Poor Charlie's Wisdom

Interloper uses a Charlie Munger story to discuss investment banks and their clients:

Charlie Munger’s reticence to speak publicly is a grave disappointment because he’s proven adept with wonderfully entertaining and enlightening anecdotes like this:

I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.”

The metaphor of investing opportunities as fishing lures works better than its more popular “market as casino” counterpart on a number of levels, most notably with respect to the initial confusion regarding who the fish really are.  The fishing lure salesman is only concerned with whether his product works to the extent that it affects repeat business and investment banks are no different. For the salesman, he would rather his product perform well, but would be perfectly happy with a world where everyone bought tackle, went fishing and nobody caught anything. The corollary for investment banks is that a world in which everyone keeps trading even though they all lose money would be perfectly fine and massively profitable.
In the real world, selling lures that don’t attract fish and selling trade ideas that always lose money would be, at best, a short-term operation. Both cases, however, imply the same subtle manipulation of its clients. The fishing lures are purple to attract fisherman, not fish and “actionable ideas” are designed to attract investors, not necessarily investment returns.

The whole thing is worth reading.  The point may be a little overdone, but when it comes to dealing with Wall Street, a little caution is a good thing, as long as it doesn't lead one to invest in Wall Street-provided "protection".