El Niño Hits Business & Robotaxi Race Accelerates

**SPEAKER_1** (0:00)
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**Hanna Horvath** (0:31)
What do fish, ski passes, AI data centers and interest rates all have in common?

**Dylan Lewis** (0:37)
Plus, the index fund celebrates its golden jubilee.

**Hanna Horvath** (0:39)
For Friday, September 4th, it's Brew Markets Daily. I'm Hanna Horvath.

**Dylan Lewis** (0:43)
And I'm Dylan Lewis. Let's get moving and grooving.

**Hanna Horvath** (0:54)
It's Friday. We are in the last days of summer. And going into this long weekend, I wanted to catch up on some of the stories that we did not have time to cover this week.

**Dylan Lewis** (1:02)
That's right. In a moment, we're going to explore weather trends affecting companies.
Also look at the barrage of Robotaxi rollouts this week. But first, we're going to celebrate a birthday. This week, the index fund turned 50 Hanna, get us started here. I have a quick question for you. You have money in Vanguard index funds?

**Hanna Horvath** (1:17)
So I am actually a Fidelity girl, but I love index funds. Huge fan over here. I probably have about over 90% of my portfolio in them.

**Dylan Lewis** (1:26)
I think we are similarly allocated. I am also an indexer, but I'm a little bit more loyal to the OG, Vanguard. It was literally the first investment I ever made when I was 18 Once I had taxable income, my dad sat me down and said, son, you're opening a Roth IRA, and when you're 59 and a half, you will thank me. I'm guessing that a lot of our listeners are also in index funds. That's a tongue tweezer right there.
Because tens of millions of Americans are. It is one of the most popular ways to invest. The people who are in index funds have Vanguard and Jack Bogle to thank for that. 50 years ago, he launched the first one.

**Hanna Horvath** (2:02)
Yeah, and of the five largest mutual funds in the US., four of them are actually index funds from Vanguard, and the other one is an index fund from Fidelity. Combined, these five have about $5 trillion in assets.

**Dylan Lewis** (2:13)
But back when the first index fund was introduced in 1976, it was considered an absolutely radical idea. At the time, investors put money into funds run by money managers, running sophisticated strategies, and those money managers largely underperformed market indices. So Jack Bogle at Vanguard had a radical idea. Don't look for the needle in the haystack. Just buy the haystack, people. This novel idea was widely panned when he first introduced it. The first index fund, an S&P 500 fund, only raised $11 million, and it went well short of its initial targets. A lot of people in the market called this Bogle's folly.
Nevertheless, he persisted. In the late 1970s, less than 15% of Americans were invested in the stock market. Today, that number is over 60%.
So that's more Americans enjoying the financial gains of capitalism because of Jack Bogle and the index fund. And because index funds have lower fees, more Americans are keeping more of those gains. Vanguard estimates that they've saved investors over $570 billion in fees over the years through low-cost indexing instead of paying high fees. For actively managed funds, 50 years in, the index fund, in my opinion, is maybe one of the greatest wealth generators for average Americans. And personally, Jack Bogle, one of my favorite investing icons.

**Hanna Horvath** (3:32)
Yeah, I'm with you there, especially as somebody who does not like paying investing fees. One of the other really interesting pieces here for me is just how much American retirement planning has changed since that index fund was invented. You know, as you said, it was introduced in 1976 and the 401k was introduced just a few years later.
In the 1970s, roughly half of American workers were covered by a pension program that provided a defined benefit to them when they retired. And today, the 401k dominates. Only about 10 percent of corporate workers are covered by pensions. So the index fund came into being at the same time that the burden of retirement planning started to shift from the company to the individual.

**Dylan Lewis** (4:08)
I was curious as I was doing my little dig in index funds this week, what kind of market dynamics were caused by the rise of index funds and the dominance of passive investing. And one of the things that's interesting to me about it is the index fund really shifted what an index does because for a long time, it was a measure of the market. Now it is also a blueprint for investment vehicles, and the index makers themselves are now kind of gatekeepers of capital.