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Empire of the Fund
Empire of the Fund
The Way We Save Now

W ILLI A M A . BIR DTHISTLE

1
 1
Oxford University Press is a department of the University of Oxford. It furthers
the University’s objective of excellence in research, scholarship, and education
by publishing worldwide. Oxford is a registered trade mark of Oxford University
Press in the UK and certain other countries.

Published in the United States of America by Oxford University Press

198 Madison Avenue, New York, NY 10016, United States of America.

© Oxford University Press 2016

All rights reserved. No part of this publication may be reproduced, stored in

a retrieval system, or transmitted, in any form or by any means, without the
prior permission in writing of Oxford University Press, or as expressly permitted
by law, by license, or under terms agreed with the appropriate reproduction
rights organization. Inquiries concerning reproduction outside the scope of the
above should be sent to the Rights Department, Oxford University Press, at the
address above.

You must not circulate this work in any other form

and you must impose this same condition on any acquirer.

Library of Congress Cataloging-​i n-​P ublication Data

Names: Birdthistle, William A., author.
Title: Empire of the fund : the way we save now / William A. Birdthistle.
Description: New York, NY : Oxford University Press, 2016. |
Includes bibliographical references and index.
Identifiers: LCCN 2016007563 | ISBN 9780199398560 (hardback)
Subjects: LCSH: Mutual funds—United States—History. |
Saving and investment—United States—History. | BISAC: BUSINESS & ECONOMICS /
Investments & Securities. | BUSINESS & ECONOMICS / Personal Finance / General. |
LAW / Business & Financial.
Classification: LCC HG4930 .B47 2016 | DDC 332.63/27—dc23
LC record available at http://lccn.loc.gov/2016007563

1 3 5 7 9 8 6 4 2
Printed by Edwards Brothers Malloy, United States of America
 For Alison.

To Elspeth, Isolde, and Alana.

 CONTENTS

Acknowledgments ix

Introduction 1

PART I A N ATOM Y OF A F U N D

1. Purpose 19

2. Structure 29

3. Economics 50

PART II DISE A SE S A N D DISOR DER S

4. Fees 71

5. Soft Dollars 89

6. Fair Valuation 99

7. Late Trading 112

8. Market Timing 122

9. Selective Disclosure 133

vii
viii Contents

PART III â•… A LT ER N AT I V E R E M EDI E S

10. 401(k)s and Individual Retirement Accountsâ•… 141

11. Target-╉Date Funds╅ 162

12. Exchange-╉Traded Funds╅ 175

13. Money Market Fundsâ•… 190

PART IV â•… C U R E S

14. A Healthier Use of Mutual Fundsâ•… 205

Notesâ•… 219
Selected Bibliographyâ•… 243
Indexâ•… 245
 ACK NOW L EDG M EN TS

I thank my colleagues and friends for their extremely helpful comments, espe-
cially Lori Andrews, Kathy Baker, Jack Bogle, Larry Cunningham, John Demers,
Tamar Frankel, John Kastl, David LaCroix, David Lat, John L., John Morley,
B. Carruthers McNamara, Frank Partnoy, John Rekenthaler, and Christopher
Schmidt. Many students provided valuable research assistance, particularly Priya
Gopalakrishnan, Gordon Klein, Matthew McElwee, Ashley Montalbano, and
Jessica Ryou.
I thank Faber and Faber Limited for kind permission to quote the lines from
Philip Larkin’s poem, “Toads.”
I greatly appreciate Scott Parris, Cathryn Vaulman, and Oxford University
Press for their support of this project, Carole Berglie for her skillful editing, and
Eunice Moyle for her stylish design.
I am most grateful for Alison, Elspeth, Isolde, and Alana.

ix
 Introduction
Nearly 80 million baby boomers will file for retirement benefits over
the next 20 years—​a n average of 10,000 per day.
—​Social Security Administration,
Annual Performance Plan for Fiscal Year 2012

Over the past 30 years, America has embarked on a grand experiment—​per-

haps the richest and riskiest in our financial history—​to change the way we save
money. The hypothesis of our experiment is that millions of ordinary, untrained,
and busy citizens can successfully manage trillions of dollars in a financial system
dominated by wealthy, skilled, and powerful investment firms—​fi rms that on
many occasions have treated investors shabbily. As ten thousand baby boomers
retire from the workforce each day and look to survive for almost two decades
largely on the mutual funds in their personal accounts, we will soon learn whether
our massive experiment has been a success. And if not, we will also soon discover
just how enormous the costs of failure will be.
Just a single generation ago, large numbers of Americans enjoyed the protec-
tion of a pension offered by their employer. The typical pension guaranteed its
beneficiaries a steady stream of payments from their retirement until their death.
Together with the benefits of Social Security, pensions provided secure retire-
ments to millions of working Americans.1 The golden age of the pension, how-
ever, is effectively over. And it may at best have been merely gilded, for not once
in the past thirty-​five years did more than 40 percent of American workers ever
participate in such a plan.2
Today, the benefits of Social Security and pensions look alarmingly inad-
equate. The average monthly benefit for retirees from Social Security is now
$1,335, or just over $16,000 per year. 3 Pensions, meanwhile, have rapidly disap-
peared from our economic ecosystem: public pensions are underfunded by tril-
lions of dollars,4 and the number of U.S. private-​sector workers covered solely by
pensions has fallen to an all-​time low of 3 percent. 5 Americans in the future will
have to support themselves far more on the success or failure of their personal
investment accounts.

1
2 Introduction

We as a nation have chosen to entrust our savings not to large pools overseen
by professional asset managers but instead to the smaller, individual accounts
of almost 90 million investing amateurs. In the argot of the investment world,
Americans are losing defined benefit plans, such as pensions, and are being directed
into defined contribution plans, such as 401(k)s.
The rise of these individual accounts has, in turn, funneled massive amounts
of retirement savings—​more than $6.9 trillion—​into one of the most popular
investment options in personal accounts: the mutual fund. American investments
have built an empire of 8,000 funds holding more than $16 trillion.6
The way we save now may enable some Americans to earn comfortable returns
in the years ahead, but is also likely to leave many others disappointed. Though
mutual funds and 401(k) plans may feel familiar to many of us, in fact they present
a number of challenges and dangers to lay investors.
The primary consequences of our new approach, for instance, are that ordi-
nary Americans now find themselves responsible for deciding whether to enroll
in an investment account, what amount of each paycheck to contribute to that
account, and how to invest those savings successfully for up to forty years of a
career and for decades more in retirement. As Thomas Friedman observes, “It
is a 401(k) world”: “Government will do less for you. Companies will do less
for you.” 7
Though the rhetoric of individual choice may appeal greatly to the American
psyche, this change also brings personal liability for getting any of these difficult
decisions wrong. And we are getting them wrong: approximately one-​third of
U.S. households currently have no retirement savings at all.8 Of the remaining
two-​t hirds, those who have accumulated nest eggs have enthusiastically vouch-
safed them to the mutual fund. So if there are any problems in that particular
basket, American investors will find themselves extremely exposed to those
vulnerabilities.
As we will see, funds do suffer from a number of problems. By illustrat-
ing the structural vulnerabilities in mutual funds, the perverse incentives of
fund managers, and the litany of scandals that have bedeviled the investment
industry, this book attempts to forewarn and forearm Americans. To negoti-
ate our new investing paradigm successfully, Americans will need a greater
understanding of mutual funds, more transparency from the financial firms
that manage them, and stronger enforcement by prosecutors of the regulations
that govern funds.
This book also proposes an alternative way for Americans to invest their sav-
ings, one that is less expensive and more scrupulously managed than the mutual
funds in which individuals can participate today. By pooling the bargaining
strength of millions of investors into a powerful savings plan, Americans could
enjoy the benefits of both individual control and economic security.
 Introduction 3

The Demise of the Pension

Unrest in the Midwest
February is no time to wander outside in Wisconsin. Certainly not without a com-
pelling reason or the warmth of a grilled brat. In February 2011, the average high
temperature in the state capital, Madison, was only 29.6 degrees Fahrenheit.9 The
Green Bay Packers won the Super Bowl in Texas that month,10 but the last tailgate
at Lambeau Field—​prior to a satisfying home win over the Chicago Bears11—​had
been weeks before, on January 2. In any normal winter, citizens of the Badger
State should have been tucked up inside, savoring their ability to play football,
craft delicious dairy products,12 and behave sensibly.
Instead, tens of thousands of them—​over a hundred thousand by some
estimates—​were outside in the cold. Not just for a quick dash to replenish the
frozen custard and cheese curds. But for hours. Then for days. Then for weeks
and months. When these massive and persistent crowds of Wisconsinites did
step back indoors, they did so most dramatically by forcing their way into the
rotunda of the State Capitol, where they interrupted lawmakers with drumbeats
and chants. Even, if reports are to be believed, with the utterance of an epithet
or two.13
For a few tumultuous months, these un-​m idwestern displays by the citizens
of Wisconsin captivated the front pages of newspapers across the United States.
Yet they were surpassed by the enormities of the state itself. Indeed, by officials
in each branch of the Wisconsin government: executive, legislative, and judicial.
The newly elected governor, just a few months into his term, prompted these
massive demonstrations by announcing his controversial plan to limit employee
benefits.14 Fourteen state senators who opposed the plan evaded capture by the
Wisconsin State Patrol and fled to an undisclosed location in Illinois—​in an
attempt to prevent a quorum for a vote on the governor’s bill.15 When the bill nev-
ertheless became law, a challenge to its legality made its way to the Wisconsin
Supreme Court, where tempers amongst the justices frayed to the point that one
accused another of putting her in a chokehold.16
Americans today are much more familiar with the Wisconsin governor who
triggered this astonishing chain of events, now that he has survived a recall elec-
tion, won reelection, and run for president of the United States. He is, of course,
Scott Walker.17
But what could possibly have been in his plan that so exercised the good peo-
ple of America’s Dairyland? Some provisions of Governor Walker’s bill enraged
public employees for obvious reasons, such as requiring them to contribute far
more to their pensions and curtailing their ability to bargain collectively. But
the law, formally titled 2011 Wisconsin Act 10, also included another idea, one
4 Introduction

less prominent but with a greater potential impact on the citizens of Wisconsin.
Section 9115 of the bill required a study of the effect of “establishing a defined
contribution plan as an option for participating employees.”18
Whatever such an academical exercise might entail, it certainly doesn’t sound
very important or threatening, does it? In fact, the proposal hinted at the begin-
ning of the end of public pensions in Wisconsin and their eventual replacement by
defined-​contribution accounts. This substitution is one that private companies in
the United States widely adopted to improve their balance sheets in the 1990s.19
And state and municipal governments throughout our country might hope it will
do the same for their budgets some day.

