Episode 400: The Evolution of Index Fund Investing

18:25Tim Edwards:and if you believe that markets in aggregate go up over time it's a perfectly reasonable strategy to hold everything it's very selective to think that you can get in and out at the right time when building an index or picking individual stocks in your portfolio it's the same thing what goes back to the hank bessemender research and different people have different takeaways Some people take away from that research. I can avoid the duds and pick the good ones. Other people say that doesn't make any sense whatsoever.

18:58Ben Felix:Yeah, exactly. And that's where I think Hank would tell people to review the literature on overconfidence if they think that they can be the ones to pick those mega winners. But you're right.

19:07Tim Edwards:And then on the flip side, people don't want to be over-concentrated to the current winners because they're afraid they're going to go down. But you also can't predict that side. So it's better just own the market as a whole. yes you're going to ride those ones down if they don't do well but you'll also ride up the ones that replace them in the future you can't know with certainty what's going to do well so it's better just own everything all at once and like you think about those winners the experience of amazon the classic amazon story of how many times it fell some ungodly amount like would you really stuck through those 90 drops i just take your current portfolio knock off 90 yeah it's a good point.

19:49Tim Edwards:Really? That's not causing a little bit of stress? And at some point you would just conclude that, hey, I thought this was going to be the next big winner, but clearly not. It's easy to look back and say, oh, you know, it's Amazon. If I just held on, it would have become Amazon. But you didn't know where it was going to go at the time. You would not have had that kind of confidence. But the other interesting thing here is that if you go back to that other period of high concentration in 1965 though the sectors that those big companies were in were a little bit more varied than they are today they're basically all tech companies today whereas here you've got what three oil companies but you've got a retailer a photography company kodak chemical producer telecoms ge so you have at least three or four different significant sectors there so it was probably a little bit more diversified.

20:43Tim Edwards:There was no reason necessarily to believe that all of those companies could be hit by the same kind of shock. Whereas tech companies are probably a little bit more vulnerable to moving in lockstep than those were back in 65.

20:59Ben Felix:They're pretty diverse though. You look at the big companies today, they are all technology companies, but I mean, what isn't to some extent a technology company today, like everyone is using technology, but the actual fundamental revenue sources from today's large companies, they're not all the same.

21:15Tim Edwards:Yeah. Amazon is not NVIDIA. Yes, they're tech companies, but it's naive, I guess, to suggest that they're highly correlated.

21:23Ben Felix:They might be, they might still be, but if some fundamental shock affected Amazon's business, that same fundamental shock won't necessarily affect, I don't know, Google's business or NVIDIA's business. Yeah.

21:35Tim Edwards:And if you take that down another level, each business is fairly highly diversified in terms of revenue sources just in that individual company as well.

21:45Ben Felix:Agreed. So that was Tim's paper. Then Jim Rowley also had a paper. His paper was shared the same title as our panel. So Benefits Beyond Beta Charting the Evolution of Index Fund Investing. So his paper shows that while indices like the S &P 500 are still prevalent and important today, there are many, many more indices tracking all kinds of different parts of the market. I think he makes his point on the panel too. Index funds are spoken about as this monolith, as this one big thing that owns a lot of the market. But in reality, they're really diverse strategies that track lots of different things, lots of different parts of the market.

22:22Ben Felix:And they're also used in different ways. Not everybody just buys and holds index funds. They're often used in an active way or as part of an active strategy. Another thing that the paper touches on that we've talked about, I don't know when, but we have talked about on the podcast at some point in the past, is that indices with similar names can be very different depending on the index provider. So if you think about stuff like how does the index you're looking at define company size? How does it define growth versus value? How frequently does the index rebalance? And those can all result in pretty material differences between two funds that are labeled small cap or value or small cap value.

23:03Ben Felix:They're just making the point in the paper, again, that index funds are pretty dispersed in terms of what they actually own and what they do, even for funds with a shared name. So that's that paper. And then there's one more paper that was not in the conference package, but it's another paper from Jim Rowley that he draws on pretty extensively. So I'll talk about that one last. Any comments though on the diverse set of index funds that exist?

23:29Tim Edwards:I thought this paper was really interesting too, because I think it's such a great point to appreciate how index funds and indexing strategies from a practical point of view has changed so much. And that 20 years ago, if you were one of the rare people who advocated index investing, your decision about how to implement that decision was pretty easy. at least in Canada, you basically had one big index provider and a small number of ETFs to choose from. I'm exaggerating a bit, but not that much. Whereas today, once you've made the decision to build a passive portfolio, yes, there are easy solutions, right?

24:12Tim Edwards:The one fund solutions are available, but there's lots of those too. And they're all built a little bit differently. and there's thousands of other ETFs and index funds to choose from. If it's not actually thousands, it feels like it. You really do need to have some expertise in how to evaluate how an index is constructed, what's included, what's not. If I want to buy an ETF that holds US stocks, for example, am I going total market, large cap, mid cap, NASDAQ? There's all sorts of different ways to access those asset classes. And there's definitely better ways than others. So I think it's just a little bit harder now to do it without guidance.

24:54Tim Edwards:But the information is so much better. Back in the day, the information, there was nothing.

24:59Ben Felix:I don't know, man. Do you disagree? There is good information, but to say the information is better, there is so much crap out there, Cameron.

25:08Tim Edwards:I agree with that. There's more access to good information. Back in the day, there was scant access to information. Sure. Even to understand how creation and redemption would happen was like a mind-bending thought experiment at the time to try and understand how do you do this ETF thing? It wasn't available. This is back in 96, 97, as it was all kind of starting in Canada. Oh, I agree. Your ETF slopped in that whole commentary, 100%. Like there's so much noise today. And my experience like with AI is that it's not making things better.

25:42Ben Felix:Well, it's slop. It's AI slop and there's ETF slop and you add it all together and it's just, there's a lot of slop. Not so easy to navigate.

25:50Tim Edwards:On the positive side though, I would add though, of the good index funds that have always been available by the reputable providers, the management of those funds has become a lot better too. I think if you go back 20 years again, you'd probably see higher tracking errors. You'd see things like representative sampling where you only purchased a subsection of the index because it wasn't practical to replicate it by buying all of the stocks. Currency hedging is another thing that has improved so much over the years. If that's something you want to lay over your index fund, it used to be really ham-fisted and it's much better now.

26:30Tim Edwards:So just on the technical side, the funds themselves are better and managed better. But again, it's just a little hard to sift through the chaff to find the good ones.

