Digital Wealth

Preface

The future is already here. It’s just not very evenly distributed.

—William Gibson

In 1989, three separate global events heralded a revolution in household investing, with the potential to save American households billions over the coming decades.

In 1989, researchers from Carnegie Mellon University’s ChipTest project joined forces with IBM. Their computer was renamed Deep Blue after a naming contest. This chess computer would ultimately defeat the world champion. The same principles of deep analysis and simulation across multiple scenarios are employed by investment algorithms. The technology that beat the world champion once required a room of computing power. Today, as a sign of the incredible improvements in processing power, that same software no longer requires its own room and can run on a basic consumer phone.

In May 1989, Index Participation Shares (IPS) began trading on the American and Philadelphia stock exchanges, an equity derivative attempting to match the returns of the Standard & Poor’s (S&P) 500.¹ The Chicago Mercantile Exchange sued, and a decision by a Chicago Federal Court ultimately stopped the practice due to regulatory issues. But public interest in trading an entire stock market in the same way that you can trade a single stock was demonstrated in the brief period that this product traded.

The concept ultimately led to a similar fund being set up in Toronto to track the TSE-35 index the next year, which was again short lived, but this led to ...