Uber's gig economy comes for finance!

An upheaval is shaking Wall Street as passive investing becomes the default and stock pickers are pushed to the side - AEI
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​More below.

This will radically change, and drive down costs in retail finance, and investing. Good.

The current holdout, which makes no sense are the large money pools. For example:

More on Harvard's $2-billion loss on its endowment - AEI

"MP: My estimate is based on this report showing that the top six highest-paid employees of Harvard Management Company (out of a staff of more than 200) were paid nearly $50 million collectively a few years ago. Assuming that the average salary of the other 195 employees at HMC is $100,000, that puts the total payroll close to $70 million annually. At Harvard’s current tuition of $43,280, the payroll of HMC would cover the cost of tuition for more than 1,600 Harvard students. Interestingly, that is about exactly the number of freshman students (1,667) this year."

The employment cost of these fund managers is roughly the same as the entire freshman Harvard class. So, if Harvard would simply move to an automated investment which matched its risk profile, every year Harvard could offer it's entire freshman class free education. I suspect with the significant other cost savings, and better ROI, Harvard would be able to match another year of students, call them the Sophomore year. Then by only using a small additional fraction of the yearly ROI, it would seem Harvard could pay for the other two years of students, call them Juniors, and Seniors, resulting in a free Harvard, all the time, for all students. 

Whether this is optimal remains a question, however, what is not a question is that large institutional investors from pension funds, to university endowments should be switching to automated investment programs, utilizing large scale index investing as the primary investment mechanism. 

Of course, it is easy to see why the investment managers would argue contrary, their employment demands they do so.

Upton Sinclair once said, "It is difficult to get a man to understand something, when his salary depends on his not understanding it."

True dat!

The world of finance seems to be the current victim of the Internet's ruthless quest for efficiency, and zero costs. Boohyah!!!