Art Buchwald is credited with saying, “If you attack the establishment long enough and hard enough, they will make you a member of it.”
Indeed, one can easily imagine an intellectual hall of fame containing iconic figures to which Buchwald’s adage applies. This would include people like Galileo, Newton and Einstein from the sciences; Shakespeare, Michelangelo and DaVinci from the arts; and our nation’s own Founding Fathers from the realm of society and government.
It appears we can now add one more name to that list: Financial celebrity John Bogle.
Bogle famously took on the establishment when he came up with an idea many considered downright silly: creating a mutual fund of all the stocks from a particular index.
In his case, he chose the S&P 500. At the time, the commission costs alone would have made such a portfolio impractical.
Of course, aiding by both the movement toward discount brokerage and the almost universal acceptance of Modern Portfolio Theory (not to mention an unusually savvy anti-establishment marketing campaign), his fund now stands as the largest in the world and his concept is considered the de facto standard.
In the process, Bogle has assembled a financial militia far greater than the army Arnold Palmer once created.
These “Bogle-Heads” fearlessly defend their leader, often with a cult-like vigor. It’s not clear if Bogle actively encourages these people, but he sure doesn’t spend a lot of time discouraging them. At his best, Bogle uses his celebrity to continue to defend the best interests of the common investor. Lately, he has joined the crusade for the adoption of a universal fiduciary standard. Many (primarily those on Main Street) consider this a good thing. Many others (primarily those in the establishment) are fighting this effort with every ounce of political lobbying money they can muster.
There comes a time, however, when someone who fights the establishment becomes the establishment. You might call this the consequence of “winning” the argument. Unfortunately, the winners sometime forget they won. Their drive to take on the establishment ignores the fact they are the establishment. In a Greek tragedy, this occurs just before the hero’s fall. It’s called hubris. It’s meant to teach us never to take ourselves too seriously because, if we do, sooner or later we’ll find ourselves hoisted upon our own petard.
One wonders if Bogle crossed that line last week with his comments at a financial convention in New York City (see “401k & Retirement Advisers Shocked by, Sympathetic to and Cynical of Bogle Comments,” FiduciaryNews.com, July 1, 2014). There’s no doubt that Bogle’s marketing switch is always “on” and that he’ll never stop promoting index funds. What surprises many is Bogle’s idea to use the government as the hammer to promote his products. This suggestion calls into question Bogle’s character: He appears willing to sacrifice the universal benefits of our free market system solely for the benefit of his own business.
Those most angry at this behavior are asking “Is Bogle crazy, or does he just need a refresher course in Econ 101?” Those less cynical feel Bogle’s heart is in the right place, but his solutions are self-serving at best.
But Buchwald may have the greatest insight on this matter. It’s a classic Hollywood story: downtrodden neighborhood encourages child prodigy to achieve; child prodigy gets a lucky break and becomes famous; the rich and famous laud child prodigy; child prodigy discovers he can get farther if he downplays his roots; eventually, child prodigy forgets his roots, sacrificing them for his career.
It’s not necessarily done maliciously. It’s human nature. It also appears to be happening right now to John Bogle. After decades of taking on the establishment, he is now part of the establishment. And the ultimate act of someone in the establishment is to conjure up a way to use the government to promote your ideas. All those little people he’s helped through multiple generations?
He’s still trying to help them, only his actions betray an attitude that suggests they can’t help themselves.
And that’s the best operating definition of the establishment.