From CEO to Startups: Masters in Business with Former Vanguard CEO Bill McNabb

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1:00Cheaper prescriptions that are easier to get and care that looks at the whole person. How you need it. Optum is helping make Healthcare work as one for everyone. Learn more at business.optum.com. Never bet against American grit or American energy. Through innovation, venture global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's venture global. That's unstoppable energy. This is Masters in Business with Barry Rittholds on Bloomberg Radio. This week on the podcast, another extra extra special guest, Bill McNabb was CEO and chairman

2:04at the Vanguard Group. He had been with the firm for 30 years helping to take them up to trillions of dollars. We've spoken to him a couple of times. In the past, he discusses his post-Vanguard career, the boards he's sitting on, all the finteched startups and venture capital he's working with. I thought this conversation was fascinating and I think you will also, with no further ado, my sit down with William McNabb. Bill McNabb, welcome back to Bloomberg. Oh, thanks Barry. It's great to be here. So the last time, the last two times you were here, you were running Vanguard Group. I'm curious, how does a guy who rode at Dartmouth, taught Latin and coached at the Havard School, end up running the world's largest mutual fund company? So there's an old saying that it's better to be lucky than smart and... My mom used to say that to me all the time. And that really did apply. I got very lucky, Barry, in terms of just opportunities that

3:11happened to come across my way. And I had incredible mentors who sort of helped take those opportunities and make more of them than maybe they would have been otherwise. And one thing led to another. Huh, really interesting. So, teaching Latin and coaching. What does that teach somebody like you about leadership that you able to apply across three decades at Vanguard? Yeah, I think that the two big things, and I was very fortunate to work for somebody at Vanguard who really lived this. And I'll come back to that in a second. But the power of we versus I, I was coaching a rowing team. And no matter how good the individual athletes were, if they didn't really exist in order to make the Boko faster, you weren't going to win. And we had to really get that across to people. And that collective drive for success actually is incredibly applicable in the business world. I think the other thing, maybe a little more subtle

4:15is you lead by example. And some of the people who talk about it and they theorize and all these fancy saying, I'd rather just watch somebody do what they do really well. And if they're building good teams, just that example of how they do it is really worth emulating. I work for Jack Brennan, as you know, and you've had Jack on here before as well. And Jack really lived that. Like for me, when I got to Vanguard, the Wii versus I was very apparent where he was driving the firm. And then no one led by example better than Jack. And you know, when you've grown up in that world as a coach and an athlete and then you get it reinforced professionally, you know, early in your career, it becomes a way of thinking. Yeah, big fan of Jack Brennan loved what he did. When you joined Vanguard in 86, it was obviously a fraction where it was today. It was far less than

5:16a trillion dollars. And even in the mid 80s, I mean, that was the beginning of the bull market that started in 82. You had Peter Lynch and the fidelity. Michelle and fun. Berkshire Hathaway was on the rise. Stockpicking was on the rise. I guess I could say indexing was a fringe idea. What did the firm look like back in the mid 80s? Did you have any idea what was coming your way over the next couple of decades? This is why I said it's really better to be lucky than smart. I did not see this incredible explosion coming. What attracted me to Vanguard was I was working here, you know, for what's now JP Morgan Chase in New York and was getting a little frustrated with a lot of things and decided it was probably time to go. And one of my really, again, one of my mentors said to me, go find a place where the values match your own. And when I went in and interviewed with Jack Brennan

6:16and then Jack Bogal, you know, I found it was like, wow, this is so different. And it was there was tremendous appeal. And so I did it really based on gut and intuition. At the time, and so when I interviewed with Jack Bogal, the funny story was he had data pulled out a bunch of stuff and he's like, you know, we just crossed 15 billion dollars under management. And I have no idea how we're going to get to 20. So I don't know why you would come here. You know, you're doing big things on Wall Street. And I didn't even really have a response. And then he went on and he goes, but of course, and for the next hour and a half, I got a lecture about everything that needed to change in the asset management business. I go home and my wife says to me, how did go? I said, I don't know. I didn't say anything. But she goes, well, what are you going to do? And I said, well, she, if he offers me the job, I'm going because there's just something like there was the passion and the drive and the, you know, really contrarian view. So the early days, look, we paid as much attention to active management as Fidelity did. So Fidelity had Peter Lynch and Magellan Fund. We had John

7:22Neff in the Windsor Fund. Sure. On the great, you know, arguably one of the two or three greatest value investors in history. And, you know, Jack himself was very, you know, making sure that we were competitive money market funds were just taking off. And we got into the money market fund wars. So, you know, people will, you know, it's hard for people to imagine today, but yields were in, you know, 17, 18% different times. And dry face Fidelity and Vanguard were the three money market fund giants, you know, we each had a couple billion dollars. But everybody was comparing yields. And so active management and the yield on the money market fund in the early days, those were like the big drivers. So, so my pet thesis. So, to put this into context, 15 billion in the early 80s, just about 15 trillion today, that's just a crazy, crazy, a thousandfold increase, 10,000 fold increase. That's just a insane run. My theory is the late 90s, the scandals, the crashes,

8:26the annual scandal, the accounting scandal, the IPO scandal, all one after another. I think a lot of people just threw their hands up and said, you know what, just buy me the whole market. Let me know when it's time to retire. Let me know when I have enough to retire. Is that oversimplifying what happened or is that a, I would say that's, that's the psychological part of it. There was also the math part of it, which is on an after tax basis index funds beat 90% of active equities over any long, any rolling, anything more than a decade. So, if you were a long-term investor and you wanted to win, you indexed. And so, you know, it was, it was interesting to me as a participant in the market. I'd listen to our competitors and they talk while, you know, indexing's having its moment, but it's going to cycle out and, you know, stock up, it's going back. Any day, and the math was just overwhelming. That when you, and the real reason, and this was Jack Bogels, again, oversimplified discussion, but essentially, if you have two big parts of the market, one that's

9:30actively managed, one that's passively managed, they have to add up to the market. That's right. So, the average on the active side is going to be the market because you know the index side is going to be the market. And then you take costs into account all of sudden you've got, you've got arithmetic working in your favor. So, for us, there was this, it's simple, it's easy, it's low cost, and it works. And, you know, I think that was such a powerful thing. And our shareholders, Barry, as you know, because you've been a student of the game for so long, they stayed with us way longer than other investors stayed with their firms. You know, on average, I think it was three acts. So, the average duration of a relationship was three acts that of the industry. That's an incredible advantage in terms of just, you know, how you think about your business. So, you become CEO in August, oh wait, two weeks later, Lehman Brothers goes cut put,

10:33remind us what was happening in that era. What was that transition like stepping into the lead role, just as it looks like the world is going to hell. And what was that experience like? Yeah, so look, you know, in the darkest days, I mean, everyone was questioning whether the system would survive. So different than other crises we've seen, people really looked at like, will the market actually survive this? And we had a deep seated belief it would. And so we, we kind of had this bifurcated way of looking at the world like each and every day, what were we doing to better assure our investors that somewhere down the road, things would get better? And they had to stay the course like the worst thing you could do was to panic. Unless you really believe the world was going to end. And we had to do, so we met twice a day

