AI Now or Never: A Conversation with Former Vanguard CEO Bill McNabb

Bill McNabb — Former CEO and Chairman, Vanguard. Bill led Vanguard from 2008 through 2017, guiding the firm through the financial crisis and into a period of extraordinary growth. Under his leadership, Vanguard made employee engagement — not just investment performance — the first metric reported to the company each year. He serves on the boards of multiple public companies and startups and has been a Valence board member for three years.

Parker Mitchell — Co-Founder and CEO, Valence. Parker leads Valence, the company behind Nadia, an AI coach deployed across dozens of Fortune 500 organizations to support leadership development at scale.

Bill McNabb became CEO of Vanguard two weeks before the 2008 financial crisis and spent the next decade proving that leadership development and employee engagement were not soft investments — they were the engine behind the company's growth. In this conversation with Valence CEO Parker Mitchell, he brings that same directness to AI: why boards are pushing companies to stop deliberating and start experimenting, what a smart AI portfolio strategy looks like, and why the only unacceptable move right now is doing nothing.

Key Takeaways

• The only wrong answer on AI is inaction. Bill draws a direct line from creative destruction theory to today's AI moment: if you can imagine a disruption, someone is already building it. Organizations that delay AI experimentation are not playing it safe — they are falling behind and robbing their people of learning opportunities in the process.
• Boards are pushing companies to act, not just plan. Across the large public companies and startups Bill serves on, the consistent board message is the same: stop studying it and go try something. Find use cases that make sense for your specific business and run experiments — especially with focused external partners who can move faster than internal teams.
• A portfolio approach balances internal development and external partners. Unless a company is a deep tech firm, even excellent internal engineering teams cannot match the speed and focus of purpose-built vendors. The right strategy allocates a portion of AI investment to going deep with a small number of external partners — not building everything in-house.
• Employee engagement is the axle the business flywheel spins on. At Vanguard, Bill made employee engagement the first of four core company metrics — above client loyalty and profitability. The data showed a direct correlation between engagement and net promoter scores. When leadership investment intensified, the company moved from steady growth into hyper-growth.
• Reskilling is how you get ahead of disruption instead of being a victim of it. Vanguard reskilled the majority of its engineering workforce as technology shifted — from COBOL to modern languages, from waterfall to agile — without ever conducting a RIF in its first 40 years. The commitment to reskilling produced lower turnover and better performance than competitors who did not invest the same way.
• Additive AI investments land better than subtractive ones. The AI applications that generate the most organizational acceptance are those that visibly help people do their jobs better and grow — not those framed primarily around cost reduction or automation. Starting with the additive case builds the trust and adoption that makes everything else possible.

Questions This Session Answers

What are boards saying about AI strategy right now?

Across large public companies and smaller startups, board conversations on AI share the same central tension: how fast to move and where to place bets. The consistent message from boards is to stop deliberating and start doing. Bill McNabb describes boards actively pushing leadership teams to identify specific, practical use cases and run experiments rather than waiting for a fully formed strategy. The risk of moving too slowly is seen as greater than the risk of an imperfect first move.

Should companies build AI internally or use external vendors?

Bill McNabb's advice is to do both — but not to overestimate what internal teams can deliver in specialized areas. Even Vanguard, where 35% of employees are software engineers, recognized that its own team could not match the speed and focus of a purpose-built AI vendor. His recommendation is to allocate a portion of AI investment to going deep with a small number of external partners alongside internal development efforts, rather than betting everything on either approach alone.

How did Vanguard connect leadership investment to business results?

Vanguard tracked four core metrics: investment performance, client loyalty (net promoter score), expense ratio, and employee engagement. Bill McNabb made engagement the first metric reported to the company each year — above all others. The data showed a direct correlation between employee engagement scores and the net promoter scores of the client groups those employees served. When Vanguard doubled down on leadership development at all levels, the company moved from consistent growth into a period of accelerated hyper-growth.

