How Jack Bogle Revolutionized Investing

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On this week's episode of Motley Fool Money, host Chris Hill and Motley Fool contributors Jason Moser, Ron Gross, and Andy Cross hit on the market's biggest stories. Tune in for the latest news out of Netflix (NFLX -0.08%), lululemon athletica (LULU 2.64%), Tiffany (TIF), UnitedHealth Group (UNH -1.98%), and American Express (AXP 0.85%); as always, the guys also share some stocks on their radar. In memory of the late Jack Bogle, they close with a celebration of the truly world-changing work he did with Vanguard, and play some clips to remember his sense of humor. Also, Chris talks with Reuters journalist Paul Lienert about what he's seeing at the Detroit Auto Show, from massive crossovers and SUVs to a surprising lack of electric cars to a surprising presence of electric helicopters, and more.

A full transcript follows the video.

This video was recorded on Jan. 18, 2019.

Chris Hill: It's the Motley Fool Money radio show! I'm Chris Hill. Joining me in studio this week, senior analysts Jason Moser, Andy Cross, and Ron Gross. Good to see you as always, gentlemen! We've got the latest headlines from Wall Street. We'll get a report from the auto show in Detroit. And, as always, we'll give you an inside look at the stocks on our radar. Later in the show, we're going to reflect on the life and legacy of John Bogle, the founder of Vanguard, who passed away this week. 

But we will start with the business headlines. First up is Tesla (TSLA -3.40%). Shares of Tesla falling around 10% on Friday after the company announced it is cutting its full-time workforce by 7%. CEO Elon Musk said the company needs to lower costs while also increasing production on the Model 3. Jason, 2019, not off to a great start for Tesla.

Jason Moser: No. If you remember, SpaceX is going to be cutting jobs, as well. It does stink for people losing their jobs. From a business perspective, this is a good thing, which is why I thought the stock would be up on the news. It's always a coin flip, really. The market is selling the stock off on this news, which is a little interesting. But when it comes to Tesla, it's about figuring out ways to cut costs, ramp up production. 

Ultimately, this goes back to coming up with cars that people not only want, but they can afford. It goes back to this debate we've had for probably five years, as to whether Tesla actually has pricing power or not. It always struck me that they didn't. The cars were essentially built, they're very expensive, you have to offset some of that cost with tax credits and whatnot. And to attract a bigger audience, they typically are not going to be paying up for premium automobiles. I mean in Musk's own words here, in the email he sent, I'll quote this, he said, "The need for a lower-price variant of Model 3 becomes even greater on July 1st, when the U.S. tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely." Does Tesla have pricing power? I would say no. I think they're making the right call here in figuring out ways to whittle down costs because they are, I believe, stepping into a very challenging period.

Andy Cross: Building on that silver lining, what Elon said in his email which caught my attention was, "We're reducing headcount by 7%. We grew by 30% last year, which is more than we can support." So, here's the thing we've been looking forward to from Elon Musk, which is to show that he can run this company as a CEO, as a real car company. I saw that in that letter. That's what impressed me and gave me encouragement for Tesla shareholders and customers going forward.

Moser: I agree with that, totally. He looks like a guy who is ready to run this business, not just offer up big old grandiose visions.

Hill: They're going to report earnings on February 5th. He was pretty clear last year that, when they reported a profit, we're going to be profitable every quarter. What do you think?

Moser: I like to underpromise and overdeliver, so I might have done it a little bit differently. I guess time will tell.

Ron Gross: He's one of those CEOs that will get it done, no matter whether they have to work double time, cut costs, whatever they have to do on either the top line or the expenses. If he said it, he's going to try to get it done. 

Hill: Fourth-quarter subscribers for Netflix came in lower than the company had predicted. Still, shares of Netflix up this week, thanks in no small part to the price increase the company announced two days before they released the earnings.

Cross: It was an impressive quarter, continuing to build on as they are building this behemoth of a media company with 139 million global subscribers, 58.5 million in the U.S., 80.8 million internationally. Growth was up 30%. They continue to see they need to make the investments as they're building out the platform that they can serve. 

They offered up a lot of interesting content stats which I found very interesting. Analysts have been looking forward to this. The one that I found the most interesting is that they now in the U.S. have about 10% of TV screen time per day. That's about 100 million viewing hours in the U.S. per day on Netflix. When you think about the volume of content they have, the ability to show that to those subscribers, it continues to impress me. However, it's expensive, and the free-cash-flow line continues to be negative. 