11:33every morning and every afternoon. And we went through, you know, transaction by transaction, fund performance, everything you needed to, you know, try to assure our investors. At the same time, we knew that the world was going to be different. Regulation was going to be different. The competitive landscape was going to change. And maybe even some of the business models were going to change. And so we started laying the groundwork for all those changes. And, you know, just to give you a couple of tangible examples, the role of advisors. So at that point in time, the independent advisor channel, which again, you've lived this, was a really tiny fraction of advisors. Most of it was, you know, the big brokerage firms. And they were primarily commissioned driven. Right. All transaction- All transaction-based. And essentially conflicted because the more you trade, the more money they make, the more you trade, the more you lose from a performance standpoint. So we believe that the world,

12:36this would accelerate the move to asset-based fees and that it would be a very different model. The other one for us, we really thought this would accelerate indexing for all the reasons that you cited earlier in terms of just, hey, it's safe. It's just by the market. And again, the math was overwhelming. Even during a downturn, stockpickers did not outperform the index. Which is the claim before- Right. Just wait till the next downturn and you'll see how well stockpickers have done. So we knew that- So we started to make moves around those changes. We knew the regulations were going to change a lot. And we also knew the competitive landscape. And frankly, we didn't get that all right. We knew somebody would end up with iShares because Barclays Bank was under such a duress. I didn't see BlackRock doing it. I just didn't anticipate that. What a great buy for them. It was phenomenal. I mean, one of the stories we don't talk much about.

13:37We actually were a serious bitter on it until the regulators came in and changed the game. And then we had to back away. Really, how come BlackRock would be allowed? And Vanguard wouldn't, we were allowed, but they wanted to pair their institutional business with the iShares franchise. We didn't want anything to do with that institutional business because we were all mutual fun retail based. So, and again, all the credit in the world to Larry Finken, his team, and BlackRock, what they did. But it was interesting. I had a director come to me after all this. And he says, so you're six months in the job. You come to us about doing our first acquisition ever. It's a very large check. And I, you know, over a beer sometime I can tell you about all the nuances that when I was, it was pretty cool. So what's that tell you about ETFs in this advisor channel? And we took that back. And that's when we really went all in on ETFs and all in on really serving

14:42advisors better. And that was a huge change then. I want to circle back to advice and target date funds and just stay with O809 for another moment. The first time you were on, you told a story about you had figured out how nervous your employees were. And do you recall what I'm talking about? Yeah. Remind us of what that environment was, how was affecting clients, staff, and what your solution to it was. So, you know, all of our competitors were laying people off left and right, because transaction volumes had just gone away. And other than selling. Other than selling. And you're, you know, if you're, you know, the classic mutual fund company in that in those days was probably 65, 70% equity. And equity market peak to trough was down 50%. So your revenue was down 35%. I think I think it was 57, 56 something like that. March 9th, I think. Yeah, that's exactly right.

15:44So it was identical to 73, 74 in terms of the drawdown. So our people were incredibly nervous. I mean, people were wondering, so we went to our people and we got our boards blessing to do this and said there will be no redundancies, no layoffs. All we want you to do is be flexible. And we may need you to move from one role to another wherever the client demand is and whatever the need is. So we ended up doubling down on service and doubling down on fixing problems that, you know, we had server, you know, everybody has service issues. We took, if we had excess people, we turned them loose on those problems. And the theory was you couldn't cut your way out of this. And if you had people nervous about their own jobs, how are they going to reassure clients about the world's not ending? They were going to feel conflicted. And I think it really worked because everybody

16:45exhaled everybody at Beth and we went all in on educating our, you know, our clients and people, you know, our service levels were incredible. We got a lot of, you know, we got a lot of positive reinforcement back from the clients. So I think strategically it was one of the most important things we did during that period. And then out of the depths of the financial crisis, you guys leaned hard into the advisor channel into building your own advisor space and then targetate funds, which I believe came out of an offsite meeting around the crisis. Tell us a little bit about that redirection expansion and the new post crisis direction for Vanguard. So it really was, you know, we did this, we did this very existential exercise with Jim Collins, the great business writer. And good to grade is that right? Good to grade. He had done the two books that were really influential on our thinking were

17:46built to last. How do you build a company that can be a leading company for 100 years? And then good to grade. And so we asked ourselves in order to be great, you know, we thought the first step was what's our why? Like, you know, why do we exist? And we had a mission statement and it was very long and how to adjectives and adverbs. And we took a team and we mixed the team, it was a couple senior people, but all the way down to the front lines. And we said, come back with, why do we exist? Why do we have a right to exist? And it was really simple. It was take a stand for investors, treat them fairly and give them the best chance for investment success. And that latter one in particular, targetate funds, you do the math. We could demonstrably show that investors who went and targetate funds did better than those who didn't. Doing our own advice program, low cost advice that's, you know, tax sensitive, really focused on asset allocation and very disciplined and

18:50rebalancing and not letting people, you know, in a sense harm themselves that, you know, that's where advisors add tremendous value. So, you know, build a build, you know, build that. So these things bury were, they were in a sense logical outcomes target. And, you know, the targetate thing was interesting. We had people arguing about, well, it doesn't really take risk into account, you know, just setting a date. And like every risk quiz I've ever seen gets the same answer, moderate. Like, it's, you know, you know, my experience has been when you do the risk tolerance surveys with investors, what you really find out is what's been going on in the market for the past six months. So if it's doing great, they're much less risk averse. And when it's in the crap or suddenly, no, no, I'm not an adventurous investor. I'm a low risk investor. So when we really looked at the math, those quizzes were adding no value in terms of the asset allocation decisions we were making. So we were like,

19:51just take it out, make it simple. Like, tell us when you're going to retire and that's the fun we're going to put in. And, you know, again, I mean, you track all this, the fun performance of those funds versus unmanaged accounts in 401k. It's superior. There's a reason that has become the default holding in 401k's because before that Richard Thaler driven behavioral change was made, people would just leave money and cash. And when the market would run on, care and keep investing contracts and money market funds were the default options of choice. And I started out as guaranteed investment contract product manager at Vanguard. So like, I knew this world really well. We had, it's funny, you mentioned Thaler. So Shlomo Bernarci and Dick Thaler did all of the seminal work on applying behavioral finance to 401k plans. We sponsored a lot of their research. Oh, really? We actually worked with them and that it really helped us think about automatic enrollment into 401k plans, automatic escalation of your contribution as your salary increases. And then, you know, the default option

20:56being a target date fund. The more you can automate a process, the less opportunity there is for human bad decision making and poor intervention. So last two Vanguard questions before we move on. So Jack Bogel was at Vanguard pretty much your entire tenure. What was your relationship like with him? I know he wasn't necessarily a big fan of things like ETFs or overseas investing. Tell us a little bit about what was like to work with Jack for 30 years. You know, Jack, Jack, I chuckle because I learned so much, you know, one of my early roles, it was my second role of Vanguard. I sort of fell into running product development, which was really whatever Jack thought up as a new investment product. You went and did the homework and then you know, went and executed. So I got to work with

