Perhaps the best place to begin is with my heritage: heavily Scottish, which may be enough to explain my apparently legendary thriftiness. The Armstrongs—ancestors of my grandmother on my mother's side—came to America from Scotland in the early 1700s to farm here (a wonderful reminder that nearly all of us are descendants of immigrants). I've always thought of my great-grandfather—Philander Banister Armstrong—as my spiritual progenitor. He was an industry leader, but did his best to reform first the fire insurance industry (in an 1868 speech in St. Louis, he implored, "Gentlemen, cut your costs"), and then the life insurance industry. His spirited 1917 diatribe—258 pages long—was entitled A License to Steal: How the Life Insurance Industry Robs Our Own People of Billions. The final sentence: "The patient [the insurance industry] has a cancer. The virus is in the blood. He is not only sick unto death, but he is dangerous to the community. Call in the undertaker."

The Hipkins family—my mother's family—were Vir-ginians who also came to America early in the eighteenth century; some of their progeny would serve in the Confederate States Army. My Hipkins grandparents, John Clifton Hipkins ("The Skipper") and Effie Armstrong Hipkins ("Chick"), were colorful characters who expected their three children and six grandchildren to be good citizens and to make the most of themselves.

William Brooks Bogle and his wife Elizabeth also arrived here from Scotland, but much later, during the early 1870s. Although Ellis Island was not yet the port of entry, their names are on a plaque there. Their son (and my grandfather) William Yates Bogle was a successful merchant in Montclair, New Jersey, highly respected in the community, and the founder of a company that became part of the American Can Company (which in turn became Primerica Corporation in 1987), large enough to be among the 30 stocks in the Dow Jones Industrial Average for 75 years.

His son, William Yates Bogle Jr., was my father. At the start of World War I—before the United States declared war—he volunteered to serve in the Royal Flying Corps and flew a Sopwith Camel. This dashing pilot, handsome to a fault, was said to resemble the then Prince of Wales, who became king of England in 1936 (before abdicating to marry "the woman I love"). My father was injured when his plane crashed, and he returned home, marrying my mother, Josephine Hipkins Bogle, in 1920.

Life was easy for the well-to-do young couple, but sadly, their first two children (twins, Josephine and Lorraine) died at birth. Their first son was my brother William Yates Bogle III, born in 1927, shortly followed by another set of twins on May 8, 1929, David Caldwell Bogle and me, John Clifton Bogle.

We were born some years after my Bogle grandfather had provided a handsome new home for the growing family in Verona, New Jersey (abutting Montclair). But the Great Crash came, and soon both my home and my father's inheritance were gone. We moved into my mother's parents' house, the first of the frequent moves that were to send the struggling family up and down the Jersey coast.

So while my family began with enough—in fact, much more than enough—we soon were in difficult financial straits. (My father, having grown up surrounded by the good things of the era, lacked the determination of his father, and struggled to hold a job.) From an early age, all three boys had to earn what they got. How well I remember the constant refrain, "Idle hands are the tools of the devil" (pronounced, in the Scots way, divil).

I've often thought that we three brothers had the perfect growing-up environment: a family with community standing and never a concern about being inferior or disrespected, yet with the need to take responsibility for our own spending money (and even to help fund the family exchequer), the initiative to get jobs, and the discipline of working for others. While we had wonderful friends—still friends today—who had more than enough and who played while we worked, we learned early on the joy of accepting responsibility, of using our wits, and of engagement with the people (rich and far from rich alike) whom we served in our various jobs, winter, summer, spring, and fall.

In seventh and eighth grades, we twins attended a small grammar school in Spring Lake, New Jersey; we then moved on to nearby Manasquan High School. But my mother, ambitious for her sons and deeply concerned that we weren't getting the best of schooling, sought something much better. Through her persistence and determination, all three Bogle boys became boarding students at Blair Academy in northwestern New Jersey—an incredible opportunity to begin a fine education. It was my mother's drive for her boys' education that overcame our lack of money, and Blair provided us with scholarships and jobs. In my first year, I waited on tables and, as a senior, rose to the demanding job of captain of the waiters.