Hill: You look at the subscriber number, Ron, yes, they came in a little bit lower than they had guided, they still came in close to nine million. 

Gross: The growth, obviously, is impressive. Playing the expectations game with that, you're going to be ahead or behind in any given quarter. But very, very impressive. Speaking of pricing power, getting back to that, it clearly seems that Netflix does have pricing power. That doesn't extend into perpetuity. At some point, they're going to raise prices, and it'll tip the scales to where some people will say, "That's too much for me. I'm not actually utilizing Netflix, I'm not enjoying the content enough to pay the price that they're charging." But it doesn't seem that that will be anytime soon.

Cross: Can I go back to that stat I said? It's 100 million hours of video per day. That's about 1.7 hours per day per membership in the U.S. That's about 51 hours per month. The average price for Netflix subscriptions is about $10. That's like $0.20 an hour that we're paying to use Netflix. So, when I think about the ability for them to keep raising prices as they need to deliver this content, I do see room for them to grow in that regard.

Hill: We talk about Netflix in the competitive landscape going up against the likes of Disney, Hulu, etc. I thought it was pretty smart of Reed Hastings to talk about the competitive landscape, not just in terms of those companies, but also broadening it to talk about things like YouTube and Fortnite. Certainly for younger people, that's taking some of their attention, as well.

Moser: I think that's the key, understanding that they're in the entertainment industry. It's not just streaming video. Fortnite is a good comparison there. Just to go back to the price increases for a second, because I do feel like Netflix has earned that right to boost prices incrementally. They're going to be able to do that for a little while longer. The question for me is, how far can they go? If you just look at the math here and say Netflix raises prices by $10 a month on all U.S. subs today, that gives them an additional $7 billion in revenue per year. The problem is, that money's already been spent. And they're going to have to keep on doing that. Part of the downside of the binge-watching movement is, the content lasts a much shorter lifetime, which means you have to come out with more content. Their business model is in the line of producing a ton of it. It's going to be expensive to do, but they've proven very worthy of maintaining that subscriber base.

Gross: You counter that with a company like Costco, which also appears to have some pricing power with their membership fee. But every time they raise that membership fee, it accrues to the bottom line. It's incremental profit because they're so profitable in the first place because the model just works.

Moser: Yeah, the argument with Netflix is, eventually, those price increases will trickle down to the bottom line. But it's still in theory right now. We have to wait and see.

Cross: They did raise $800 million in notes, at one point $1 billion in euro notes, during the quarter. Continuing to put debt on the balance sheet that they hope they can recover from down the road.

Hill: Shares of Lululemon Athletica up 10% this week after the company raised guidance for the full fiscal year. Ron, safe to assume that Lululemon had a good holiday?

Gross: Good holiday. I'm going to say the word athleisure, but I don't want to. [laughs] But for our listeners, I'm going to say the word.

Hill: I don't like the word athleisure.

Gross: And you should not, I agree. Strong holiday season, which was not the across-the-board experience for retailers. We certainly didn't see that. If this was a discounter, I would say that makes sense. But this is a fairly high-priced item here. Kudos to them. Athleisure remains hot. The company's doing really well. I expect to see a great report when they do actually report earnings. If you recall, back in the last quarter, comp sales were up 17% on a 44% increase in direct-to-customer business. The stock continues to execute well. Stock's up almost 100% over the last year.

Hill: Tiffany shares also up this week. Help me out, guys, because I'm not really sure why they're up this week. Same-store store sales during the holidays down 2%. They came out with guidance for the full fiscal year that they said is going to be at the lower end of the range.

Gross: Now, this makes more sense. You have a high-end retailer that had a soft holiday season. Chinese tourists spending globally less hurt them. Soft demand in the U.S. and Europe hurt them. Worldwide same-store sales were down 2%. Not surprising, I would have expected to see a report like this. 

Why the stock is up, I can't really explain. They cut profit guidance, which usually means the stock is going to trade down. It's at 19X earnings, so it's not really expensive. People you know aren't maybe selling it off on value. Maybe it just was stable enough.