21:57him a lot in those early days. He was incredibly demanding, very fair but incredibly demanding. And I had my share of, you know, do I need to get my resume in order because he had been a lot of pen marks on a paper or whatever. But when I became CEO, you know, I got a nice note from him right away. And then a few months later, I got like a 20 page like series of things we should be thinking about. And you know, I'd say all well thought out about half of which I said that's we're going to do something different. But you know, he wasn't, he certainly was not shy. And so you're right, you know, ETFs, global, global funds, international investing in general was not a huge fan. However, you know, I had a couple of great people on my staff who just constantly went to see him and I'll

23:00talk to him and you know, really take his wisdom. And in the end, if you watch some of his last interviews on ETFs, he'd say, unless you do it like Vanguard does it. And he slowly moved there. I think the other thing, you know, so international, he, the team in Australia, which is our, was our biggest international presence when I retired. And I think it still is. Jack made a visit there. You know, after he'd retired, but he was still running the bubble research center. And it was epic. Oh, really? They talk about it still to this day about how impactful it was to have the founder there. And he was so proud that the message was going beyond our borders. And so, you know, again, there was still still no real traction in Europe starting to lean that way. They, they have just such a different, I don't know if it's the fact that their retirements are more or

24:05less, you know, covered state, state driven and the banks control everything there for the most part. Although in the UK, there's been, we've had a lot of successes. Yeah. It's shifting there before everywhere else. So, so last Vanguard question, I recall just at the tail end of the financial crisis, you guys crossed a trillion dollars and two trillion dollars by the time you retire, I don't know if it was four or five trillion dollars. Over five. Five trillion dollars. My question for you was your first day of retirement. What was it like waking up saying, I'm not responsible for thousands, millions of investors and trillions of dollars. You know, it was mixed emotion, Barry. You know, so much of my career was spent in front of clients. You know, I helped build our 401k business in the early days. So, I got out to see employee groups on behalf of the plan sponsors. So, I probably had more interaction than anyone had ever had with

25:10directly. I missed that a lot. Those, I mean, I just had so many incredible experiences and relationships. And I missed our people. You know, one of the great things in this, you know, both Jack Bogl and Jack Brennan were so good at they did not like hierarchy. And they didn't like this idea that you know, we didn't have executive dining looms and you know, special parking places and all that kind of stuff because we believed everybody's job was really important. And you know, we all used to love to walk the floors and you know, see what people were up to and talk to them. So, I missed that and I missed the clients. But, you know, at the same time, the team that was there, you know, I'd worked with most of them for 25 years. I felt good about that team. And I was like, go knock it out of the park. You left the place in good shape. Coming up, we continue our conversation with Bill McNabb, former CEO and chairman of the Vanguard Group, talking about his new roles

26:13in the boardroom and working with startups. I'm Barry Rittultz, you're listening to Masters and Business on Bloomberg Radio. This is The Bloomberg Tech Minute brought to you by Chachy PT. Now with Chachy PT work, I'm Carol Maser. Has the AI moment arrived at corporate offices worldwide? Not yet. And it's perhaps several years away, according to one survey of corporate recruiters who circle the world's business schools each fall and spring. Bloomberg's Rob Mandelbaum notes that according to the Graduate Management Admission Council, the skills recruiters sought most among 2026 graduates of business school master's programs, including MBAs, for communication, problem solving and adaptability, which changed little from last year. Training in artificial intelligence tools ranked in the bottom third of the skills list, but recruiters did say AI specific training will be more important in five years. On that, recruiters rated current

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29:20Hidden fees add up fast as AI workloads grow. Wasabi's flat pricing eliminates all of it. One rate? No surprises. With global scale, enterprise performance, and predictable pricing, Wasabi helps organizations focus on innovation instead of cloud bills. Companies that are paying more in fees than an actual storage costs can fall behind. Don't let it happen. When your AI needs your data and you have a budget to meet, get Wasabi. Learn more. And try now for free at wasabi.com. Wasabi, VAI Storage Cloud. Proud Partner, the iHeart Podcast Network. I'm Barry Ritthalts. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Bill McNabb. He is the former CEO and chairman of Vanguard. The firm now runs, I don't know, is it $14 trillion? Some wild number. You step down to CEO at 60 with the firm pretty much running on all cylinders, doing great,

30:20great team. As someone who just went through the process of succession planning, I have to ask you, how did you know it was time to step down? How do you think about doing succession correctly? There are so many examples of firms that get it wrong. So, one of the things about, again, I had a great mentor on this. My predecessor, Jack Brennan, Jack retired when he was 54. But he stayed as chairman for a few years, right? Just a year. But he had run the firm for 12 years. I couldn't believe it when he told me he was going to do this. And I was going to succeed him. And I asked him why. And he said, look, he goes, somewhere in that 10 to 12 year range, if you've done a decent job, people stop pushing you and they stop questioning you, because you've been right more than you've been wrong. And he goes, that's not healthy. And the ability to reinvent the firm or to really push for innovation gets harder,

31:22because you really need a collective wisdom to do that. And that's where the art is, Barry. But I felt like the team was really strong. I was seeing signs. We'd had a lot of success. So I was seeing some of those signs and it was, okay, time to let a new generation see what they can do. And leave the place in a good spot and then go. Did you set up like a detailed plan as to your retirement or was it just evolving organically? So at a detailed plan as to how we were going to do the transition in Vanguard. And we worked really closely with our board on that. And if there were steps in terms of my own thing, I was like, I didn't want to think about it. I thought I'd wait until I was out. I had a year where I was board chair still. And I'd originally said I would do that for as long as three years. But after a year it became clear like the firm is really doing great. There's no need for this.

32:24But that year I did a ton of travel for us all around the world, seeing clients, regulators, whomever. And I also did a lot down in DC because there was a lot of regulatory stuff going on. And so I had a lot of travel time. So that's when I started to think about, okay, what am I going to do with this next phase? And I described this phase as sort of the, there's like three parts to it. There's family and fun. There's governance. And then I'll call it, I call it pay it forward, but mentoring and helping develop a new cadre of leaders and so forth. And I've been pretty, I won't say systematic, but I've tried to be careful. I've probably over committed it a couple times and different things. But you know, you try to feel your way through that. And the family and fun stuff are the passion things. The governance for me, you know, I had

33:27an opportunity to co-write a book on governance with Ram Shron. And we did the book. And we talked to everybody like it was so much fun, you know, talking to Warren Buffett about, you know, how does he think about governance? Just incredible. And Dennis Carrey was the third co-author, by the way. And we, so I did that. And that led to, you know, leading the co-leading the NACD's Blue Ribbon Commission on the Future of the American Boardroom. And I do work with CESAP, which is CEO's for corporate purpose, you know, Darryl Brewster's organization, which does incredible work on governance as well. So I had this whole sort of academic thing around governance going on. And then got the opportunity to serve on two, you know, very large public boards. It's where, you know, you're on the other side. So, so let's talk about those boards. IBM and

