Some years ago, in a land called Indicia, revolution led to the overthrow
of a socialist regime and the restoration of a system of private property.
Former government enterprises were reformed as corporations, which then issued
stocks and bonds. These securities were given to a central agency, which offered
them for sale to individuals, pension funds, and the like (all armed with newly
printed money).
Almost immediately a group of money managers came forth
to assist these investors. Recalling the words of a venerated elder, uttered
before the previous revolution ("Invest in Corporate Indicia"), they invited
clients to give them money, with which they would buy a cross-section of all the
newly issued securities. Investors considered this a reasonable idea, and soon
everyone held a piece of Corporate lndicia.
Before long the money
managers became bored because there was little for them to do. Soon they fell
into the habit of gathering at a beachfront casino where they passed the time
playing roulette, craps, and similar games, for low stakes, with their own
money.
After a while, the owner of the casino suggested a new idea. He
would furnish an impressive set of rooms which would be designated the Money
Managers' Club. There the members could place bets with one another about the
fortunes of various corporations, industries, the level of the Gross National
Product, foreign trade, etc. To make the betting more exciting, the casino owner
suggested that the managers use their clients' money for this
purpose.
The offer was immediately accepted, and soon the money managers
were betting eagerly with one another. At the end of each week, some found that
they had won money for their clients, while others found that they had lost. But
the losses always exceeded the gains, for a certain amount was deducted from
each bet to cover the costs of the elegant surroundings in which the gambling
took place.
Before long a group of professors from Indicia U. suggested
that investors were not well served by the activities being conducted at the
Money Managers' Club. "Why pay people to gamble with your money? Why not just
hold your own piece of Corporate Indicia?" they said.
This argument
seemed sensible to some of the investors, and they raised the issue with their
money managers. A few capitulated, announcing that they would henceforth stay
away from the casino and use their clients' money only to buy proportionate
shares of all the stocks and bonds issued by corporations.
The converts,
who became known as managers of Indicia funds, were initially shunned by those
who continued to frequent the Money Managers' Club, but in time, grudging
acceptance replaced outright hostility. The wave of puritan reform some had
predicted failed to materialize, and gambling remained legal. Many managers
continued to make their daily pilgrimage to the casino. But they exercised more
restraint than before, placed smaller bets, and generally behaved in a manner
consonant with their responsibilities. Even the members of the Lawyers' Club
found it difficult to object to the small amount of gambling that still went
on.
And everyone but the casino owner lived happily ever
after.