Moser: I think there's a consistency, also, with Tiffany. They've proven over long periods of time that they don't chase those dollars, they don't resort to those fire sales to move inventory. You know what you're getting with them from a retail perspective, which is pretty valuable if you're looking for one of those buy-and-hold-style investments.

Hill: Shares of UnitedHealth Group up 7% this week after reporting strong profits in the fourth quarter. Jason, UnitedHealth is a $250 billion behemoth, and it's only getting behemoth-er.

Moser: [laughs] I love the use of that word there. I'm going to take that one home this weekend. You keyed in on my first observation. This company is so impressive in its scale. That scale is such a tremendous advantage in relation to their core business, which is essentially writing healthcare policies for the country and a lot of markets around the world. Full-year revenue was up 12%, $226 billion they brought in on the top line. The medical care ratio for the year was at 81.6%, down slightly, and that's a good thing. They typically keep it in the 81% to 82% range. 

An interesting thing on a call I noted. This quarter, you're hearing them talk more and more about using digital channels, which is just code for telemedicine these days. That word this quarter was mentioned seven times on the call. You go back two years, never mentioned even once on the call. They're talking even more and more about that stuff. You'll see some advertisements on TV, as well. I think there's a lot of buy-in to that market. You may remember that UnitedHealth Group is a component of my Healthcare and Wealthcare basket of stocks. Closing in on one year, and man, these guys have a performance Bill Belichick would be proud of. It just keeps on doing its job. It's up 17.6% for the year vs. the market's 0.6%.

Cross: Over 10 years, it's up 900% vs. 250% for the market.

Moser: It's an impressive business.

Gross: Wow, nice!

Hill: Atlassian (TEAM 1.42%) is not a household name, but maybe it should be. Second-quarter results for the software company were good enough to send shares of Atlassian to an all-time high on Friday, Andy.

Cross: Atlassian makes collaborative software for companies. We use them here, their Trello solution. EPS of $0.25 vs. $0.13 last year, vs. $0.21 for the estimate. Subscription revenue up 56%. Operating margin on an adjusted basis increased to 25% from 22%. Things continuing to do well for Atlassian as they're growing. They passed 65,000 customers for their Jira product, which is their core solution. Lots of software innovation at Atlassian and delighting customers around the globe.

Hill: American Express closed out its fiscal year by more than doubling its annual profit. Shares of AmEx up this week. Ron, their expenses definitely going higher.

Gross: Going higher. But they have to do that to compete. There's a lot of offerings out there when it comes to cards. For example, they revamped their Gold card recently to include more travel and dining benefits. There are expenses associated with that. 

But it was a strong report. It was actually a little light compared to expectations. But let's not play that game just for this moment. It was a strong report with revenue up 8%. Sixth consecutive quarter with revenue growth of at least 8%, which is pretty solid for them. As you mentioned, on an annual basis, profits more than doubled. Really good to see. Solid guidance. The stock's trading around 12X. These stocks do trade typically lower than a market multiple, so it doesn't necessarily indicate a very cheap stock, but it's certainly not expensive.

Hill: There was a point in our lifetimes where this was the card to have. It really seems like, whether it's through their own stumbles or just greatness on the part of companies like Visa and Mastercard, that AmEx really got lapped. 

Gross: I used to use it exclusively. Now, I don't use it at all because I replaced it with something like a Southwest card, or people love hotel cards.

Moser: Ron, I have the American Express that I used to use religiously and now only occasionally because most of my behavior has gone over to the Amazon Prime card, which is working out quite nicely.

Hill: Let's get to the stocks on our radar this week. Our man behind the glass, Steve Broido, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week?

Gross: I'm going to go back to Union Pacific (UNP 1.03%), which operates one of the two largest railway networks in the U.S. They operate west of the Mississippi, connects about two-thirds of the country by rail. A unique competitive position as a result of their behemoth nature, for sure. They're constantly getting better, more efficient. They've got a rising dividend, aggressive share repurchase. They've paid dividends on the common stock for 119 consecutive years. 

Hill: Years?!

Gross: Years. They've been around a while. So, for those dividend investors out there, this is a good one. Solid company, and they continue to increase the dividend.

Hill: What's the ticker?

Gross: The ticker is UNP.

Hill: Steve, question about Union Pacific?