How should organizations approach reskilling as AI changes the workforce?

Vanguard's experience with technology transitions offers a practical model: get out in front of change with aggressive reskilling programs before disruption forces your hand. When technology shifted from legacy COBOL systems to modern languages and agile development, Vanguard reskilled the majority of its engineering workforce rather than replacing people. The result was lower turnover and stronger performance than competitors. The employees who resisted reskilling largely removed themselves; the company did not need to conduct a single reduction in force in its first 40 years.

Why is now the right time to act on AI — even without certainty about where it leads?

Bill McNabb applies the lens of the innovator's dilemma and creative destruction to AI: if a disruption is imaginable, someone is already building it. Organizations that wait for certainty before acting are not managing risk — they are accumulating it. Every period of inaction is also a lost learning opportunity. The companies best positioned to succeed will be those that have accumulated experimentation, adapted from failures, and built internal fluency while competitors were still deliberating.

Full Session Transcript

You've been a close follower of Valence for over five years — what made you take a bet on what you've called a garage startup?

Parker: Bill is the former CEO and chairman of Vanguard, and has been a close follower of Valence for the past five years — and an extraordinarily valued board member for the past three. I thought we'd begin here: when we were first being introduced to Vanguard, I know we dressed up nice and tried to pretend we were a big company. Tell us a little bit about why Vanguard decided to take a bet on what you call a garage startup.

Bill: Well, you were a garage startup. Good to be here, Parker. Thank you for having me. It's actually even more than five years ago now, which is really remarkable. One of my former colleagues had met Parker and came away impressed with some of the ideas Parker and his team talked about in terms of making teams more effective. You have to understand, the two most impactful experiences I had before getting to a place like Vanguard were: one, I was a competitive rower, so team orientation became part of my DNA. And second, I was a teacher. The whole teaching and coaching thing became really interesting to me. At Vanguard, we had done a lot of work — we're investors, so everything comes down to an ROI calculation. And we were struggling with the amount of money we were spending on development, not because we thought it was a bad thing, but because we couldn't figure out why there were big drop-offs after some of the initial training and workshops we ran. The idea of having a team-based platform that actually reinforced some of the concepts we were trying to teach hit home hard. And then, as the business evolved to the coaching model, that was the big gap that had been missing. It's been really exciting to watch it evolve.

What are boards talking about on AI — and how has that conversation shifted over the past 12 months?

Parker: You're also on boards, so you're seeing this not just from stories at Vanguard about day-to-day challenges, but I imagine 90% of board meetings are about AI now. What are the differences in the tenor of those conversations from 12 months ago to today?

Bill: What's really interesting is I have the privilege of serving on two very large public company boards, but I also sit on boards of several startups and smaller-cap companies — and we're having the same discussions. The big tensions are how fast to go and where to put your bets. In most of the discussions I'm involved in, what we as board members are doing is really encouraging companies to not just talk about it forever, but actually go do something — find use cases that really make sense for their particular business and go try something.

In the larger companies in particular, there's becoming a tension between business leads who want to go try things and chief technology officers who are saying, "Let us build it for you." What we're doing in the boardrooms I'm in is saying to the CTOs: great, go develop, but we're also encouraging the business to go experiment with people who are maybe a little deeper on particular topics. At Vanguard, as an example — and I'm not on the board there anymore, but talking to my former colleagues there — they've been a very early adopter of Valence, love it, and it's deployed through probably about 80% of the company at this point.

Parker: We checked. Sixteen thousand users.

Bill: Yeah. 16,000 out of 20,000 employees. Pretty remarkable adoption. We also have a company called WRITER, which is a startup doing content creation, and the CTO has four or five big projects driving development. For companies with those kind of resources, I love that kind of approach. For smaller companies, I think finding people like Valence — who can really solve a specific problem for you, really quickly, and give you hands-on experience with AI — is what makes a lot of sense.

