I will just quickly introduce Jonathan Clements, who in turn will introduce Charlie. Jonathan was on the last panel. He is a former Wall Street Journal columnist. I will say for me as a young analyst working at Morningstar, he was my favorite part of the journal and really very much influenced my own career path to talk more about personal finance and financial planning.

And has the Humble Dollar blog and also was involved in a great book project, a book I just love that has come out over the past year called My Money Journey, which is essays by people about how they found their own financial footing. So Jonathan, if you can come up here and introduce Charlie or do you want to sit tight?

Okay, great. Thanks, Jonathan. >> Good morning, everybody. I moved back to the United States from London in 1986 and I became a reporter at Forbes Magazine, which meant that basically I was a glorified fact checker. I spent the next two years of my life trying to make sure that the senior writers didn't make too many errors in the magazine.

But one of the nice things about the job was that you had a certain amount of free time. And Forbes also at the time had a great library. And that's where I got my personal finance education. And going through the stacks down in the second floor library, I came across this book called Investment Policy.

Now, Charlie, that really wasn't a very catchy title, was it? Investment Policy was a book that came out in 1985, but it really grew out of a financial analyst journal article that appeared a decade earlier in 1975 called The Loser's Game. And it was, of course, written by Charlie Ellis.

So, Charlie, tell us a little bit about the story behind that essay and how it evolved into what's become a phenomenally selling book, Winning the Loser's Game. >> Do you mind if I take just a minute and go in another direction and then come back? >> You know, you are a difficult individual, I know, but go ahead.

>> I'm looking out at this really large audience. And those of you who I've met obviously have certain characteristics. I'd like you to think just for a minute about Jack Bogle, how he had a nightmare and he had a dream. His nightmare was that he would be forgotten. And it really, really mattered to Jack that he not be forgotten.

As he told me, the only reason I'm really writing books is so I might not be forgotten, at least for a while. But I'm really, really worried about being forgotten. And if you look at this group or walk the hallway or that lovely sign out front with Jack's picture, you realize, oh, Jack, you may be gone, but you're certainly not forgotten.

The second thing -- The second thing is, Jack was a real tightwad, and he made a celebration out of being stingy and cheap. And how he would take personal to save a couple of nickels. He would be thrilled. This is the first time in 50 years that I've been in a public speaking situation with no fee whatsoever.

So back to your question. I happen to love tennis as a game. It doesn't take very long to get there. You can play for as long as you feel like, and then you've got plenty of time left over for the rest of your day. Whereas golfers, it takes a while to get there, and it's a long, long game, particularly if the weather's nice a little bit.

And you don't have much time. >> I wish I were a really gifted tennis player, but I'm not. And so I was attracted to the idea that tennis is a overcoming problems game, rather than a doing brilliant things game. Wonderful man named Simon Rameau, who more than anyone else invented the American space program as the chief executive officer of GRW Thompson Rameau Wooldridge.

He conceptualized what space could be all about, and made clear in such a way that Congress and the administration really understood this is something we've got to do in a major way. It was a very talented business executive. Much more important to him, he was a gifted musician. He and three members of the Los Angeles Symphony Orchestra performed in public as a string quartet quite often, and took on some very complicated pieces of music.

Finally, he was also a terrific athlete, and his favorite game was also tennis. And he wrote a book called Extraordinary Tennis for the Ordinary Tennis Player. That's me, ordinary tennis player. So I bought the book, and it was a mind-opening experience for me. The purpose of the game, for those of you who are expert, is to hit a shot that goes so close to the line that the other person can't quite get it back, or is hit so hard that the other person has put a little bit on their back foot, or in a series of shots has them running back and forth across the court trying to keep up with you, and gradually you get ahead of them and slam it through into the corner.

That's what experts do. They win points. The rest of us, the outcome of the game is determined almost entirely by who loses the most. And I thought, that's my kind of game. I double fault sometimes. I hit it in the net sometimes. I hit it out of bounds sometimes with the least intention.

