November 20, 2007
Banking on Gullibility and Inertia
Another 7,000 word piece from Michael Lewis, The Evolution of an Investor. How much do you think Conde Nast pays Lewis to write this kind of thing?
“His job, as he now defines it, is to tell investors that the smartest thing they can do is nothing. He acts as a brake on, rather than an accelerator for, their emotions. For that, he takes between one-half of a percent and 1 percent annually, which is more than they’d pay if they simply bought index funds on their own. ‘I tell them, ‘Look, if you can control your own emotions and you want to go to Vanguard, you should do it.’ And every now and then, someone asks the question, ‘Why do I need you, Blaine? What are you doing?’ And I say, ‘Howard, be careful or I’m going to send you back to Smith Barney.’ And they laugh. But they know exactly what I mean.’”
50 to 100 bps a year for keeping his investors in index funds — maybe the sweetest racket of all.
November 20th, 2007 at 10:39 pm
Good find.
November 21st, 2007 at 12:45 am
What an amazing snow job. Hard sell graduates to soft sell (with a well-placed sting when needed). 1% of assets in exchange for hand holding and heart-washing.
November 21st, 2007 at 1:40 am
I take a wider view. Most Americans don’t even save. If they’ve bothered to save, good for them! If they then make silly, lazy investment dicisions - oh well.
I would like to believe that most people are capable of managing their own money, but I suspect that isn’t reality. I also believe that most people’s advisory decisions are a combination of performance (10%), and interpersonal (90%) - whether they know it or not.
No different than their choice of hair stylists.
November 21st, 2007 at 2:00 am
cm- u read Mr China by clissod?
November 21st, 2007 at 2:10 am
C.M. said:
“How much do you think Conde Nast pays Lewis to write this kind of thing?”
Are you interested in providing this kind of service to Conde Nast ?
November 21st, 2007 at 7:29 am
@CapGain: Of course most people aren’t capable of managing their own money, but they could pay an advisor at Vanguard a one-off $500 flat fee and be set for life instead of having some guy like Lourd take 1% a year forever for nothing.
@pete: That’s an off-topic question (email me next time), but the answer is yes.
@Todd: No, I’m just interested in what a professional writer like Lewis gets for doing a 7,000 word piece.