Blair's motto (translated from the Latin) is "Come, Study, Learn," and so I did. Pushed by demanding old-school masters who seemed to sense that I could, with great effort, excel—although the classwork was far more demanding than any I'd ever before encountered—I gradually managed to overcome my early lag in studies. At graduation, I was class salutatorian, and was voted "Best Student" and "Most Likely to Succeed," accolades that may hint at both the determination that I still can't seem to shake and, perhaps, the entrepreneurial spirit that would later shape my career. I'll never forget the inspiration that I received when in my junior year I read this sentence in Thomas Macaulay's essay on Samuel Johnson: "The force of his mind overcame his every impediment."

So my attitude to what's enough in this life, I think, has been largely shaped by my heritage and the experiences of my youth, not least among them being blessed by a strong family: proud grandparents, loving parents, and a marvelous brotherhood of three who fought with each other but were united when others wanted to take us on.

That combination might well have led nowhere; after all, the Bogle boys were hardly worse off than countless numbers of other American youths. But as I reached toward maturity and ever after, I have been blessed with infinite good fortune in my life, often of miraculous dimension. Surely my first major break was when Blair Academy accepted the responsibility for my education. Without these breaks, who knows where I'd be (indeed, as you'll soon learn, even if I'd be) today? I have come to refer to each turn of good fortune as akin to discovering a diamond. Over the course of my life, as it has turned out, I would discover "acres of diamonds."

This story was a special favorite of Dr. Russell Conwell, who founded Philadelphia's Temple University in 1884. The story inspired his classic lecture, "Acres of Diamonds," which he delivered more than 6,000 times, all the world over. The moral of the story: "Your diamonds are not in far distant mountains or in yonder seas; they are in your own backyard, if you but dig for them."

The very first student at what would become Temple was so inspired by the speech that he came to Dr. Conwell, eager for an education but unable to pay for one. Accepted on the spot for tutelage, the man went on to rise to a position of eminence and public service. I have no trouble believing that story because when, as a young man, I first read Dr. Conwell's lecture, its message also inspired me, even as it continues to inspire me today. And all of those fortunate discoveries of one diamond after another took place right in my own backyard, in a city in which I'd never before set my foot.

It was just before Thanksgiving of 1945, shortly after the end of World War II, when this young resident of New Jersey first arrived in Philadelphia. My late twin brother, David, bless his soul, was with me; we were two 16-year-old boys getting off a bus from Blair Academy, coming to the City of Brotherly Love for the first time to celebrate the holiday with our mother and father. Our parents (my older brother, William, then 18, was serving in the U.S. Marine Corps) had recently moved into two rooms on the third floor of a modest home in suburban Ardmore, but the tiny space was enough for all of us—at least for the holidays. We ate our dinners at the small Horn & Hardart's restaurant around the corner. Later, when I was on vacation, I worked the graveyard shift at the Ardmore Post Office.

I found my first diamond, if not quite in Philadelphia, nearby. Through the extraordinary preparation for college that Blair Academy had given me, I gained admission to Princeton University. To make it financially possible for me to attend, the university offered me both a full scholarship and a job waiting on tables in Commons. (A waiter yet again—I must have been good at it!) In later years, I worked at the Athletic Association ticket office, managing one of its departments during my junior and senior years.

With a series of summer jobs (one as a runner in a local brokerage firm; another as a reporter on the police beat for the Philadelphia Evening Bulletin), I was able to earn the remaining money I needed. I worked very hard, and the hours were long. But I loved hard work then—I still do—and I grew up with the priceless advantage of having to work for what I got. But in my long career I don't ever recall thinking of work as work, with one exception: a stint as a pinsetter in a bowling alley (now there's a truly Sysiphean job!).

While I was studying at Princeton, my parents' marriage fell apart. My father moved to New York, and my beloved mother, terminally ill, remained in Philadelphia. I wanted to return there to be with her after my graduation in 1951, and fate intervened to make it possible. (Sadly, her life ended in 1952.)

At Princeton, this callow, idealistic young kid with a crew cut had determined to write his economics department senior thesis on a subject on which no earlier thesis had been written. Not John Maynard Keynes, not Adam Smith, not Karl Marx, but a subject fresh and new. What but fate can account for the fact that in December 1949, searching for my topic, I opened Fortune magazine to page 116 and read an article ("Big Money in Boston") about a financial instrument that I had never heard of before: the mutual fund. When the article described the industry as "tiny but contentious," I knew that I had found my topic and, though I couldn't know it at the time, another diamond as well.