I never wanted to do any of those things, but they do happen. And if I could cut back on those mistakes, sure enough, I'd have a better outcome. One of his recommendations was hit the serve always, first serve and second serve, that is about as good as you can do and get in 80% of the time.

If you do that, you will double fault once or twice in a set, and that's all. And your second serve will keep the other player back in the court and on defense. It's a magical insight. And I tried it, and it worked for me. And I had a wonderful time.

So I realized, my God, this is a brilliant understanding, and it applies entirely to investment management. If we could just eliminate our dumbhead mistakes, if we could just avoid making, "I'm terrified I'm getting out of the market at the wrong time," or, "I'm excited as could be about this is a really opportunity at the wrong time," we would do fine.

And so that's the origin of the book. -So that was the origin of the book, but you wrote the original essay in 1975. -Right. -And by the way, Charlie, thanks to Wikipedia, I can tell you it's about to turn 86. -Next week. -Next week. I won't sing "Happy Birthday" to you because...

But Charlie wrote "Winning the Loser's Game" half a century -- the original article half a century ago. And at the time, you had spent a considerable period covering analysts with Donaldson, Lufkin, Genrette. -Right. -And you had seen how well they did, the analysts, and that gave you an insight into the performance-management game and how it was a loser's game.

Can you talk a little bit about that? -Well, one of the great privileges of being a stockbroker is you get to meet a lot of people. And if you're in the institutional business, you meet a lot of people at major institutions. And I was responsible for all of our clients in Northern Manhattan and Boston and Chicago.

And Boston was a hotbed of talented people. And one of the things you couldn't help but realize is these guys are all really good at what they're doing. They're all smart as the dickens. They've got terrific good education. And, boy, they're fiercely competitive. Second thing you learned is they're all fighting against each other, and they don't realize that they're competing with each other.

And that's pretty tough competition because they're all really smart, and they're all really well-educated, and they're all highly motivated, and they're competing with each other. That's not going to work out all that well for all of them. And sooner or later, people are going to have real difficulty. And that was, for me, a really opening-minding insight that just they are not trying to compete with the market.

They're competing with each other. The market, you can look at it and say, "Ah, you know, it's just the market." But when you're competing with brilliantly talented people with great educations and all ferocious ambition to beat you back, this is a different game. - So when you wrote the 1975 piece for the "Financial Analyst Journal," what sort of reception did it get among people on Wall Street?

- Oh, they loved it. - They thought that they were playing a loser's game. - They loved it. I got so many friendly remarks. (audience laughing) I read your article. Of course, you're wrong, but I thought your article was beautifully written or it was fun or your analogy was really terrific, but you're wrong.

I'm going to beat the dickens out of the market and this is how I'm going to make my living. You really are wrong. (audience laughing) So far, the evidence seems to be going the other way. And the game's not over yet. It's a long, long, long, long game. But the evidence keeps building that active investment managers, as talented as they are, and I have to tell you, we have never in the world had such a talented group as we have now, active management practitioners.

Incredible. We have never had as much equipment for them to use. The computing power that they carry around in their pockets is way beyond anything that could have been imagined 30, 40, 50 years ago. The information flows that go to them from thousands and thousands of analysts and portfolio managers and economic analysts and strategists from all over the world, all day, every day through the internet is unbelievable.

If you haven't played with the Bloomberg terminals in the last couple of years, find an opportunity to go play with the loop terminal. They are unbelievably powerful. Only problem is everybody's got them. Everybody has a Bloomberg terminal. Most people have two, one at home and one at work. A lot of people have three, one at home, one at work, and one in the car that drives them into work.

The information is not competitive. The computing power is not competitive. The talent and education is not competitive. It is overwhelming. And they're still out there struggling away, hoping to find a way to be able to do better than the competition. The analogy that comes to my mind is, if you are 6'2" and you're 24, and you are a damn good athlete, and you've had some experience as a prize fighter, and you and I meet each other somewhere out here in the hallway, and it's a competition, I know who's gonna lose.

It's gonna happen for sure. But change things a little bit. You've got a knife and I've got a knife. I might be good with a knife. No, no, you've got a gun. Well, I've got a gun. Yeah, but you might have a killer instinct, and I might flinch at the idea of killing somebody with a handgun.

