Bookstrapping: Trillions by Robin Wigglesworth
Robin Wigglesworth’s book traces the development of the idea that hedge funds and investors can never do better than an index fund in the long run., highlights Reeta Ramamurthy Gupta in her review.
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The stock markets have been in the news for a massive correction. In the first two months of 2025, Indian stocks lost $520 billion; higher than GDPs of Pakistan and Bangladesh!
With the markets seemingly limping towards recovery, we review Trillions by journalist Robin Wigglesworth, a somewhat historical book about why the creation of index funds (now popular!) was not an overnight success. The book personifies the quote, "all progress depends on the unreasonable man,” attributed to George Bernard Shaw.
Wigglesworth’s book traces the development of the idea that hedge funds and investors can never do better than an index fund in the long run. It is just a question of minimizing costs. Warren Buffet famously bet on this and won!
Despite this, trying to beat markets is part of human nature. People want to do something active with their money instead of being passive. However, ‘passive investing’ has become the bedrock of finance today. Very few investors understand where and how this practice emerged- so anyone who wants to understand modern investing will do well to read this book.
The book features names that investors are not familiar with- for eg; Louis Bachelier, the French mathematician whose early-20th-century work on the random walk laid the groundwork for index fund and mathematician Jimmie Savage, who discovered the work of Bachelier. This led to a study of the random nature of stock prices.
Wigglesworth explains why the indexing revolution has saved investors, billions of dollars in fees and has shaken up the investment industry. It has also created a more democratized landscape - allowing small investors access to diversified portfolios previously available to institutional investors only.
He also raises provocative points about the pitfalls of indexing, most notably the inability of index funds to adapt to new economic or social conditions. The other aspect is the concentration of power in the hands of a few - thanks to the success of the index funds.
Summing up, the creation of index funds was an inconvenient truth. That’s why only a few smart, passionate outsiders who were looking for a way to apply the academic research they studied to real-world investing kept it alive. Isn’t this how all disruption happens?
Read More: Why AI may never match the human brain!