26:41Ben Felix:It's a good point. Even on the slop comment, I do, and I've said this before, I think it is absolutely incredible what we can put into an ETF. Like that's cool. There's cool stuff happening. It's just, it's probably mostly not good for investors, but it's still from an implementation perspective, it's like, wow, that's really impressive. So this last paper from Jim, which again, he alludes to some of the data in this paper during the panel discussion. It's called Setting the Record Straight, the Truths About Index Fund Investing. And again, we will link this in the show notes if you want to read it.

27:13Ben Felix:It's on Vanguard's website. So this one, this paper notes that increased adoption of index fund investing has heightened emphasis on the binary labels of passive and active as if all index funds can be described as a monolithic, homogeneous strategy, and that this has led, that perception has led to many faulty assertions about index fund investing. What the paper does is goes through assertions tied to the growth of index fund investing and offers evidence that refutes a lot of the key misperceptions. It does start off with five key benefits of index investing, which listeners probably don't need to hear, but maybe it's always good to hear.

27:50Ben Felix:index funds give you diversification, low costs, consistent relative return predictability. That means you know you're going to get the index return, the market return. You're not going to get the market return plus or minus an active return. So consistent relative return predictability. That's another big thing of a bit of a tangent, tying it back to the introduction discussion on institutions. Institutions really struggle. You mentioned this, Ben, with tracking error, you benchmark against an index because that's what everybody does and it makes sense to do that. But any tracking error relative to that is really, really hard for institutions to deal with because it's like, how long is this going to go on?

28:29Ben Felix:Should we expect it to turn around? Usually it doesn't. Potential for tax efficiency is another benefit of index funds and simplicity and transparency. You kind of know what you're going to get. They also mention, this is something often referred to as the Vanguard effect. They mentioned in the paper and they show data supporting it that index funds have driven down the costs of investing in both active and passive funds. It's like Vanguard shows up to a market. It happened in Canada. Vanguard shows up to a market and they offer super low cost funds. Everyone else has no choice. They have to lower their fees to compete.

29:02Tim Edwards:We were talking about it before we started recording too what the number is there that Vanguard had estimated that they had saved investors over$500 billion in fees since 2000, just from the advent of, and the popularity of indexing. That is a just mind-blowing number that has affected. And as you pointed out, this doesn't just mean people who chose indexing saved that much. It means all investors have benefited from it, even the active ones, because fees on active funds have come down as well. So thank you, John Vogel.

29:37Ben Felix:It's the Vanguard effect. Another point that this paper makes is that index fund ownership is not as high as people often think. This could be contested, but we hear about like 50 % of the market is owned by index funds. That's 50 % of the fund market. Index fund assets make up, the Vanguard paper shows about 23 % of the total US market cap. And in Canada, it's around 12%. That's year end of 2024 data. Now I say that can be contested because actual indexed strategy ownership may be higher. Not all index investors are index funds. So if we just look at, okay, where are the index funds? Let's see how much of the market they own.

30:18Ben Felix:There are lots of institutions, other types of investors that are not using ETFs or mutual funds that are following an index or very closely following an index. So Marco Salmon does have a paper on this, which is actually now published in the Journal of Financial Economics, which is pretty cool. We had him on to talk about that paper a while ago, episode 322, before it was published in a journal and now it's in a top journal, kind of neat. Anyway, so he used 2021 data and he showed that index funds at the time owned about 16 % of the US market. So that number has gone up to 23 % based on Vanguard's data.

30:53Ben Felix:But what Marco found is that the overall passive ownership share was around 33.5%. So he did that based on trading data. It was like what proportion of investors trade like index funds, basically. You can hear him describe his whole methodology and how he got there in episode 322. All that to say that 23 % is Vanguard's number based on index funds. The actual proportion of index investors, including non-funds, is probably quite a bit higher than that. But I think the point still stance. It's not as high as people believe when they hear 50%. The next point in Jim's paper is that while index funds have grown and increased their ownership of the market, we already mentioned this, they are a diverse set of strategies.

31:38Ben Felix:It's not one index fund that people buy and hold. It's a whole bunch of different things. And then the final section of the paper goes through the myths that they want to debunk. So the first one, and this is one that Mike Green's going to love to hear. Hi, Mike. They say that market cap weighted index funds have not made the largest stocks larger. They explained that a market cap weighted index fund invests in each stock proportional to the stock's market cap weighting. This does not make any stock larger than another and thus does not reinforce concentration. Now, I would note that that logic does not account for differences in the price elasticity of small versus large stocks.

32:18Ben Felix:We did learn about that from Valentin Haddad in episode 314. I would love Val to collaborate with Vanguard on understanding what's going on there, but Val does show that the price elasticity of larger stocks tends to be lower. They're less elastic, which means their price response to a proportional trade of the same size should be stronger than a smaller stock. Just felt like I had to mention that. We did too, but go ahead. Okay. One point from this Vanguard paper that I thought was really interesting is that the US equity index fund's highest proportional ownership share is in mid-cap stocks, not large caps.

32:59Ben Felix:That's something that probably surprises a lot of people.

33:02Tim Edwards:And that's because probably individual investors or institutions are more likely to hold positions in individual stocks if they're mega caps.

33:11Ben Felix:Is that the idea? I think that's it. They mentioned in the paper that on average index investors tilt away from larger stocks. I wouldn't have guessed that if I had to guess. They're kind of trying to make the point that if we're worried about index funds owning a large portion of a certain type of stock and having an effect on it, maybe we should worry about mid caps more than large caps. And no one seems to be talking about mid caps. So they conclude on this point that given the diversity of equity index fund offerings and investors using passive for active purposes, it should not be a surprise that index funds ownership of stocks is not market cap proportional.

33:49Ben Felix:Index funds, they finish this with a fine point on it. They say index funds have not made the largest stocks larger. Not mincing words there. So then they go on to the growth of index investing having inhibited price discovery. And they show there that index fund trading volume constitutes just over 1 % of total trading activity, while active fund trading volume is higher at 2 % of total volume. But even still, mutual funds and ETFs are a small part of overall market activity. It's mostly broker-dealers, market makers, and other investors that are constituting the lion's share of trading on a typical trading day.

34:25Tim Edwards:Were you surprised that the numbers were that low? Because I was definitely that only 1 % to 2 % was from passive or active funds. I would have thought it would be significantly higher.

