There is a substantial art business in New York. Art prices have appreciated, but very few people point to their record of what they have sold in total in the art business as to its appreciation. They point to their successes, but they do not quite say they have sold 200 Picassos over the last 50 years because they were smart to discern that it was merchandise for them to be selling. In this room, except for one old man on my left and two medium aged men on my right, I do not think we have anybody who has reached the ripe age of 40. So that in fact we have a very young average age. We are in the investment business to provide account management appropriate to the needs, the different needs, the various needs, and the changing needs of primarily individual investors and pensions. We admit that we have had some failure, but I view these as I view the potential of this group, more or less, as an opportunity to create in this firm the discipline, the courageous, organized, coherent, repetitious, explainable, inheritable approach to the management of the funds that people have entrusted to our firm. We may not, probably will not and should not, aim to point to our ability to deliver the customer’s yacht. Nevertheless, we can deliver to the customers what they are entitled to, what is explained to them and what is developed for their best benefit.
The New York Stock Exchange not too long ago said that there were 30 million individual investors. That same figure in 1948 was 4.7 million. Those individual investors (it is fascinating what I am going to say now) invested their money primarily not totally up until 1956 and 1957 as individuals, and that is when the mutual bond business really started to grow. These individual investors, how did they invest their money? There were a few unique individuals who studied the markets and invested in it, but most of these people did it as an ancillary activity primarily employed in some other capacity rather than investing. The stock market was merchandised and promoted. It was promoted by the New York Stock Exchange; it was promoted by Merrill Lynch; it was promoted by what was then the great firm of Francis T. DuPont and Co. It was promoted by the Reynolds, the Shearson and Hammills and the Shields and the Paine Webbers and the Hayden Stones. There are literally 5 or 100 relatively major brokerage firms that employed thousands, and we will leave it at that: individual stock brokers who were told to go out and recommend securities to various types of individuals. That started after the war. To this day, except for one study that was done by the Brookings Institute, there is no way that anyone can really trace how these individuals investors performed – how they invested, why they invested, the techniques they used, the success or failures that they had. It is not available anywhere. It is an interesting question; why is it not available anywhere because no organization among the ones mentioned would be proud of the record of success that they had in regard to their record of investments as it related to their individual recommendations. As a matter of fact, there were some studies done by the accumulation of research reports, and I am sure that if we had been in business in those days, at the same time our record would not have been different, but that is where the opportunity of this young group lies, including myself. There were not records because there was limited success and because the individual investor was not given the opportunity, for whatever reason, and it is complicated. It relates also to the fact that the levels of competence among the brokers was low, that the levels of compensation that Wall Street was able to earn on its commissions were extraordinary, and it became a business of potential greed and avarice, with no records, and it was management by levels of profitability as it relates to the firms and differentiated from levels of profitability as it relates to the client. So in the 50’s someone decided (IDS was there early) that the individual investor could not by and large achieve successful investment results on their own. Therefore, a completely managed, highly diversified portfolio in which he could be told that was owning a piece of America and could get the “Professional Management” and that they could not have on their own. It was out of that that the mutual fund industry developed.
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