iSteve commenter Grumpy observes:
“It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.” — John C. (“Jack”) Bogle (paraphrasing Upton Sinclair).
Mr. Bogle was referring to money managers, but his observation probably explains most of the willful ignorance that Mr. Sailer has been pointing out for years.
Mr. Bogle died today, at the age of 89.
From the NYT obituary:
Mr. Bogle built Vanguard, which is based in Malvern, Pa., on a cornerstone belief that was anathema to most mutual fund companies: that over the long term, most investment managers cannot outperform the broad market averages. He popularized and became the leading proponent of indexing, the practice of structuring an investment portfolio to mirror the performance of a market yardstick, like the Standard & Poor’s 500 stock index. …
“My ideas are very simple,” he told the financial columnist Jeff Sommer of The New York Times in 2012. “In investing, you get what you don’t pay for. Costs matter. So intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won’t be foolish enough to think that they can consistently outsmart the market.”
Vanguard is now managing (not very actively) $4.9 trillion. Indexing makes sense based on the Efficient Markets Hypothesis, but what happens when Vanguard takes over the world? Does the EMH still work if most everybody is trying to free ride on those few who do try to outsmart the market?