34:27United Health Group to giant companies so different and each going through very different transformations. How do you shift from being a CEO to being a director? And what can a board actually accomplish other than just responding to crises as they come along? You know, I think, I think the board, I think there's sort of three broad categories that the board has to lean in on, you know, the hardest thing being an ex-CEO is you're used to like running things. And you can't do that. Like, there's a line between management and governance for a reason. And, you know, you try to be very aware of that. But I think where you can lean in is if you think about at the highest level what you're doing is you're allocating capital. And you're allocating financial capital and human capital. So for us, the way we phrased it,

35:32and we did this in our book, by the way, and we said, look, focus on talent, focus on strategy, focus on risk. And from a governance standpoint, it all sort of boils up to those three things. And how do you help the company think through talent and culture? Do you have the right people to execute the strategy? Most boards want to go right to strategy. But, you know, I think you've got to really, you've got to really help the CEO and the C-suite team think about that culture and think about talent. You know, the best companies do this really well. You know, strategy strategy has really evolved. It used to be, you know, I can remember doing this up with a Vanguard board early in my career. You know, you do a strategic plan, a five-year plan, and you know, it was all written down. Okay, that's what we're going to do. I mean, you've got to be so much more agile now. That's a great Mike Tyson quote. Everybody has a strategy until they're

36:36punched in the nose. It's got to be applicable to big corporations as well. So, you know, we talked about my Vanguard experience. I got it firsthand in 2008. Yeah. Because we had a plan. And that plan just, we just threw it out. And that plan was one of the coolest sets of objectives and things we were going to do different, completely off. The world changed. The world changed. And so I've tried to bring that mentality in the boardroom. And again, I'm very lucky that the two boards I serve on think that way. You know, I think IBM has gone through a lot of transformation. Our current CEO, Arvin, he's really brought a strategic agility into the company. And if you look at the progress, the firm has made since he became CEO. It's really a very gratifying look. We had a big sell-off last week or two. But we'll talk about what's happening in the markets. I think in the

37:40long run, what we're doing strategically makes a ton of sense. And again, we're trying to remain very agile. So let's stay with IBM, which has gone through, they began as a typewriter company. Right. And it's people don't realize how often IBM has one of the few companies that has successfully pivoted time and again, to from to mainframes to PCs to. So now the pivot is to hybrid, cloud, AI, when you think about all the different things they're doing. How do you help oversee this giant business model that's being rebuilt from the ground up? Look, you try to bring what experiences you have and you try to ask really good questions. And our board has got a breadth. I mean, when you look at the breadth in the board, different people bring different perspectives. So I think when I first came on the board, it was the idea was, oh, you're going to bring a shareholder

38:42perspective. It's like just the shareholder voice in the room. And that's true. But I'm also doing all this work now in the venture world. And so I'm living the AI life big time. I'm seeing, you know, the pluses and minuses and everything else. So you try to bring some of that experience. We've got other people who are, you know, deep, deep, deep in different elements of technology. We've got other people who are really deep in terms of, you know, financial services, and which is a huge part of our customer base. We've got some people who are, you know, who will push on the science. You know, we have a former president of a major university, but her whole background was computer science. And so when we start talking quantum, like her eyes laid up, and I mean, she can go toe-to-toe with, you know, the research team on the quantum stuff. We're never going to know as much as the management team and the people on the ground. But if you can ask the right questions, you know, I think that becomes really important.

39:45Let's talk about your other big company board seat, United Health. Really, I don't know any company that's gone through a rougher stretch due to outside forces. The CEO gets murdered. Then there was the guidance issue. Big leadership change. The former CEO comes back, Steve Helmsley. And now they're in the midst of a turnaround. What is the board's job in an environment where it's just one crisis after another? And nothing that the company is necessarily done, it seems to be almost all, you know, random externalities. So you have to, this is again going back to that agility thing. You know, a lot of a lot of business writers have talked about, you know, the need for management teams to, you know, have a more venture, a more startup mentality, be, you know, be quick to pivot. Boards now have to be quicker to pivot. So we've had to pivot. We've had to think about leadership differently. You know, Steve coming back, huge blessing for us that he's ready and able and willing to do that.

40:50One of the greatest CEOs of our time, you know, most people don't know his name, but his ability to see around corners and make hard decisions and then go and execute. It's incredible. But, you know, sweet, but we had, you know, that wasn't in the plan. Barry, we had to adjust pretty quickly. And you know, what you try, again, what you try to do is you try to ask the right questions, you try to probe. You try to be supportive where you need to be supportive. You try to be challenging where you need to be challenging. So it's so fascinating to me that you're on these two giant public publicly traded companies. Boards, Vanguard is mutual. They have no outsider shareholders. All their mutual fund investors are effectively the owners. There's no stock price to worry about. How different is it stepping into this world of public company directors? It seems like, you know, such a giant shift.

41:55Yeah, it is. And look, I think there are people who are in a lot of ways are way more qualified than I am. And, you know, you try to play, you try to be as helpful as you can be. I think the one thing that Vanguard actually really trained me well for was to think long term. And yet at the same time, you know, our performance was measured every day, every week, every month. So we had this ability to do both. And, you know, again, Jack Brennan, Jack Bogo really drilled that into us. And I think our team did it exceptionally well. When you're, you know, the biggest aha is like the pressure on the quarter, right? Like, you know, you're giving guidance. You're, you're, you're, you're, you're, you know, really thinking hard about your earnings calls and so forth. That was a new thing for me. Because, yeah, again, I never had to do that. But the analogy is, you know, we were very, you know, long term performance is made up of a lot of

42:56short term performance. So I paid a lot of attention to short term performance. I didn't obsess over it. I paid a lot of attention to it because it led to, you know, accumatively, it leads to long term. So I've had to bring that same mentality. I've had to learn that here. It's a little bit different. But how to, how to be very focused on, you know, quarter by quarter by quarter and what we're doing and executing. But also the one part I, I do try to push is the, let's not forget the long term. So I don't know anybody that's either on a board or is an investor that is remotely enthusiastic about let's stop reporting quarterly numbers. It seems kind of absurd. On the, but at the same time, there's an increasing number of companies that say, we don't know the future. We're not going to give you guidance. That's your job as an analyst. Our job is to run the company. Reconciled those two with us. So I think the, so I think the move away from quarterly reporting is,

44:00you know, frankly, it's a false move. It doesn't add accomplish anything. I know they tried it in the UK and it did nothing. Did nothing. You know, could you simplify reporting? Sure. There's things we do that don't add any value to the investment community and simplify it. I actually think quarterly reporting is very important. I think transparency about what's happening is incredibly critical. If you, if you, if the government were really, you know, the regulator for really serious about, about the issue, the guidance is where they would go. They would say, okay, we're not going to allow guidance. You know, what's interesting is, and I would have been in that camp 10 years ago. You know, if someone, when I was, I went into probably a hundred boardrooms. My last couple of years of Vanguard because we were the largest shareholder and people would ask, you know, should be give guidance or not. I'd say, no, you don't need to give that. What you do see though is that there are situations where the street gets it so wrong that you, you're giving guidance to

