovation Go Too Far? 493

Part Six. Idealism and the New Generation 507

Chapter 25 Business as a Calling 511

Chapter 26 The Right Kind of Success 517

Chapter 27 ‘This Above All: To Thine Own Self Be True’ 521

Chapter 28 ‘Enough’ 529

Chapter 29 If You Can Trust Yourself . . . 535

Chapter 30 The Fifth ‘Never’ 543

Chapter 31 ‘When a Man Comes to Himself ‘ 549

Part Seven. Heroes and Mentors 557

Chapter 32 Walter L. Morgan 563

Chapter 33 Paul A. Samuelson 569

Chapter 34 Peter L. Bernstein 575

Chapter 35 Bernard Lown, MD 581

Index 587

About the author

JOHN C. BOGLE is the founder of the Vanguard Group of Mutual Funds and President of its Bogle Financial Markets Research Center. He created Vanguard in 1974 and served as chairman and chief executive officer until 1996 and senior chairman until 2000. In 1999, Fortune magazine named Mr. Bogle as one of the four ‘Investment Giants’ of the twentieth century; in 2004, Time magazine named him one of the world’s 100 most powerful and influential people, and Institutional Investor presented him with its Lifetime Achievement Award. In 2010, Forbes magazine described him as the person who ‘has done more good for investors than any other financier of the past century.’ Mr. Bogle graduated from Blair Academy cum laude in 1947 and Princeton University in 1951, magna cum laude in economics. In 1999, he received the University’s Woodrow Wilson Award for distinguished achievement in the nation’s service.

Don’t Count on It! is Mr. Bogle’s ninth book. His earlier books include Common Sense on Mutual Funds, The Battle for the Soul of Capitalism, The Little Book of Common Sense Investing, and Enough.