There's a classic joke about Wall Street. I feel like I read it in one of my grandfather's old joke books, probably a musty little Bennett Cerf tome from the 1950s with jokes organized in categories like "Hungarian Diplomats" and "Long Hairs".
Mike goes to visit his old friend Fred, who has been doing very well for himself in New York City. Fred's got a job working in a mail room on Wall Street, and has become quite plugged-in to all of the industry gossip. The two go for a jaunt just outside of the city, along the shore to view the haunts of the Wall Street rich and famous. As they drive along a wharf, Fred points out the notable yachts to Mike and informs him of the owners.
"That big one over there with all of the flags is Johnston's yacht. He's the managing partner at Harwich, Hayes, and Blogg. They're one of the biggest investment advisory firms on the street. That one over there is Jackson's. He's a founding partner at Smith, Jackson, Smith. They've got some really great ideas on how people should invest their cash. Oh, and that really nice one is Smith's. It's a different Smith, of course. He's one of the senior partners at Smee, Blunner, and Howe."
"But Mike," Fred asks, "where are all of their client's yachts?"
Ha ha ha. It isn't really funny, because story jokes like that generally aren't very funny. It also isn't funny because it's true.
Warren Buffet wrote about it in his 2006 letter to his shareholders, doing a much better job of it than I ever could. I got this via Paul Buchheit's blog post responding to a "What Do I Do With My Big Pile of Money?" question on HackerNews. As always, Buffet's description of capital markets is clear-sighted and sane. This excerpt is an amazingly straightforward and approachable discussion of the problems that arise when you've got an entire professional investing industry. He estimated when he wrote this letter back in 2006 that 20% of investment profits are getting sucked out of investors pockets by "professionals". Good grief.