45:04actually protect yourself from the street getting it so wrong. And that's the part that I've had to sort of balance in my own head because I never really understood that until I was in the boardroom. And then you see what people, you see the conclusions, some of the, the, the cell side in particular comes to and you're like, whoa, that's not even remotely true. And then you have to guide them. But look, if to me, the single biggest thing we could do would be, whether you give guidance or not, would be to really hold companies accountable for providing long-term outlook. So what if you took one earnings call year, I'm making this up, but we've talked about this at CECP quite a bit. And you devote, you know, you're, you're reporting on the quarter, but you devote it to, here's where we are against our five year aspirations or our tenure aspirations, whatever the right time frame is. Here's how we're doing. Here's by the way, you know, we told you last year that five years from now,

46:07we want to do X, the world's changed a little bit, we've got to pivot. So we're not going to do X, we're going to do two X. That to me would be a lot more productive in in terms of getting people to think long-term. Really interesting. Last question on the board room. Are you ever in a meeting where somebody that's on the board realizes, oh my god, this is the former CEO of Vanguard? Hey, Bill, I got a question on my 401k. How often does that come up? Actually, it happened a couple times. And, you know, a couple of my colleagues in different boards were actually big 401k clients. So we did have good chats about that, but we'll see, these guys are pretty sophisticated. Yeah, they don't need my help. Coming up, we continue our conversation with Bill McNabb, former CEO and chairman of the Vanguard Group, talking about startups and the future of advice. I'm Barry Richholz, you're listening to

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50:17One rate? No surprises. With global scale, enterprise performance, and predictable pricing, Wasabi helps organizations focus on innovation instead of cloud bills. Companies that are paying more in fees than an actual storage costs can fall behind. Don't let it happen. When your AI needs your data and you have a budget to meet, get Wasabi. Learn more. And try now for free at wasabi.com. Wasabi. VAI Storage Cloud. Proud Partner of the iHeart Podcast Network. I'm Barry Rittalts. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Bill McNabb, former CEO and chairman at the Vanguard Group. Now, sitting on a few boards and advising private equity venture capital and startup firms, which is really quite the pivot from a mutual fund guide or a VC and PE. Sort of guy, what attracted you to those fields and some of the younger companies that you're advising?

51:18Two things I would say. One, I had no experience in the private markets. Private markets are growing dramatically and I just felt like I need to understand this better. For me, that was the chance to learn something new and hopefully help while you're doing it. Selfishly, I thought I was going to learn a lot and I have been overwhelmed by how much I've learned. And how much more I have to learn. Second, during my last couple years of Vanguard, we established a research group that we began to talk about doing some venture investing ourselves. Not about making money or on behalf of our clients, but more just being in the ecosystem. And then I came about because we did a trip to Silicon Valley, took the whole leadership team, met with every large VC there, a bunch of their portfolio companies. And we walked away blown away by what we didn't know about our own business and what the future might look like.

52:23And so to me, no matter where you are in the investment arc, if you will, understanding what goes on in the startup world is I think just important to understanding the bigger picture. And then the last thing I'd say, this is just a passion play. Our mission, if you boil everything down at Vanguard, we wanted to make the world a better place for investors like that. I mean, we got up every morning and afternoon, I'm lucky I get to do that. And the startups I'm working with, I believe very deeply that they have the potential to make the world a better place for investors. And if I can keep doing that for the next 20 years, I'm going to be really happy. So you're a senior advisor to Venrock. Are you helping them that startups or ideas or founders like what's your role with a fairly well-known venture fund like that? So the partner with whom I work the most is guy named Nick Bime. He's incredible. He's just, he's Ron Corners. He's got 25 years of experience

53:31doing this. He's like, I learn something every time I talk to him. So Nick will get approached by a lot of different people. He will meet a lot of different people when he gets something that's interesting. You know, I often get a call and it's like, hey, would you talk to these guys and see what you think. So you and I both have good connections with Jason Wankett, Altrus. And that's how my recent, full disclosure, by the way, not your only recent guest, RealSwealth Management uses Altrus as a custodian. The firm's venture arm is an investor in it. I personally invest in it. I always like to get those disclosures out so nobody misunderstands what we're talking about. And I'm an investor there too. So yes. So, but, you know, Nick calls me after we first met and he says, there's this guy I want you to meet. And just tell me what you think. He goes, we've invested. So Van Rocket actually already invested in this case. So I meet Jason.

54:33And I'm like, he had me on Hello, right? Super impressive. And incredibly impressive. So the early days it was Nick, Jason and me in the boardroom. And I would say my role there was really twofold. One was just, Jason was a student of Vanguard. And like, what did we get right? What did we not get right? How did we think about scaling? So I tried to bring that to the discussions in the boardroom. And then very importantly, over time, Jason particularly asked me, can you just talk to some of my senior team on a regular basis? And so I do. And that's the mentoring part. And I think that's a big part of what, in a sense, I'm therefore is, I've made a lot of mistakes. I've sort of lived a lot of different movies that they're going to now watch. And I live through. And live through. And, you know, where is it relevant? Where is it not relevant?

55:34There are situations where new ideas get presented. And then I will be part of the vetting process as well. So, you know, Vanilla, which is a software product, help with the state planning. You know, we basically, there's a Steve Locction who you know, personally, incredibly brilliant planner around all this. And it's like, let's take his brain and codify it. Turn it into software. And, you know, I got a chance to interact. And we knew Steve a little bit from Vanguard and serving him, you know, through the investment side. We started an RIA from scratch. So, I don't know if we'll ever be able to compete with you. But we're still under 10 billion dollars, where, which I have to explain to family members is walking around cash. It's not real money. Yeah, it's real money. It's, you guys have done a great job. But what if you had a

56:38blank sheet of paper and could create a firm from scratch? So, we're going to do that. And we're in the process called ARCA. You may have seen some of the prime releases on it. I got a chance to work with two co-founders of three, there are three co-founders of the firm Finney. And again, you know, Finney, you know, Finney's a little different because what Finney's trying to do is really help firms do a better job matching prospects and client and in turning prospects, the right prospects into the right clients. This is a huge problem in the RIA space. People don't understand how important fit is. And we've been fortunate to build that into our process because it's disruptive for someone to come in. They're the wrong fit. They transfer everything in. It's so much time and effort. It's such a lift. And then six months later, everybody realizes, oh, we've made a mistake. And then it's a divorce and it's disruptive on the way out. You know, we actually were really strict on client

57:42selection in my time at Vanguard. And so when I met the two of the co-founders in particular, I talked to a lot. And they're describing this to me. I'm like, oh, my God, I love this stuff. I'm like, this is exactly how, you know, it's one of the most important things you learn in terms of building a great business. Is that fit? And they were thinking about things from a technology standpoint that were way beyond me. I mean, there are a bunch of AI engineers. I mean, they didn't exist 15 years ago, 10 years ago, even. And so, you know, watching that, watching their thinking on that. But very importantly, one of the cool things, and again, I'm getting tactical here with Vinny, but it's just interesting to me because they developed a way, you know, they're going to price this in a way that aligns outcomes much more structurally sound. So at Vanguard, one of the cool things we did was where we had active equity, for example,

