John Bogle is the founder of the Vanguard Mutual Fund Group, and the creator of the first index fund. Reading his latest book Enough: True Measures of Money, Business, and Life was like listening to one of his many speaking engagements, a distillation of a lifetime of wisdom from a man who changed the way that billions of dollars are invested today.
As Heller famously responded when told by Kurt Vonnegut that a hedge fund manager had made more money in a single day than his classic novel Catch-22 made in its entire history, “Yes, but I have something he will never have… enough.”
Very simply, this book outlines the problem with making how much money we have the way to measure “success”. Such a philosophy affects how individuals invest, how business is conducted, and how lives are led. Bogle warns that this is taking our country down a dangerous road, which may leave our future less bright than the past. As Albert Einstein said: “Not everything that counts can be counted.”
His words about the need for character, accountability, and stewardship definitely ring true. However, I just can’t see the people of Wall Street turning down all this easy money without some “convincing” from the rest of us. Sure, they may feel a tinge of guilt now and then. But as Bogle paraphrases Upton Sinclair: “It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to.”
In my opinion, it all ends up falling on us common folk as a whole to vote with our own dollars by not allowing overpaid CEOs as shareholders and consumers, not investing in high-cost complex investments, and not valuing “stuff” so much. We need to change things from the bottom up, not just with top-down rules and regulations.
Finally, my favorite part of this book is how Bogle acknowledges that his success was largely due to a mixture of luck and the assistance of many other people who believed in him. Too many successful people look back and think they did it all themselves. Sure, they may have worked very hard, but every one of us had help. A loving and supporting parent. A teacher who went the extra mile. A mentor who shared their own experience. Knowing that you didn’t do it alone, makes it easier to stop thinking of only yourself, which helps you find the balance of “enough” that includes thinking of others. At least that’s how I see it.
Recap
This is not a book about what kind of stock to buy. If you want Bogle’s view on that, read the more in-depth Common Sense on Mutual Funds or the concise Little Book of Common Sense Investing. I actually like the short one better.
Nor is this a book about frugality or living below your means. Instead, this tends to be more of a “Big Picture” book, about our definition of what “success” is. What should our goals be? What do we value? If you’re looking for some guidance in this area, or feel like there is something missing to this pursuit of money, then this is the book for you.
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Right on, Jonathan!
Another excellent book which discusses the roots of individual success is Outliers by Malcolm Gladwell. In it he explodes the myth that one’s success is entirely a private affair. Every successful person benefits from a long string of coincidental good fortune. Individuals must put in a lot of hard work, but without the advantages of good fortune, the individual would not even have the opportunity to do the kind of work that leads to success. Everyone who subscribes to the “pull yourself up by the bootstraps” theory of life ought to read this book to add some nuance to their life view. It sounds like Bogle would agree.
Was looking for others’ opinion of this as well, before I pick it up.
John Reed, from his book Succeeding, also mentions the same concept regarding having enough, but also focuses on the fact that trying to be too wealthy is overrated too; he points out how one either doesn’t have the time to manage the other parts of their lives (like his job offer out of HBS consisting of one where he worked for 60+ a week, the other 70+), or how one starts to risk his/her family’s life, as well as one’s own; just look at the memo AIG sent around a few weeks back, about how not to get “mobbed” after all the debacle regarding the bailout.
(note: I’m not trying to comment on the political atmosphere that has recently happened, just pointing out the amount of cash alone was enough to infuriate people).
Great post, man. The complex instruments that led a lot of people to make a lot of money turned out to be based off of no actual wealth at all. I like your comments about approaching the current crisis from both sides. We can’t let anyone get too leveraged in future society.
Here is a good post from a favorite blog of mine about how the bankers owe it to the citizens of Earth (not just Americans) to take some jabs on the chin for the damage they’ve caused. This isn’t just about punishment though. Its about restoring that “character, accountability, and stewardship” you mention.
Thanks for referring wonderful book. There are just mere handful of sane and life changing books when it comes to investing and success.
Thanks for the review, Jonathan!
I’m in the middle of finishing up another book that was reviewed on your website – “Wise Investing Made Simple”. I’ll surely check this latest title from Bogle from our local Library (4 copies available 🙂
Reading these books helps me remind myself why I invest the way I do, and why my family leads the lifestyle we have chosen.
So you’d recommend the book =)?
The problem is there are alway people who will vote that they individually want more… encouraging CEO’s to be greedy and what not also… Everyone wants to beat avg right =)?