Illinois Isn’t Burning, Yet

Perhaps the most combustible government in the union is another midwestern
state, just one to the south of Wisconsin. The risks of ignition in Illinois arise from
its poor credit rating, unfunded pension liability, and insoluble political paralysis.
Illinois’s credit rating and pension liability are the worst in the nation; its political
problems might be, too, if such things could be quantified.20
The Standard & Poor’s rating of Illinois’s credit is A-​, which might be cause for
self-​congratulation on a high-​school report card, but is an abysmal score in the
world of credit ratings. Six grades below the best possible rating (AAA, which
fifteen states hold), Illinois’s A-​is lower than every other state’s rating.21
The unfunded pension liability in Illinois is now more than $111,000,000,000
(that is, $111 billion). This caravan of zeros represents the void separating the
amount that Illinois has promised to pay its retirees and the amount it has actually
set aside to honor those promises. For scale, consider that Illinois collects about
$40 billion in annual revenues. 22
Though political paralysis is a difficult phenomenon to measure, the dysfunc-
tion in Illinois is evident even to a casual observer. Not only from the state’s
impressive lineage of incarcerated governors but, in this financial crisis, also from
the inability of politicians to negotiate any sort of workable solution. A recent leg-
islative effort to fix the gaping budgetary hole was struck down as unconstitu-
tional by the state’s supreme court, to little surprise.23
That people in the Land of Lincoln are not yet marching on Springfield and
gatecrashing the capitol might be due only to the failure of politicians to pre-
scribe medicine strong enough for Illinois’s ailment. Still, public finances are
now in such a dire condition, worsened through years of malign neglect, that
when legislators do eventually get around to proposing a serious solution, large
groups of Illinoisans will be upset. The most serious, if not the most popular,
solution in Illinois is likely to be the same idea as set forth in Governor Walker’s
law: to shift new state employees out of a pension and into a defined contribu-
tion plan. 24
 Introduction 5

Illinois and Wisconsin are far from alone in suffering these budgetary woes.
The Pew Charitable Trusts reports that the majority of American states are delin-
quent with their pensions.25 Indeed, the aggregate unfunded gap in state pensions
is now well more than 1 trillion dollars.26 Even by the louche standards of our
nation’s recent financial debacles, this number is gigantic.
For those Americans who still have them, such as public employees in
Wisconsin and Illinois, pensions remain vitally important. But we should be care-
ful not to overstate the historical importance of pensions. And at no time did pen-
sions swaddle the land in a security blanket. In 1975, even before the introduction
of 401(k) plans, fewer than 40 million Americans participated in pensions, and all
pension plans combined held less than $200 billion. Only 21 percent of private-​
sector employees at the time received any money from them, and their median
annual income was less than $5,000 in today’s dollars. Pensions were not then a
financial panacea for the United States and will not be anytime soon.
On the contrary, pensions are dwindling quickly. In America’s public sector,
the pension is very ill; in the private sector, it is effectively dead.

The Rise of the Fund

In place of the pension has arisen the individual savings account and, more spe-
cifically, the investment fund. Let us first examine the difference between pen-
sions and individual investments, and then consider why we have shifted from
one to the other.

Pensions versus Individual Accounts

A pension is, metaphorically, something like a bus: a functional if unglamorous
conveyance driven by a professional to carry us as passengers on our trip to future
financial security. Individual accounts, by metaphoric comparison, are more like
cars: zippier vehicles that we drive ourselves to whatever destination we hope to
reach with our savings. And for those investors who do drive their own cars, per-
haps the most wildly popular road on which to travel is the mutual fund. Our
experience with mutual funds, however, provides sobering evidence that these
roads can be dangerous to travel.27
Though we have seen fierce opposition in places like Madison, employees across
the United States have for the most part quietly accepted individual accounts.
Recall that those protestors in Wisconsin ultimately lost their battle when
Governor Walker and his legislative allies successfully enacted their new law.28
Indeed, the adoption of individual accounts appears to be proceeding as com-
prehensively as did our adoption of automobiles a century ago. We Americans,
it turns out, tend to like driving our own cars. Paternalistic advice that a bus or
6 Introduction

a train might be safer isn’t terribly compelling; indeed, it may seem unappeal-
ingly European. Like automobiles, our new innovation of individual accounts
can, when used prudently, bring many potential benefits. And mutual funds, too,
are important and useful financial pathways for guiding people to save for their
future, their health care, and the education of their children. The mutual fund is
now the central investment tool that Americans use to save, in both retirement
and all other personal accounts.
But, one might wonder, are not financial professionals involved in both pen-
sions and mutual funds? And, if so, are not the risks of the two modes of saving
comparable? Yes, managers do indeed participate in both systems, but, no, the
risks are not comparable. The timing and manner of professional involvement dif-
fer critically and lead to very different outcomes. Automotive experts help to cre-
ate both buses and cars, but a professional drives the bus, while you drive the car.
In a pension plan, employees have no involvement whatsoever in how monies
are invested. In an individual account, on the other hand, each employee chooses
the specific mutual fund, if any, in which to invest. Managers of a pension fund
act under a duty to generate streams of payments to people who are no longer
working. Managers of a mutual fund pursue far narrower objectives. Investors in
their funds, after all, may be senior citizens saving for retirement or hedge funds
executing a short-​term trading tactic. With over 8,000 U.S. mutual funds in the
market, the investment approach of any given fund is often narrow, specialized,
and aggressive.29
To use an alternative metaphor, pension managers and mutual fund advis-
ers are both chefs of a sort. But pension managers create entire meals to provide
nutrition, while fund advisers sell individual dishes to satisfy taste. If investors
eat their complete pension breakfast, they are likely to benefit from a nutritious,
if modest, meal. If investors pick and choose individual foods, they can easily
hurt themselves by binging on obscene amounts of truffled omelets. Mutual fund
investors can and regularly do lose substantial amounts through fees and poor
performance; pensioners get no more, and rarely any less, than what they have
been promised.
Pensions, again, are known more technically as defined benefit plans and,
though hopelessly technocratic, that dollop of jargon does capture their
essence: in a pension, the benefit one receives is defined in advance. That is, the
payout an employee will receive at retirement is established long before that per-
son ever becomes a pensioner.
Typically, the amount of the benefit is set forth as a formula for determining
an annuity—​t hat is, a regular stream of payments the employer will pay to the
employee from the moment she retires until the day she dies. A basic formula
would be a certain percentage of the employee’s final salary, multiplied by years
worked. Pensions, of course, can differ widely and offer more or less generous
benefits. A more generous pension might increase the monthly amounts through
 Introduction 7

annual cost-​of-​living adjustments or, upon the death of the pensioner, continue
to be paid to the pensioner’s surviving spouse for the remainder of that person’s
life. 30
Another common pension perquisite has inadvertently evolved into one of the
most generous: healthcare coverage. As part of a standard pension plan, the retir-
ing employee typically remains covered by the employer’s health insurance fol-
lowing retirement and for the rest of the pensioner’s life. 31
An employer responsible for making monthly pension payments to its army of
pensioners is confronted with a mathematical challenge. How can the employer
amass enough money to pay all those indefinite obligations that will come due
decades into the future? One way to tackle this problem in a pension is, in some
form, to set aside regular contributions and to save those sums while the employee
is an active member of the employer’s workforce. As useful as that pile of money
might be, it will rarely be sufficient to cover an unknown stream of pension pay-
ments years into the future. But, of course, the savings alone are not intended
to support the pension payouts. Employers do not simply stash these contribu-
tions in a coffee can under the bed. Instead, they place the sums in a pension fund
and hire professional money managers to invest the savings over the course of
decades, in an effort to build a corpus of investment returns that will augment the
original contributions. Indeed, in a successfully managed pension, those invest-
ment returns, compounded over decades, might vastly outweigh the amount of
the original contributions.
If employers rely on these contributions to fund pensions and hire experts to
increase those sums, why have they soured so much on these plans? The problem
for employers arises when their pension plans have not saved or appreciated suf-
ficiently to cover their obligations. And, in recent history, problems have arisen
not so much with the savings and investment returns flowing in but, rather,
with the amounts due to flow out. Pension obligations have ballooned well
beyond what employers predicted decades ago. And the essence of a pension is
that employers are contractually responsible for covering any and all shortfalls
between what their pension promised and what the pension fund may actually
have accumulated.
Why have obligations increased so unexpectedly? For two primary reasons.
First, Americans have developed the tenacious habit of living longer. In the past
quarter-​century, the life expectancy of Americans has increased by almost a
decade. 32 From an employer’s perspective, that increase represents ten more years
of obligatory pension payments. Jane Austen long ago instructed us on the health-​
giving powers of an annuity, when her Fanny Dashwood, in Sense and Sensibility,
bemoaned the idea of giving one to her father-​in-​law’s widow, Mrs. Dashwood:

