David Rosenthal: evaluation

Transcript context

…It's perfect. Jack assigns one of the first employees, a guy named Jan Twardowski, to go write the software to do this, to create the first retail index fund. He goes off, writes it in the APL programming language on a time-sharing computer in Philadelphia. Jack, meanwhile, goes off to Standard and Poors headquarters, and negotiates a licensing fee with them for the rights to use the S&P 500 index as the basis for this first index fund. There's a great story that Jack tells on a podcast interview about this. He was negotiating with whoever the head of the department that ran the 500 was at S&P. And the guy was like, 'Basically, I don't know, gosh, should you be paying us? Should we be paying you? This is gonna be great marketing for us.' They eventually land on Vanguard paying S&P $25,000 per year that they sorta pull out of thin air as the transaction value for this. Which is absolutely hilarious because now index fund licensing is basically the entire business of indices around the world, and it is extremely high-margin. I've got the numbers on this. People estimate that Vanguard pays S&P Global something like $300 to $400 million per year and is their single largest licensing client, and the licensing segment of their business as a whole does $1.85 billion a year. And to your point, David, that is essentially all profit, right? I mean, the whole world has agreed the S&P 500 is the standard brand for the market, and so they just get to take a rent of $1.85 billion a year for anybody who wants to make an index fund.…

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