Title: The statistomat pitch
Author: Davis, Chan
Language: English
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                         The Statistomat Pitch

                             By CHAN DAVIS

                    Illustrated by JOHN SCHOENHERR

              _The product looked okay, and the salesman
                   was sharp ... dangerously sharp!_

           [Transcriber's Note: This etext was produced from
                        Infinity January 1958.
         Extensive research did not uncover any evidence that
         the U.S. copyright on this publication was renewed.]


The little salesman buzzed into my hotel room exactly at 10. He must
have been waiting in the corridor, ambushing the second-hand.

I watched from my deep chair in the corner while he slid open his
raincoat, lifted it neatly off his back (the casual shrug wasn't his
style), and stood with it hanging from his forefinger. With a bright,
apologetic smile he hung it up in the alcove behind the door. I decided
not to object to his using the hook without asking; it'd just slow
things up.

The salesman smiled again, ducked out into the corridor and back in
with a flat 24x20 brief case and a large, oddly shaped suitcase. His
presentation charts and a mockup of the computer, obviously. More
apologetic faces, and he sat down.

He said, "It was _very_ good of you, Mr. Borch, to give me this chance
to tell you about our new, personalized Statistomat. I know you're a
busy man--"

I raised my drooping eyelids just enough to see him properly.

"--with all your responsibilities, and I hope I'll be able to answer
all your questions on modern estate planning. That's what I'm here
for!" He smiled as if he were pausing for questions, but he didn't
pause.

He intoned, "The man of wealth has a special responsibility in our
society. He is the trustee of invested capital, on which our economy
rests. His proud charge is to direct and build his holdings wisely;
and natural economic laws have justly placed the nation's considerable
estates in the hands of men equal to the charge.

"At the same time, such men owe themselves freedom from deprivation.
And they owe themselves a financial plan adapted to their
own--er--preferences and tastes in freedom from deprivation. This is
why we speak of _personalized_ estate planning. Maybe this will be
still clearer, Mr. Borch, if we look at an example."

       *       *       *       *       *

Here we go again, I thought, as he hauled a packet out of his brief
case, opened it out into a little stand on the table, and flipped up
the first chart.

"Take the case of Robert Jones, who inherits $25,000,000 from
his father. The inheritance taxes are all taken care of by
investment-incentive deductions, so Mr. Jones has $25,000,000 in liquid
assets to invest."

Right on the ball, I thought. The hypothetical 25 million was just
about twice the publicly known size of the Borch estate, therefore
right in the league he could figure I'd like to be playing in. And the
hypothetical Jones on the chart, confidently facing the future, was
handsome and dignified, but not _much_ more so than I was.

"Mr. Jones has a wife and one young son." They appeared beside him on
the second chart, and they looked very pleasant. The salesman knew Jed
Borch was unmarried. "He has planned to his satisfaction a way of life
appropriate to his standing." On the next chart the Jones family was
backed up by a half-acre bungalow, a lake, and wooded hills.

"His desire is for security, to ensure this pattern of living to
himself and his wife, and to his son. His personalized Statistomat
plans his finances accordingly." On succeeding charts, Jones changed
only in subtle lengthening of the firm lines in his face, his wife
didn't change at all, but his son sprouted to a six-footer and the
bungalow grew some too. A bar graph superimposed on the picture kept
track of the investment. By the time the boy was full-grown it had
risen to a modest $100,000,000.

"On the other hand, consider Michael Thompson. Starting with the same
sum of $25,000,000, he may just as legitimately view different goals.
Mr. Thompson is unmarried, and has not yet chosen to what station he
will aspire." Chapter Two of the charts had just as admirable-looking
a man (different color hair). I was curious how much Statistomat would
finagle for him, but not curious enough to sit through another dozen
charts. When the salesman said, "Naturally he's willing to risk--" I
interrupted:

"I don't want any risk. Can't afford to." I smiled slyly.
"Responsibility to society."

"Of course, of course, but you might be willing, like Mr. Thompson,
to--er--look beyond the more accepted channels of finance for the sake
of the larger returns that can be realized by breaking new ground, as
it were--participating in pioneering enterprises."

"Oh, sure. Don't want to miss any bets."

       *       *       *       *       *

So far you couldn't see anything to complain about in his pitch,
considering it alongside the pitch for General Computers' Incomac. In
fact it essentially _was_ a General Computers pitch, with the brand
name changed. Let's get to the point, I thought. I pointed to the odd
suitcase. "Uh ... what's that?"

He was adaptable enough to give up the Michael Thompson story and open
up the suitcase, promptly and proudly.

"Oh, the computer," I said, almost encouragingly.

But he didn't let that stand. "No," he admitted, "this is just a
life-size facsimile of the new Statistomat. I'm afraid the real thing
is too valuable and too heavy for me to carry around, even to such an
important interview as this."