34:36Ben Felix:With the amount of trading that market makers do, I wasn't super surprised, but I also had my mind on this calibrated to an older Vanguard paper where they showed something similar. For sure, the first time you see that number is a surprising statistic, no doubt. So they conclude on this point that while index funds are an important source of ownership, they own a lot of the market. They claim that they're becoming the primary driver of market dynamics is demonstrably false. Kind of similar to the price elasticity point, I think that the volume of index fund trading is not typically what gets cited as an issue by critics of index funds.

35:13Ben Felix:It's really their price insensitivity when they do trade, which may lead to less elastic stock prices. If prices are becoming less elastic, one thing we might expect to see is increasing market volatility. And the Vanguard paper does touch on this. They chart the relationship between the percentage of the market owned by index funds and market volatility. And they show that while index funds have consistently trended upward, volatility has not commensurately done so. Lots of interesting data. One other interesting point made in the paper is that the dispersion in stock returns has remained relatively unchanged as index funds have grown in importance.

35:51Ben Felix:So they measure dispersion as the fraction of stocks in the Russell 3000 index that have either outperformed or underperformed the index by at least 10 percentage points in a given calendar year. And so the chart they have for this one shows that index fund assets have consistently trended upward, but dispersion has really not changed much over time. It kind of fluctuates pretty much randomly around 70%.

36:13Tim Edwards:Does that mean it's a stock picker's market this time?

36:16Ben Felix:That section of the paper is saying, it is addressing whether there are still opportunities for active managers to outperform. That's the whole premise of that point is that opportunities for active to outperform have remained the same over time. And they don't throw down on active managers there, even though they could have, but they don't throw down and say that their performance continues to be terrible relative to the index. But that's true too. I didn't update it, it's probably a couple of years ago now, but I went back through all the old SPIVA reports, going back to like the very first ones, I charted it myself over time as the proportion of whatever five and 10 year outperformance changed over time.

36:52Ben Felix:If you go back to like, I think you can find maybe 2006 or 2008 or something with old SPIVA reports and it's been flat. The proportion of active funds outperforming the index has not changed much over time. So I think that kind of speaks to their point that opportunities for active outperformance, which they're measuring as dispersion have been pretty stable despite the growth of index funds. That's our little preamble there. We're just getting started guys. Unless you guys have any other comments, we'll go ahead to the panel discussion that we mentioned earlier. Then stick around though, we will still do the after show after the panel.

37:32Ben Felix:We're going to start our first panel here, Benefits Beyond Beta, charting the evolution of indexing. And so what we're going to do is explore 50 years of index investing from wealth creation and innovation to the forces shaping the next era. We're going to talk about how index funds may or may not be affecting financial markets. It should be a really, really great discussion. I'm Ben Felix, your moderator. Please welcome our panelists, Tim Edward from S &P Dow Jones Indices, Jim Rowley from Vanguard, and Shelley Antonovich, Chief Economist at ICI.

38:08Ben Felix:All right, Jim, I'd like to start with you. What is passive investing?

38:11Jim Rowley:Great. We're going to start off the day with the most loaded question for a term I'm not really sure I like very much because I don't think there's a very good definition of it. And I can give three examples or three reasons why I don't think it's a great term or there's a unified definition. Number one is that this phrase word passive doesn't really make a distinction between fund implementation and asset allocation. And a good example might be our esteemed economist might here, might decide she favors small cap value over the rest of the market. And she implements her portfolio with a small cap value index fund.

38:47Jim Rowley:Now, the way the headlines might say, wow, Shelley's a passive investor. Yeah, but against the total U.S. equity market, Shelley's absolutely an active investor. I think the second reason I'm not a big fan of the word passive is I've had the privilege of hearing Tim present over and over. Passive doesn't really make a good distinction with respect to weighting and selection criteria. And I would personally love to see Tim argue against himself about rules-based indexing, let's call it the S &P, equal weighted 500. Is that passive or is it not passive? And I'm sure Tim could make great arguments on both sides why it is or why it isn't.

39:23Jim Rowley:And for me, the third reason it was brought up on the panel before is the concept of custom indexing or direct indexing, we want to call it that. And then in his day job as a chief investment officer could offer one of his clients an optimized S &P 500 index with a focus on tax loss harvesting and or ESG preferences. And I don't know where the dividing line is, what part of that is being passive. And then when all of a sudden is it just a flat out active strategy? So I sum that all up and I use those three examples to say, I don't know what the definition of passive is.

39:56Ben Felix:It gets referred to as this sort of monolithic blob of passive assets, but it's really not that.

40:02Jim Rowley:No, I think you've heard the phrases before that we see a lot of investors using passive for the purposes of active.

40:09Ben Felix:Tim, how does the relationship between index providers and fund companies work?

40:14Jim Rowley:There's a very simple way that index providers and fund companies interact. I hope everyone in this room knows. And then there's a subtle and, dare I say it, slightly more magical process that happens around that. The simple and obvious way, one of the reasons that we're all here today is because almost 50 years ago, soon to be 50 years ago, Vanguard and S &P partnered. Vanguard would create an investment product that rather than seeking to beat the market, sought to offer the market returns. and they did so by agreeing a license with an index provider, which allowed them to use our IP, our stocks and weights, but also to use our brand and our index name in their messaging and to use a value proposition like we are going to track not just an index, but this index.

41:01Jim Rowley:So that I think most people know, but that's the formal way in which index providers and fund companies partner in order to offer solutions. The more interesting thing or the magic happens, and then what next? If you look at the bond markets or bond indices, the fund managers actually need to do a lot of work in order to replicate those index returns. And they have to often use sampling methodologies, there's a degree of trading involved. The interaction between the fund managers, the fund investors, and the index providers through consultations helps us to evolve our index methodologies so that they are still representative of what the market is doing and what the market is needed.

41:40Jim Rowley:and the broader community, everyone in this room, when you start using those indices as reference points, when you start using the products that are tied to those indices, that's where the real magic happens. And provide your feedback to the index providers and the fund companies or how these need to evolve to reflect the market's changes. That's how indices start becoming benchmarks. That is a process that happens with high degree of community engagement.

42:03Ben Felix:So there's a feedback loop between the index provider and the fund company. They're not operating in isolation. Makes sense. Shelley, who is investing in index funds?

