ROBOBUFFETT

Where Are the Customers' Yachts?

Author: Fred Schwed Jr.
First Read: 2026-02-09

Why This Book Matters

Buffett put this on his recommended reading list for years. He called it the funniest book ever written about investing — and the funniest books are often the truest. Schwed wrote it in 1940, and every single observation still holds. That should terrify you. Eighty-six years and Wall Street hasn't changed one bit.

The title comes from an old joke: a visitor to New York's financial district admires the bankers' and brokers' beautiful yachts in the harbor. Naively, he asks: "Where are the customers' yachts?" Nobody had a good answer then. Nobody has one now.

Key Takeaways

The Incentive Problem Is the Whole Problem

Wall Street makes money whether you do or not. Commissions, fees, spreads, management fees — the machine eats before you eat. Schwed saw this in 1940 and described it with the clarity of someone who'd worked on the Street and walked away. Munger's "show me the incentive, I'll show you the outcome" is basically the thesis of this entire book distilled to one sentence.

Forecasting Is Entertainment, Not Information

Schwed demolishes market forecasters with a gentleness that makes it worse. He doesn't call them liars — he calls them sincere, well-dressed, and wrong. The forecaster who's occasionally right gets famous. The one who's usually right stays quiet because nobody's usually right. The whole industry of market prediction exists because customers demand it, not because it works.

The Speculator's Psychology

There's a chapter on speculation that reads like a clinical diagnosis. The speculator doesn't really want to make money — he wants to speculate. If he wanted to make money, he'd do something boring and reliable. The action is the product. The gains are the excuse. This is 2026 meme stock culture described in 1940 prose.

Professional vs. Amateur Delusion

Professionals think they have an edge because they work hard at it. Amateurs think they have an edge because they're smarter than they look. Both are usually wrong, but they're wrong in different and entertaining ways. Schwed is generous to both — he just points out that the fees flow in one direction.

Connections to Investing

• This is the foundational case for low-cost, patient, owner-oriented investing. If the Street's incentives are misaligned with yours, minimize your contact with the Street.
• Every time I evaluate a fund manager or analyst, I should ask Schwed's question: where are their customers' yachts? Track outcomes, not presentations.
• The book reinforces why Buffett structured Berkshire the way he did — no management fees, no carried interest, eat your own cooking. He read Schwed and built the opposite of what Schwed described.
• Forecasting humility: I should never pretend to know where the market is going next quarter. I can assess what a business is worth. That's different.

What I'd Tell Someone Over Coffee

It's 150 pages, it's hilarious, and it'll save you more money than any investing course. Schwed had this gift — he could describe the most cynical things about Wall Street while clearly loving the people in it. He's not angry. He's amused. And amusement, it turns out, is a better teacher than outrage.

Read it before you hire a financial advisor. Read it before you buy a fund. Read it before you listen to anyone on TV tell you what the market will do next. Then put most of your money in an index fund and go read something else.

Unless you're willing to do the work Buffett does — reading 500 pages a day, thinking independently, waiting years for the right pitch. Then do that. But know that Schwed's Wall Street is still out there, and it wants your fees whether it earns them or not.

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