Chief economist’s log, stardate 62014.1

Okay, everybody, don your pointy ears. We’re going to boldly go where (I’m guessing) no investment company has gone before. We’re going to talk about how wise long-term investing is like Vulcan investing.

I’ve always been tempted to keep a pair of pointy ears in my desk for those moments when I need to indulge my inner Trekker (that is the correct term—Star Trek fans disdain the word Trekkie), so the connections are obvious to me. But in case you don’t see the parallels between Gene Roddenberry’s groundbreaking science-fiction show and successful investing, let’s start with an obvious one: The Vulcan blessing, “Live long and prosper,” is an apt motto for Vanguard clients.

Let’s modify it to “Invest long and prosper” to more closely capture one of Vanguard’s four principles for investing success: discipline.

Vulcans were devoted to discipline too. Some of them chose to complete Kolinahr training, in which they demonstrated that they had purged themselves of emotions. Kolinahr also enabled them to continue to keep feelings at bay and live by logic alone.

Disciplined investors are like Kolinahr masters. They ask the right questions to identify goals and then develop diversified, low-cost portfolios to achieve them. Then, during those inevitable market downturns, they resist the panicky urge to sell. When markets rise, disciplined investors may do the hard work of selling some of their winners and reinvesting in some of the lower-performing assets to restore the original balance.

The logic of low costs

That kind of discipline requires strict adherence to logic. Logic, of course, is the creed of the Vulcans. The Vulcans were once a violent people, but eventually adopted a code of ethics that required using only logic to make decisions and repressing the emotions they believed led to problems. The logic of low costs is relentless. At its heart is the idea that you can’t control most of life or the markets, so you should control what you can. Costs are high on that list.

Vanguard research shows that, over time, lower-cost funds are more likely to outperform.¹ Index funds can be a key part of a low-cost strategy, especially because they generally also have the potential to be efficient when it comes to taxes.

Appealing to human nature

The most famous Vulcan, Mr. Spock, had green blood and bristled whenever Captain Kirk suggested his science officer had any human qualities. But the truth is that Spock was half human (on his mother’s side).

And Spock reported to Kirk, who was brash and all too human at times. The two personalities balanced each other. The obvious investing parallel would be to point out how U.S. Treasury securities and investment-grade² corporate bonds can lessen the volatility of equities, but that’s a little too elementary. The bigger point is about the value of active investing. Some investment managers, like Kirk, have skill, an ability to maneuver to achieve goals despite the circumstances.

Those managers can be hard to identify ahead of time, but they’re out there, which is why Vanguard offers active and passive funds.

Active funds also meet an emotional need, a human need, to hope. For some clients, a portfolio that’s 100% index is perfect. They like the low costs and potential tax efficiency. They may like the “buy the market” philosophy or may not want to devote time to identifying outperforming managers. But many investors are drawn to alpha and want a piece of it. They may have an appetite for risk, just as Kirk had an appetite for exploration and adventure. For this group, devoting a portion of a portfolio to active management may make sense.

The market and the Kobayashi Maru

I think even Spock might have invested in active funds. He had watched Kirk triumph in seemingly impossible situations. After all, Kirk was the only student in the history of the Starfleet Academy to defeat the Kobayashi Maru, a computer-simulated training exercise to test the character of aspiring captains in the face of a no-win scenario. The test is designed to see how future leaders will react in the face of death.

Kirk, however, doesn’t believe in no-win scenarios, so, in a controversial move, he reprogrammed the computer to include a solution that allows the captain to be victorious. He won the loser’s game, just as successful active managers hedge their bets by emphasizing discipline and low costs.

Do I actually think the (fictional) 23rd-century approaches of a brash captain and his stoic science officer hold useful lessons for today’s investors? Well, let’s just say the parallels between Vulcan behavior, along with Kirk’s calculated risk, and Vanguard research suggest that to insist otherwise would be highly … illogical.


1 The Vanguard Group, 2014. Vanguard’s Principles for Investing Success.

2 A bond whose credit quality is considered to be among the highest by independent bond-rating agencies.


All investing is subject to risk, including possible loss of principal.