Episode Details

0:00 -- Intro.

1:26-- About this podcast's sponsor: The American College of Governance Counsel.

2:13 -- Start of interview.

2:45 -- John's "origin story." His time at WLRK and at the SEC.

4:15 -- His focus at Harvard Law School and Harvard Business School.

4:39 -- About his book THE PROBLEM OF TWELVE: When a Few Financial Institutions Control Everything (2023). Publisher: Columbia Global Reports. 

"Around the year 2000 [Index Funds and Private Equity Funds] began a sustained takeoff and the book is motivated to tell the story of how that happened and then more importantly what's happened since 2000 with 10-15% compound annual growth every single year for both kinds of funds which is much bigger and much faster than the economy or the capital markets or corporations."

"The problem of twelve is just trying to get a catchy way to get people to understand that it's not just growth, that'd be one thing, but it's concentration."

11:22 -- On "What came before: the Twentieth Century's Public Company" and the rise of private markets.

"Actually, the public markets have gotten bigger, even though the number of companies has fallen. It's not like they're shrinking, which sometimes is the way people talk about it. But what's different is their autonomy is declining. So in 1990, the board of a public company and its CEO were the centers of power.  If anything, the CEO was probably the most dominant player and the board was kind of a check. The shareholders were kind of out there, but they really only mattered in a hostile takeover. That was it." "[By year] 2000, 2010, and definitely today what I just described is not true. Boards are now more powerful than CEOs in general. They have a greater influence over setting strategy today."

"[The] power started and ended with the CEO in the boardroom. And that really has, I think, dramatically declined and continues to decline as a way of describing how the US economic system works."

15:39 -- Evolution of US boardrooms since the 1970s.

"I think of boards as becoming more important during that period because businesses were stumbling. As long as CEOs were successful in running their empires, I don't think the pressure to provide a different governance system would have been nearly as powerful."

"Jay Lorsch at HBS wrote an early study suggesting that boards really were not doing much. Jay was very much part of the movement to get boards to be more active, because he thought that was better than the alternatives of either continued stagnation in economic activity or worse solutions, which other people were proposing."

20:19 -- On the impact and evolution of Index Funds.

"[T]he key thing is scale. It's not as if there's like 55 different index funds all competing with each other. No, there's really just a small number of families [ie. the Big Four, BlackRock, Vanguard, State Street and Fidelity] that are achieving these scale levels. So that's the basic problem of the book."

"[W]hen Jack Bogle set up Vanguard, he wasn't setting out to take over half of all the stocks in the country.  It took him 30 years just to get to 2%. It's just a side effect and so the system was not designed with that kind of concentration in mind. 

"[W]e're now having to go through a period where we