No, you've got a machine gun and I've got a machine gun. Who gives a damn about you being 6'2"? You've got a tank and I've got a tank. Nobody cares about the fact you're 22, 6'2", and you're a prize fighter. That's what's happened to the investment management world. The power of the tools that are available to the people who are doing the work have gone up and up and up, and all of them, for the individual, are marvelous.

You should see what I've got in the way of technology. You should see what I've got in the way of information. Only problem is, everybody else has it too, and exactly the same time. So they're equalizers. They make all of us more and more and more equal. And if you think the market's gonna do 7% a year and you've got a 1% fee, that's a 15% of returns fee.

That's gonna be really hard to overcome by outsmarting the other people, smart as they are, hardworking as they are, all over the world. - So just to give you some historical context, when Charlie's original essay came out in 1975, that was before Jack opened the S&P 500 fund to investors in 1976.

So when you hear Charlie talk about his essay and the reception that it received, remember, this was radical in the mid-1970s. This was stuff that people on Wall Street not only didn't want to believe, simply didn't believe. They really did believe that they were better than average. So Charlie launched a firm called Greenwich Associates, which was a management consultancy firm.

And in 1976, I think I've got this right, he had a fateful lunch with a man by the name of Sandy Getzman. And this is the point at which you realize that Charlie is a complete fraud and is in fact a brilliant active investor. So tell us about the lunch, Charlie.

- Sandy Getzman was the chief executive of a firm called First Manhattan. And they had been clients the year before. And I've written, as we did for each client, an analysis of their strengths and weaknesses with a series of three, four, five specific recommendations as to what they should do differently.

They had some terrific research for creative investment ideas. They did not have institutional or industry coverage. They didn't do it that way. They were looking for individual stocks rather than wanting to be responsible for all the stocks in the chemical industry or all the stocks in the auto industry or any other industry.

And I've explained to them quite carefully that they were working in a way that was counterproductive because brilliance in creative ideas, without having the full understanding and context of the total industry, they were going to miss the privilege of being listened to carefully by the analysts at the institutions.

And all the institutions had analysts who covered their industry and then found the best ideas and fed them up to the portfolio managers. And as a result, they were never gonna have access to the portfolio managers. And they were going to never be able to build a significant institutional business.

This is some way to treat a client. You're making a terrible mistake and you're really in trouble. I called the next year to see if I could make an appointment to see Sandy. And his assistant said, "Well, Mr. Gottesman would like very much to see you, "but he would like very much that you would come for lunch." And I thought, this is gonna be terrific 'cause we just told him he's doing everything wrong and he has decided to upgrade my stature and invite me to come in for lunch.

This is going to be a guaranteed win. So I went in and with all the politeness I could set us, Sandy just delighted with this conversation, looking forward to it very much. He said, "Before we get in the conversation, Charlie, "let me just tell you, "we're never gonna take your service again.

"You told us that we couldn't succeed with what we're doing "and we understand that you're right. "We can't succeed with most institutional investors, "but that's only part of our business. "We do a lot of investment management "and we do individual stock brokerage for individual people. "We don't need institutional business.

"That's a small sideline." Look, ooh-wee, why would he invite me to come in if that's what he has as a message? Most people would send a short message, "You're wrong for us "and we don't want anything to do with you," or a telephone call or some other. But here he's invited me in for lunch.

Well, Sandy, we've got this really interesting service for investment management. Would you like to know how you're doing compared to other investment managers? No, Charlie, we don't really care about that because most people are going after the large pension funds. We're going after the small pension funds run by entrepreneurs.

So we don't really care about that business. Ooh-wee, this is gonna be a difficult situation. I said, "Okay." Sandy said, "Well, let's go up for lunch." Then as we got in the elevator, I realized I've got to come up with something to talk about over lunch because he has just shot down the two possibilities I had on the way in.