But if you observe, people always live for ever when there is an annuity
to be paid them; and she is very stout and healthy, and hardly forty. An
8 Introduction

annuity is a very serious business; it comes over and over every year, and
there is no getting rid of it. 33

Of course, since the founding of the Republic, Americans have been increasing
their life expectancy, and any decent actuarial predictions made twenty-​five years
ago should have foreseen many of those extra years of pension payments. They
did, but their math was still off.
What the actuaries did not predict was the second reason that pension obli-
gations have swollen so much: healthcare costs in the United States have spiked
in recent years. 34 Since many pension benefits included healthcare coverage,
employers have also been responsible for those unexpected increases in health
insurance premiums. And not only have healthcare costs risen rapidly in general,
those costs are most acute at the end of a person’s life, when we devour a huge per-
centage of our lifetime healthcare services. That extra decade of life expectancy
has come to us not, alas, in our dashing twenties but in our seventies and eighties,
when we’re consuming buffets of prescription medications, hip replacements, and
life-​prolonging treatments.
Employers surprised by—​and financially responsible for—​these unexpectedly
expanding obligations have felt themselves shackled to a corpse and have sought to
rid themselves of their pension plans.35 For existing pensioners or employees whose
pension benefits have already vested, an employer may not easily renege on pen-
sion payments. That is, an employer cannot simply announce that it has changed its
mind and no longer wishes to make any more pension payments; that path would
be littered with lawsuits for breach of contract. Instead, a particularly determined
employer might attempt to discharge its pension obligations through bankruptcy,
and many have done so. In the private sector, pensions are disappearing like a sump-
tuous stand of tropical rainforest. In the public sector, pensions remain prevalent,
but even municipal bankruptcies are on the rise, and lawsuits are proliferating as
states and municipalities attempt to obviate their pension obligations.

America’s Embrace of Individual Savings Accounts

The public employees of Wisconsin, Illinois, and many other states may be fighting
to keep their pension plans, but they appear to be losing the struggle. Employers
both private and public are prevailing in their efforts to shunt their employees
into individual accounts, primarily as a means of shifting the costs and risks of
future payouts from employers to employees.
These days, in the private—​and perhaps soon the public—​sector, employers
rarely promise newly hired employees a pension. Instead, they offer a different sav-
ings plan: a defined contribution plan. That technical term includes 401(k) plans,
403(b) plans, 529 plans, and individual retirement accounts. What is defined in
 Introduction 9

this new species of plan is no longer the benefit, as it was in a classic pension plan.
Rather, these plans define only the contribution, which is the amount paid in. That
is, the employer disavows any responsibility for what the plan is capable of—​or
answerable for—​paying out in the future. 36
In practice, a certain percentage of each employee’s paycheck is set aside, before
taxes are deducted, and contributed to the defined contribution plan. Sometimes,
but not always, the employer chooses to contribute an additional amount into the
employee’s plan with each paycheck. An employer’s decision to contribute any
matching sums will turn on the same array of factors as influence all employ-
ers’ offers to their employees: in the market for labor, how much do they need to
sweeten their package of salary and benefits to attract talent?
Once an employee elects to enroll in one of these accounts, the employee—​
not a firm of investment professionals—​determines how much of each pay-
check to set aside (up to certain federal maximums) and in what particular
investments to allocate those sums. As in pension plans, the overarching goal
is that the corpus of contributions, augmented with decades of investment
returns, will eventually amount to a valuable nest egg that can support the
employee when she is no longer actively employed and earning. To accomplish
that goal, most investors with individual accounts direct their savings into
mutual funds.

Funds May Not Be as Familiar as They Seem

Though mutual funds may seem ubiquitous and familiar to many Americans, they
can carry hidden dangers. Let us return to our automotive analogy for a vivid
warning.
Karl Benz, widely acknowledged as the inventor of the modern automobile,
designed his first engine in 1878. 37 Section 401(k) of the Internal Revenue Code,
widely acknowledged as the source of the individual tax-​advantaged retirement
account, first appeared in the Revenue Act of 1978. 38 We are now almost forty
years into our experience with the 401(k). At about this stage of our embrace of
the automobile, in 1915, approximately 6,800 people died in motor vehicle acci-
dents. 39 As Americans tightened their embrace of automobiles in the subsequent
decades, annual deaths swelled to the tens of thousands before reaching a grisly
peak of more than 54,000 in 1972.40
Now consider the financial crisis of 2008. During that unpleasantness, we saw
the value of mutual funds plummet, slashing as much as 40 percent from the sav-
ings of investors on the very cusp of their retirement.41 Our national zeal for indi-
vidual accounts might very well inflict significant costs on Americans in the years
to come. As individuals, obviously, but also as a nation.
10 Introduction

What Don’t We Know About Mutual Funds?

Mutual funds are widely considered to be simple tools used by school teach-
ers and plumbers as a safe means to preserve their life savings. When scandals
afflicted other aspects of our financial industry, these funds appeared to be the
rare investment resistant to fiscal intemperance. Indeed, observers hailed their
portfolio managers and boards of trustees as models for corporate America.42
Mutual funds, alas, do have plenty of their own secrets.
Many of these skeletons tumbled out in a dramatic press conference in
September 2003.43 The attorney general of New York State surprised watchers
that day by naming four large mutual fund firms as perpetrators of “a funda-
mental violation of the rights of shareholders.”44 Bank of America, Janus, Strong
Financial, and Bank One had collaborated with a hedge fund named Canary
Capital Partners, alleged the attorney general in his complaint, to swindle fund
investors using a pair of schemes known as late trading and market timing.45
The head of Canary was a fellow by the name of Edward Stern, most famous
prior to this unpleasantness as the son of Leonard Stern, the billionaire magnate
whose name graces the business school of New York University. Stern the younger
did not follow his father’s path by making a fortune selling dog food and copies of
the Village Voice; instead, he went panning for gold in the quiet waters of mutual
funds.46
Stern persuaded this quartet of mutual fund firms and other intermediaries to
grant him permission to do the legally impermissible. With Bank of America, for
instance, Stern bargained for the ability to place late trades in mutual funds until
6:30 p.m. New York time. Entering a mutual fund trade any time after 4:00 p.m.
Eastern Time and receiving that day’s price, however, is a violation of federal
securities law. As the New York State attorney general characterized the practice,
“late trading can be analogized to betting today on yesterday’s horse races.”47 The
winnings from Canary’s dead certs came out of gains that would otherwise have
accrued to ordinary, law-​abiding investors in the mutual funds. Bank of America,
naturally, received compensation from Canary for extending this privilege.48
In Stern’s other schemes, involving market timing, he won the complicity of
investment firms to trade millions of dollars in and out of their funds on short
notice. This style of rapid trading, which capitalizes on arbitrage opportunities,
was expressly banned by the funds’ legal documents. Funds publicly prohibit
market timing because it diverts profits out of the accounts of the funds’ long-​
term investors and into the hands of market timers. Indeed, fund firms like Bank
of America even employed “timing police” to protect their funds from this sort of
behavior. As with their late-​trading arrangement, however, Canary simply paid
Bank of America to keep those constables off the beat.49
Stern may have lacked his father’s acumen and integrity, but he certainly
shared his ambition. Stern fils and Bank of America were not content with the
 Introduction 11

occasional order faxed over after market-​moving news, nor a few hundred thou-
sand dollars quickly bounced in and out of a fund. Instead, the bank gave Stern a
“state-​of-​t he-​a rt electronic late-​trading platform”50 that allowed Canary to place
late trades from its own computers directly into Bank of America’s system with-
out needing anyone’s authorization. The bank also provided Canary with a credit
line of approximately $300 million to finance this late trading and market timing.
Only when Canary’s practice of churning $9 million in and out of funds each day
had sufficiently exasperated employees at Bank of America did they deploy their
own timing police. 51
The New York State attorney general with this gift for a narrative—​and tele-
genic Repp ties, tailored suits, and scandals of his own to come—​was of course
Eliot Spitzer. His revelation on September 3, 2003, triggered a wave of investi-
gations into all aspects of mutual funds. Lawyers and accountants scoured this
multi-​trillion-​dollar industry to which 91 million individuals had entrusted their
savings. 52
Regulators, plaintiffs, and trustees soon alleged that many of the most trusted
firms in the business had engaged in illicit practices beyond the original sins of
market timing and late trading; for instance, failing to remit promised discounts;53
selectively disclosing the holdings of fund portfolios to preferred clients;54 failing
to “fair value” the worth of assets under their management;55 and, not surpris-
ingly, destroying evidence of these abuses. 56
Twenty of the country’s oldest and most renowned fund complexes paid out
unprecedented settlements to government regulators: Bank of America paid
$375 million; Invesco Funds Group Inc. paid $325 million; and Bear, Stearns
paid $250 million. Many more, including Alliance Capital Management, MFS,
Citigroup, and AIG, also paid nine-​d igit settlements, for a total of almost $4 bil-
lion in penalties. 57
But news coverage of these abuses in mutual funds soon gave way to the sub-
prime mortgage scandals of our subsequent financial crisis. 58 And the public’s
appetite for mutual funds soured only for a short while. After a brief period of
withdrawals, the number of fund investors rose to 96 million, and by 2006 their
assets climbed above $10 trillion. 59
So why should we continue to worry about the failings of one sleepy financial
instrument amid the regular implosions of so many? As we shall see, problems
with mutual funds are problems for millions of ordinary Americans.