"How heavy?"

"I'd say about ten times as heavy as this one," he evaded neatly. "Now
on this facsimile I can illustrate the ideas we've been developing.
Here, you see this screen and these knobs. I'll turn this switch on and
we can watch this part of it just as if this was the real computer."

My surprise was genuine. His demonstration mockup was a live one. I
wished my brother could see it.

"On this screen we record your time-dependent utility function. For
your convenience, the input is mechanical, but from this point on all
the Statistomat's computing is performed digitally."

I said, "Huh?"

"Time-dependent utility function," he repeated brightly.

"Oh, I can't be bothered--all that technical stuff--leave it to
specialists," I muttered, making the trap nice and inviting.

But he knew he had to explain. "Naturally only the essentials need
_your_ personal attention," he said smoothly. "You express in the
time-dependent utility function your financial policy--the broad,
overall outlines of the course you want to steer. This must come from
you. This makes the difference between a Robert Jones and a Michael
Thompson. You have a possibility of doubling your investment in a year,
let's say. How certain do you have to be of it before you prefer it to
a more conservative investment? Even odds? Six to four? Or we might ask
a similar question about a ten-year period. You see the point."

"Uh ... but it depends on how much I've got." I kicked myself. My
brother would not approve my helping the salesman along like that.

"Ah, yes! Certainly! When you have a hundred million, an extra million
won't seem nearly as important to you as when you have twenty-five.
We understand! Our technical expression for this is that the value of
money to the investor is not a linear function of dollars. Logarithmic,
some say--but that depends on the investor. Whatever relationship you
select as a matter of fiscal policy. That is a part, a critical part,
of the information which you give the Statistomat when you work out
your time-dependent utility function, or risk function, as we call it
for short."

"No risk! Can't afford risk!"

"Mr. Borch, I speak with confidence when I assure you that your estate
can be subject to as little risk when its direction is assigned to the
Statistomat as in any other way." I almost called him on that, until
I reflected that he had really made only one specific claim: that you
could feed just as excessively conservative a risk function into the
Statistomat, if you were compulsively conservative, as you could into
the G.C. Incomac. That might be true.

He went on, "Two of the soundest business research agencies in the
country have been invited to inspect all our operations and have okayed
us, not once but repeatedly: the S.E.C. and the F.T.C."

Darn right they've checked you, I thought--by law. And don't think
they'll stop.

       *       *       *       *       *

But it didn't do any good to spot a steep slant in his formulations.
He was a salesman, after all. Just so he stayed clear of demonstrable
falsehoods and "fraudulent tendencies" (as defined by the 1978 Commerce
Act), he was within his rights.

He was staying clear. Some of his claims a stickler might want to check
up on; but I wasn't going to bother any more to watch for things like
that. I thought the stickler would find in each case that he'd been
wasting his time. This little salesman seemed awfully good at skating
just at the edge. He really knew his profession.

I didn't let my bafflement show. I just looked at him dully and made
noises as if I was about to say something. I was, but I didn't know
what.

There just had to be something bad about this Statistomat venture.
Without (apparently) any new gimmick, a small new company was producing
just as good a product as one of General Computers' best-managed
divisions. How could Statistomat hope to deliver a normal profit? It
wasn't reasonable. There must be badly cut corners, if not in the
product then in the sales program or the servicing of customers; or
else the investors _weren't_ hoping for a normal return. In that case
there was something funny in their motives--a long-range scheme to
undermine G.C., or something. That might show up in this salesman's
pitch.

So I switched to, "How do I know what stocks this thing'll tell me to
buy?"

"Not _tell_ you to buy," he corrected charmingly, "_buy_ you. The
machine can be connected by direct wire to the Exchange's computer."

"Yeah-yeah, but how do I know what stocks I'll be getting? I want
General Computers preferred!"

He smiled. "Quite possibly you'll find yourself the owner of a
considerable block of G.C. preferred--provided of course your
time-dependent utility function dictates a policy which--"

"You mean," I said, with the very suspicious expression my brother
always objected to, "you'd let your machine bid for G.C. stock for me?"

"Naturally. The Statistomat has often recommended purchase of G.C.
stock. Let me explain to you an aspect of modern firm management which
may be so specialized as to have escaped your attention.

"Each firm draws up what is called a preference function. It is
somewhat analogous to the investor's time-dependent utility function.
It gives exact expression to the objectives of the firm. For any
conceivable economic position the firm might be in, it determines,
let us say, the weight the board places on a dividend this year as
against a larger dividend a year from now, or ten. And so on. It is
the criterion for all the optimization computations which pattern the
firm's activities.