As we sat down, I said, "Sandy, you're one of the best investors anybody knows. "Would you talk about your favorite all-time investment?" Said, "Sure." Said, "First, what was it?" Still is. "What is it?" Berkshire. I'm sorry, Berkshire Hathaway. Oh, I'd heard about Berkshire Hathaway and I'd heard about Warren Buffett and I knew something about the Buffett partnership, but I didn't really know very much about it at all.

So I said, "Sandy, can you do me a big favor? "Would you talk in depth about Berkshire Hathaway? "Start by telling me how long you're going to own it." "Forever." I had had a conversation with my partners that we were running a fragile business. We were a small firm.

We couldn't possibly borrow any money from a bank. So if we had any trouble financially, we were in serious jeopardy, probably wiped out. And that we ought to put aside a reserve, which we could do if we would defer our annual bonus by six months. And the other fellows in the partnership said, "You know, I really don't want to do that "'cause I'm almost hand to mouth, "but yeah, I think that's a really good idea.

"We'll put it aside." So we had $100,000 that we had decided would be enough of a safety cushion in case we got in trouble. And my partners had said, "Charlie, you know something about investing, "so why don't we look to you to find "how we should invest this?" I said, "Fine, I'll gladly do it." So it was that background, Sandy started talking about Berkshire Hathaway and laid out a concept of why that was a great long-term investment that was compelling in my mind.

So I went back to my partners and said, "I think we should put everything into Berkshire Hathaway." What the hell is Berkshire Hathaway? I'd never heard of it. You will hear about it. It's a really, really well-run investment organization and it's diversified and it's in fairly conservative stocks most of the time and it's got some really clever ideas about how to do better.

Well, that was a long time ago and the stock was selling a little over $1,000 a share in the A shares. There's nothing like being lucky. (audience laughing) - And today, Berkshire, what? Around half a million a share? - Yeah. - And do you still own it? - I'm following Sandy's advice.

He said, "Forever." And I figured, why not? It's forever with me too and now, of course, it'd be stupid to sell it and pay the capital gains. You'd never recover it at my age before you're gone and buried. So I'm looking at it sort of like a flower bond.

Those of you who are in your early, mid-80s will understand flower bonds were the bonds that you could use to pay off your estate taxes. They were bargained and the price is up and stuff like that. - So I wanna move on to another part of Charlie's story career.

Charlie spent 17 years heading up the investment committee for Yale University. - I was on the investment committee for 17 years and I was chair for 11. - Which means that basically, Charlie, was David Swenson's boss. - No, no, I was sitting in the front row seat watching the best talent that any of us have ever, ever known of.

- So tell us about David. - He's a beautiful man. He was good-looking. He was a good athlete. He was as nice a guy as you would ever want to meet. He was the most disciplined investor there has ever been. Everything about his activities were worked out and done deliberately.

His greatest personal strength as an investor was his fascination with risk management. Most of us think risk will take care of itself. Not David, he really wanted to manage the risk very, very carefully. Before he got to Yale, he had invented the first major derivative transaction. $100 million swap between floating rate and fixed rate interest between IBM and the World Bank.

Nobody had ever conceived of doing anything quite like that kind of a transaction. He conceived of it and then figured out who would be the right clients to do the transaction with. And then of course, the fee was pretty attractive on both sides. Then at Salomon Brothers, which is where he was then employed, it was a spellbinding experience to see somebody do something creative.

David invented the endowment model concept of investing, which is probably the most powerful development of thinking in investment management. That anybody has ever done except possibly indexing, which I'm devoted to, so be careful, there's a bias there. When he got to Yale, New Haven, I have to tell you, New Haven is somewhere between New York and Boston.

Boston's a hotbed of talent. New York's a hotbed of talent. Nobody needs to have some place to live and work that's halfway between the two cities. And that's what New Haven was. They had no investment community of any kind of distinction or capability. There was no way that somebody who was really good was gonna leave Wall Street or Boston in order to get a job in New Haven.

And it was sort of the desert of investment management. He was sole responsible for the endowment. And his starting place was to create the first really serious-minded investment committee that Yale had ever had, which is an interesting challenge. He put together one after another after another first-rate insights into how you could do one thing after another after another after another.