58:46every active equity manager was on an incentive scheme where if they outperformed over a long period of time, we would actually pay more. And the expense ratio would go up, but we were happy with that. And if, by the way, if they didn't, they go the other way. We want the other way. We're the only firm who did that across every active equity portfolio. And we did that very early. You know, Vinny is doing a similar concept and analogous concept with like, you know, we're not going to be your traditional SaaS company where we charge these really big seat licenses. And you know, we're negotiating who's using what. We're going to do it all on success. Like if if you get the right clients, we're going to we'll earn more money. And if you don't, that's that's on us. It's a really cool concept. And so again, I got tactical there, but it makes a point that, you know, what you're really looking for. If they get it right, it changes the industry in a really positive way. Altruis gets it right. It changes the industry in a really

59:48positive way. So let's dive down into that a little deeper for for each of those. I had always been told, hey, custody is, you know, razor thin margins is nothing you can do there. And besides Schwab and Fidelity, the giants in that space, no one's going to take them on. You have to be a little you know, crazy to say I'm going to take on the two behemoths, but they've become altruist, has become the third largest custodian for RIAs, at least if we're going by advisor served. I don't know what that looks like by by dollar amount. What did you see when you first started talking to Jason Wank about what has always been such a challenging little margin business? You know, Jason had this vision that that the legacy players, you know, do a fine job, you know, at a level. But in a sense, these businesses had become, you know, I hate the term cash cow, but you know,

1:00:50there's not a lot of innovation, not a lot of new technology being brought to bear. I want to say two years ago, and I help him not getting this wrong. I think it was Schwab was generating 57 percent of the rate revenue just from the cash sweep that they're paying a few bips on, but earning for three, four percent on spread spreads everything there. That's exactly right. So, you know, he had this patent and he had been an advisor. And so he's like, what do I really want? And so the the way we thought about it was, yes, there's the, it's there's custody and we can digitize it and we can make it much more efficient. We can make it much better lower cost, frankly, for the advisor. So they can pass on value to the client. You can though actually make it a platform that's more than just custody. So we introduced Hazel, which is this great tax planning capability is, you know,

1:01:50AI driven and it's taken the end of everybody in my firm loves it and PS Jason was more than an advisor. He's an engineer. So he brings sort of that coder mentality to how can we use technology to make this faster, better cheaper? So the way I always envisioned the direction we get we go was, this is going to be the platform of the future for advisors. And we will make it so much easier for them to do what they need to do. And Jason's got that engineering mentality. He's got that drive. He's incredibly passionate. If you look at the, you know, you look at the altruist flywheel. It looks a lot like the Vanguard flywheel did, you know, in terms of just this, if it works, the self reinforcing perpetual improvement, perpetual driver of good outcomes, it has been created. What's the old line? I think this was Jeff Bezos. Your margin is my opportunity.

1:02:56That seems to be what's happening there. Tell us a little more about vanilla. What are they doing? And where is the disruptive opportunity there? So with vanilla, you know, if you think about at the high net worth and ultra high net worth, which is, you know, a significant amount of assets in the industry, you know, we talk about asset allocation, we talk about cost and you know, at Vanguard, we really talk about cost a lot. The single biggest opportunity for value ad is in estate planning. I mean, you can save people millions of dollars where there's no other category that can do that. And vanilla changes the experience dramatically for the advisor providing that estate planning rather than whiteboards and stickies and flow diagrams hand drawn. It just gives you this incredible automated output. So, and I got a chance to be kind of an early pilot because Vanguard

1:03:58was actually an investor in vanilla. Vanguard itself. Oh, really? And they, you know, were running pilots. So I raised my hand said, you the best conversation I've ever had with the advice team that does our family. Well, by far, because we got, I mean, it, you know, I built this whole balance sheet in one place. All the family, all the family trees, if you will, we're all right there. All done automated and an automated. And vanilla is a product that is not necessarily the end investor, but the advisor in between. Yeah, it's it's really complex for the average person who's just logged on on their own. Yeah, the whole estate plan. It really is a business. It's really being sold to advisors. So you're seeing wealth management firms adopt it. So, you know, the vanguards of the world and, you know, other big firms you would know well, bringing it in and saying,

1:04:59this is going to be the platform where we do estate planning. So I'm hearing a very consistent theme which is all of the disruptive fintech that you involved with. Finney, altruist, vanilla, seems to be all marketed to the advisor is it, which is so different from what you're doing on the board seats. Any other startups or other technologies you're looking at, either to the advisory community or anywhere else. You know, yeah. So I've been involved in a couple of others. You know, one, there's a company called Moment, which is some ex-citadel guys who really are reinventing the way fixed income gets traded. And I'm not an investor there, but I like to think of myself as a friend of the firm. And Venrock is an investor there. And so, you know, I have those conversations. Again, the theme is not dissimilar in that you're making the

1:06:02world better because they're doing things with fixed income trading that has been done on the equity side for years. You know, fractional trading bonds, they make it like that. And they're really having a pretty significant impact. There's one that there's one that we're involved in. Again, I'm not an investor in this one either, but I talked to them a lot around litigation. So that's a little bit different. It's my one non-sort of investment oriented. What's the name of that firm? Sillow. Okay. And again, what's really cool about them is it's a marriage of incredible legal talent with engineering mindset. So imagine the Jason Wank of litigation lawyers. Like, this is, you know, people who write code but have deep litigation experience. There have been a handful of funds over the past few years that literally are making investments

1:07:03based on litigation outcomes, class action outcomes. And they are truly non-correlated because the outcomes have nothing to do with the market or the economy. It's a really interesting space. Yeah. And, you know, this company will do things that will, this is going to disrupt this industry as much as anything we've talked about. So, you know, for me, you know, the fun part is all these entrepreneurs, you know, it's like you're getting a chance to work with some of the brightest minds in the country. They're all super passionate about what they do. And they're incredibly talented. And you know, you're not going to get it all right and some of them are going to be more successful than others. But the, you know, if you can sort of help them along a little bit with lessons learned and whatnot, you know, it's incredibly gratifying. You give them the best chance for future success. So, so the future of advice going forward, you've mentioned

1:08:07some of the robo advisors like BenoMenton, Wellfront. And in fact, the robo advisor that Vanguard set up under your leadership quickly scaled up to 100 billion plus and then kept going. Now the biggest by far, the biggest robo in the world. But it doesn't sound like you think that the future of advice is just going to be automated or technology. What is the future of advice look like for both the average mom and pop investor who need some help planning their retirement or paying for kids college or the higher net worth that's thinking about what am I going to do with this extra capital in terms of philanthropy or generational wealth straight up to you know, the multi-family offices and big numbers. So look, I think there'll be a, you know, I think there's going to be a spectrum. I do think there will be people who go the automated