"Under a 1978 law, every corporation offering stock on the Exchange
must publish its preference function. All these preference functions
are known to your Statistomat; in effect, it is as if they were all in
Statistomat's memory, continuously updated, automatically. Naturally,
for a particular kind of investor only certain kinds of stock are
suitable.

"But Statistomat does more--and this is the point I think you'll find
intensely interesting. After all, more than the firm's policy is
important. Two firms may have identical financial policies but very
different dividend rates, either due to different degrees of success or
to different kinds of partial success. Statistomat also has available
to it a sound estimate of the firm's expectations--"

"Who does the--uh--estimating?"

"Based entirely on Commerce Department reports. That's as impartial as
you can get, Mr. Borch, and it's also one of the best-informed sources
in the country. This information is processed at our home office on one
of the largest automatic computers in the world. You see, Statistomat
Incorporated is deeply conscious of its responsibility to give flawless
service to the men who control and direct America's fortunes."

       *       *       *       *       *

The little salesman sounded overconfident again so I thought I'd shake
him up. "What does General Computers use for their whatchamacallit?"

"The General Computers' Incomac uses exactly the same sources of
information."

I said in a bored voice, "What do you do different?"

"The principles of investment planning are scientific principles, Mr.
Borch, and anybody working in this field must follow them."

Let's hear you desperate, I thought, but my voice just got drier.
"Guess I might as well get an--"

"Of course there are differences!"

"Uh--yeah?"

"Oh, yes, yes! You see, even though the principles are the same, still
if only one company was offering this service to investors--"

"Then what? It'd jack up the prices?"

But that was over-eager. He backed away immediately: "Certainly
not, Mr. Borch. Who could suggest such a thing? We all know General
Computers' spotless reputation as one of the most heavily capitalized
corporations in the country. Besides, by now we should be free of
wild brain-truster theories about the evils of monopoly." He smiled
sanctimoniously.

I drawled, "So what if only one company was selling these machines?" My
brother would be grinding his teeth at this follow-up. But I thought I
just about had this salesman boxed. I'd better! He was catching on.

He answered, "Even though the same principles are applied, there are
bound to be individual differences in their application. If all users
of estate planning computers had relations with the same firm, all
these minor fluctuations would be in the same direction for all of
them. Although the investment mixes would be far from identical, they
would be more alike than economic principles require. On the other
hand, the investor who has the courage to associate himself with an
alternate set of analyses may be comparatively alone in the course he
chooses. Thus he may benefit, when this course chances to be better
than expectations, by having to share the reward with relatively few
others."

I had him! I said, "You mean this thing might buy me different stocks
from what the G.C. whatchamacallit would?"

"Why, yes, it would be surprising if there was not at some point a
difference in the two solutions. That was the point you raised so
well--"

"And you mean your answer might make me more money?"

"Why, yes, in the case--that is, in the way that I was discussing.
Mmm-hmm."

"But then you think G.C. gives out wrong solutions."

"Not _wrong_--"

"Solutions that aren't the best--that _means_ wrong, huh?"

"Why, yes, I mean, I suppose that--" He stopped.

       *       *       *       *       *

I smiled. I dropped my Jed Borch personality (which the little salesman
probably much preferred). "You know who you've been talking to?"

"F.T.C.?"

"An F.T.C. Investigator," I said, professionally. Without waiting for
him to ask, I showed him my card, with the impressive embossed words
across the center: "Fair Trade Corps." Then I pressed a button and
instantly two cops were in the door and at the salesman's shoulders.

The salesman said, "What's the charge?"

"You know what it is."

"The charge, please."

I shrugged. "Fraudulent tendencies; to wit, unfair, untrue, and
scurrilous maligning of a competitive corporate body, individual,
and/or product. Okay, boys."

They handcuffed him and hustled him out without even picking up his
luggage and his raincoat. He tried to look confident, but I thought
the law-abiding public wouldn't suffer much longer from the connivings
of Statistomat, Inc. I settled back into the deep chair and turned with
a triumphant grin toward the door of the room's closet.

It opened. My brother, dressed in the distinctive charcoal-green suit
of a General Computers junior executive, stepped out, turning off the
tape recorder as he came.

He was grinning too. "You had me biting my lip," he admitted, "but you
came through all right. It's a good thing, too. It always gives me a
specially grateful feeling when I see society saved from a deviant
like that.... It's not that there was any danger they would have
challenged Incomac's market leadership, but even if they had continued
in existence as small as they are now they would have taken away _some_
customers. Our responsibility to our stockholders is not just to make
profit. It is to make the maximum possible profit--to optimize!"

Of course!

My brother's gaze was distant as his keen mind searched for the deeper
lessons of the day's work. He said, "Maybe we should get the public
release of those Commerce Department reports discontinued."




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