John Bogle on the Balance Between Professional and Business Values in Investing—Part 1

An essay by Vanguard founder John Bogle, published in a recent issue of the CFA Institute’s Financial Analysts Journal, offers insights and guidance concerning the need for balance between professional values and business values in the world of investing and finance. This is the first installment of a five-part series providing highlights of the essay.

Bogle cites a 2005 article in which Harvard professor Howard Gardner and Carnegie Foundation president Lee Shulman argue: “The primary feature of any profession [is] an inherently ethical relationship between the professional and the general society.”

He then applies this notion to the finance industry, highlighting the need for investment firms to balance between maximizing profits and serving clients while keeping the clients’ interests front and center. In most lines of business, Bogle writes, professionals must satisfy both the inherent value and the perceived value of the product from the consumer’s point of view. In investing, he asserts, the satisfaction of clients is measured “almost entirely in dollars” which makes inherent value (rather than perceived value) the central focus.

“Dollars are fungible,” Bogle contends, while “automobiles are not.”