Steve Broido: It seems like gas prices continue to rise. I would imagine that helps Union Pacific. Am I right? 

Gross: You are right. But the strength of the economy is largely what their results are based on. Let's keep an eye on the economy here. The downturn in the coal industry has hit the rail industry as well, but they still continue to produce pretty impressive results. 

Hill: Another benefit, if you're investing in a railroad, pretty high barrier to entry.

Gross: For sure. They're building a lot of new ones.

Hill: It's not like the four of us can just go out and start our own railroad. Jason Moser, what are you looking at?

Moser: We're talking about 90% of the flavor and 10% of the cost, my favorite spice maker, McCormick (MKC 1.04%) (MKC.V 2.53%), ticker MKC. Earnings are out next Thursday, January 24th. I'm going to be watching to see signs that the Franks and French's acquisition is still going along nicely. All signs point to success there. 

I really found it interesting last quarter, they noted that the company itself has added distribution to 20 new countries year to date, including larger markets like India. I want to see them tie a bow on that and really understand how much opportunity is left out there from a global perspective. Wouldn't be surprised to see these guys try to pull off another acquisition at some point. It sounds like they're getting this RB Foods one through.

Hill: Steve, question about McCormick?

Broido: McCormick seems to totally own the spice category. What do you do once you own a sector? What do you do next? 

Moser: You do one of the things they did, in making smart acquisitions. The RB Foods acquisition gave them access to more of the condiment side of the flavor market. I think that's ultimately what they're trying to do, is expand their flavor portfolio beyond just spices. I'd keep an eye out for potentially a new acquisition. 

Gross: I want a flavor portfolio.

Hill: Andy Cross, what are you looking at?

Cross: NVR (NVR 1.58%), the home builder that's located just up the street in Reston, Virginia. Reports earnings next week. $9 billion market cap. The stock peaked at $3,600 last year. Yes, $3,600. It's now at $2,500, down about 30%. It's the class of the home builders, which have really struggled as interest rates have increased. I'm looking to see what they're saying about their new orders, which were up about 2% last quarter. Their average selling price went in the other direction, down 2%. Symbol is NVR.

Hill: Steve, question about NVR?

Broido: It seems like home prices are going down as interest rates rise and sales seem to be decreasing. Why am I interested in this company? 

Cross: The stock is cheaper. They're the class of the industry. When you think about the returns on capital this business makes and the way they go about running it, when I look at the next five years, and the stock has outperformed the industry and the market over the last five years, I expect more of the same.

Hill: A home builder, a spice maker, a railroad, what do you want to add to your watch list, Steve?

Broido: I like that dividend. I'm going with Ron and Union Pacific. 

Hill: I really thought you were going to say 119 quarters.

__

Hill: This week, Detroit is home to both the Automotive News World Congress and the North American International Auto Show. Here to help us make sense of it all is veteran journalist Paul Lienert. He covers automotive tech, innovation, strategy and finance for Reuters and he joins me now from the Motor City. Paul, always good to talk to you!

Paul Lienert: Same here, Chris! Thanks!

Hill: What's your headline for the week?

Lienert: [laughs] In a world of electric vehicles and automated vehicles, if you walk through the Detroit Auto Show, you're going to see a lot of big trucks and big-ass crossovers.

Hill: I was looking at your Twitter feed, and I did notice you talking about the pickup trucks, the SUVs. Help me understand, because you know a whole lot more about the automotive industry than I do, what constitutes a big-ass crossover?

Lienert: I'm looking around at stuff with badges from Cadillac to Lincoln to Hyundai to Honda to Ford (F 6.10%). I'm seeing vehicles that are nearly as big as trucks, that have three rows of seats, that can carry seven or eight passengers. Many of them are all-wheel drive, or at least have all-wheel drive capability. And they can get very expensive very quickly. You can use your own terminology. I tossed that out there to see what kind of a reaction I'd get.

Hill: If what's being featured are the trucks, the SUVs, etc, where are the sedans? It really seems like, if we're just looking at automotive trends, sedans are on their way out.

Lienert: Chris, as you know, Ford announced last year that it was killing off most of its sedans in the U.S. because demand is sliding rapidly. GM (GM 1.98%) only recently announced it's going to start killing off some sedans. But if you walk through the auto show, you can find them here and there. Honda and Toyota, of course, sell two of the most popular sedans in the country. They're there. Lincoln, which is moving rapidly to become an all-SUV, all-crossover brand for Ford, they still have two or three sedans on their stand. Forgive me if I got a little schizophrenic feeling walking through the show.

