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.