Trillions Is a History Lesson for Anyone Involved in the Markets

Robin Wigglesworth
John Lothian

John Lothian

Executive Chairman and CEO

FT Correspondent Robin Wigglesworth Interviewed by JLN About His New Book

Robin Wigglesworth loves history. He is the author of a new book on the history of passive investing titled, “Trillions; How A Band Of Wall Street Renegades Invented The Index Fund And Changed Finance Forever.”  Wigglesworth spoke to John Lothian News over Zoom from Oslo, Norway where he is stationed as a correspondent with the Financial Times. We interviewed him about this first book he has written and why he wrote it.

As he dug into the history of passive investing, he found it fascinating, full of interesting people with great stories who helped define their own industries. The stories were both interesting and important, and Wigglesworth said, “That is when you know you have struck gold.” 

After two years working on it, Trillions was recently published and Wigglesworth is doing interviews with media outlets around the world. Already JLN has published links to an independently generated and externally written review by the Financial Times. We also published a link to a review by the Wall Street Journal.

We asked Wigglesworth about who some of the characters are in the book.  He started with the man he called the “godfather of indexing,” Louis Bachelier, a French mathematician who died in obscurity. He also tells stories about Eugene Farma, Harry Markowitz and Bill Sharp. 

The first index fund came from Wells Fargo and a guy named John “Mac” McQuown who hired a bunch of the academics listed above. McQuown is a former winner of the CME’s Melamed-Arditti innovation Award, which he won along with Jack Bogle. Wigglesworth also mentioned Rex Sinquefield at American National Bank of Chicago and Dean Lebaron, who each came up with the idea for an index fund at different times. 

We asked him about the themes in the story he found most interesting. The biggest theme is an old one, technological disruption. Incumbent Wall Street firms don’t like to disrupt themselves, so it takes some second or third tier challengers and unusual characters to do so. 

Wigglesworth spoke about some of the negative externalities that come with index investing.  He broke them into four different categories.

The first one was Jack Bogle’s favorite one, that you can put anything into an ETF wrapper. Wigglesworth does not believe all the different ETF products that have proliferated in recent years are right for all investors.

The second category of externalities is the power that has accrued to index providers who control trillions of dollars of equities and their voting rights. He even thinks the big index providers have some quasi-regulatory powers.

The third category is the idea that indexing distorts markets, leading to more volatility.

The four externality is the one Wigglesworth is the most worried about. That issue is that the big keep getting bigger. State Street, Vanguard and BlackRock are the examples he cites. Vanguard and BlockRock have between them $16 trillion of assets, giving them tremendous power over the stock market.

Wigglesworth also spoke about the impact on price discovery of equity shared from indexing.  He split his answer into micro and macro perspectives. 

He mentioned Tesla as a good example of a stock that had an impact on indexing as people anticipated it would be included in the S&P 500. 

Wigglesworth spoke about the different bogeymen of the financial markets from different eras, including trusts, hedge funds and private equity. 

As a journalist, Wigglesworth said his investment portfolio is not very large, so the impact of the lessons he learned has had little impact on his own investing. He did learn to appreciate ETFs a little more from writing the book.  The Covid pandemic crash of March 2020 showed the strength of the ETF market, he said.

As for what is next, Wigglesworth said he would like to write a magazine piece on the history of the bond market, noting that “two years ago bonded debt became bigger than bank debt.”

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