42:12Shelly Antoniewicz:Short answer, it is a lot of Main Street Americans that are investing in index funds. ICI does a bunch of investor surveys. And according to our data, 37 million U.S. households, so that's half of all U.S. households, own a stock index mutual fund. And then if you think about ETFs, we've got 19 million ETF investors that are holding a stock index ETF. You just can't add those two numbers together because there's actually a lot of overlap between that. You know, if you think about ETF investors, about 86 % of ETF investors who have an index fund also hold an index mutual fund. It's really sort of a subset that could have become index investors.

43:06Shelly Antoniewicz:These people are middle America. If you think about household income in both groups, mutual funds, ETFs, median household income for an index fund investor is$150 ,000. And that's household income. So you got to think about like two earners. So we're talking about regular people that are saving through index funds. On the mutual fund side, the owners, kind of index fund owners, skew a bit older. The median age is 55. On the ETF side, it skews a bit younger. They're 51 years median age. That's because index is really very popular with younger investors. So over 20 % of ETF investors are under 35 years old.

43:56Ben Felix:Makes sense. The market penetration of index funds in the United States has been much greater than where I'm from. I'm from Canada, and we're still investing in a lot of actively.

44:04Shelly Antoniewicz:Yeah, well, they realize the benefits. They see the benefits of the low cost, the diversification, the broad market exposure.

44:12Jim Rowley:I think what's great and should be highlighted with what Shelley talked about is, and I can't remember the exact number, But let's call it two and a half to three million dollars, I think, is the number that any individual would need to save for themselves to go out and buy all the underlying securities in the S &P 500 index, fully replicate, market cap proportional, holding at least one whole share of every company. Wow.

44:37Shelly Antoniewicz:What's interesting is how they're being used. If we look at just the stock index fund investors, over 80 % of them, their primary financial goal is to save for retirement. So these people are getting exposure to index funds through their 401k. And then when they either leave the job or retire, they're rolling that out into an IRA. And we find on that side that a lot of ETF investors have IRA accounts. Over 80 % of ETF investors have IRA accounts and are really using ETFs in those IRA accounts.

45:16Ben Felix:Jim, you alluded to this. How actively are investors trading index funds?

45:21Jim Rowley:In terms of trading index funds themselves, I kind of go back to Shelley's point about who's investing them. And some of my earliest exposure, if you will, to ETFs at Vanguard is working with our financial advisor services unit. And I remember when I started there, this is 2005, 2006, for some reason there was always this conventional wisdom that only institutions use ETFs. And I start working with this business unit to find out our third-party financial advisor clients are absolutely using ETFs to build diversified portfolios in a strategic manner, I might add. Meaning even at that type of investment professional, they're not using ETFs because they like to trade them.

46:04Jim Rowley:They can for liquidity purposes if they want. But the idea of who's trading ETFs, at least when we think about our experience with third-party financial advisors, they're not really used for trading. They're used for building long-term, low-cost, diversified portfolios. One of the interesting features about the ETF market in particular is that while there are many participants in that market who are constructing long-term, often retail or wealth portfolios seeking long-term growth, I mean, it is important to observe that there are many active decisions being made in constructing those portfolios.

46:39Jim Rowley:But additionally, there are other communities using index funds. One of the curious facts when you think about, you know, what is passive investing? What is index investing? Not every day. On some days, it's Tesla. But on many days, the most traded security in the world is an index fund. It's an ETF tracking the S &P 500. There is an evolution that is happening in the equity and in the bond markets, whereby 40, 50 years ago, the job of an active investor was to pick individual stocks and individual bonds. And the toolkit has now expanded where you have an intermediate role. You can use sectors, whole markets, countries, factors, et cetera, et cetera.

47:20Jim Rowley:And if you like, this high-frequency community is heavily involved in policing the prices, not just of individual stocks, but also market segments and whole markets. And in the interplay, the network effects between the active police, the higher-frequency community, and the investors who benefit from that level of scrutiny and price discovery is one of the more fascinating features. There are many different kinds of investors in index products, and some of them have a very active, very trading mentality. But that's not a bad thing, that the two communities can really benefit from each other's participation.

47:56Ben Felix:Shelley, does that come out in the surveys that you do at all, how retail investors are using index funds?

48:01Shelly Antoniewicz:Yes, because we ask them, what are your primary reasons for sort of investing in funds? And given such strong penetration of index funds in our surveys, that their primary reason is retirement, also saving for children's education, emergencies. So really, truly, index funds are helping these people save to meet their sort of financial goals.

48:29Ben Felix:Jim, one of the things we've seen over the last probably 10 years, but in recent history, it's gotten pretty extreme, is the innovation, if we can call it that, of indices and ETFs tracking them. There's an index for everything and an ETF for everything. Do you think index funds have strayed from John Bogle's original just-by-the-haystack vision?

48:50Jim Rowley:Because of the growth and the innovation of the types of different products, I kind of view it as the haystack's still there. And what I mean by that is, if we're viewing funds in individuality, I don't think that's the right way to think about it. I think this idea of buying the haystack, when you think about the different products, we can still build portfolios. We can still own the haystack, maybe we all have different shapes because we might have different risk preferences. We might have different parts of the market that we think are a little better positioned than others. But I think the right way to think about it is the enormous amount of choice with individual products is we all still collectively have a haystack.

49:29Jim Rowley:Haystacks just might be different shape versus one another.

49:33Ben Felix:Makes sense. Bob mentioned the haters of indexing. I want to talk a little bit about that, about how index funds may or may not be affecting financial markets in different ways. Shelley, can you talk about what the current evidence says about how index funds are affecting financial markets?

49:48Shelly Antoniewicz:When you look across the academic literature that's out there, there isn't a single unified conclusion about how index or index funds or index investing affects the financial markets. The findings are diverse. And in fact, you can even find published academic papers whose conclusions are in direct opposition to each other. For instance, there's a recent paper that's been put out by Valentin Haddad and some of his co-authors. And it's published in the American Economic Review, very well-established peer-reviewed journal. And they argue that the growing amount of index investing out there has made the demand and for individual stocks, less elastic.

50:39Shelly Antoniewicz:Basically, what that means is that their market responds less to information or price changes for these individual stocks. At the same time, in this same paper, the researchers also find that active investors still play a central role in price discovery, and the market has not become meaningfully less competitive. In that sense, even within one paper, there's two opposing findings on this. There's other studies. There is another paper out there that looks at the mega firms that indexing creates this concentration, and I think Bob mentioned this as well, and creates these mega firms. On the other side of that, there is another paper out there that is It's very highly cited.