After a year of intense study of the mutual fund industry, I completed my thesis and sent it to several industry leaders. One was Walter L. Morgan, mutual fund pioneer, the founder of the Philadelphia-based Wellington Fund and member of Princeton's class of 1920. He read my thesis and liked it sufficiently that he would soon write: "A pretty good piece of work for a fellow in college without any practical experience in business life. Largely as a result of this thesis, we have added Mr. Bogle to our Wellington organization." I started right after my 1951 graduation (magna cum laude, thanks largely to my thesis) and never looked back. I have worked there—one way or another, as you will soon see—ever since.

I have no way of knowing whether it is true, as some of his closest associates told me after his death, that Walter Morgan thought of me as the son he never had. But he was like a father to me. He became my loyal and trusted mentor, the man who gave me the first break of my long career. More, Mr. Morgan was my rock, the man who had confidence in me when I had little confidence in myself, the man who gave me the strength to carry on through each triumph and tragedy that would follow.

When I joined Wellington Management Company in 1951, it was an important company in a tiny industry, and managed a single mutual fund (Wellington Fund) with but $150 million in assets. But we were growing rapidly. By the early 1960s, I was deeply involved in all aspects of the business and soon became Walter Morgan's heir apparent. Early in 1965, when I was just 35 years old, he told me I would be his successor as the leader of the firm. Yet another diamond! Although many other diamonds still lay hidden in the earth beneath me, undiscovered, the company was in troubled straits, and Mr. Morgan told me to "do whatever it takes" to solve our investment management problems.

Headstrong, impulsive, and naive, I found a merger partner—in Boston, of all places—that I hoped would help me do exactly that. The merger agreement was signed on June 6, 1966. With an ebullient bull market in stocks on our side, the marriage worked beautifully through early 1973. But when the bear market came and the stock market tumbled (a decline that would ultimately slash stock prices by 50 percent), both the aggressive young investment managers who were my new partners and I let our fund shareholders down. (The asset value of one of our funds plummeted by 75 percent!)

By late 1974, as the bear market took its toll and large numbers of our shareholders took flight, the assets under our management had plunged from $3 billion to $1.3 billion. Not surprisingly, my partners and I had a falling out. But my adversaries had more votes on the company board than I did, and it was they who fired me from what I had considered my company. What's more, they intended to move all of Wellington to Boston. I wasn't about to let that happen.

I loved Philadelphia, my adopted city that had been so good to me. I had established my roots there, finding even more unimaginable diamonds. In 1956, I had married my beloved wife, Eve, who was born and grew up in Philadelphia, and by 1971, we had been blessed with six wonderful children (followed eventually by 12 terrific grandchildren). We intended to stay where we were, and I had a plan to do just that. For when the door slammed on my career at Wellington, a window opened just wide enough to allow me to remain in Philadelphia.

Pulling off this trick was not easy, and in fact I might not have tried doing so if I hadn't had the two characteristics that someone once attributed to me: "the stubbornness of an idealist and the soul of a street fighter." After a long and bitter struggle, I was able to parlay a slight difference in the governance structure of the Wellington funds (owned by their own shareholders) and Wellington Management Company (owned by public shareholders but now largely controlled by the former partners who had just fired me) into a new career—and with it more diamonds than I ever could have imagined.

A majority of the directors of the board of the funds themselves were independent of Wellington Management Company, and I proposed that they adopt an unprecedented, unique structure, one in which the funds would govern themselves. The idea was simple. Why should our mutual funds retain an outside company to manage their affairs—the modus operandi of our industry then and now—when they could manage themselves and save a small fortune in fees? They could be truly mutual mutual funds. The battle was hard fought over a period of eight busy, hectic, and contentious months, with the fund board almost evenly divided. But this new structure finally carried the day.^[2]

I named our new company after HMS Vanguard, Lord Horatio Nelson's flagship at the great British victory over Napoleon's fleet at the Battle of the Nile in 1798. I wanted to send a message that our battle-hardened Vanguard Group would be victorious in the mutual fund wars, and that our Vanguard would be, as the dictionary says, "the leader in a new trend." However, my idea suffered a setback when the fund directors allowed Vanguard (now owned by the funds) to handle only the administration side of the firm's activities, responsible for the funds' operating, legal, and financial affairs. When we began in May 1975, we were barred from assuming responsibility for investment management and marketing, the other two—and far more critical—sides of the triangle of essential mutual fund services. To my chagrin, these key services would continue to be provided by my rivals at Wellington Management Company.

