The Clash of the Cultures: Investment vs. Speculation
John C. Bogle
John Wiley & Sons (2012)

How a culture of short-term speculation now dominates a traditional culture of long-term investment…and why that must end

The “clash” to which the title of John Bogle’s book refers is best explained by this passage from the “About This Book” section in which he compares a clash today between speculation and investment with the clash between science and the humanities that C.P. Snow examines in his book, The Two Cultures (1964). “Resisting the new dominance of speculation over investment might seem to fly in the face of our ever more scientific and technological world. After all, innovation, information, instant communications, and competition have brought great benefits to our society. But I see our financial system as somehow separate and distinct from the other business and commercial systems that permeate our world.”

Bogle wrote this book to “sound the alarm about the shocking change in the culture of finance that I have witnessed firsthand during my now 60-year career in the financial field – the gradual but relentless rise of the modern culture of speculation.”

These are a few of several dozen passages that are of special interest and value to me:

o The Wall Street Casino (Pages 7-10)
o The Failure of the Gatekeepers (53-63)
o “The Procedures of Corporate Democracy” (99-101)
o Building a Fiduciary Society (135-138)
o Exhibit 5.1, Scoresheet for the Stewardship Quotient (146-147)
o The Un-Proof of the Pudding (205-208)
o “The Seven Deadly Sins” (218-226)
o What Would an Ideal Retirement Plan System Look Like? (249-250)
o Ten Simple Rules for Investment Success (310-322)

Here are four of the mini-commentaries that are also of special interest and value to me:

o Box 1.2, The Prescience of Benjamin Graham — 1958 (Pages 14-15)
o Box 2.2, Excerpts from Alfred Rappaport’s Saving Capitalism from Short-Termism (49-51)
o Box 6.1, Ideas versus Implementation (173-175)
o Box 9.2, Reasonable Investment Expectations for the Coming Decade (315-317)

There is also another passage from John 10: 11-13 that Bogle cites on Page 65:

“The good shepherd lays down his life for the sheep. He who is a hired hand and not a shepherd, who does not own the sheep, sees the wolf coming and leaves the sheep and flees, and the wolf snatches them and scatters them. He flees because he is a hired hand and cares nothing for the sheep.”

When I first came upon that passage, I was immediately reminded of Robert K. Greenleaf’s essay, The Servant as Leader (1970), in which Greenleaf observes: “It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. That person is sharply different from one who is leader first, perhaps because of the need to assuage an unusual power drive or to acquire material possessions…The leader-first and the servant-first are two extreme types. Between them there are shadings and blends that are part of the infinite variety of human nature.”

Those who advocate long-term investment rather than short-term speculation are not philanthropists but the most successful of them, and they include Bogle, see themselves as shepherds rather than as wolves.

As I worked my way through these and other passages within Bogle’s lively and informative narrative, he seemed as if he were functioning in several quite different but related roles: as a forensics specialist, a police inspector, an expert witness, a crusader, a cheerleader, and (alas) a coroner. Greed and incompetence have “killed” or permanently crippled so many careers, personal lives, and even entire organizations.

Nonetheless, Bogle remains hopeful that, somehow, what he proposes with the aforementioned ten “simple rules” will eventually prevail. He encourages all who read the book to “Stay the Course!” (Rule #10). “As the financial markets swing back and forth, do you best to ignore the momentary cacophony, and to separate the transitory from the durable. This discipline is best summed up by the most important principle of all investment wisdom: Stay the course!”