If you really wanted to have a talented investment team, fine, start with someone who is a gifted teacher, David Swensen, ask him to create a seminar that the smartest students at Yale will all want to take. And Yale has not a very large undergraduate college, but a little over a thousand students per year.

But they are really the cat's meow in terms of talent and creativity and ability to learn. Have a seminar that all of those students are gonna want to apply for. Carefully select the 25 students you will allow into the seminar. Within the seminar, make it spellbinding experience of learning and development.

Choose the one or two or three students each year who are really outstanding and offer them a summer internship. If someone is in the summer, proves that they are really gifted at doing the work, offer them a two or three year extended position. And if they are really, really good in that two or three years, offer them a chance to stay permanent on the team.

Oh, by the way, make it fun. Lots of activities in sports because Yale's got all kinds of sports equipment and facilities and David's a very good athlete. Have really interesting competitions, with other teams. Be sure that you have group activities that are very close-knit, bring people together so that they realize this is like a family.

Be sure that they have a chance to learn an enormous amount because they're included in all the most important meetings and they participate in the decision after the meetings. Pretty soon you can attract, particularly in a scuttlebutt network, passes the word, students pass it on to other students, pass it on to other students.

So it didn't take more than two or three years before everybody at Yale knew the best thing you could possibly do is get into David Swenson's seminar. So it attracted quite a large group and then he carefully selected the best of those students to be members of his seminar and then took it from there.

- So in terms of the investment committee overseeing-- - Same thing. - David Swenson, I mean, was it like the cop with the presidential motorcade, you just waved it through or did you ever second guess David's decisions? - Well, first David did the selection of investment committee. He did not just take whatever was offered.

He was very careful to find a cluster of people, really small number of people, but a cluster of people with different backgrounds who would really be committed to helping the Yale endowment and who would be sources of insight and information and perspective and judgment that he might be able to incorporate.

So it was his investment committee without a doubt. And then he treated them as though they were gods and they gradually thought themselves as being pretty close to gods with David as their favorite employee. The intensity back and forth was quite terrific. Lots of open discussion. Only once in 17 years did I see a recommendation from David's team come up and meet a series of skeptical questions from the investment committee, at which point David said, I think what we ought to do is take this back for further consideration.

Of course, it never came up again. Once in 17 years, and if you look at the Yale endowment, it had over a hundred different investment managers, most of whom none of us would recognize by name. There was no well-known investment management firm that ever made the cut in David Swenson's array of investment management because he was reaching for people who were so talented, but so new that nobody knew about them or would feel comfortable hiring them.

He was the first client for a very large number, quite successful later on investments. He was very good at it and that helped, but he caught people at just the right time. And then the interesting thing to me was, even though I would not have recognized four out of five of those managers, and I've got a reasonably wide exposure in the investment management world, I just didn't know them at all.

The average duration of the relationships was 17 years. Imagine that, that the average duration of the investment manager relationship turnover was what, 6%, it's just phenomenal. - So when I was hurriedly sketching notes for today's conversation with Charlie, I knew that he had been a friend of John Neff and I was gonna ask him about that.

For those of you who've been long-term investors in the Vanguard Windsor Fund, you'll of course know John's name. I was also gonna ask Charlie about Burt Malkiel. Charlie's also good friends with Burt Malkiel. They go on vacation together. They did a book together, probably the second most famous book that Charlie's written, "The Elements of Investing." And of course, Burt and Charlie sat on the board of directors of Vanguard together for a while, but I'm gonna leave that aside because we're gonna run out of time and I have one last topic that I wanna talk about, one last series of stories, which of course is Jack Bogle.

So Charlie, you're a management consultant. You look at Jack's tenure as the Chairman Chief Executive of Vanguard. How would you appraise him as an executive? - Terrible. (audience laughing) - Would you like to elaborate? (audience laughing) - Well, if you had asked as a leader, then I might not have said terrible.

I would have said compelling, exhilarating, inspiring, and capable of causing people to reconsider what they wanted to do with their lives and why they wanted to do it. You heard earlier observations about the service ethic that's deeply rooted in the people who work at Vanguard. Candidly, serving as a consultant and then as a director of Vanguard, I was backstage all the time and I saw all kinds of opportunities to observe.

