In Praise of Copycats

"'Critics called it "Bogle's folly.' In 1976, John Bogle introduced the first index fund through his new company, the Vanguard Group. The idea was based on research for his senior thesis in economics at Princeton, in which he showed that, on average, professional money managers failed to beat the rate of return of the overall market. (The thesis, written in 1950, earned him an A+.). Wall Street veterans initially scoffed at the fund, which tracked the Standard & Poor's 500 Index.

Who would be content with hitting the market average? But the critics were quickly proven wrong. Vanguard grew explosively, and it is now the largest mutual fund company in the nation. Mr. Bogle's ideas have been widely copied by rival firms. Until recently, competitors were free to copy financial innovations—and as a result, index funds are now a huge business for Wall Street..."

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