I'm with Igy, on pretty much everything, although I recognize that the markets are a many-dimensioned social phenomenon and thus can have "a life of their own", apart from business and investing concerns.
In particular, I am with him, and coach d, on the asymmetry of compounding--which is why I have been able to do so well using the markets in an index fashion. All I have done is to have avoided the big down periods. As I have said many times before, and as Igy and coach d seem to support, that is the aspect of "doofus investing" that is critical to actual success (which is why I have been so hard on the flagpoles).
Regarding 401k's, the deficiencies of the boomer generation, and of 401k participants in general, can be characterized as either insufficient returns, insufficient contributions, or a combination of the two, according how one wants to characterize the issue. It is important to remember that 401k's do not represent the entirety of one's net worth, or of one's future income stream.
We keep a small 401k as a canary in the coal mine, the typical crappy mutual funds. VFINX 80%, VBMFX 20%. I use it to gauge my own proclivities--the temptations to rebalance, to sell, to change investments, cash out, etc. It's fascinating to consider, while I pull a flagpole and let the money sit there and see what happens over time, and during certain time periods. It makes me feel like such a plebe, and disappointed when I do some analysis and see how the down times just kill the returns.
I don't think mutual funds are a complete scam, but neither do I think they are totally worthless.