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Illustration: Aïda Amer/Axios

The best speech ever given to an audience of bankers was delivered by Paul Volcker in December 2009: "The most important financial innovation that I have seen in the past 20 years is the automatic teller machine."

The big picture: Volker was right in substance, but he did miss one financial innovation that has been unambiguously positive for the world. The low-cost index fund, as popularized by Jack Bogle (1929–2019), has given millions of investors billions of dollars in extra retirement income.

Bogle created a fund-management giant in Vanguard, which is owned by the investors in its funds and therefore has no need to maximize the profits it makes.

  • For anybody trying to work out where to invest their retirement savings, it's hard to do better — and very easy to do a lot worse — than just putting the whole amount into a Vanguard index fund.
  • Bogle's insight was that an individual investor will find it statistically impossible to beat the market over the long term, either by picking stocks or by picking fund managers. Index funds provide market returns at minimal cost, by excising stock-pickers entirely.

Millions of Americans have got the message and have moved their investments to index funds and other passive strategies. The biggest fund managers, including Vanguard and BlackRock (which owns iShares), are built on not picking stocks.

  • Vanguard and BlackRock are two of the largest shareholders in just about any big company you care to mention; they have no choice in the matter. Yet as large shareholders, they are constantly subject to campaigns urging them to divest from certain companies.
  • BlackRock, in contrast to Vanguard, is reluctant to admit that it has very little control over much of its asset base. BlackRock CEO Larry Fink enjoys the bully pulpit that comes with controlling trillions of dollars. (Bogle, by contrast, never tried to tell public-company CEOs how to run their companies.)

This week, BlackRock was embarrassed by a fake letter from Fink, designed to make him look like an ineffective blowhard. The point of the letter was to show what Fink could achieve if he really wanted to, including divesting from carbon-investing companies even in his "broad indexed funds."

  • There's a case for divestment, but a fund manager doing any such thing is by definition an activist.

The bottom line: Passive investment is good for millions, but active investment is still necessary. It holds managers accountable for their actions and provides crucial price discovery. Bogle was proud to be a passive investor. Fink, by contrast, seems to want to have it both ways.

Go deeper

Schumer's m(aj)ority checklist

Senate Minority Leader Chuck Schumer. Photo: Tasos Katopodis/Getty Images

Capitalizing on the Georgia runoffs, achieving a 50-50 Senate and launching an impeachment trial are weighty to-dos for getting Joe Biden's administration up and running on Day One.

What to watch: A blend of ceremonies, hearings and legal timelines will come into play on Tuesday and Wednesday so Chuck Schumer can actually claim the Senate majority and propel the new president's agenda.

The dark new reality in Congress

National Guard troops keep watch at security fencing. Photo: Kent Nishimura/Los Angeles Times via Getty Images

This is how bad things are for elected officials and others working in a post-insurrection Congress:

  • Rep. Norma Torres (D-Calif.) said she had a panic attack while grocery shopping back home.
  • Rep. Jim McGovern (D-Mass.) said police may also have to be at his constituent meetings.
  • Rep. Adam Kinzinger (R-Ill.) told a podcaster he brought a gun to his office on Capitol Hill on Jan. 6 because he anticipated trouble with the proceedings that day.
Off the Rails

Episode 3: Descent into madness ... Trump: "Sometimes you need a little crazy"

Photo illustration: Sarah Grillo/Axios. Photos: Tom Williams/CQ-Roll Call, Chip Somodevilla/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. This Axios series takes you inside the collapse of a president.

Episode 3: The conspiracy goes too far. Trump's outside lawyers plot to seize voting machines and spin theories about communists, spies and computer software.

President Trump was sitting in the Oval Office one day in late November when a call came in from lawyer Sidney Powell. "Ugh, Sidney," he told the staff in the room before he picked up. "She's getting a little crazy, isn't she? She's really gotta tone it down. No one believes this stuff. It's just too much."