51:36Shelly Antoniewicz:It's a paper by David Oter and his co-authors, and that's published in the Quarterly Economics Journal. Again, another highly rated journal. And they look at these sort of mega firms or what they call superstar firms, and they find that the drivers for these firms having such high market caps is technological change, international growth, capital flows. It's all of these other things. And you know what's not on that list? Index funds. There's a big discrepancy, diversity of views, even within the academic literature on what the impact of index investing is.

52:19Ben Felix:For every PhD, there's an equal and opposite PhD, I guess.

52:22Shelly Antoniewicz:Well, you know, economists are on the one hand, on the other hand.

52:25Jim Rowley:So Vanguard, my colleagues and I, I can think of two pieces of research we're very fond of. You know, if you're a superhero fan, I think the first article is with great uncertainty comes great volatility. Simply put, we looked at the link between the growth in index fund assets and market volatility. What we found is there's no relationship between the growth in index fund assets and market volatility. But rather, we find that one of the causes of market volatility is economic uncertainty, which I don't think is a very shocking result. I think we all could have guessed that. There's another area of research that maybe has been a personal favorite of mine.

53:00Jim Rowley:It's the concept of dispersion around security returns. I just had this great idea. I should have made this a guessing jar to everybody walking in here, and I'll get to that in a second. But the concept of dispersion is when we think about a market's return, the individual securities in that market, the returns are dispersed around the market average. And we've looked at our proxy for the market as the Russell 3000 since the early 1990s. And as you can imagine, if you could visualize a chart, you'd see the growth in index fund assets just being this linear uptick. But if I said a simple way of thinking about dispersion is, who are the stocks every year that outperform that market by 10 percentage points or more or underperform the market by 10 percentage points or more?

53:46Jim Rowley:And I'm going to ask everybody right now in your head to think about on an average, there's a little bit of cyclicality, but it's basically a flat trend. What's the proportion of stocks in the Russell 3000 that can, on average in a given year, do better than 10 percentage points or worse than 10 percentage points? It's 70, 70 % of the stocks, which number one tells me there is plenty of opportunity for active management to pick winners and avoid losers. But then the second reminder is, wow, indexing is a really great thing. Owning a broad market index fund eliminates that dispersion and lets you reap the benefits of the market's return.

54:24Ben Felix:So you're saying market volatility and dispersion have been relatively unaffected by the growth in indexing? That's my position, yes.

54:32Shelly Antoniewicz:Well, that's actually backed up by a recent paper by Chuck Fang. and he also, you know, doing econometric analysis, finds that there's no problematic effect of index investing on volatility or the dispersion of individual stock returns.

54:48Ben Felix:Now, Tim, we've touched on this, but I want to hear your take. How are index funds affecting cross-sectional asset prices? This idea that there's an index fund bubble that's pushing the largest firms up larger and larger, what are your thoughts on that?

55:00Jim Rowley:Well, rather than take it to one academic versus another, since we're in the New York Stock Exchange, I think we can actually bring this all the way down to brass tacks with a thought experiment. Suppose you wanted to make a reasonably large position in a total market cap-weighted index. Suppose you wanted to put a billion dollars into a cap-weighted portfolio. Well, 50 years ago, you would go downstairs with a program trade and you would be allocating. You'd say, well, I want to put whatever it is, 7 % in Apple, 6 % in Microsoft, and so on down the list. Now, importantly, the weighting you have chosen for each stock is in proportion to the size of the outstanding stock and the outsiding supply of that stock.

55:43Jim Rowley:It's why also we use free floats in our index weightings, how much of it is out there available in trading. So your purchase will be run programmatically downstairs, but the extent to which you are taking the supply is perfectly matched in every stock. Look, if the market cap was 100 trillion, it's not. But if it was and you were buying 0.1 % of that, that means you're buying 0.1 % of Apple's outstanding stock, 0.1 % of Microsoft, and so on and so on. Just as a thought experiment, it should be clear that your investment is not going to affect the price of the larger stocks compared to the smaller stocks in theory, right?

56:19Jim Rowley:But it's a thought experiment. Apple has a higher weight than many other stocks in the index. The reason Apple has a higher stock weight than many other stocks is because active investors, people who weren't investing in market cap proportions, liked Apple more than they did all the other stocks. That's a really important fact. In fact, anything else except market cap weighting would be providing price information. But cap weighting is just benefiting from an incredibly chaotic consensus of people's views on what the fair value for all these securities are and not adding your own voice to that.

56:58Jim Rowley:So are there some large companies in the US right now? Yes, absolutely. Has it happened before? Yes, absolutely. Is it down to index funds? On just pure common sense basis, you know it doesn't make sense. There are various ways that you can see that supported in the data. I'll tie together Tim's thought experiment with going back to Shelley's points about who owns index funds, we've done our own fair share of research to say, well, let's look at ownership of Russell 3000 companies and the proportion of shares held outstanding by U.S. equity index funds. And I can't tell you how many times I show this chart to people I would call actually in the know about investing.

57:38Jim Rowley:And when we're able to show the highest proportion of ownership by index funds is in the mid cap space. It's not in the large cap space. And most find that to be like a shocking finding that when we are so laser focused on the largest of the large, you make the argument index funds collectively are actually underweight the largest of the large.

57:57Shelly Antoniewicz:Well, even more than that. So if you look at the entire US stock market capitalization, index funds, index mutual funds, index ETFs, they hold 30%. 30%. There's still 70 % over there that's not held by index funds.

58:13Jim Rowley:There is another thought experiment we can bring in because this is not to say that there isn't an impact between index-related tools and price changes. We can keep it at the overall market level, but I do think there's an important point around the ability to trade whole market segments, sectors, etc. But we can keep it whole market. Overnight, while hopefully we're all asleep, you can actually trade other products tied to the S &P 500, options and futures that trade almost 24 hours a day, almost. And many in this room will be aware, and if you're not, let me tell you that it is the case that when the stock exchange opens downstairs, the price at which the securities open is typically very close to where the futures were indicating they should open.

58:59Jim Rowley:Now, that tells you something really important. It tells you that these index-based derivatives, futures and options, are acting as a mechanism for risk management and price discovery. So there is an impact on prices, but it is one where it is the same kind of impact that was traditionally happening with just individual securities. It is people with active views. It's people arbitraging. It's people expressing and managing risk. It's just that they are able to do so at a broad market level rather than running 500 program trades in 500 stocks.

59:35Ben Felix:Whether index funds are the cause or not, Tim, how concerning is it, the current level of US market concentration?