I knew that we would have to expand our narrow mandate and take responsibility for the full range of administrative, investment, and marketing services that all fund complexes require if Vanguard were to have even a fighting chance to succeed. So we had to seek yet more diamonds. We quickly found one to rival the fabled Kohinoor diamond in size. The fact that investment management was outside of Vanguard's mandate led me within months to develop a great idea that I had toyed with for years, which had even been suggested by the research I had done for my senior thesis, and in which I had written, mutual funds "can make no claim to superiority over the market averages." Before 1975 had ended, we had formed the world's first index mutual fund.

The idea was the essence of simplicity: The portfolio would simply hold all of the stocks in the Standard & Poor's (S&P) 500 Stock Index, based on their market weight, and would closely track its returns. Our index fund was derided for years, and was not copied until nearly a full decade had passed. The new fund, originally named First Index Investment Trust (now Vanguard 500 Index Fund), began with just $11 million of assets, and was dubbed "Bogle's Folly." But it proved its point. The first index fund gradually earned compound returns that were substantially higher than the returns earned by traditional equity funds, and would become the largest mutual fund in the world. Today Vanguard 500 is one of 82 index and virtual index mutual funds that constitute nearly $1 trillion of Vanguard's now-$1.3 trillion asset base.^[3]

Thus, in the words of Psalm 118, "the stone that the builders rejected . . . became the chief cornerstone" of our new firm. But its birth was a mighty fragile thing. The argument that we were not overstepping our narrow initial mandate just squeaked past approval by the board of directors. The trick of the index fund, I contended, was that it didn't need to be "managed"; it would simply buy all of the stocks in the S&P 500 index. But with this quasi-management step, we had edged into the second side—the investment side—of the triangle of essential fund services.

How to again expand our mandate to control the third and final side—the marketing function? Why, just find another diamond! And so we did. The idea was to eliminate the very need for distribution, abandoning the network of stockbrokers that had distributed Wellington shares for nearly a half-century, and instead relying not on sellers to sell fund shares, but on buyers to buy them. The risks of such a sea change were enormous, but so were the opportunities.

On February 7, 1977, after yet another divisive battle and another board decision that was closely won, we made an unprecedented overnight conversion to a no-load, sales-charge-free marketing system. Once again, we've never looked back. We've never had to. With the extraordinarily low operating expenses that became our hallmark—a product of our mutual structure and our cost discipline—offering our shares without sales commissions proved a logical and timely step into a world that would be increasingly driven by consumer choice and the search for value. The motto of our marketing strategy: "If you build it, they will come" (a now-familiar phrase that inspired the creation of a baseball diamond, of all things, in Iowa, immortalized in the film Field of Dreams). And, though what we had built took years to reach full fruition, come the investors did, first by thousands, and then by the millions.

The diamonds Vanguard had accumulated during those struggles, however, were not yet quite in our possession. We held them only on loan. For the Securities and Exchange Commission (SEC) had given us only a temporary order allowing us to take some of these crucial steps. Believe it or not, after a tedious weeklong regulatory hearing, the SEC staff ruled against our unprecedented plan. Aghast, for I knew that what we were doing was right for investors, we mounted a vigorous appeal and—after a struggle that lasted four long years—triumphed at last in 1981, when the SEC did an about-face and at last approved our plan. The Commission did so with a rhetorical flourish that concluded with these words:

In every respect, the Commission's parting salute was to prove prescient.

So the diamonds weren't going to Boston. They were at last permanently in our hands—or, far more accurately, in the hands of our shareholders, remaining where they belonged, in Greater Philadelphia, birthplace of Wellington in 1928 and of Vanguard in 1974. You might think that the store of diamonds in my Golconda was at last exhausted. But miraculously, there proved to be yet another diamond awaiting my discovery.