How Does Our Experiment Appear to Be Proceeding So Far?

The Center for Retirement Research at Boston College reports that for those on
the cusp of retirement—​workers between the ages of fifty-​five and sixty-​four—​t he
median balance in household 401(k) or IRA accounts is $111,000.60 Perhaps such
12 Introduction

a six-​figure sum appears opulent, but when we consider that it must support a
retirement that could continue for decades, it is inadequate.
Today, the average American retires at sixty-​one and dies at seventy-​nine.61 At
our current rates of interest, inflation, and life expectancy, $111,000 would provide
only about $7,300 in each year of a two-​decade retirement. People with a balance
that meager are about to confront an extremely lean retirement. Note also that
more than one-​fi fth of the workers in this survey hold balances of less than $13,000.
Amounts that small would not even provide the pittance of $1,000 each year.
The state of our experiment is alarming. In the cohort of 76 million retiring baby
boomers,62 many of whom are going to rely heavily on individual accounts, we can
be sure that millions will fall short. When they do, large swaths of Americans will
soon require substantial financial assistance from other sources.
We won’t really discover the broader results of our experiment until these baby
boomers have retired en masse and have attempted to support themselves on the
balances of their accounts without additional income from regular salaries. The
statistics on savings we have amassed so far suggest that we are likely to hear a
great deal more about the inadequacy of individual savings accounts in the years
to come.
So what happens if an individual employee mismanages this project and the
monies in his retirement account turn out to be insufficient to cover the necessi-
ties of his retirement?
Recall that with a pension, the employer promises to draw upon the corporate
or public revenues to cover any such shortfalls in the plan. Corporate employers
make this promise via contracts, so they are legally enforceable for as long as the
employer remains solvent. Public employers make their promises via contracts,
state statutes, or even provisions in state constitutions, which can render them
extremely difficult to break. Staring into their budget chasm, Illinois lawmakers
have tried but failed to wriggle out of the state’s constitutional provision man-
dating that pension benefits “shall not be diminished or impaired.”63
Even in bankruptcy, pension payments may be continued to some extent by
the Pension Benefit Guaranty Corporation (PBGC), a governmental agency
charged with insuring pensions in much the way the Federal Deposit Insurance
Corporation protects deposits in banks that go bust.64 But with so many demands
on its insurance of late, the PBGC is not a well institution. Like so many of its ben-
eficiaries, the PBGC runs a worrisome deficit of its own: in 2015, its obligations
exceeded its assets by more than $76 billion.65
Unlike a pensioner, the employee in a defined contribution plan is alone
left with the consequences. If money in the employee’s account runs short, the
employee runs out. So the implicit promise of a defined contribution plan differs
fundamentally from that of a defined benefit plan.
Perhaps, though, this difference is capitalist and meritocratic, and so is quint-
essentially American: more risk, certainly, but also greater possible reward.
 Introduction 13

Whether trillions of dollars of American life savings ought to be directed into

investments with higher risks and rewards depends, in great part, on the personal
and societal consequences of those risks’ being realized.

Failure and Success

The Consequences of Failure in Our
Experiment with Mutual Funds
If, indeed, mutual funds and individual accounts are vulnerable, heaping so much
of our money upon them could be an extremely dangerous adventure in public
policy.
One might argue that the risk of people losing their own money in individual
accounts is offset by their greater possible rewards and, in any event, ought to be
no concern of the rest of society. This libertarian strain of argument insists that
government should have no interest in the success or failure of an individual’s
efforts to save for her own future. As with the perils of smoking—​t he argument
might go—​what business is it of ours if someone wishes to harm herself, whether
it be with cigarettes or inept investing?
The answer might turn, as it did with smoking, on the second-​hand and soci-
etal consequences of disastrous investing. As a country, we began to care far more
about cigarettes when we learned of the harms that smoking inflicts on the lungs
of others, as well as on the public health budgets of our commonwealth. The value
of individual accounts will implicate similar policy considerations if maladroit
investing on a vast scale damages our nation’s fiscal health.
If Americans turn out to be largely inexpert at saving and our experiment
does not succeed, great swaths of our fellow citizens could become destitute
in their most vulnerable years. How likely is that eventuality? John C. Bogle,
one of America’s leading authorities on mutual fund investments, warns that
our retirement system is “headed for a train wreck.”66 If he and many like-​
minded experts are correct, then as a nation we will face the choice of either
ignoring the plight of those whose 401(k)s are bare or of providing very expen-
sive support to the impoverished. 67 At a time of historic financial inequality,
the state of our union surely will not benefit from more sources of economic
dysfunction.
One cannot know, of course, how our future politicians and policymakers
might solve such a problem, but the elderly have long been a very powerful vot-
ing constituency in our democracy. Little imagination is needed to suspect that
if defined contribution plans turn out to be a widespread disaster, those suffer-
ing the most will vote for financial assistance. If millions of elderly Americans
lose in the 401(k) sweepstakes and face crushing poverty in their later years, they
are likely to push for all American taxpayers to share in the costs of our grand
14 Introduction

misadventure. And, like our other post hoc financial bailouts, the consequences
are likely to be expensive, divisive, and broadly unsatisfying.

Success with Better Investors and Better Investments

Just like racing down the open road in our own cars, taking control of our finances
can be a compelling notion with intuitive American appeal. But with investing as
with driving, we can be injured through any combination of engineering flaws in
the cars or roads we use, of our own shortcomings as drivers, and of the peril of
others on the road. This book proposes a suite of tools—​transparency, financial
literacy, and enforcement—​to help investors avoid these dangers.
First, consider the structural vulnerabilities of mutual funds. Many investors
are unaware of the operations or economics of these funds. The financial houses
that run mutual funds, for instance, owe conflicting allegiances to two very differ-
ent groups of people: their own shareholders and the fund investors whose money
they manage. To satisfy their own shareholders, fund managers must maximize
fees, yet every increase in fees drains money directly from the savings of fund
investors. Each year, the industry with this conflict of interest pockets nearly $100
billion of our savings.68
With greater transparency, investors would learn that fund firms make more
money by increasing the size of a fund, even if they do so only by bringing in
new investments without generating any positive returns for existing inves-
tors. In this system, therefore, marketing can triumph over prudent invest-
ment. Indeed, federal law permits fund advisers to use the money of current
investors—​v ia infamous 12b-​1 fees 69—​to advertise the fund to prospective
investors. Ultimately, every fund investor should be taken aback to learn that
this industry is one of the rare economic markets in which price and perfor-
mance are inversely related.70 That is, the more one pays for a mutual fund, the
more likely that fund is to produce lower investment returns. Imagine a world
in which the most expensive cars were the worst jalopies. Financial drag from
high fees causes this quirk of mutual funds and can profoundly erode our sav-
ings, particularly when compounded over decades. But greater transparency in
the ways of the mutual fund can help investors to protect themselves from these
structural impediments.
Second—​and though we all hate to do it—​let us reflect upon our own possible
shortcomings. We would all like to believe that, with a little motivation and some
self-​help, we could win friends like Dale Carnegie and invest like Warren Buffett.
But empirical studies repeatedly demonstrate that laypersons lack the institu-
tional resources and the financial expertise we need to succeed at this project of
investing large amounts by ourselves for years to come.71
The discomfiting reality is that the average individual does not abound in the
key requirements of successful investing: discipline, deferred gratification, and
 Introduction 15

math.72 As humans, we tend not to be very sapient at forecasting our economic

requirements decades into the future, at setting aside income today that we will
need for the years ahead, and at calculating the investment options that will pro-
vide the best mix of risk and reward to increase our savings to sustain our future
lives. As Richard Thaler notes, we simply don’t enjoy many opportunities to get
better at this project: “when it comes to saving for retirement, barring reincar-
nation we do that exactly once.”73 Indeed, those challenges are difficult even for
the most powerful, wealthy, and experienced investors in our nation’s economy.74
Improving financial literacy, however, can help prepare investors to face these
challenges.
Third, consider the risks from our counterparts’ behaving badly. The history of
Wall Street is blotted with tales of financial insiders who have deceived ordinary
investors. Though the structure of funds allows firms to obtain large amounts
of our savings legally, some professionals have proved creative at squeezing ever
more pennies out of our accounts illegally. Investment banks like Bear, Stearns
and Bank of America, hedge funds like Canary Capital, and fund advisers like
Putnam, MFS, and Allianz among many others have paid many billions of dol-
lars to settle claims of wrongdoing in an alarming array of unlawful schemes like
late trading, market timing, unfair valuation, and more. Several of the chapters in
this book will illustrate the diverse array of schemes by which experts in the fund
industry have absconded with the savings of ordinary investors. Through greater
enforcement of mutual fund investments, financial regulators could reduce the
most problematic excesses in the industry.
To forestall those ominous outcomes, American investors need alternative—​
and better—​solutions.
This book is an effort to teach investors how to use our new investing technol-
ogy safely. How many lives might have been saved if our society had more quickly
recognized the perils of speeding and drinking? Or the benefits of seatbelts, safety
glass, and airbags? If investors today can—​w ith a little driver’s education—​learn
the structural vulnerabilities of investing on their own and the dangers to avoid in
mutual funds, we stand a much greater chance of preserving our individual finan-
cial health and the nation’s fiscal and democratic vitality in the years to come.
Of course, even the most sophisticated investors need better tools. No individ-
ual 401(k) investor, no matter how brilliant or wealthy, has the bargaining power
to demand the best prices and most scrupulous behavior from a trillion-​dollar
investment industry. To ensure that Americans can make the most of our new
world of individual accounts, we must create an inexpensive and well-​r un account
for all Americans. As it happens, just such an option already exists in the Thrift
Savings Plan for federal employees: a plan managed by one of America’s lead-
ing investment firms for astonishingly low fees. Why does BlackRock run these
investments so well and so inexpensively? Because the 4.5 million investors con-
stitute a powerful buying club with more than $400 billion in assets. By opening
16 Introduction

this plan more broadly or creating similar pools, more Americans could prosper
in our new investing paradigm.
This book provides an introductory lesson in how to navigate investment
funds, and makes an argument for how individuals can work together to
demand better investment tools. The sooner we improve the way we save now,
the more surely we can safeguard our own financial destinies and our nation’s
fiscal strength.
 PA R T I