Hill: Yeah, I'm wondering if, for anyone who's thinking about buying a vehicle later this year, if they're going to all of a sudden see dramatically lower prices on sedans, the dealers are just looking to move to make room for the bigger stuff?

Lienert: I would count on that. And I would count on that from many brands. 

Hill: If they're not being celebrated, they're certainly being invested in. $300 billion being invested globally in electric vehicles. Is anyone making a splash this week in Detroit?

Lienert: Electric vehicles are normally quiet, but it's amazing to see an auto show in recent years that's quiet on electric vehicles. There was a concept on the Nissan stand, a concept on the Infiniti stand, which is a Nissan brand, and then the Chinese brought a concept. But boy, you have to look hard at the Detroit show this week to find an EV on the show floor.

Hill: Why do you think that is? I understand the appeal of the larger vehicles, but with so much money being poured into electric vehicles... are they just taking a year off, and in 2020, we're going to see more of a splash?

Lienert: I have a real easy glib answer, and then probably a slightly longer, but more sensible answer. I don't know what it's like where you live, Chris. Here in the Detroit area, gas is around $2 a gallon. You don't need to go much further than that to understand why people are a little reluctant to move out of their familiar internal combustion engine vehicles. 

The longer answer is, EV charging stations are still pretty hard to find. It still takes way too long to charge an EV and many EVs, all the way up into the top of the Tesla range, still cost way more than a comparable gas engine model.

Hill: There have been years past when you and I have talked where Tesla was absolutely the belle of the ball when it came to the auto show. How is Tesla being talked about? The people you're meeting with this week, how is Tesla regarded? And what are people asking about the next 12 to 24 months when it comes to Tesla?

Lienert: I think the big buzz right now is, who's going to be out on the market within the next 12 to 24 months to challenge Tesla? There's a lot of competition coming mainly from the Germans right now, but from some other quarters, as well. Tesla's had the game pretty much to itself for a number of years. That's about to end. 

Tesla's also moving into China. That's going to be an interesting situation to watch, too, not just from a political and trade war perspective, but to see if they're going to switch technologies, what they're going to do over there, will the Chinese embrace Teslas like the Americans have over here? And finally, later this year, we're going to get to finally get a look at the Model Y, the compact crossover that's coming out to join the Model 3.

Hill: What's your big question about the future of electric vehicles? I don't know if too many people are looking at the oil and gas industry, predicting that prices are going to spike dramatically in 2019.

Lienert: They are not. Nobody is saying that. In fact, just the opposite. Oil and gas prices should be relatively stable, at least for the foreseeable future now that fracking and other newer technologies have given us a glut of petroleum. In a nutshell, my question about EVs is, who will buy them?

Hill: You mentioned the Germans a moment ago. This week, Volkswagen and Ford Motor announced a global alliance to build pickup trucks, delivery vans, and more. You tell me, why are these two rivals teaming up? 

Lienert: These two companies have been doing this dance for a little while. Volkswagen in years past actually talked to Chrysler -- oh my gosh, 30, 35 years ago -- about doing a much broader tie-up. Ironically, Ford was given a chance to buy Volkswagen right after World War II and turned that down. 

Right now, they have different needs. Volkswagen desperately needs to get away from the diesel scandal. It's way out in the forefront of electrification. It's pouring like $90 billion into battery-powered vehicles. Ford is a little bit behind the curve on that, so it could probably use some of Volkswagen's expertise. And I think Volkswagen's work on automated vehicles, it hasn't stalled out, but it could probably stand to work with Ford and Ford's Ergo unit, which has been doing great work on automation, or at least development of automated vehicles. 

There are some areas where they could participate. They can help each other in Europe, they could help each other in South America. So I think the talks will continue.

Hill: Let's go back to trucks for a second. What's the current state of the competition between Ford Motor and General Motors? 

Lienert: Guess what? There's an interloper here that may knock Chevrolet out of the long-hailed No. 2 position, and that's Fiat Chrysler's RAM brand. The two are squaring off at the Auto Show. There's a new RAM heavy-duty pickup and new Chevy Silverado heavy-duty pickup, and you can price those puppies all the way up close to $100,000 if you load them up with all the goodies and gadgets they offer.