59:41Jim Rowley:Thank you for giving me an opportunity to do a shameless promotion for, I hope you have picked up your partner's perspectives already, because this is a really good question. And you can sort of split it. Is it worrying that the US equity market is rather concentrated? And should I do something about it? It is potentially worrying. And what you might decide to do about it may depend on the investor. But I do think the perspective offered by history is useful. So we are in a situation today where do top five, top seven, whichever you prefer, we looked at the top 10. And the top 10 stocks in the US represents a similar weight today, and almost 40%.

1:00:15Jim Rowley:The last time we saw that was in 1965. I can make the very clear observation. In 1965, there were no index funds. The first one came, thanks to Vanguard, 11 years later. No index funds, similar level of concentration. No index futures, no index options either, by the way. But what's interesting is if you look at the dynamics, the interaction over time, We measured, you know, how did concentration change? How did market performance change? It is not the case that high concentration is definitely a bad thing for markets. It is the case that concentration tends to decrease and increase over time.

1:00:50Jim Rowley:The fascinating piece is you might think if concentration decreases, that means the larger stocks do badly. And if the larger stocks do badly, that must mean that the equity markets have collapsed. But it's not necessarily the case. And actually what you see is far more interesting. What can happen is, if you like, a changing in the guard. The current heroes may decline, but the next generation may already be in the index. And their gains can be extraordinary. And they can sort of take over the job and the role of carrying the markets forward. Has that started happening already? I don't know. I mean, so far this year, we have seen a broadening of market returns.

1:01:29Jim Rowley:It's very early right now to say. But there's certainly a sense of disruption, creative destruction in equity markets. And that dynamic, allowing the big guys to fail in order to allow others to rise and take their place, is not so much a feature of indices. Indices reflect that. It's a feature of the capital markets. Long story short, the message would be high concentration in itself can be concerning, but it doesn't have to be.

1:01:57Ben Felix:We've been here before and returns have continued to be fine. I'd love to hear from each of you what message you have for people who are concerned about these things, about index funds affecting the quality of financial markets and causing, if we believe that, high concentration. Shelley, we'll start with you.

1:02:14Shelly Antoniewicz:You know, I'm just going to go back to saying, look, you know, there's been a lot of research done on this. There's no clear-cut answer. There's studies that say this. There's studies that refute that. Another piece of evidence against index funds having an impact on the markets or a negative impact on the markets is, do you remember, you know, index inclusion? You would bring a new stock into the index. That stock would get like a bump, a temporary bump in returns because it's now in the index. That's shrunk dramatically over time. And that shrunk because we've got more arbitrage opportunities and active managers that are more efficient.

1:02:53Shelly Antoniewicz:So there is no more sort of equity index premium.

1:02:58Jim Rowley:It goes back to the point about the way that indices evolve with the marketplace that's using them. We, S &P Dow Jones Indices, actually changed the way that we communicate changes in our major indices. I don't know if anyone in this room was still operating in the time, but more than 20 years ago, the case was that we would tell you after the close of the equity markets what you should have bought just half an hour ago. It sounds like a small, very technical thing. We changed it so that we would tell people in advance. Now, in theory, that sounds like, by the way, I say tell people, distributing that information to the entire market at the same time, right?

1:03:34Jim Rowley:But that actually changed the dynamics of the way that the people tracking index funds rebalanced. There was a large community of individuals and traders and so on and shops who were then keen to own the stocks that would be bought by index trackers and sell it to them, hoping to benefit from this pop-in price. But it's very different, very difficult to distinguish that which might sort of feel somehow predatory. But if you actually look at what they're doing, they are serving the needs of liquidity of people tracking indices. They are buying the securities that people tracking in the indices are going to want to buy.

1:04:12Jim Rowley:And what's happened is that has become an incredibly competitive marketplace. And that is why, you know, whereas it used to be 6 % to 8 % pop, statistically, that's now to basis points. It's a tiny, tiny bump because of the transparency improvement, but it's also because of the interaction between users of index products, the fund companies who are managing their index exposures, the level of transparency provided by the index provider, and the market awareness of those dynamics.

1:04:40Ben Felix:More indices too, I think. Yeah. Stocks are moving from one index to another. It doesn't have as much of a price impact.

1:04:45Jim Rowley:Can we please remember the consumer choice element of index funds? Putting aside all the market talk, there's an economics lesson here. Consumers have chosen to buy a product that they believe to be of superior quality at a better price. And if everybody can indulge my soapbox, unlike a car where maybe price and quality are independent, with investment products, quality is a function of the price. And I wish everybody thought more in terms of like, this is consumer choice. Consumers, i.e. investors, have outwardly selected index funds because they believe they are better quality at a better price.

1:05:23Ben Felix:Tim, do you have a parting thought for the haters?

1:05:25Jim Rowley:First, I'll echo Jim. I think it's a line from Jack Bogle. You get what you don't pay for, but don't just take our word for it. Look at the statistics. I mean, we put out an annual scorecard for kind of the active industry. Our latest statistics were 94 % of actively managed US domestic equity mutual funds underperformed the S &P 500 over 20 years. 94%. So those are the odds. But the conclusion is, it's supporting the choice point. You want to try and beat the market, you want to join the police, great, brilliant. But the availability of a choice to just participate in market gains is worth a lot to those people who have benefited from it.

1:06:04Ben Felix:Awesome. Thanks, guys. That's all the questions I have. I thought that was a great discussion.

1:06:08Tim Edwards:Thank you.

1:06:15Ben Felix:For the six of us who are still listening, four of us here, I guess there's two listeners, at least two more people, I hope. What do you guys think of the panel?

1:06:23Tim Edwards:I thought it was great. I thought it was interesting, well-spoken, understandable. I thought your questions were good. First, I think you do a great job. You're totally calm and brought out good questions. So that was well done.

1:06:34Ben Felix:That was a fun thing to do. Cool to be talking to those people. Cool to be invited.

1:06:38Tim Edwards:That's good to build your exposure in that community too, which is nice. Nice that they reached out to you. It's a great compliment.

1:06:43Ben Felix:I think that's probably because of when we had Jim Broly on the podcast, he was thinking, who do I know that could moderate a panel discussion about index investing? So is this event a whole day? It was the morning. It's like 8 a.m. until noon or something like that. I flew in the night before and then flew out the next afternoon. How were the other speakers? There was a whole bunch of people. I'd have to go and look up the agenda to tell you all of them. There was four panels and each one had multiple speakers. Wow. Nice. That was cool. Okay. After show, here we go. We have a bunch of comments.

