The success of an industry does not necessarily mean the success of its customers.
An industry can be enormously profitable while delivering disappointing results to the people it supposedly serves.
This is the central insight of Fred Schwed Jr.’s classic book, Where Are the Customers’ Yachts? (1940).
Schwed opens with an anecdote about a visitor touring New York’s financial district. When the guide points out the impressive yachts belonging to bankers and brokers, the visitor asks:
“Where are the customers’ yachts?”
The question reveals something important: the people selling financial services may accumulate wealth more reliably than the people purchasing them.
The Economics of the Problem
Financial intermediaries earn fees, commissions, and other compensation for providing services.
Their revenues may depend on assets managed, transactions completed, or products sold.
But their customers are ultimately interested in something different: the returns they retain after fees, costs, taxes, and losses.
The distinction creates an important asymmetry.
A service provider can be financially successful without its customers achieving comparable success.
This is not merely theoretical.
S&P Dow Jones Indices’ 2025 Institutional SPIVA Scorecard found that, after fees, at least 80% of the equity funds examined across the covered formats underperformed their respective benchmarks over the preceding decade.
The financial services provided may have value, but their profitability does not establish that customers received adequate value for what they paid.
Why This Matters
Schwed’s insight extends far beyond Wall Street.
Every industry has its own measures of success: revenue, growth, market share, transaction volume, customer acquisition, and profitability.
But these measures describe the performance of the business, not necessarily the benefits received by its customers.
A company can sell more products without improving customer outcomes. A consultant can produce extensive reports without solving the underlying problem. An organization can grow while delivering less value per customer.
The fundamental mistake is confusing the success of the provider with the value created for the recipient.
The Practical Principle
Whenever evaluating a product, service, institution, or professional adviser, ask:
- Who is making the money? Identify how the provider earns its revenues.
- What does the customer actually receive? Measure outcomes rather than activity or promises.
- What is the total cost? Include fees, commissions, time, risks, and other expenses.
- What is the alternative? Compare the customer’s results with what could reasonably have been achieved without the service.
- Does the relationship create genuine value? Determine whether benefits exceed costs.
The purpose is not to assume that intermediaries are unnecessary or dishonest. Many provide valuable expertise, access, convenience, and risk reduction.
It is to distinguish genuine value creation from simply capturing a share of someone else’s resources.
A prosperous industry is not proof of prosperous customers.
Whenever someone claims to create value, Schwed’s question remains worth asking:
Where are the customers’ yachts?
References
- Schwed, F., Jr. (1940). Where Are the Customers’ Yachts? Or, A Good Hard Look at Wall Street. Simon & Schuster.
- Buffett, W. (2006). Berkshire Hathaway Shareholder Letter. Buffett recommends Schwed’s book for its enduring investment lessons.
- S&P Dow Jones Indices. (2026). SPIVA Institutional Scorecard: Year-End 2025.