1:09:07way fully automated, you know, the original wealthfront model if you will. But increasingly, I'm pretty convinced that it's going to the bulk of the people investors are going to go with advisors where there's a human touch. I think that human touch is incredibly important. And so all the technological advances that we're seeing, whether it's vanilla software planning, whether it's the platform that Altros is developing, whether it's Finney's ability to help you, you know, grow your business more effectively and organically, those things free up the advisor to do the personal stuff. And so, you know, I don't know at Rittholz what your average number of clients per advisor is, but let's just say it's a hundred, which is in the industry kind of a norm. I see no reason why somebody can't serve 300 more effectively than they serve the hundred today with the

1:10:09technology that's coming. And the reason I think it's important to have that person is, I think that the really thoughtful advisor can really prevent you from getting off the reservation. You know, the automated programs are great, but people can opt out of them pretty quickly. Right. And we do see that. And again, you said last six months are always indicative. You know, one of the things that we didn't talk about, but it's incredibly troubling to me is the over gamification of investing that's going on right now and the amount of day trading. We're back to day trading. Sure. I started in the 90s when that was, you know, I remember the e-trade commercials and the tow truck driver who owned an island, he just liked to help people who get flat tires. So he's still doing it. Like that was, and it's full circle between the prediction markets and then all the gambling apps were right back to where. And you actually see it in trading volumes. End of day options, single day options.

1:11:16It's, you know, it's not all being done by algos and hedge funds. Like there's a retail element now that's incredible. And you know, again, you've taken a S&P 100 stock that might have traded, you know, 10 million shares a day, now it's trading 50, 60, 70 million shares a day. And what what it becomes is self perpetuating thing. The more volatility there is, the more the day traders come in, the more they come in, the more volatility there is. And in, you know, at the end of the day, you know that only the house wins there. Like the house will win. Same is true with the prediction markets. There's a tiny percentage of consistent winners and 90 something percent of people are making donations. That's right. So that's why I think the person remains incredibly important. So you know, it was interesting in a venture capital conference. I was at, you know, somebody asked the question. They said, do you think all the AI and all the technology that's coming

1:12:16is going to replace humans or enable humans? And I think it's, I think there are places where you can say it's replacement. Could be both. Yeah. Could be both. I think here the majority of it's going to be enabled. So what just to share a little bit of what we've been seeing, it's not that we're creating new information. We're finding ways to take notes and keep a running dialogue of everything that's going on with AI. But then access it and use it in a way that is just enormously helpful to clients. And very often, you know, if you're having a conversation with a client that's an hour, you're doing a year in review or maybe it's a quarterly review or anything like that, lots of stuff goes by that you may not pick up in that moment. But if you have a tool taking notes and reviewing it and summarizing it and remembering that two years ago, they said,

1:13:18we'd really like to buy a vacation property now that the kids are out at the house, but we're not sure what we can afford. Hey, if you can access that and not forget it, if you have a permanent memory, not only can you successfully manage more clients, but you're going to do a much better job of it. So the fear of all this job loss, I mean, it's certainly not showing up in much of the data yet. You still have relatively low unemployment and relatively low unemployment for people under 25, which usually runs about double the traditional U3 unemployment. So I'm fascinated by this. Do you recall in the mid 2010s, the assumption was, oh, these robot advisors, they're going to put all the humans out of business. Is this just an ongoing, let-ite fear that every new technology leads to? I think so because, look, there is disruption. I mean, there will, you know, and certain

1:14:23jobs are going to go away. Right. And when you're in the middle of that, like it's overwhelming, but I do believe that the creation of new categories of jobs, we can't even imagine, it's going to continue. I do think there are areas where the technology just allows you to do more, like you described. You know, it's interesting. We had an interesting thought experiment. So when the robots started, our idea was to take the best of wealthfront technologically, but to have a certified financial planner at the end of the telephone or video screen to interface with the client. And my chief of staff, who was a 20-something software engineer at the time, said, like, now, like, who needs a person? And I said, well, how much, you know, so I said, so we formed a little, we got a little focus group. This is completely unscientific.

1:15:26This is again, sometimes how I like to do things. And so we, we sat around and we said, so it gives you $25,000, but you want a little bit of advice. They all wanted robots. Like, I don't want to talk to somebody. I said, it's $150,000, which for them at the time was probably equal to a year's pay. Four or five out of the six were like, I can't, I got to have a person. Like, technology can be helpful, but I need to be able to talk to somebody for that amount of money. And it really stuck with me. Like, you know, there's, there's, there is, there is a comfort. And, you know, again, you've done a lot with Morgan Howell over the years, the psychology of that, and that need for human interaction, I think is very powerful. So I always hated the idea. Listen, I'm a middle class kid from the suburbia. I didn't grow up with any money or any thoughts of an inheritance or anything like that. The idea of having a 10 million, or even a $1 million minimum was, I was never comfortable with. So we set up two digital platforms,

1:16:33one driven by betterment, which is under a quarter million dollars. And there is a group of advisors that come along with that. So if you're a 50 or 100 or $5,000, it doesn't matter. There's no minimum. If you're up to quarter million dollars, the whole platform is digital, everything from the on board to the allocation, but there is a live human being there if you want to talk to somebody. And then the platform that we built from a quarter million to a million was based on buying BlackRock's future advisor, which they figured out, oh, this isn't the future of ETFs. We don't need to own this. And so we ended up purchasing that from them. Not only is that $250 million, but it comes with also with a specific advisor. And as much as people say, I love the digital platform. I don't need to deal with anybody. I just want to log on to the website or app and deal with it. As soon as there's any volatility, they just want someone to talk

1:17:39them off the ledge and say, hey, it'll be fine. We go through a 10% drawdown, you know, two out of every three. I want to say it's three times every two years, something like that. So this is normal. And you know, if you look at here's how many drawdowns we've had over the past 20 years, they may not know that. They may not have access to that. But if a person says, hey, we can't guarantee you that the market's going to keep going up forever. But here's what the history looks like. It's just a huge comfort for people and they could stay out of the wrong way. Absolutely. So I think it's really powerful. And again, thematically, certainly everything we're working on in a lot of our startup plan is exactly it's taking that concept using the technology to make it faster, better, cheaper, but making sure a person is in the loop for that comfort faster, better, cheaper, way more personalized, way more personalized. So we've covered so much stuff before I get to my favorite questions.

