‘Great skepticism’ a primary trait for industry innovators: Bogle

John C. Bogle, founder of the Vanguard Group, believes “great skepticism” and questioning everything helped lead to his overwhelming success, and recommends others in the industry also adopt a critical eye.

Mr. Bogle, who accepted an award Monday at InvestmentNews’ inaugural Icons and Innovators awards luncheon, which honored 20 individuals who’ve made an outsized impact on the financial advice industry, called himself “a pain in the dufflebag.”

“You tell me something is true, I’m going to try to figure out why it isn’t true,” Mr. Bogle said. “You show me a column of numbers, and it doesn’t have the answer I like, I’ll say, ‘These numbers are wrong.’ You’d be surprised how many times those numbers are wrong.”

“So be skeptical. Look behind the figures,” he added, telling audience members to be “very nasty about it” when examining those figures. “And, when you’re proven right, be arrogant.”

Mr. Bogle, who profoundly changed the investment world by introducing the concept of the index mutual fund to the masses, was one of two industry icons honored at the event in New York, the other being Charles R. Schwab, founder of the Charles Schwab Corp., who revolutionized what it meant to be a discount brokerage firm.

Taking business risks was a common theme among speeches at the afternoon awards ceremony, including Mr. Bogle’s.

“Starting Vanguard was an adventure, an experiment … which basically had no chance to succeed whatsoever,” he said, describing how the company was initially plagued by bad investment performance, a shrinking industry and 83 consecutive months of net redemptions by investors.

“Anybody want to bet on whether it would succeed or not? I would not have bet on it,” Mr. Bogle said. The concept of index investing, which “everyone thought was terrible,” took 20 years to gain traction, and “from this hopeless situation” Vanguard was able to innovate for investors, he said.

The inaugural crop of icons and innovators also focused on customer centricity as a large reason for their successes.

“We have to listen to our customers,” said Jon Stein, the founder and CEO of digital-advice provider Betterment who was one of the 18 industry innovators. “There’s so much they’re saying and there’s so much more we can do.”

When it comes to innovating and trying new things, “the customers will figure out what works,” said Ken Fisher, founder and executive chairman of Fisher Investments, one of the largest registered investment advisers in the world.

Mr. Bogle, quoting economist Adam Smith, also hit on this point, saying the sole role of the producer is to serve the consumer.

“The industry hasn’t gotten that yet.”