1:07:16Ben Felix:Jeez. Anything else, Cameron? People say that they miss your chit chat, your book recommendations, your shows. What do you got? Putting them on the spot. Oh, what have I got?

1:07:26Tim Edwards:Not a lot of shows. I don't watch a lot of TV anymore. Listen to a lot of podcasts, actually. I confess I'm loving The Daily from The New York Times, which I'm sure a lot of listeners check out regularly. I like the deep dives into topics, which is good. I confess we're watching Love is Blind. Judge me not, I'm just coming clean. And I'm pretty sure I'm the only one on this panelist. You know, a lot of guilty pleasures. You're also watching The Golden Bachelor and 600 Pound Life was one of your go-to shows for a while. All the secrets out there. One, we got to save some. Benjamin, I'm going to dig into your watching habits still.

1:08:04Tim Edwards:This is about you, camera. Yeah, it's about me. Main thing in this one has been a lot of skiing. What a ski season in Lawrence and Quebec. Wow. Compared to out west, I don't know if you've talked to people who've been skiing out west. Oh yeah, no snow. Talk to someone with the veil last week, it's like no natural snow in Vail, which is just devastating for some of the areas. Houston, Ontario, Western Quebec, It's been phenomenal. Just like the perfect ski season. Nice winter weather for sure. How about you Dan? What do you do in the winter? Well, geez, this is the coldest winter we've had here in Toronto for years.

1:08:35Tim Edwards:I mean, we had minus 20 Celsius for probably two weeks without much of an interruption. It's finally warmed up in the last few days. I've been getting outside again, but it was too cold to ski for sure. I mean, you had the snow, but that's a long chairlift ride in 20 below zero with wind chills. So it was mostly indoor activities.

1:08:58Ben Felix:Yeah, it got cold. Right where I am, we had some below the minus 30s, like minus 32, minus 33. Had to worry about the well line freezing. It was cold.

1:09:07Tim Edwards:Oh, the well line. Back to your happiness place. Home ownership. Yeah. Sorry I let you down. I'll come better prepared next time.

1:09:15Ben Felix:That was great. That's the juicy stuff that people want to get from you, Cameron.

1:09:18Tim Edwards:Oh, juicy. I appreciate the follow-up Ben Wilson. That's very kind of you.

1:09:22Ben Felix:Ben Wilson, he's vicious, man. Vicious? You let your guard down for a second, you're cooked.

1:09:28Tim Edwards:Oh, he'll get you. Don't tell him what you eat because that'll show up in a future episode as well. It's all fair game around here. You guys dish out your own fair share. Yeah, but not on a podcast.

1:09:41Ben Felix:Okay, we have some reviews from Apple Podcasts to read. under SEC regulations, we're required to disclose whether a review which may be interpreted as a testimonial was left by a client, whether any direct or indirect compensation was paid for the review, or whether there are any conflicts of interest related to the review. As reviewers are generally anonymous, we are unable to identify if the reviewer is a client or disclose any such conflicts of interest. But we do have four reviews. Daniel, I take the first one.

1:10:09Tim Edwards:So this one says, a gem of truth and nuance in a sea of financial slop. That's a great headline, by the way. Absolutely brilliant show and great to see that the best finance podcast anywhere is hosted by two and sometimes more Canadians. Sad at the lack of after show lately, hopefully the six of us that listened to it will be coming back soon. Would love an episode discussing planning in the context of mixed currency compensation for Canadians, especially those who receive CAD and euros and USD. That's an interesting one we haven't done yet.

1:10:43Ben Felix:That is an interesting one.

1:10:44Tim Edwards:Cool topic idea.

1:10:45Ben Felix:I'm glad that we satisfied the need for an after show with this episode. For the six of you. For the six of you, yep. Cameron, you got the next one?

1:10:54Tim Edwards:Sure. Review slash question. This podcast is phenomenal. I have been listening for over a year and look forward to Thursday mornings to catch the latest episodes. The reliance on evidence to drive portfolio construction is refreshing. I'm coupling this review with a question. I'm curious to know what clients of yours are invested in the five-factor model portfolios that you announced years ago. Because the premiums can take a while to capture. I guess I'm curious as to if there is a preferred time horizon, number of years the dollar is to be invested for this model portfolio to be implemented for a hypothetical client.

1:11:32Ben Felix:For us, the vast majority of our clients are in dimensional portfolios. Larry Swedro, when he was a guest super early on in the podcast, we asked him that question. And he said that people get this backwards, that the premiums, because they increase the reliability of the outcome, because you have more premiums that could show up to help you. For shorter horizons, his claim at the time was that it's actually better to have more factor exposure if you have a shorter horizon. If you're just exposed to the market and the market goes through a long period of underperformance, which has happened many times throughout history, that's not so good.

1:12:05Ben Felix:Now that goes away with geographical diversification with a market cap weighted portfolio. I don't think factor exposure is very sensitive to time horizon. Like if someone's retired, probably still makes sense. If someone needs their money in five years, they probably shouldn't be invested in a stock portfolio period. But I don't think that the decision to tilt toward other asset pricing factors other than market beta, I don't think that's very sensitive to your time horizon. If you can be investing in stocks, I think you can be investing in a factor tilted portfolio. What do you guys think?

1:12:35Tim Edwards:I'd agree with that. Yeah, the factors can take a while to show up, but you could say that about the market factor, which is the overwhelming one.

1:12:43Ben Felix:Larry's point was that, what you just said, Dan, and that if you look historically, if you go look through the data, having just the market, you've got a higher chance of having one of those longer periods of poor returns than if you are tilted toward some of the factors. Now, factors had gone through, they started to come back. They went through a long period of underperformance recently. So maybe that's what people are anchored to, but happens with the market too. It's been a while since we've had a long drought of equity returns, but it certainly does happen. No kidding. Then you get the next one.

1:13:12Tim Edwards:Love the episode with Nick Majuli. I especially liked it when you guys talked about the 0.01 % rule, which allows you to stop sweating those tiny marginal spending decisions. It made me feel okay about always springing for the cage-free eggs now, even though I probably should have stopped worrying about the$5 difference decades ago. Thank you so much, Ben.

