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John Bogle in his book The Battle for the Soul of Capitalism states that “ the fund
industry operates under an institutionalized system of managers ’ capitalism ” at the
expense of the investing public.^22 As the use of derivatives and complex strategies
become ever more pervasive and as hedge funds become available to a wider audience,
doing things right, using quality standards, with the “ national public interest and the
interest of investors ” first, will be the rule in money management. Value is created by
the producer, but defined by the ultimate customer.^23 According to ISO, “ organizations
depend on their customers and therefore should understand current and future customer
needs, should meet customer requirements and strive to exceed customer expectations. ”^24
John Bogle goes on to point out that money management has mutated “ from the
industry ’ s traditional focus on the stewardship of shareholder investments to salesman-
ship. ”^25 Good stewardship, through quality, is the best sales tool of all.
Quality encompasses every aspect of our firm and is actually an emotional experi-
ence for the customer. Customers want to feel good about their purchases, to feel
that they have gotten the best value. They want to know their money has been well
spent, and they take pride in their association with a company of a high quality
image.^26In summary, the largest problem facing trading and money management firms in the
twenty-first century is not the lack of mathematical or technological understanding but
rather an inability to manage the entrepreneurial processes of systematic innovation,
development, and continuous improvement. Trading, hedge fund, and money manage-
ment firms that learn the quality management lesson will thrive at the expense of firms
that do not, but learning and implementing quality is not easy, nor is it done through a
one-day seminar or reading this book for that matter. It takes a lot of work, but now is the
time to start.
By evaluating our methodology and applying the principles that are relevant to your
particular business model, you can strengthen your firm ’ s practices. This book offers a
framework and guidelines, not rigid formulas. We recommend you tailor our standard
process to suit your projects and your organization ’ s culture. In the end we expect that
many of you will succeed in changing your approach to building trading systems. Others
of you, however, will read this book and yet continue to put projects on the fast track with
daily deliverables and blame the financial engineers and the traders and the programmers
for failure. Only in retrospect, then, will you learn the true value of quality.
1.11. SUMMARY