ANATOMY OF A FUND
Because of the unique structure of this industry … the forces of
arm’s-╉length bargaining do not work … in the same manner as they
do in other sectors of the American economy.
—╉U.S. Senate Report, 1970

Though mutual funds now dominate the financial accounts of 55 million

households in this country, ordinary investors are largely unaware of their
complexity and peril.1 To understand these ubiquitous instruments—╉and
to appreciate their hidden dangers—╉let us begin by exploring their anat-
omy. When we inquire into their purpose, structure, and economics, we
will answer the wherefore of mutual funds.
Many books on personal finance adopt an approach similar to diet
books: “Invest in nothing but the ten worst performing stocks … they can
only go up!” “Consume nothing but paprika and 7-╉Up … you’ll cleanse the
toxins and weight away!” This book strives to be more like a simple medical
text: by learning how funds are put together and where the money flows,
you can inoculate yourself against a broad range of common investing mal-
adies. But the better metaphor may again be automotive.
If individual accounts like 401(k)s and IRAs are the midsize sedans of
American investment, then mutual funds are the charming old U.S. high-
ways upon which they travel. A jaunt along Route 66 may not be as expe-
ditious as a sprint down an interstate, as exhilarating as a few laps of the
Indianapolis Speedway, or as glamorous as a joyride through Beverly Hills,
but it is a stolid and sensible way to get where one hopes to go. In finance,
high-╉frequency trading funds are faster than mutual funds, hedge funds are
more volatile, and private equity funds are often more lucrative. But those
exotic investment tools are also far more dangerous ways to invest. And
they are certainly no place for ordinary citizens to nurture their life savings.
18 Pa rt I: A natom y of a Fu n d

Mutual funds are—​and, in large part, ought to be—​the overwhelmingly

popular choice for most American families.2
As a nation, we currently save more than $16 trillion in these funds,
entrusting them with everything from our future savings to our retirement
nest eggs, to our children’s tuition. Mutual funds now hold almost a quar-
ter of all our household financial assets and 60 percent of all the money in
our individual retirement accounts—​and those percentages are both rising
as mutual funds establish themselves as a standard default option for our
investments. In short, when Americans find themselves with an extra dol-
lar to save, the obvious destination for that investment is a mutual fund. 3
Thus, to understand America’s finances, and our own, we must under-
stand mutual funds.
Another random document with
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knowledge greater than any of the sciences. The unfolding soul of a
child is God’s greatest mystery; the science that deals with
developing life is the science that the primary teacher must know.
The little minds of her pupils are like strangers in a strange land. The
teacher is the guide. Her responsibility is of the greatest.
(1) The first day. Important as is the first year, the first day of
school is equally so. Not merely the first day of the first year, but the
first day of every school year. That “first day” impression that the
teacher makes, often has a far-reaching influence. Very frequently it
is a day of confusion for both pupil and teacher, neither knowing just
exactly what is to be done. There is no surer way to complexities than
to open school without detailed plans.
(2) Detailed plans. The simpler the plans the better, but every
detail of the daily program, lesson, assignments, seating, etc., should
be worked out carefully beforehand.
The teacher should meet the pupils with a friendly greeting and
without any hesitancy assign them to their seats, adding such other
instructions as are necessary. However, not too many instructions
should be given; better none than too many.
If parents accompany the pupils, they should be treated with
consistent courtesy and their questions answered firmly. It is always
best to say as little as possible to parents, never forgetting, however,
to be polite. As soon as school is begun, the teacher may tell a story
that will attract the children to her and leave a good impression.
Following the story, lesson assignments should be made. All
assignments and instructions should be simple and plain. If it is
necessary to do some school work, the tasks should be short and so
simple as to be entirely within the ability of the children. Take great
care to leave with them at the close of their first day the feeling of
power to do what will be required of them. In closing the session
mention some delightful bit of work, that “we will do tomorrow.”
In rural schools the first day is even more perplexing than in
village or city schools, because, in the rural school, one teacher has
all the grades. Plans for study, recitations and recesses should all be
made so that any question asked about any phase of the school work
can readily be answered. As in the city school, older pupils should be
promptly assigned to their seats; to allow them to select their own is
poor policy and almost always results in trouble later in the year. If
the teacher knows the names of the pupils, it is a good plan to have
the names on cards placed on the seats in which the teacher wishes
to have the pupils seated. The smaller pupils should also be shown to
their seats and assistance given them in getting their books into the
desk in an orderly manner. After school is called to order the work
for the day should begin at once. The teacher may give an opening
talk if he thinks that is best. However, it is advisable not to do that.
At this stage of the work it is very prudent for the teacher to avoid
making set rules or even feigning authority. Be unassuming. As in
the city school, work on the first day should be simple. The pupils
have had no preparation and cannot respond in recitations.
Sometimes teachers ask the pupils to prepare the lessons first, but
they are in new surroundings and not used to study; it is better to
make assignments and explanations, then fill the remainder of the
day with “busy work,” songs and stories. But whatever the teacher
does must be so done that the pupils will feel that he is in earnest.
Try to send the children home that night with the impression that
this term’s work is going to be a very interesting and happy one.
In the first grade, children tire easily and consequently lose
interest. Therefore, they should have frequent changes from one
activity to another. The lessons should be short, followed by “busy
work,” then a play period, or simply gymnastics. If gymnastics are
used the exercises should be varied. There is such a wide range of
possible exercises that it is easy for any teacher to have plenty of
gymnastic drills or simple games, allowing much activity, which will
interest pupils for many months. None of the exercises of the first
grade should be carried so far as to tire the pupils.
From the foregoing, it is apparent that a well devised daily
schedule is important. It must be workable. There must be no gaps in
it wherein the teacher gives the children idle moments. Material for
use during the day should always be arranged before school opens in
the morning.
3. Regulating the Movements of the Pupils
One of the most necessary duties of the teacher at the beginning of
the year is to train the children to habits of regulated and quiet
movements when passing in and out of the school-room, going to the
blackboard, coming forward to the recitation seats, passing material
for busy work, or during any other concerted action. The first day is a
particularly opportune time for drill in quiet movement, not only
because no lessons have been made ready and, therefore, the teacher
is entirely free to take as much time as is desirable without feeling
that he is encroaching upon other lessons, but also because such
exercises impress upon the children the necessity for quiet
movement at a time when their minds are not prepossessed with
other subjects. The suggestion is likely to lodge firmly in mind at this
time, partly because of the prominence given to the thought and
partly because of the absence of conflicting interests on this first day.
Furthermore, in drilling the children from the start to recognize the
signals and to obey them, the teacher is taking a long step toward
securing control of his room. Of course, he must not expect the
children to learn the whole lesson in one day. Even adults require
“drill” before they can respond perfectly to regulated movements. To
first grade children the signals and directions are absolutely
meaningless until the meaning is taught. Nevertheless, even first
grade children can be taught easily to be quiet and orderly, and if the
drills are given as little games, competitive or otherwise, they will
look upon the whole thing as play and hence will respond heartily.
Suppose, for example, that the inexperienced teacher who enters
the school-room saying to herself, “What in the world can I do to
keep all these wriggling children in order for a whole day!” should
have some of the following drills (abridged from Hillyer’s “Child
Training”[3]) at command to use whenever the children begin to be
disorderly or seem not to comprehend directions.
3. Hillyer, V. M.—Child Training, pp. 14–28.—New York. The Century Co.
(1) Simple directions. Say to the children, “I want to see if you can
do what I tell you, just when I tell you, and just the way I tell you.”
Then give the order: “Stand up.”
Some may obey promptly, some may obey more slowly, some may
hesitate, look around to see what the others are going to do, and
finally, but tardily, rise. Some may pay no attention to the order at
all, but look blankly around or at something else, exactly as if they
had been excepted from the command.
If there is much irregularity in obeying correctly and at once, it
may be necessary to say, “All children stand up,” or, “All of you stand
up,” and this may have to be supplemented by the explanation,
“When I say, ‘Stand up,’ I mean you, John and Mary, as well as the
others.” Then give the order: “Sit down.”
Repeat these orders, “Stand up,” “Sit down,” half a dozen or more
times, until all the children understand what is wanted and obey
promptly, quietly, and without hesitating or lagging.
Have them first imitate you, while you execute the order, as
directed. This is training by imitation. Then have them carry out the
order from the command alone. Give the order, but do not execute it
yourself, or better still, tell the children to close their eyes and keep
them closed while you give the order and they obey. This is to
prevent imitation of others in the class. They are not trained until
they can obey promptly without seeing either the teacher or another
child whom they can imitate.
Further directions may be: “Look up, down.” “Face right side, left
side.” “Place your hands on top of your head, under your chair,
behind your back.”
Afterwards, practice them individually, giving more attention to
those who are unfamiliar with the terms used or are slow to carry
them out.
(2) Simple orders. Give the first direction to a child and wait his
precise fulfilment, asking the class if the child has followed the
direction in every particular, or if he has failed and in what respect
he has failed.
Each time an order is executed the children should be called upon
to suggest where an improvement is needed, as, for example: “John
banged the door.” “He didn’t shut it quietly.” “He made too much
noise in going to the door.” “He asked which door,” or “He
hesitated,” “Took too long,” and so on.
(3) Simple deferred orders. Prepare a list of orders as in the
preceding drill and tell the children you will give each one an order,
but is it not to be executed until you give the word. Then read the list
of orders, putting the name of a child before each order, and when
you have finished, say, “Now, do what I have told you.”
(4) Negative orders. The burden of much of the instructions to
teachers and parents is “Don’t say don’t.” Nevertheless, for purposes
of discipline, practice in obeying negative commands is highly
important, as most laws and rules from the Decalogue down, are
prohibitions: “Thou shalt not.”
Face the children away from you and tell them you are going to
practice them in obeying the order, “Don’t look.” Tell them that when
you have given the order, they are not to look around, under any
circumstances, no matter even if a contradictory order is given, until
you call “Time.” Then give the order and behind their backs try
different devices to entice them into looking. Tell a story and pretend
to illustrate it, saying, for instance, “Jack and Jill went up a hill, like
this” (stamp about or make noisy gestures), “to fetch a pail of water,
like this” (make chalk marks on the blackboard, as if drawing) “and
broke his crown, like this” (drop a book or something heavy), and so
on. Suddenly speak into the ear of one, saying, “Look here,” tap
another on the shoulder excitedly, and so on.
(5) Double orders. Make a list as in drill 3, but with two orders for
each child, thus: “John, hand me that book, and put this on the
table.” Use in the same way as in drill 2.
(6) Prohibitions. Tell the children you are going to practice them
still further in obeying “Don’ts.” Then, give the order: “Don’t make
any sound until I call ‘Time.’”
Allow them to move their heads, arms, feet; even to move about,
though this privilege should be forfeited by any one failing in the
slightest degree to observe the command. Watch and listen for the
faintest sound and have them do the same, but only the teacher must
call attention to any voluntary or involuntary breaking of silence. At
the end of five minutes call “Time.” Discuss with the children what
they could do to observe the command better or more easily and
repeat the exercise.
Then tell them to get into a comfortable position, one that they can
maintain indefinitely, as they are to remain not only silent but
motionless. Ask them to pretend that they are to have their pictures
taken, that the slightest motion, shifting of position or twitching—
breathing and blinking of the eyes excepted—will spoil the picture,
and say, “Now, don’t move till I call ‘Time.’”
Call “Time” at the end of two minutes, as this is a very severe
ordeal. Further practice, however, should make them able to hold
this position for five minutes longer.
 Tell the children you are going to command, “Don’t talk,” and then
are going to try to surprise them into talking or asking a question,
but they must say nothing under any circumstances. Tell them they
are supposed to be mutes, without the power of speech—as dumb as
the animals.
Then give the command, “Don’t talk,” but continue to talk yourself,
telling either a story or something about which children would
ordinarily ask questions, and if this does not succeed, abruptly ask
one of the children a question, trying to take him off his guard or to
startle him into a reply.
Any wide-awake teacher will readily perceive how these drills can
be gradually extended to include the concerted movements of the
whole school, furnishing both relief from more fatiguing school work
and pleasure in the performing, while, at the same time reducing the
chaotic movements of untrained children to quiet, restful, intelligent,
coöperative school-room procedure.
The following case illustrates the difficulties of attempting to
secure the more complex forms of regulated conduct without having
first given sufficient drill on obedience to directions.