1:18:42Is there anything we haven't covered yet? I think we're good. We we we tagged touched a lot of stuff. So so let's jump to those questions. And I've asked you these 10 years ago, but I want to circle back to them. See if I'm consistent. Right. Well, we'll see what's what's changed over the past decade. So I'm going to assume your mentors are all fairly much the same. Tell us who Jack Brennan clearly, one of those people who were the mentors who who shaped your career. So Jack Brennan certainly, you know, and I talked about that earlier, but you know, lead by example and the power of we versus I at a rowing coach post college. And his big thing to me when I was thinking about leaving New York and going to Vanguard was find a place that matches your values. And you'll be happy. And I dedicated my last annual report at Vanguard, you know, Vanguard funds to him, you know, a section of it to him because that advice actually was what put me over the top

1:19:46in terms of I got to go to Vanguard. You know, the other there were so many other mentors. One I'll mention though, we had a great board early in my career and Charlie Alice who, you know, the the great author of winning the loser's game, Charlie was on our board. And Charlie was actually a real mentor to me because when he was at Greenwich and he would come and present to us how we did competitively in the 401k market. And I was running that business. So we developed a pretty good bond. Then when he came on the board, you know, he just was always there to sort of, you know, push and prod a little bit and help shape me. And again, the way he thought about investing just absolutely resonated obviously with what he wrote. He just wrote a new book just dropped a few months ago. He's still active in his 80s. It's incredible. It's incredible. Speaking of books, what are some of your favorites? What are you reading currently?

1:20:46So right now, I'm reading Jim Collins's What to Make of a Life, which is very different for him. It's not a business oriented book. As I mentioned to you and other times, good, great and built the last Jim Collins classics, you know, they're the first business books I go to. But this is what he does is he takes lives of people we know in sort of pairs. And he just like, what were the key events that made them do what they do? So he uses like two football players from when I was growing up. Carl Eller and Alan Page, Minnesota Vikings. One of them went on to have a real drug problem and then become an incredible champion of rehabilitation and did so much for his community. The other one went on to be Supreme Court justice in Minnesota. Wow. And what were the key decisions? What allowed them to go from this great football career to a second

1:21:51act? So anyway, I'm reading that. I'm partway through it. It's phenomenal. The, you know, I always have a fun book or two I'm reading too. So I'm still big science fiction collection. So the strength of the many and the strength of the few, it's two parts. There's a third one coming. Imagine ancient Rome meets the matrix. That's all I'm going to say. Wow. Only a weird brain like mine could find a fascinating. That's intriguing. I watched and read Project Hail Mary written by the same author as the Martian. Andy, really fascinating book. He's such a great writer. He's phenomenal. One of my favorites. Speaking of movies and or videos or podcasts, what are you streaming listening to watching these days? You know, not a ton. The most recent podcast was the acquired podcast. They did a huge thing on Vanguard. Mostly on Jack Bogol. It was great. It was really,

1:22:55really worth doing Ben Gilbert and his partner. They just did a fantastic job. You know, most of the other things, the streaming, I just rewatched Netflix did this three years series on the tour de France. I'm fascinated by it. Sports called Unchained and it's really good. So that was sort of a fun one. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either financial advice, wealth management or FinTech startups? Well, so on the latter, there's never been a better time to start a company. You know, with technology being as ubiquitous as it is and cheap, frankly, you can take an idea and you can build something pretty quickly without a ton of money. And then if it's a really cool idea, you know, there are people ready to help you.

1:23:59And write a check. And write a check. And so I'm encouraging people who have that entrepreneurial, itch, this is a great time to scratch it. Like don't wait. But you know, think about what you're trying to do. Don't do it just because you want to quote unquote get rich. Do it because you have an idea that really matters. And something, I always apply this, it's a Jim Collins phrase, the hedgehog concept. What are you passionate about? What can you be great at? And I mean great. And then how does it drive your economic engine? And so you want to have a passion, you want to something that you truly believe you can be world class at. And it's got to economically, there's got to be an engine that it drives. And if you, you know, today, it's just a great time to be doing that. If you're going into the asset management investment world, I think the two places that are going to be the most interesting, you know, I continue to think

1:24:59the venture world's really interesting because this, you know, whatever anybody's politics are, whatever all this stuff, it's cutting edge. It's the latest and greatest. You know, there are so many cool things going on right now. And you know, the chance to actually go explore that and invest in that is kind of fun. But I think wealth management, you know, I think the idea, you know, I think this advice thing has got a long way to run. And if I were, you know, a young grad, you know, rather than going into a traditional asset management, I would be thinking much more about individual wealth. And you know, how to start my own advisory firm or how to be part of a Rittholz wealth or something like that. Our final question, what do you know about the world of investing today that might have been useful back in 1986 when you, when you first joined Vanguard? So much. You know, the long term really is the way to think about things. I think,

1:26:07even though, you know, I joined a firm that was famous for it, I don't think my own brain was set around long term. And the ability to sustain your beliefs and your discipline over the long run is a singular differentiator. And you know, I've had the privilege of being inside of a lot of different firms. And it's amazing how many people don't actually still got that. So I think that, and it took me a while before I got there. So I wish I'd had it right away. You know, second for me is really pay a lot of attention to things that nobody's talking about. Like, you know, and this is much harder. So as you know, when you started the big picture, I actually started every morning with reading the big picture because you did a really good job curating what was out there and getting rid of a lot of stuff. Right. There's a long history,

1:27:08which we'll discuss off line. But when Bren and said to me, hey, I've been a reader of your stuff, when I first met him, that's some, you know, large conference room of lunch, 20 years ago, my head exploded. I might have been one of the people who pushed it that way. But, you know, to me, it was a really important thing. And, you know, I think like today, people aren't talking about leverage that much. And like, I worry about leverage. Like, when you look at what the hyperscalers are doing in terms of the bond market right now, and, you know, a couple of them are not net cash flow positive because of all the infrastructure that they're building. The leverage in the system, you know, private credit had its moment, you know, a year ago or whatever six months ago. And, you know, that was one you could see coming. I worry a lot about leverage. No one's talking about it. So it's like, I didn't really, you know,

1:28:11in the, in the, when I first started out, that way of thinking that contrary, contrariness was not part of like how I had, you know, been trained or brought up. But, again, this is where a Jack Bogal, a Jack Brennan, John Neff, the great value investor, they were really impactful. I was going through an old piece I was writing and never finished. And I found some notes and I can't figure out whose line this is. It feels like I'm stealing it from somebody. Equity crises, brews, debt crises, maim. And I've been unable to track that down. And it doesn't sound like something I would have written. But anytime I use something from someone, I'm usually very, very, um, festitious about making sure the quote is attributed correctly. Um, but it's just reminds us of, you know, leverage kills. Look, look, what's going on in Korea with their 3x and 5x

1:29:12funds as those unwinds. Man, they've had a great run and they've given a ton of it back because of the leverage. Bill, I could talk to you for two more hours. Thank you for being so generous with your time. This has been utterly fascinating. We have been speaking with Bill McNabb, former chairman and CEO of the Vanguard Group, board member at IBM and United Health Senior Advisor to Van Rock, as well as board member and advisor to so many startups. If you enjoy this conversation, well, check out any of the 654 we've done over the past 12 years. You can find those at Apple Podcasts, Spotify, YouTube, Bloomberg, wherever you get your favorite podcast from. I would be remiss if I didn't thank the crack team that helped with these conversations together. Each week, my audio engineer is Alexis Noriega. Annalook is my producer. Sean Russo is my researcher.

1:30:15I'm Barry Rittalts. You've been listening to Masters in Business on Bloomberg Radio.