A Ship-Shape Indexer

Both Wall Street and mutual fund firms love their logos.

Merrill Lynch has its big bull. Dreyfus has its lion.

And Fidelity has that freaky disembodied eye thing like the one on the back of the dollar bill and is the pride of Masons everywhere.

Vanguard, the indexing dynamo in Valley Forge, Pa., opts for an 18th-century ship. I have no idea what this ship has to do with mutual funds. I do know, thanks to a recent visit to Vanguard, that the firm's obsession with this particular vessel, called the HMS Vanguard, hovers over its sunny campus like the ghost of Captain Bligh. Or maybe more like Captain Crunch.

From where I sit -- and I hope you'll forgive me on this -- the firm goes a little bit, well, overboard with its maritime theme.

Sea of Blue

The weather vane on the HMS Vanguard drops anchor.

Credit: Courtesy of Vanguard

The HMS Vanguard was instrumental in defeating Napoleon at the Battle of the Nile in 1798, ensuring that the guy with the original short-man complex wouldn't find his way into Egypt or India. (The Battle of the Nile was voted Best Naval Battle by the The New York Times Magazine, I was told upon arriving at Vanguard. I didn't even know there was a competition.)

Jack Bogle, Vanguard's founder and a pupil of military naval history, picked the ship's name for the firm himself.

And here, employees aren't employees. They're crew members. They don't take their lunch in the cafeteria. They eat in the galley. (On the menu: Flounder N Fries. No word yet on how Long John Bogle's has test-marketed as a family eatery.) Employees don't shop in the company store. They snap up Vanguard mementos in the chandlery.

At first, all this seems kind of endearing.

"You know, it's kind of cute," says Vanguard expert Dan Wiener, who edits the Independent Advisor for Vanguard Investors, a newsletter that gives independent advice to ... well, you get it.

But after strolling around the campus for the better part of a day, I got a creeping feeling that the whole nautical thing was a little more than cute. It started to seem, well, a little weird.

"Yeah, it's kind of goofy," says John Woerth, a crew member in Vanguard's public relations department. "But I don't even notice it anymore. It must seem strange to an outsider."

How true.

On the Vanguard campus, the buildings sit majestically moored, bearing names like Zealous and Victory (also yachts of yesteryear), their interiors awash with model ships and gory paintings of naval confrontations. In the middle of the campus, a scaled-down model of the HMS Vanguard perches atop a pole. The pole, if you wanted it to, could remind you of a mast.

Maybe the scariest bit about the whole ship infatuation is the layout of the campus itself. Aerial drawings show it's shaped like a ship, with an arching bow and sturdy square stern. (Which gives the pole thing in the middle a particular significance.)

"You're not the first one to say that," says John Demming, another crew member who works alongside Woerth. "But it's part of the culture."

Indeed.

What's mind-blowing about this culture is it exhorts everyone in the company to play along, and for the most part, they do. One Vanguard employee, who shall remain nameless for his protection, told me he was a bit of a "renegade" -- not because he had an unhealthy interest in model planes or preferred the land-based Waterloo battle. Because he didn't have that much nautica in his office.

Captain Jack
Is Chairman Jack Brennan figuratively at Vanguard's helm, or literally?
Credit: Alison Moore

Everyone else isn't necessarily freaky or of the convert-you-with-pamphlets variety. You can imagine yourself having a drink with them. Take Jack Brennan, the company's chairman. Jack's a nice guy with a pleasantly tanned face. He loves to coach youth sports and still mans the phones from time to time.

But the ship-obsessed culture couldn't help but insert itself into our conversation. During my visit, Jack sat with me in his office, espousing the advantage of indexing and the importance of keeping costs under control.

I tried to concentrate on what he was saying. But my attention kept drifting to the bookcase behind him, and not for its titles. On the top shelf, there sat an obscenely large pirate's hat, a party favor from a company picnic.

Now, I have no idea whether Jack has even worn that hat. Maybe he has slipped it on during a private moment as his index funds were whirring smoothly outside his door.

But the image I got was something along the lines of the chairman of the nation's second-largest mutual fund firm running around his office, dagger drawn, snarling, "Ahoy, mateys, indices ahead!"

Which was scary. But maybe I've just been covering mutual funds too long. Land ho!

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