CASE 138 (FOURTH GRADE)

It was the custom in the Rockford school Dismissing

for the children in the first four grades to Classes
put on their wraps when the first bell rang for dismissal and then to
return. A second bell was rung as a signal for passing.
At this time, Miss Walker, the fourth grade teacher, had the habit
of going out into the hall. Her pupils then fairly flew out of the room
and down the stairs leading outside.
“Don’t crowd so, children. Why don’t you march in an orderly
fashion? There, Jimmie Blaine, you almost knocked Hilda down.
Now do be more careful the next time.”
But Jimmie was too far down the steps to hear these last words.

CONSTRUCTIVE TREATMENT
 Two bells should be rung for dismissal. Let the first be a signal for
the children to pass to the dressing-room for their wraps. Let them
pass in single file, second row following the first, and so on. Let the
second bell be a signal for leaving the room. Here again, the seating
should determine the places in line. Stand at the door leading out
into the hall. Then give the signal for passing. “First row, second,
third,” and so on. See that no child violates this rule.
When the children are once thoroughly familiar with the order and
with the meaning of the signals, the first pupil in each row may be
entrusted with the leadership of that row and the signals may thus be
dispensed with.
Fire drills should be held at least once a month. Make the
occurrence as unexpected as possible. The regular method of
formation of the lines should be rigidly followed.
When the gong rings, each teacher should immediately drop the
work at hand and say,
“Attention! One, two, three!”
The word “Attention!” signifies a definite attitude of body and
mind. The work at hand should be immediately dropped, the head
raised and the hands at rest, while waiting for the next command. Do
not give the second command until you have the undivided attention
of every child in the room.
“One” signifies to turn in the seat; “two” to rise; and “three” to
pass.
In case it is your week for corridor duty, take your stand
immediately at the head of the stairs.
The lines of the four upper grades should be already formed on the
second floor and stairs leading to the floor below, ready to follow the
lines of the first floor, or signal from the teacher on duty there.
It should take no longer than five minutes to vacate a building
holding fourteen hundred pupils.

COMMENTS

Miss Walker could not expect order in the line when she had
taught no definite procedure. The only thought in the minds of the
children in her room was to get out of the room as quickly as
possible; the manner of doing it was a matter of no consideration to
them.
Children are naturally un-orderly; it is the teacher’s duty to train
them. In this case, she should draw up an order of marching that the
children could follow habitually and without confusion.

ILLUSTRATION (SEVENTH GRADE)

The bell rang for dismissal in the Bronx Dismissing

Park Grammar School. Miss Forbes, the School
seventh grade teacher, took her place at the door of her room leading
out into the hall.
“Rise!”
“Pass! First row, second, third!” etc.
One row after another filed out of the room in perfect order. She
stood where she could see the line march down the stairs out-of-
doors. At the same time she watched the line formation in the room.
Before the last row had passed out of the room, she had taken a
second stand at the head of the stairs leading out of the building.
Looking back she saw the last child in the last row close the door of
her room.
After her children, came those of the eighth grade, while on the
other side of the staircase the third grade followed the second and
the second followed the first.
Then the four upper grades came down the stairs, from the second
floor, the boys on one side, the girls on the other.
Just two minutes had passed from the time the bell rang for
dismissal until the last child left the building.
The foregoing method of line formation may be used on every
occasion. By keeping a rigid form of discipline in moving lines up or
downstairs, the children may be depended upon to march quickly
and in good order in case of fire. This matter of perfect handling of
the orders of march cannot be too strongly emphasized. Any lack of
firmness in such regime will be sure to bring disastrous results in a
fire.
CASE 139 (SIXTH GRADE)

It was just eleven o’clock—time for Miss Passing to

Finch’s sixth grade class to pass from her Classroom
room to one further down the hall where they were to have their
music lesson.
“You may pass, children.”
“Albert, I’ll help you with your problem now if you will come up to
my desk.”
The children literally fell over one another to get out of the room.
Miss Finch was interrupted in her work with Albert by a great
confusion of laughing and talking in the hall.
She hurried to the door and saw the boys pushing each other out of
line, bumping into the girls, and, in a word, doing everything but
what they should have done, namely, march quietly and in an orderly
way down the hall to the room in which they were to have their music
lesson.

CONSTRUCTIVE TREATMENT

Every time your class has occasion to pass from the room, take the
same stand by the door, leading into the hall. Then say, “First row,
please pass! Second, third!” etc. When the last line has left the room,
take another permanent stand in the hall, where you watch the
children to see that they keep in a straight line and march in an
orderly fashion from room to room.
If one or two should “forget” to be quiet, speak to them while in
line. “John, remember the rule for marching in absolute order.”

COMMENTS

Every teacher must remember that her presence should mean

order. If the children are accustomed to see Miss Finch in the same
place every time they pass from the room, they will consciously or
unconsciously realize what she expects from them—perfect order.
 Miss Finch could not expect a room full of healthy, wide-awake
children to pass from one room to another without noise, when her
own attitude conveyed anything but a suggestion of quietness. She
put the others entirely out of her mind when she told Albert she
would help him with his problem.
It is not necessary to take the stand of a policeman, but your
attitude should be one of expectancy that all will pass quietly and in
order. It should not, however, be necessary to speak of the matter
before the whole class, unless in commendation of the fine
reputation which “our school bears for its quiet good order.”