How would you advise a leadership team to navigate the build vs. buy tension in AI over the next few years?

Parker: Other people have talked about a portfolio approach — some internal, some external, some existing vendors, some new ones. If you were giving advice to a leadership team on how to navigate that over the next couple of years, with all the internal tensions that come with it, what would you say?

Bill: I actually wouldn't overthink it. Every company has a certain amount of capital to deploy — in some it's large, in some it's really tightly controlled. I think the thing is to make sure you actually do have a balance. The one thing I'm pretty convinced of, unless you're a deep tech company yourself: no matter how good your engineering team is — and at Vanguard, 35% of our employees are software engineers, most people don't think that — the truth of the matter is we can't be as nimble and agile on things like AI coach development as a company that's designed to do it. As business leaders, the advice I would have is: whatever capital allocation you have for these experiments, make sure you've got a piece where you can pick a couple of firms and go really deep with them. It's not that expensive, and you're going to get insights you won't get from your own teams.

Parker: Are there any interesting results from AI experiments that have floated up to the board level at your public companies?

Bill: Less on the coaching side, more on the content side — but with WRITER, in one of the companies, it's been a genuine "whoa" moment. We're able to do things from a content perspective that we never thought possible before. There are also a couple of players who are really going deep on customer service — automating in a much more intelligent way how customer service reps respond to calls. If you can make those folks more accurate, more efficient, more effective overall, you get a huge amount of savings but also a huge jump in quality.

You've had a through line of investing in leaders throughout your career — how did that show up at Vanguard before AI entered the picture?

Parker: One of the things you and I have talked about is your belief not just in the value of leaders, but the importance of investing in leaders. Can you share how that showed up at Vanguard in the pre-AI world?

Bill: I had the great privilege of joining Vanguard when we were just a little beyond startup phase, a few years into our history, with our founder Jack Bogle. Jack is really an iconic founder — visionary is sometimes a word used too often, but in Jack's case it was true, and he completely disrupted investment management with our approach. But Jack also had this instinct around people. He had a saying: "Even one person can make a difference." And no matter how big we got, he kept repeating that mantra.

Jack's successor took it another step further. He said: we've had this amazing visionary founder who was pretty directive in how we built the company. That's not going to scale. We got to $100 billion doing that, from a startup of $1.5 billion. But if we wanted to go to a trillion, we were going to need a much more team-oriented culture. And so he really installed the ethos that at the senior level, a high-performing team was the way we wanted to build the business — not one visionary leader directing everybody where to go.

As our third CEO, one of the things I began to see was that the high-performing team at the senior level was working really well, but farther down the organization, there was a little less engagement than we wanted. We had seen — just from a business case standpoint — a direct correlation between employee engagement and the net promoter scores of those particular client groups. The higher the engagement, the higher the net promoter scores. For this audience, that's probably obvious. But in the early 2000s, it didn't come to people naturally. And so we pivoted and changed the whole way we thought about attracting and developing leaders, and made that the central part of what we do.

We did a lot of work with Jim Collins. We built a flywheel — here's our business model, and what the different components of that flywheel were. But at the heart of it was high-performing people. That was the axle upon which the flywheel would spin.

One of our neighboring companies was run by Doug Conant, who runs the Conant Leadership Center now. He was the CEO at Campbell Soup, and some of you are probably familiar with his work on engagement. Doug came to us and said, "How are you going to know if you're successful?" So, we settled on four numbers at Vanguard: investment performance, client loyalty, our version of profitability through expense ratio — and then Doug said, "You need a people component to that, and it needs to be first." We did exactly that. We used an engagement ratio calculated from Gallup — engaged to disengaged — and that was our number-one number. When we reported out to the company how we were doing, we always started with employee engagement. If you're going to get great employee engagement, you have to have great leadership. That's where the work really began — and it's actually what led us to Valence originally.