Hill: It was this week five years ago that Mary Barra took over as CEO of General Motors. She's well respected. She has demonstrated that the company she's running is open to innovation, trying new things. And yet investors have not been rewarded. In five years, the stock is almost exactly, down to the penny, where it was when she took the job. How is Mary Barra regarded in Detroit?

Lienert: I'm a huge admirer of Mary Barra. I think she's widely respected and admired not just in Detroit, but across the auto industry. She's done a lot of great things for General Motors and helped bring that company back from the brink. I think the single biggest issue for GM, as it is for Ford and a number of other incumbent automakers, is simply this: Wall Street -- and I use that to denote investors of every stripe -- aren't convinced that these folks can make that leap across the chasm to the future of transportation, whether we're talking about automated vehicles or electrified vehicles or the types of services that newer companies like Uber and Lyft offer. Everybody's working on it. They're scrambling. They're pouring money into it. Nobody's making a lot of money at it right now. And Ford and GM, in the meantime, continue to build big, profitable, very profitable, pickup trucks and SUVs. And GM's pretty darn good at that. 

I don't know what it's going to take to convince Wall Street. It's amazing that a company like Tesla, that's, what, 10 years old or thereabouts, and has never made a full-year profit, is actually valued by investors much higher than GM or Ford. 

Hill: There's a lot of action in the self-driving car space. You've got Ford and GM. You've got companies like Waymo. What should we be watching this year when it comes to self-driving vehicles?

Lienert: I think Waymo, which only late last year began offering a hint of a commercial service in Phoenix, is going to start to roll that out in other places, so real people can actually try the service. Think of it as an automated taxi service. There will still be drivers on the vehicles for a little while. 

GM's still, through its Cruise subsidiary, in San Francisco. Wants to launch a similar service. Ford, in the meantime, decided not to go with passengers or human beings. First, they're delivering goods, everything from pizzas to packages. They're teamed up in Miami to test down there with Postmates and Domino's Pizza. Look for Ford to expand that to a few more places. 

We're still in that very early testing stage, where you have to prove out the technology, but more importantly, you have to start proving out some of the services to see if these things will ever make any money.

Hill: Of everything you've seen this week, whether it's a particular type of technology or a concept car, what have you seen that really impressed you? Something that you thought, "Ooh, I'd like to get my hands on that."

Lienert: Chris, please don't laugh at me. [laughs] The thing that really stuck out -- I don't know if I would say it impressed me, although I'd really like to have one, is the carbon fiber electric helicopter from a company called Workhorse. It's tucked away in the back of Cobo Hall, way past the cars. But I walked over there and fell over this thing and I almost had a heart attack. It was awesome. I hope I can only figure out how to scare up about $200,000, we can talk business.

Hill: I was going to say, instead of asking you about self-driving cars, do I need to start asking you about the helicopter industry?

Lienert: Drones, my friend! Drones! Forget about these scooters, drones are the future. That and plastics.

Hill: If you want to know more about the automotive industry, you need to be reading Paul Lienert's stuff. Paul, I know it's an incredibly busy week, so thanks for making the time!

Lienert: Always love talking to you, Chris! Thanks for the conversation!

__

Hill: This week, the investing world lost a true giant. John Bogle died at the age of 89. In 1976 he founded Vanguard Group, created the first index mutual fund, and started a revolution in low-cost investing. Andy, make no mistake, every one of us -- whether we were a shareholder of Vanguard's products or not -- every one of us benefited. Every one of us is richer because of John Bogle.

Cross: I wrote this week that if there's ever an Investing Hall of Fame, he's an automatic first ballot taker. You just think about what he's created. Vanguard now has more than $5 trillion in assets under management. Most of those are invested in passive index funds to match the market in as low of cost as possible. This was revolutionary back in 1976. He was laughed at, he was derided. Yet, given the success and the way that he's built that business, as a mutual business, it really has had this lasting impact, and his legacy will not be forgotten. We all owe a debt of gratitude to Jack Bogle.

Gross: Yes. Certainly beloved by the individual investor. Not so much by the active manager, however, because all of a sudden, there was a passive product that you could buy, and you didn't necessarily need to rely on your active fund manager any longer. I think, as a whole, it's certainly been better for the investment community, for the world. But at the time, it was revolutionary, and not everyone was a fan.