ILLUSTRATION (HIGH SCHOOL)

The bell rang in the East Aurora High Passing to

School for the beginning of the first period. Classroom
Miss Wilcox took her accustomed stand by the door of her section
room. Thirty-five young men and women filed out on their way to the
first class of the day.
They passed the next classroom door, where Miss Michael, the
mathematics teacher, stood. Her attitude was pleasant but firm. She
was expecting order.
After turning the corner of the building, they were met by Miss
Aldrich, the science teacher, into whose room they marched, still in
single file.
To one boy, who had been especially troublesome in line at the
beginning of the year, she said, “Splendid, Joseph, you are getting so
that you can turn as square a corner as a cadet.”
The next case is a good illustration of what a teacher should not do
in attempting to secure regulated conduct. The story is its own
sufficient comment.

CASE 140 (EIGHTH GRADE)

“Here, come back here, you fellows,” Keeping in Line

called Mr. Girdlestone, the teacher, to two
lads going up the steps ahead of the lines. “What’s the matter with
you?”
The boys came back down the stairs, but as Mr. Girdlestone turned
around the older boy again started up the steps.
“Didn’t I tell you to come back here till your line formed, John?”
cried the teacher, angrily, as he grabbed the pupil by the collar.
“I guess you won’t shake me,” responded the boy angrily as he
caught the teacher’s arm.
A scene of confusion followed, but the youth got his shaking and
went sullenly about his work.
At the close of the day the pupil was called to the office.
“I fear I must punish you more severely for your conduct in
resisting my correction, John,” began the teacher, firmly. “Come
down stairs with me and we will try to settle this affair.”
“I guess you will have to ketch me first,” returned John, with
triumph in his voice, as he ran down the other stairs.
Mr. Girdlestone was able to block his way of going home, but
unable to lay hands on the pupil.
“You may take your punishment or not get a chance to go home
tonight,” insisted the teacher.
“Well, you fire me, then,” suggested John quickly.
“I don’t intend to suspend you,” replied the teacher. “I don’t want
to.”
“Go ahead and fire me. I’m just lookin’ for a chance to quit school,
anyway,” returned the boy, sullenly.
“John,” said the head of the school, firmly but kindly, “come on
with me and let’s talk this affair over. Maybe we can settle it in that
way.”
After considering for a few moments, during which he eyed his
teacher narrowly, John finally came along.
“Now,” said Mr. Girdlestone, as they reached the office again, “I
guess we were both just a little to blame in this matter. I guess we
both lost our heads and were too hasty in our conduct. I am willing to
assume my share of the blame and apologize to you for my
hastiness.”
 “All right,” replied the pupil, in a subdued tone, “I know I didn’t do
what I ought to in this scrape. I got mad when you took hold of me,
but I’m ready to straighten the thing up now.”
“Very well,” responded the teacher, kindly. “Let’s shake hands on
this affair and try to do better in the future.”
“All right,” said John, smiling, “I guess it will be a lesson to me.”
John continued his school work with more interest in the future
and a few years later graduated from the high school.
4. Some Things That Complicate Regulation of the School
(1) Tardiness. Tardiness in the first grade cannot be intentional on
the child’s part, nor should it give the teacher any annoyance. It
cannot be the pupil’s fault. Whenever a first grade pupil comes tardy
the teacher should ask in a kindly manner for the reason. As a rule it
will be some excusable cause, one which the parents have imposed.
The teacher should then consult the parents. If they will start the
children to school soon enough, they will not often be tardy. Not
every case of tardiness can be prevented, however; even teachers
sometimes find themselves late on account of some unavoidable
incident.
(2) Absences. Sometimes first grade pupils choose to be absent
from school for a day and often for several days. When the teacher
goes to find out the cause, she learns that the pupil is afraid of the
teacher, does not like to study, or there is some similar reason, and
he has begged to remain at home. The parents have consented to the
request. It is then the teacher’s duty to assure the parents that she
will do all she can to win the child to the school. Her visit often stops
the truancy if the teacher shows that kindly and courteous
disposition that all teachers should possess. Often when the parents
tell a child that the teacher is kind and good it has a tendency to
overcome his reluctance.
There are very few first year pupils who will absent themselves
from school without their parents’ consent.
With respect to older pupils, however, as long as there are schools,
so long there will be truancy. When the teacher has made his school
and school work interesting and tried to be kind and courteous, he
has done very much toward abolishment of the truant. There are
many cases of truancy that teachers have succeeded in stopping, but
an investigation of the school revealed the fact that the teacher was
alive to his work; every pupil knew that absentees would be missed;
further, that the teacher would ask for a reason for absence. They
knew that every detail of the school was interesting and that they
missed something when away from it. In other words, it was far more
fun to be in school than out of it.
If ever our readers feel that coercion is necessary to get regular
attendance, don’t punish, but try this plan instead: talk to the class
about some trip you want to take with your pupils, perhaps to a
woods. Play upon their imagination as to what they would like to do
on that trip, what you will take along, etc., and ask everybody to
stand who is in favor of taking the trip. Then say, “All right, be
seated. There is another thing to be said about this trip. Only those
who work well will be permitted to go with us. We are going to have a
great time and I hope everyone will get the chance to go, but only
those who have been regular in attendance will receive an
invitation.”
(3) Careless work. The first few weeks in the first grade are trying
times for the teacher. All habits that she wishes the little ones to
acquire, she must carefully teach. Much patient explanation is
necessary. Often the work of the pupils will seem careless, simply
because the children do not know how to do better. Then, too, what
seems careless to the teacher may seem very good to the child. The
teacher must not judge too hastily. If some children do get through
their tasks before the others do, because of careless work, do not find
fault but in subsequent lessons see that the most interesting work is
given to those children, then act upon the principle of suggestion, by
saying how fine it would be to do the work in a certain way. The child
will at least make an attempt. Whatever is done should be approved
by the teacher. The teacher who sympathizes with the pupils, helps
them, and directs their crude efforts, following each attempt on their
part with approval and a spirit of expectancy, always encouraging,
never discouraging, will soon have no careless work among her
pupils.
(4) Mischief. Another point that the first year teacher must learn is
that all mischief committed in primary grades is not premeditated.
Healthy children are full of energy. This energy seeks an outlet, and
in consequence, mischief may result. To leave childhood’s energies
undirected and undeveloped is a sure source of trouble. In correcting
mischief in primary grades, harsh language should not be used. The
kindest explanation of the mischief and its results is the correct way
of dealing with childish misdeeds. The child has never pondered over
mischief and has not thought ahead what the results may be.
Therefore, it is not malicious until wrong methods of control make it
so. By making prominent in his mind the right activities you will just
so far keep in the background the wrong activities and his surplus
vigor will thus be stimulated in the proper direction.
(5) Dislike for study. Fondness for study and good habits in
studying on the part of pupils will greatly simplify the teacher’s
control of the school.
There often develops a tendency in pupils to dislike certain
branches. Especially is this true in the upper grades. Such a dislike
may often be traced back to the primary grades, where the study
habits and likes or dislikes for school work are first instilled into the
child. It is vitally essential that the teacher foster in her pupils that
attitude toward school work that will send the child to the second
grade liking his work and well trained in the habit of study. It would
seem impossible that a dislike for subjects that are not taught in the
primary grades could be traced back, even indirectly, to wrong
teaching in those grades. But the chances are that somewhere in the
child’s progress towards the upper grades or the high school were
sown the seeds that developed into dislike of certain branches. If so,
the first grade teacher should take her share of the blame. She must
guard against any methods of teaching that will cause any child to
dislike to study. It is quite certain that if first grade pupils finish their
year’s work liking the teacher and the school and if they have
acquired the habit of study and like it, that teacher has done her full
duty.
It is a first requisite of the teacher to exhibit a cheerful and
optimistic disposition in the school-room. She must teach the little
ones reading and numbers, language and story telling, writing and
drawing, with such an ardor and love for her work that the children
can only think that their teacher likes these subjects better than
anything else. She must expect every child to love his work. If the
second grade teacher and the others in the higher grades will teach in
the same manner there will be no pupils in the upper grades or the
high school who have a distaste for even one branch, much less have
a dislike for study in general. A true teacher will never make her
pupils feel that she has a dislike for school work or any part of it.
(6) Dull children. Many a teacher has had her difficulties and
perplexities with the dull child. In large cities special teachers are
employed to teach dull and abnormal children. Books have been
written dealing with them. Still the problem remains unsolved. Much
has been done for them, but by no means has all been said about
what can and should be done for such children under these
conditions. The rural and village teacher cannot expect to send the
perplexing pupils to a special teacher and as a rule such children are
found in every school.
One thing, however, she must make sure of—that is, whether the
dull child is such because he is subnormal, or because of some
physical defect, or because of poor health. Poor food may cause a
child to be dull. Bad ventilation is often the cause of dullness in the
school-room. The teacher is responsible for keeping his room well
ventilated. If the dullness is due to ill-health, the coöperation of the
parents must be sought. If the child is dull because he is subnormal,
the teacher must do the best he can, and that is very little indeed.
One thing he must not do—he must not worry. It is not his fault. The
situation will be made easier if the teacher will secure the
superintendent’s or a director’s permission to let the dull child drop
some of the school work. The teacher should give the child the same
attention he gives the others; then his full duty has been done. Never
should a teacher intimate to any one of the pupils or to the child
himself, that he thinks him dull.
Many times such a pupil can be very mischievous. Whenever that
is the case the teacher should apply the devices and methods used
upon other children for particular annoyances. But just here is where
the greatest difficulty presents itself, for the fundamental element in
all methods is interest, and the dull child can not be interested. Many
times he can be interested in manual work of some kind when he can
not be made to care for the more abstract work which other children
do with ease.