I remain convinced that at Vanguard, when you ask people what made us different, nobody ever talked about our people. And we didn't brag about it, because we didn't want our competitors to know. We had structural advantages with cost and with indexing. But what really turbocharged our growth was when we doubled down on people engagement — among employees and frontline leaders all the way to the top. A company that was growing at a good clip went into hyper-growth drive when we got better at the people side. It was just math, at the end of the day. And you could take it to your board and say: look at all these investments we're making on the talent side, and look at what's happening to the business side.

How should CHROs and CEOs think about the disruption ahead — and how did Vanguard navigate reskilling at scale?

Parker: When you have that straight line — the correlation between leadership investment and business outcomes — that's incredibly powerful, because then as people see the number go up, they understand why the investments are being made. If we turn our eyes to the future — the next three to five years — there's going to be quite a bit of disruption on the people side. How would you suggest that CHROs or like-minded CEOs think about that?

Bill: It's really hard to know ahead of time exactly where it's all going to come from. But you can get clues just by watching what's happening today. What we did — and whether it's applicable across the board or not — was go through a very early period of reskilling our people. I said 35% of our workforce were software engineers. Every major legacy system in investment management was essentially built on COBOL code with DB2 relational databases. That was it. And so we had all these engineers who knew how to do exactly that. Imagine what happened when workstations came around, then the internet came around. We actually reskilled most of our engineers. We had really aggressive programs to teach them new languages, new ways of coding. We moved from a waterfall development approach to an agile approach — I think we started that almost 20 years ago now.

The commitment to reskilling people — we were fortunate, we were a really successful organization, so we had the resources to do it. But I can't prove it, and yet I believe strongly: we had much lower turnover than our competitors, and much better performance as a company as a result. It wasn't just the software engineering group — in all of our major areas, similar things happened. Our processing groups had to change what they do, and again, we tried to reskill as much as we could. We had people who resisted the reskilling, and they usually ended up taking themselves out of the equation. We never had a RIF through my tenure, through the first 40 years of the company. And I think a lot of it was because we got out in front of some of these issues.

Parker: I'll add that you took over as CEO two weeks before the financial crisis in 2008.

Bill: Two weeks before. So, yeah.

What's your advice for someone struggling to convince their organization that they need to act on AI today?

Parker: One of the things you and I have talked about is that the only wrong answer is doing nothing. Can we end on advice you would give to someone who's struggling to convince their team why they need to take action today?

Bill: I'm a huge fan of Clay Christensen's work on the innovator's dilemma. As soon as you feel like, "We can't do something new because it's going to disrupt what we've been doing, and we've been really successful" — it's the beginning of the end. Jack Bogle was actually a fan of Clay Christensen's predecessor, Schumpeter, the Austrian economist who talked about creative destruction. My observation is that creative destruction is one of the most important elements of capitalism. If you can imagine something could happen, somebody's already doing it. And they're coming at you from a competitive landscape.

This isn't like you get to choose. I think you have to do this. I don't know exactly where AI is going to end up — none of us does. But I think the biggest sin anybody could commit here is not do something. Because this is coming. The more experience, the more testing, the more pivoting from lessons learned that we do at this phase, the more likely we are to not only succeed but actually seize opportunities from this new technology. I'm completely convinced that this will be as disruptive as the internet was. And the internet was, in many ways, as disruptive as the original Industrial Revolution. If you play that out: you want to be part of it. You don't want to be a victim.

Parker: There's a learning curve, so it's important to get started early. Thank you. It's wonderful to have these conversations. I know you're joining us en route from Philadelphia to almost the Canadian border, and we really appreciate you making the time today.

Bill: It's a privilege to be here. And having known Parker since he literally started the company — I'm not unbiased when I say this — but as an investor in Valence and as a fan of what this company is doing, it's really exciting to see all of you here. We're going to learn from you, and hopefully it's going to make us a better company as well.

Parker: Absolutely. Thank you, Bill.