They were a bunch and are today a bunch of Boy Scouts and Girl Scouts. They are decently nice people to each other, ferocious in their drive to reduce cost. Who got that going? That was Jack. He was ferocious at reducing cost. And it makes a terrific difference when a large group of people can have a purpose as specific as reducing cost.

And they work away at it all the time, all the time. And with great effect. Second thing is Jack was determined to have real value delivered. And everybody who's at Vanguard has to drink the Kool-Aid. If you don't understand, we're here to serve with higher and higher value of the owner, shareholders of Vanguard.

And the owner part is something they care, they're serious about. And they mean it because investors in the Vanguard funds are the owners because the funds own Vanguard. And a little bit of a skittishness on taking risk because they, as a group, know that many of us have got this terrible temptation after things have done well to get excited rather than when things look pretty grim but might do well.

So if you think in terms of leader or founder or inspiration, then I think you'd have to rank him exceptionally high. The day after Jack died, this is the man that was afraid of people not paying attention. The New York Stock Exchange had 50 photographs of Jack's displayed all over the floor of the New York Stock Exchange because they had such a high regard for what he had done.

And what he had done was leadership. But management, he was terrible. (audience laughing) He really never, ever understood computers as a cost-saving device. He looked at the cost of a computer, the price tag, and said, "That's just too damn much. "I'm not gonna pay that." (audience laughing) Instead of realizing if he would do that, he would be able to bring the cost levels down.

He really got way behind the curve on computerization and all kinds of technology. He made dreadful mistakes. He had the chance of a lifetime to seize and make a real success out of ETFs. "I'm not gonna do that. "ETFs are speculative." "Jack, you don't understand. "ETFs are a cheap way for people to own stocks." "No, no, no, they're speculative "'cause you can trade them anytime you want to." "Yes, Jack, most people don't trade them.

"The hedge funds trade them all over the place. "That's where the turnover comes from. "You don't have to worry about individuals. "They would buy and sell them when they need to, "but they will not go crazy." "I'm not gonna buy 'em. "We're not gonna have anything to do with ETFs.

"They're speculative." And that lasted for a decade. Dead wrong. His strategy decisions in several cases were also dead wrong. He decided, for reasons that were totally inappropriate, that he was gonna do something. And he badgered the board of directors to give him permission to do it. And finally, they said, "Jack, for Christ's sake, "it's never gonna amount to anything.

"And you're all determined. "Why don't you go ahead and try it? "And when you fail and come back, "we're not gonna hurt your feelings. "And we're certainly not gonna penalize you, "but you're really, really wrong. "I'm not gonna do it." Okay. So he went out and organized a new investment service idea.

And he went to Wall Street and said, "I've got a great idea. "You guys are gonna love it. "You're really, really gonna love it. "I'm gonna raise a very substantial amount of money, "and we're gonna do something "that's innovative and creative, "and you're gonna be able to be a participant in it." Oh, that sounds interesting, Jack.

What is it? Index funds. Jack, index funds? There's some experimental work being done at the Wells Fargo Bank with index funds, but that's just not an attractive proposition. People wanna beat the market. They don't wanna buy the market. They wanna beat the market. Besides, you're gonna have a front-end load on this index fund.

So they're gonna drop back 8% at the very beginning, and the way you're matching it, they'll never, ever catch up because they're gonna stay, at best, at the market rate of return at 8% behind, 8% behind, 8% behind. Jack, don't you get it? This is a guaranteed failure. I'm gonna do it.

And gradually, his aspirations for volume of sales went from a substantial $250 million offering to $100 million offering to $50 million offering to $15 million offering, and finally, he squeezed it out into the marketplace. And it went nowhere, 'cause everybody could see. Buy this, you lose on the date of purchase, and you will never recover.

And then he thought, you know, if we drop the load, maybe that would help. It didn't make any difference. By that time, everybody knew not to touch it. Okay, I'm losing money operating this fund, and the fund itself is losing money, and we've got a front-end load. We've gotten rid of the front-end load.