Paradoxically, the next diamond I was to discover, also right in my own backyard, was in the form of a new heart. (As we all know, in card games a heart beats a diamond every time. It's true in life, too!) I had been struggling with a failing heart since my first attack, of dozens, in 1960. By 1995, time had almost run out; only half my heart was still pumping. That fall, I entered Philadelphia's Hahnemann Hospital, and on February 21, 1996, I at last received my new heart, only months, or perhaps weeks or even days, before my own tired heart would have expired. I had waited in the hospital for 128 days, connected around the clock to an intravenous line feeding me heart-stimulating drugs.

Strangely, despite the traumatic circumstances, I never thought I would die. I never thought I would live, either. It just didn't seem sensible to think about the outcome either way. But live I did, and with the heart that now beats in my body—the gift of life from an anonymous donor—and through the care of the doctors and nurses who have been my guardian angels, I have enjoyed superb health for what has now been more than a dozen years, one more reason why I am convinced that I have received more blessings—more "acres of diamonds in my own backyard"—than any other human being on the face of this earth. You were right, Dr. Conwell!

I take special joy in telling you about the diamonds in my life and career, for I'm confident that each of you readers has also been blessed with diamonds, maybe many of them, if only you would stop and take a moment to count them. But too often, like the wealthy farmer in Dr. Conwell's parable, we search for illusory treasures and ignore the real ones that lie right beneath our feet. (Note the we—I'm as guilty as the next person!)

So I have indeed been given enough—enough diamonds (and hearts) to live a wonderful life, one that I hope has been useful to a family, a firm, an industry, even a society. But during these early years of the twenty-first century, I've developed a profound concern that our society is moving in the wrong direction, a concern so beautifully expressed in David Brooks's epigraph that begins this book. I'm guessing that Kurt Vonnegut and Joe Heller would share that view. While on Shelter Island they were talking about "enough" in the context of money and investments, their work held up a mirror to our entire society that reflected some of the absurdities and inequities that we've come to accept and take for granted.

In our financial system, we focus our expectations on the returns that the financial markets may deliver, ignoring the exorbitant costs extracted by our financial system, the excessive taxes engendered by record levels of speculative trading, and inflation borne of a government that spends (our) money beyond its means, grossly devastating these returns. We engage in the folly of short-term speculation and eschew the wisdom of long-term investing. We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity.

In business, we place too much emphasis on what can be counted and not nearly enough on trusting and being trusted. When we should be doing exactly the opposite, we allow—indeed we almost force—our professions to behave more like businesses. Rather, we ought to be encouraging companies and corporations (the enterprises that create products and services) to regain the professional values that so many of them have cast aside. We have more than enough of the fool's gold of marketing and salesmanship and not enough of the real gold of trust-eeship and stewardship. And we think more like managers, whose task is to do things right, than as leaders, whose task is to do the right thing.

In life, we too often allow the illusory to triumph over the real. We focus too much on things and not enough on the intangibles that make things worthwhile; too much on success (a word I've never liked) and not enough on character, without which success is meaningless. Amidst the twenty-first-century pressures for immediate satisfaction and amassing information on demand, we've forgotten the enlightened values of the eighteenth century. We let false notions of personal satisfaction blind us to the real sense of calling that gives work meaning for ourselves, our communities, and our society.

When I make these points in forums around the country, I sometimes feel like one of those sign-wielding New Yorker cartoon prophets ("Repent, for the end is near!"). While my message is hardly in the mainstream—and generally ill received by those in charge of our corporate and our financial institutions—the message is nothing new. Consider that 2,500 years ago, Socrates had much the same message to deliver in his challenge to the citizens of Athens.

I hardly have the standing to compete with Socrates. But over the course of these remarkably blessed 79 years of life that I have enjoyed to the fullest, I have, like Socrates, arrived at some strong opinions on money, on what we should be proud of and ashamed of in our business and professional callings, and on what are the false and true treasures in our lives. I offer those opinions here in the hope that, to borrow one of Kurt Vonnegut's favorite lines, I might poison your minds, dear readers, with a little humanity.