No attempt will be made to discuss further the abnormal child.
The author feels that it is only protecting the other children and the
teacher both to have abnormal children, as well as children dull
because of ill-health and mental defect, removed from the school and
placed in institutions established for such pupils. Such a course may
cause parents to become indignant, but better that than to worry the
teacher overmuch and make him less efficient for the other pupils,
when he can not help the child in any way. Nor has he been schooled
to teach such children. They should be handed over to specialists
who are free to adopt such methods as are best for the individual
child, but not necessarily so for the whole school.
(7) Retarded pupils. In many states where there are no
compulsory school attendance laws, pupils often come into the first
grade at eight to ten years of age. This also may happen where the
child has been ill. Sometimes thoughtless teachers make retarded
pupils feel odd and out of place, even unwelcome. The teacher must
remember that the school is a public institution and every child has a
full right to all of its benefits. Not much more can be said to the
teacher than to add: treat the retarded and overgrown pupils just like
the others. If they do well in their work, recognize their skill; if they
are mischievous or cause trouble, meet it as in the case of any other
pupil. The retarded or overgrown pupil must not be made to feel
either that he should be advanced, or on the other hand that he has
neglected his work, and for that reason is out of place in the first
grade when he should be in the third or fourth. He must not be
slighted or treated differently from other pupils because he is larger
or older, unless it be to place some little responsibility upon him like
caring for the window plants or assisting the teacher to pass
materials for school work—duties which may be regarded somewhat
in the light of special privileges.
(8) The “smart” pupil. What constitutes the “smart” pupil is hard
to define, but every teacher knows him when he appears. The pupil
that is of this type is not hard to control. To notice every little
exhibition of smartness tends to make it worse. As a rule, the pupil is
not so bad or so mean as to cause any particular disturbance—he is
only annoying. To ignore him is the best cure and one that will in a
very short time cure the worst case in the first grade. When such a
pupil has said something that does not become a good pupil, the
teacher should begin to converse about something entirely different
and more interesting.
 (9) Wrong influence of parents. In this age of poor parent control,
there are more children in the public schools whose misdemeanors
are the direct result of home influences than of all other factors
combined.
The prudent teacher of the first year needs often to solicit the aid
of parents in righting a spoiled child, and often she must convince
them that they are wrong in their methods of rearing their children.
If the teacher cannot enlist the aid of parents, then she must fight her
battle single-handed. But there is no need for discouragement. The
child will love one who loves him. A lovable and wise teacher often
succeeds where a parent fails. Parents are often alarmingly short-
sighted when it comes to training their children. It is not an
imaginary condition but one all too real, that in many homes the
children are, in actuality, the controlling forces. It is distressing to
see how helpless parents can be, and what American parents are
enduring from their children. From such poorly regulated homes
come the “spoiled” children to the first grade teacher, and in many
instances all the meanness such children can perpetrate is
considered “cute” by the over-indulgent parents.
In dealing with the badly trained child, the teacher must avoid any
use of force. That would only antagonize him. The teacher should be
firm, but kind, treating him just as he treats the others; if he does
good work, commending him for it. She need not even notice many
of his outbreaks—he will soon discontinue them. Often he is spoiled
because the parents have paid too much attention to his every whim
and fancy. When he learns that he can not worry the teacher, and
that she will not contend with him in his trivial desires, he will cease
to annoy her. Last of all, the teacher can fill in the gaps of idleness in
the child’s time by keeping him interested and busy.
If the child is saucy, the teacher must avoid telling the pupil that
he “must not be saucy”; such a method will make the pupil aware of
the fact that being saucy is distasteful to the teacher, and he will
resort to that method whenever his spirits are ruffled. The better
thing to do is to ignore him altogether, and proceed with the work at
hand, as though nothing had occurred. The teacher should not
display the least emotion by look or expression, for the child usually
watches the teacher to note the effect of his sarcasm or imprudent
statement. When he finds out that he is ignored, he will resort less to
his annoying habit. If the child tries to tease her, she can casually and
without any use of force, draw him away into some interesting game
or activity. Or the teacher may call the pupil by name and say, “Come
here a moment, I have something for you to do.” She may have a new
game ready and have this pupil be the leader. This will draw his
attention from teasing. In other words, substitute some other and
more interesting activity. A few weeks of such control will remedy the
annoyance.
It is a good plan with such a pupil to send him on an errand every
now and then, when he is in a good mood, making the request in a
confidential tone, and saying to him on his return, “You are so kind
for doing that. Thank you ever so much.” This will tend to get him in
the habit of doing favors for you and will increase his friendliness
toward you. Another way to establish more firmly his willingness to
be friendly is to make it a point to talk to him before school or at
recess about something in which you know he will be very much
interested—about his favorite pastime or sport.
There is no boy or girl who does not have some hobby, and after
you have made an earnest attempt to find out what that interest is
and have begun to make use of it in getting the pupil’s confidence,
you will have put into practice a great principle in discipline. Any
new idea which you can present regarding the hobby will greatly help
you to gain the confidence of the pupil. By a confidential tone and by
showing you are in sympathy with his interests, you can gradually
win his confidence. Whatever you do, do not appear to notice when a
pupil is disrespectful to you. If he has shown disrespect in the past,
simply set about at once to gain his confidence. If he ever mimics any
gesture you have made, do not take it seriously because, nine times
out of ten, you would get poor results. Either appear not to notice it
at all or, if you do notice it, assume that it did not bother you in the
least.
To punish a child for anything whatsoever, suggests to him
precisely the thing which we do not want to suggest. Whatever we
want a child to be, we must put the suggestion into his mind, that he
already is that very thing and approve him for whatever he does in
that direction.
The principle of initiative in coöperation should be used from the
first in case of a pupil that is extremely disobedient because of home
or outside influence. Many a teacher has invited such a pupil into his
home for a dinner or supper, and has entertained him with the best
the home afforded. In doing so he made the pupil understand that he
was interested in him. Often a walk or a drive which gives occasion
for a confidential talk will establish friendly relations between pupil
and teacher. A teacher must not cease to try to win the unfriendly
pupil. One such in a school can work great harm. The teacher must
strive to make friends of all his pupils.
Approve the child’s lessons and efforts. Whether it be numbers, or
reading, busy work, or drawing, the teacher must notice the effort
and progress, and by a pleased countenance and well chosen words
encourage the pupil. Whenever the teacher has a favor to bestow, she
should see that the unfriendly pupil gets his share of the favor. If she
is having a little play or song or game, she may appoint him as the
main character. She should frequently walk with him part or all of
the way home. Such treatment will win the child in a very short time,
and what is better, it will usually win the parents.
In case a disaffected child is unusually stubborn and absolutely
refuses to obey you, avoid the use of any commands to him until after
you have entirely gained his confidence. You may continue to
command and request other pupils around the stubborn child, but
simply refrain from asking that one to do anything. Make up your
mind that you are going to cater to this stubborn pupil for two or
three days in order to win his absolute confidence and thus lay a
foundation for more satisfactory conduct in the future.
By cater, we do not mean to allow the pupil to get ahead of you—
not at all. But it may be necessary to be a little forbearing. Present
absolutely nothing to him in a personal way except what you know
will be intensely interesting. As we said before, find out what the
pupil likes to do at home, on the playground, what he likes best to
talk about, and then make it a point to converse about those things
frequently when alone with him. Show great enthusiasm in talking
along the line of his interests. If he refuses to recite, get his
confidence and then ask questions, beginning with such as you are
sure he can answer in just a word or two.
(10) Neighborhood conditions. Sometimes a teacher’s work is
greatly hampered because of an unkindly spirit existing between the
parents of her pupils. Mothers often “get even” with their neighbors
by influencing their children against a neighbor’s son or daughter
who happens to be in school. Or a teacher may have used some
unwise methods on a child, or punished in a manner not satisfactory
to the parents. The parents retaliate by influencing their children
against the teacher.
Both situations will respond to the same treatment. By no means
must the teacher appear to resent this opposition. It is every
teacher’s duty to treat such pupils just as kindly as circumstances
permit. If the teacher is determined to win such parents he will
succeed, and in time they will become the best of friends. In all cases
where such a difficulty continues to exist and is annoying, it is the
teacher’s fault. To gain the mother’s love, is to gain the child’s love
also.
Sometimes gossip or misunderstanding causes parents to oppose
the teacher very bitterly. In such a case it is expedient that the
teacher go to see the parents and have matters understood, assuring
them she will use every means to do what is right and that the
parents’ assistance will be of great value.
5. Submission to the Ringleader
(1) Lower grades. Even in the kindergarten certain children in
every class stand out as leaders. In classes above the kindergarten
this characteristic of leadership appears more and more strongly. If
the leader throws his influence alongside that of the teacher, well and
good. The teacher has thus a strong ally. If the leader arrays himself
against the teacher, then the teacher’s own influence is weakened
and in many cases seriously crippled. In the lower grades such an
antagonistic attitude on the part of a single pupil may not be a very
serious matter, but in the higher grades, and especially in high
school, where the clan spirit dominates, a single pupil may turn an
otherwise successful term into a failure. It is highly important then
for the teacher to understand how best to overcome an unwholesome
leadership on the part of the pupil.
There is but one basis upon which the teacher can operate such
principles of control as will secure the hearty coöperation of the
pupils. That basis is the possession of their confidence. The teacher
must have the confidence of her pupils. It must be a confidence that
is deep and sympathetic. It cannot be superficial. The pupil is a keen
judge and will detect a superficial attitude of the teacher. But the