1:13:33Ben Felix:Was it just me that interviewed Nick that time? I think it might have been. No, I think I was there. Why didn't he thank you then? Yeah, you're more important. That's okay. That's funny. 0.01 % rule is cool. It's like if you're going to spend something, spend money that's less than 0.01 % of your, I can't remember if it's your net worth, then you shouldn't sweat it. It's your net worth.

1:13:51Tim Edwards:So it's 3.65 % per year.

1:13:53Ben Felix:People in the rational reminder community skewered that idea though, because it's like, okay, 0.01%, but how do you limit that? What if you just keep justifying 0.01 % expenses, they stack on top of each other and all of a sudden it's a higher percentage of your net worth and you're cooked. If those are one time, not recurring, recurring would not be included in that. So 0.01%, is it per day though, or per decision?

1:14:15Tim Edwards:Every day you get 0.01%, so that's 3.65 % per year. So basically breaking down that as a safe spending rule divided by 365. 65. Cool.

1:14:24Ben Felix:Having a rule for don't sweat this expense does make a lot of sense. Next point in that episode was that people need to shift their thinking as their wealth bracket changes over time, which I think is very sensible. I think a lot of people do get caught living outside of the way they should be living based on what their financial situation is.

1:14:42Tim Edwards:That's compounded by the common analogies that a lot of people use. Like, oh, if you stop spending $6 a day on Starbucks, imagine how much money you could save. If you got$5 million, it's probably okay to spend six bucks a day on Starbucks, but some clients I've seen like the behavioral changes in them. They still are wary of spending$6 on Starbucks, even though they're at a point of financial independence. They worry about, can I do this or not? It's hard to comprehend what your wealth means sometimes.

1:15:12Ben Felix:I've heard some funny stories about stuff like that with very wealthy people who won't pay for parking close to a sporting event, stuff like that. anyway. Last review. ETFs potentially useful. First of all, I'm a massive fan and have been listening to the podcast for more than two years now, and I think you're one of a kind. Small criticism slash feedback. It's been a while since we had a really nerdy mathsy podcast. All right. We got some, we got Hendrik Bessenbender coming up. I was going to say, that'll be taken care of pretty soon. That may be before this, I think. Bessenbender's before this episode comes out.

1:15:43Ben Felix:So by the time this comes out, that's a Mathsy episode. You want Mathsy, there you go. We've got James Choi coming up too. That's also going to be Mathsy. We got you covered, I think. I work in the industry as a quant in a hedge fund, so I'm aware of some of the topics from the other side as well. Now, to my point, I have two SIPP accounts. These are the tax-free pension accounts in the UK, and you cannot withdraw from them until age 55. They both charge a management fee. One is at 0.45%, the other one is at 0.25%, which gets better at over 1 million pounds. However, for your ETF and shareholdings, the annual fee is capped at 230 pounds and 120 pounds respectively.

1:16:22Ben Felix:So I opt for a combination of ETF trackers giving me global exposure equivalent to FTSE all world with a home bias. Can you think of any reason anyone should hold anything else than ETFs with a portfolio of a hundred thousand pounds or more? And then they list the providers. I don't know if I fully understand the question there, but is there a reason to hold something other than ETFs if you have a larger portfolio? I think it ties back to our discussion about institutions in the introduction. I think people tend to have a bias toward complexity, particularly as they have more capital to invest.

1:16:56Ben Felix:It's just like, there's no way that how I was investing at$10 ,000 still makes sense at a hundred thousand or a million or a hundred million. But I honestly think that simplicity is better than complexity at any level of net worth, at any level of investable assets. It's a very expensive misconception that people get caught in where they think they must have to change what they're doing because they have more money to invest. But that's what the people selling the expensive financial products, they will want you to think that. That's really good business for them. But the evidence on that stuff being objectively better, I don't think it's very strong.

1:17:34Ben Felix:So hopefully that's the question that this listener was asking, but I don't know if you guys interpreted what they wrote differently.

1:17:39Tim Edwards:I would agree with that. Certainly if you're talking about individual investors, there might be a point where you could make a good argument that it makes sense to diversify beyond traditional index funds, but it's not at the individual level. I think we're talking at the institutional level, right? Even if you've got two or$300 million, dollars you could probably invest in a portfolio of index funds and be just fine maybe if you're a pension plan and you manage 20 billion dollars you could make an argument that there are opportunities that you can diversify into private equity and infrastructure and all these things that are just off the table for individuals but i've had people say to me indexing doesn't make sense after, you know, 5 million or 10 million.

1:18:33Tim Edwards:That's a lot of money for an individual, but in the scheme of things, it's not that much money and the market can absorb your 5 to 10 million just fine. There's no dearth of opportunities when you're talking about numbers like that. So the reader here is talking about individuals. And I think the answer is no, there's no compelling reason to hold anything other than a portfolio of index funds at the number he gives is a hundred thousand pounds. It's not a mind blowing sum of money.

1:19:03Ben Felix:Even for institutions, like we hear those points that you made there, Dan, but then you go and look at the returns of institutions of pensions that are saying like, Hey, we've got these opportunities that aren't available to retail investors. I'm not going to name names of the pension funds here, but a lot of them have not performed very well relative to the index. I think there are probably arguments unrelated to asset only performance. Like if you have real long-term liabilities and you're required to keep pace with those, that's probably a stronger argument to do other stuff that may, for whatever reason, be more closely related to inflation.

1:19:38Ben Felix:Like if you need to hold a certain type of asset that is going to be well matched to your specific liabilities and you can't get that in public markets. I buy that argument, but the argument that there are special opportunities for even the largest pension funds, I'm not convinced that's true because the data do not support it at all.

1:19:55Tim Edwards:Yeah, I certainly wouldn't argue the point too much. I mean, I think it's a reasonable expectation, but yeah, if you're pointing out that a lot of very large pension funds, for example, underperform basic benchmarks because the active part of their portfolio doesn't outperform.

1:20:14Ben Felix:Including the alt, the private stuff. A lot of promises were made about those asset classes over the last 20 or so years and I don't think any of them have been delivered on. All right, that's it for the reviews. Anything else? Any parting thoughts?

1:20:25Tim Edwards:I don't think so. 400 is pretty cool.

1:20:28Ben Felix:Bit of a different formula for our 400th episode. We had our little preamble or whatever of the after show plus a panel, which we've never done that before, at least not quite like this. So hopefully people enjoyed it, but you can let us know in the comments or in the Rational Reminder community.

1:20:42Tim Edwards:Congrats guys on 400. It's pretty impressive. Very well done. All right. All the best.

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