I need volume. So he merged it with a closed-end fund that was also being managed, or distributed, by Wellington, and that gave him enough to break even. And after nearly a decade, indexing started to catch hold. It catch hold and went on and on, and I'm all for being ahead of your times, but being that far ahead of your times, I'm not so sure.

- So we only have a few minutes left. If there are any questions, Christine's, oh, Christine already has them? - I have a couple, but I'll take one. - All right, we'll try and rattle through these as quickly as possible. You need to be a little less loquacious, Charlie.

(audience laughing) - Okay. - All right. All right, coming back to David Swenson. Should investors make room for alternative assets in their portfolio? - No. (audience laughing) - Would you like to elaborate? - Well, you told me not to. (audience laughing) Let's be realistic about markets. If I were running an alternative investment fund, I know where I want to go, where big money makes relatively quick decisions and sticks with them for the long, long time.

That has nothing to do with individual investors. I wouldn't dream of talking to individual investors. I'd concentrate entirely on endowment funds, and you would never be able to shake me loose from that. However, if I were running a, I've got to make money somehow enterprise, and I couldn't compete successfully with institutions for institutional money, I might very well find a way to create an access for individual investors.

Nobody's mother would ever say, "Go ahead, go ahead and deal with that guy." And anybody's father would say, "Don't touch the son of a bitch." And I think they'd be right. It's a fair market out there, but that doesn't mean that all the players are fair to you, and if you don't belong there, you're going to be treated unfairly.

I don't belong there, and I think most individual people don't come near belonging there. - All right, second question for you. Are there any market segments where investors use actively managed funds? - No. - Not emerging markets? - Well, no, certainly not. Let me just be fair. If you are fluent in Chinese and are resident in China so that you can access a lot of the information that might be available, because the Chinese market is still overwhelmingly dominated by individual investors, you could, if you were a logical, hardworking person, gather information that would give you a comparative advantage, and then if you were very disciplined in your investing activities, you could probably do better than the Chinese market.

I have two grandsons who are half Chinese, half American. They're fluent in Chinese. They might be candidates for this. These two kids are really super bright. 16, and they could do it. But if they came to me and said, "Grandpa, that's what we think," and they call me Charlie, but, "This is what we think we do.

"We are gonna go to China and make our life there "investing in Chinese stocks," I would plead with them to do something else because they've got quite a lot of talent, and they could do something that's a hell of a lot more interesting than buying and selling stocks. - All right, so final question.

This one is for me. What's your favorite Jack Bogle story? You can give us two. You have three minutes. (audience laughing) No pressure. - Jonathan, you should have given me a pre-warning that that's what you were gonna ask because-- - All right, so as a warm-up for Charlie, while the cogs turn, in the early 1990s, I was covering mutual funds at the Journal.

That was my first job at the Journal, and my counterpart at Barron's was Leslie E. And Leslie wrote a piece for Barron's where she referred to Jack as the ever-self-righteous Jack Bogle. The day the piece appears, her phone rings, she picks it up, and on the other end is this voice that says, this is the ever-self-righteous Jack Bogle.

(audience laughing) He loved it. - That was Jack. It was an article that had Jack and Warren Buffett analyzed jointly, and Jack was pissed off because Warren was mentioned eight times and he was only mentioned twice. (audience laughing) - It's one of the great mysteries of all time, which is you go to the campus, you will see a statue of Jack Bogle, a substantial statue, more than life-size.

And you may be the person who, for the first time in world history, figures out who ordered that damn statue to be put up in that complex. I know the directors were not part of that decision. I know that the management wasn't part of that decision. And the only person that I can imagine is a certain curmudgeon that wanted not to be forgotten and wanted to be, wanted desperately, desperately to be a hero to ordinary investors.

And so it came to pass. Or, as one of Jack's assistants from many years ago, Kevin Laughlin, used to say, there are only two groups of people in the world who walk to the office every day and pass a statue of their boss, the people of North Korea and me.

(audience laughing) Thank you, Charlie, for your time. - Thank you, Charlie. - It's been a great conversation. you