By the makings it seems that something that lets a person make money by subcontracting out and w/ limitedd time investment is dangerous for greed and abuse…
Not too long ago, I saw a poll of CEOs next to a poll of regular people both asked the same question: are you hopeful about the economy. The average guy was, the CEO wasn’t. I don’t know if I’m right in this, but I think it’s because the average guy now basically feels a bit empowered by this recession. They think, if I don’t buy a car, GM goes under–which is true and always has been true, but I don’t think we saw the strength of it until the current crisis. I also think there’s that sense of disaster overcome that helps the average guy out. If five years ago losing fifty grand on the stock market was something unfathomable to you, then now, you have to feel a little bit powerful for having survived something like that. I know people who’ve lost four or five times that much and they’re still standing.
On the other hand, I still see in education that ultimate fear of falling through th cracks. Universities are still enrolling Business majors more than anything else…and law and MBA programs are still giving equal seats to the English majors. It’s a hard sell to tell people that the future isn’t all about their annual salary, even when we now know that all of it can go away without much warning.
I added a recap section to the end of this post, which I think better explains what this book is about (and also what it is *not* about). I think that’ll help people decide whether to read it better than a thumbs up or thumbs down recommendation.
Oh, and the book is very short, about 200 small pages with big print. I finished it in a day.
OT. Jonathan, I was wondering if you might done some analysis regarding the following situation:
I have a W-2 job but on occasion also do consulting and some IT work on the side.
A new client wants to give me more substantive work but wants to pay me as if it were dividends given by his company. Do you know what is best in this case, appearing as an S-corp or an LLC for tax purposes (both income and self-employment)?
Fantastic review Jonathan! Best one I’ve ever read explaining what the book is about.
Teri,
A client couldn’t “pay you” in dividends unless you were a shareholder of their company. Even then, that would be tricky. I think you may be confusing what he is asking you.
My guess is, this new client is suggesting you form an S-corporation yourself. That way, when he pays you, he wouldn’t have to provide you with a 1099. He would just be paying a corporation.
There are benefits to forming an S-corporation for you, notably you can avoid paying FICA taxes on a portion of your income by paying “yourself” in dividends from your own S-corp.
As an example, if you make $60K from this client (no expenses), you can pay yourself a salary of $30K (subject to ~15% FICA taxes) and pay the other $30K to yourself in dividends. (Technically “distributions, but they are the same thing as dividends.)
In this case, you would save $4,500 in FICA taxes.
If you are making considerable money through self-employment an S-corp is a reasonable option. There are expenses to forming and running an S-corp (notably, payroll…) but they are usually more than offset by the savings.
Thanks, Maury. This client is asking me to provide him with a W-9 form.
Brian Says:
April 21st, 2009 at 9:36 am
Not too long ago, I saw a poll of CEOs next to a poll of regular people both asked the same question: are you hopeful about the economy. The average guy was, the CEO wasn’t. I don’t know if I’m right in this, but I think it’s because the average guy now basically feels a bit empowered by this recession.
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I wish that were the case but more likely it’s because the “working class” has relied on years of optimism to ferry them through rough patches in the past… nothing lasts forever – not even economic downturns; but it’s a big picture argument that the average worker fails to appreciate.
I am far from elitist (well, no one has ever called for my head on a pike at work) but I do believe that capitalism works best when the “average worker” has something to hang onto – in other words, something that keeps them happily assembling widgets without disruption or protest.
Lest they forget, periodic economic stimuli (i.e., checks, grants, dental plans, etc.) get most folks in the fattest part of the bell curve back to proudly churning out more widgets… whereas industry execs (e.g., surveyed CEOs) maintain a 50-foot view and know that the overall economic picture will be a little less bright, as they are the ones manning the dimmer switch.
“We need to change things from the bottom up, not just with top-down rules and regulations” many people understand that but the true challenge to get such people motivated to act together to bring about the change they want
I had to stop reading this post at “over paid CEOs”. Comments like that feed into wealth envy.
Well, Bogle isn’t talking about absolute numbers. He looks at CEO pay as a multiple of the average employee pay vs. their performance. Should it continue to increase when the effectiveness decreases?
So which CEOs are over paid given their performance? If you’re going to make a statement like that, don’t generalize. A CEO isn’t your “average employee” either. However if any employee isn’t performing there should be a system in place to deal with it.
If you want to get mad about someone’s pay, get upset about the pay checks you contribute to. Government is overpaid. Even in a time when everyone is cutting back, companies and individuals, I find it difficult to believe that our government has found numerous ways to increase it’s budget to record highs despite a drop in GDP. How about that for something to be upset about because we are forced to pay those salaries.
All the recent talk about CEO pay is just a distraction. Nobody cared about CEO pay before the economy went to hell. Our federal government has managed to fool us into believing we can spend our way out of a financial mess and here we are still debating CEO pay…