Hill: Oh, no question! There were absolutely people used to a pretty cushy fee-based lifestyle, Jason, on Wall Street. And I'm sure some of them tried to pull him aside and say, "John, why are you trying to ruin a good thing here?"

Moser: Everything changes eventually, right? A lot of his investing tenets are what helped build our Foolish investing philosophy here that we talk about every week, on and on and on. I've seen the question posed more than once this week, who's going to be the next Jack Bogle for the market? I think the point is, there's not going to be one and we don't need one. That's how profound what he did was. He's going to have people like us, organizations like us, investors like us, get up there and call BS when we need to. That's the impact he's had. I think once that cat is out of the bag, it ain't getting back in.

Hill: We here at The Motley Fool had the chance to meet him a bunch of times. We've had him here at Fool headquarters a number of times. We loved Bogle for his passion, his competitive fire, also for his sense of humor. I want to play a clip of Jack Bogle when he made an appearance on the original Motley Fool Radio Show around the turn of the century. Here's Jack Bogle playing around of Buy, Sell, or Hold with me and Tom Gardner.

[...]

Tom Gardner: OK, let's start with buy, sell, or hold Warren Buffett.

Jack Bogle: Buy. He's a fundamental value investor. He would diversify a portfolio of U.S. stocks because he has some high-grade stocks in there but has also done very well over a long period of years in insurance company holdings. He's more of an insurance company than he is a U.S. stock investor now.

Gardner: OK, Jack. You live in Valley Forge, Pennsylvania, in the area. Buy, sell or hold Philly cheesesteaks?

Bogle: Hold Philly cheesesteaks.

Gardner: OK, why are you holding?

Bogle: Well, I'm holding them only if you don't have heart problems, because they've got, A, cheese, and B, steak. Cholesterol lovers -- those that can handle it, anyway -- should be entitled to it. They're delicious! They should be entitled to a good Philly cheesesteak. But I'm not putting it on buy, because you might do it more than, say, once a month.

Hill: OK, John, our final one: buy, sell, or hold teen pop sensation Britney Spears.

Bogle: Well, I would sell Britney Spears. 

Gardner: OK, let's hear why. 

Bogle: Well, she's a little sultry for those goo-goo eyes, I don't know, she's displaying a certain amount of virtue that we didn't use to see the stage.

[...]

Hill: Love that! Love that clip! Also, as he indicated when he was talking about cheesesteaks, pretty remarkable that Bogle had a heart transplant when he was in his mid-60s. Made it another 23 years. I think we all had the chance to meet him. So much energy and an absolute iron grip of a handshake.

Cross: The story of when he founded Vanguard, being forced out of Wellington, it's a really great boardroom struggle. He went off and backdoored his way back into creating the index funding and creating Vanguard and turning it into this amazing business. 

Gross: He was a convert. He was not always a fan of passive investing. In fact, he railed against it. But kudos to him for realizing in the end that this was the way to go and it would be a great thing for individual investors.

Hill: Although, his senior thesis at Princeton was about index investing. I don't know about your senior thesis.

Gross: [laughs] Not that!

Hill: All right, Ron Gross, Jason Moser, Andy Cross, guys, thanks for being here! On behalf of producer Mac Greer and our engineer, Steve Broido, we're going to hand the final minute of the show over to Jack Bogle. This is from a visit he made to Fool headquarters a decade ago, when he shared how he came up with the title for his book Enough: True Measure of Money, Business, and Life.

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Bogle: Kurt Vonnegut and Joseph Heller, the author of Catch-22, of course, are going to a party and share that lifestyles of the rich and famous and socially prominent place off Long Island in New York, to a party given by a billionaire hedge fund manager. And they get into the party, and Kurt says, "Joe, see that guy over there? He's a hedge fund manager, billionaire. And he made more money today, this one day, than you have made on every copy of Catch-22," probably the biggest book of the postwar generation, post-World War II generation, ever sold. He says, "He's made more money than you on every book, every copy of Catch-22 that's ever been sold." And Joe Heller looked at Kurt Vonnegut and said, "That's OK because I have something he will never have: enough. Enough." And that's where the story comes from.