TRILLIONS

Anyone who’s ever dabbled in the stock market (or wanted to) always checks whether their portfolio is doing better or worse than the market.

Naturally, “beating the market”—or “chasing alpha” to use a more technical term—is what every investor hopes to accomplish. It’s also proven difficult to do. There’s a wealth of financial and economic theory that demonstrates why this is the case, and there are anecdotes aplenty of investments gone wrong and portfolios wiped out. Of course, this hasn’t stopped people from trying, armed with some proprietary investment theory, trading algorithm, or even insider information. But gains are short-lived in many cases and most people remain better off with passive investment strategies than with actively managed portfolios.

As such, the risk neutral solution would be to simply invest in a representation of the market, which people are able to do today thanks to index funds. Yet what’s surprising is that index funds are a relatively recent vintage, and their emergence as a financial instrument was neither obvious nor guaranteed. The birth of the index fund and how it reshaped modern financial markets is the subject of Robbin Wigglesworth’s book Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Change Finance Forever.

Trillions is arguably equal parts history book and financial theory explainer, achieving the Goldilocks zone that makes both reasonably accessible regardless of one’s background in finance. The narrative can be dizzying at times owing to a very large cast comprising the many different traders, executives, professors, researchers, and entrepreneurs that played a part in the creation of both the index fund and the market for the same. But it’s an interesting peek at how modern financial instruments and markets develop over time, especially given that index funds have been a net positive to the world (unlike other products that ended up as financial weapons of mass wealth destruction).

In addition, for people who study finance Trillions has the added appeal of bringing to life many luminaries whose work is often cited in the literature or who are mentioned in the news, such as Eugene Fama, William Markowitz, Merton Miller, John McQuown, and Jack Bolge (to name a few in no particular order).

It stands to reason that for so long as people look to invest their money there will be those who inevitably aspire to beat the market. Such is life. But Trillions should go far to educate many more about the wisdom of locking in market returns, a straightforward idea whose time had definitely come.