A year ago, on December 11, 2008, it was revealed that a multi-billion dollar hedge fund was, in fact, a ponzi scheme, and that the reverberating name of the confidence man was Madoff.
In the blink of an eye and with the illusionism of a magic trick – poof! – all of the loot vanished.
Our project here is not to throw stones and brand victim as villain, not to trivialize loss, not to sweep all of the swindled into a particular dust heap, and not to ignore an indictment of capitalism, but to poke through the ruins of the aftermath and observe the necessary complicity of the mark with the con.
Confidence men are hardly criminals in the usual sense of the word, for they prosper through a superb knowledge of human nature… the confidence man… not really a thief at all… does no actual stealing. The trusting victim… thrusts a fat bank roll into his hands.
What all confidence games have in common is that they employ the victim’s greed as a lever.
The Swindle, starring the con man and the mark, is an ancient game, one as old as human nature and as American as huckleberry pie. Someone has to be cast in the role of the rube.
Once a mark, always a mark.
The telling ratio is roughly 4:1. Four refrains heard from the mouths of Madoff’s marks before December 11, and one sung afterwards.
M doesn’t charge fees. Apparently, this mantra was like waving a red flag in front of a bull. A mark wants something for nothing.
M doesn’t accept just anyone’s money. The mark’s ego is flattered at the start. If marks were not so anxious to impress strangers, they would keep their bank accounts intact much longer.
I’m not greedy because M gives modest steady returns rather than high risky ones.
Early prosperity dulls the mark’s sensitive organ of skepticism.
The mark gets to have his cake and eat it monthly, as the uncorroborated statements displayed what were in fact exceptional returns relative to principal stability. Risk and return refuse to correlate when using ‘jail arithmetic’.
Mr. So-and-So says it’s a good deal. Every con game uses shills, ropers, steerers, convincers, and ten-percenter’s to raise the necessary capital for plunging. An insideman is like your mother. Mother knows best…
One characteristic of a mark is that he will not bother to kick the tires himself, but prefers lazily to rely on someone else’s word.
The unarticulated premise behind it’s a good deal is often because I can get more – more than is reasonable, more than the other guy. (Capitalism, anyone?)
And too often, under the principle of hoggishness, if some is considered good, then more is considered better. So all the eggs went to market in one basket, and checks and balances were left at home with the umbrellas.
When the scandal finally broke, after having basked in the conceit of knowing the right people and of being “in the know,” the chorus could only bleat in reverse:
But I didn’t know!
That an unregulated hedge fund was riskier than an FDIC-insured bank account? That diversification really ought not be skimped? That…
But I didn’t know!
That M was the particular Ponzi scheme that it was, in all its particular details? That is not the same as not knowing that something in the recipe was too rich for the diet.
I didn’t know! I trusted: M himself… the shill… the government… that the laws of investing could be broken and I wouldn’t be caught.
In other words, faith-based investing: belief over due diligence.
After the September 2, 2009 SEC report, no one could credibly claim that the clues had been invisible. We didn’t know proved not to rest on We couldn’t have known. For no one ever depends on government to protect them from a fleecing, any more than your neighborhood bank will surely not loan you money that you couldn’t possibly repay. Caveat emptor abides.
Finally, I didn’t know as an exculpatory incantation went out at the end of World War II. One of the paradoxes of self-deception is its element of willful ignorance, complicated by our tending to take seriously what we tell ourselves. In the end, a zero is a zero, not a halo.
To invest one’s money in a balanced portfolio designed to meet goals and objectives is a very different thing from handing over one’s bundle to the smartest person one hears rumor of. The difference, trite as it may sound, is personal accountability, something that can never be delegated.
It is, after all, sheep and goats that get fleeced.
Good fortune can lead to the sense that one stands above the common clutter, that one can’t lose… For those who had given M their nest eggs, it was a classic case of pride front-running a fall. The future shattered on December 11, 2008, and was wiped out along with one’s wallet. Dreams were scythed down to size, and tomorrow took on an unrecognizable shape.
Many (and I emphasize, not all) victims who howl for justice and restitution shamelessly weigh their suffering in a scale reserved for less than 1 per cent of our fellow human beings. Their damage amounts to a reduced lifestyle that still finds them many decimal places to the left of most individuals and families. This reification of lifestyle, which in part begot this mess in the first place, is what is truly shameful, not the narcissistic embarrassment of having been suckered. (Some Madoff victims have yet to ’fess up to their families.)
Scratch a contradiction and one may find hypocrisy. Money doesn’t buy happiness; money isn’t the meaning of life. How hollow one’s lip-synced platitudes now sound. For too many, it is a Material World…. filled with material fools.
One will never find peace of mind by comparing today’s cloth coat with yesterday’s furs. How about settling for a more common measure of humanity? Let’s redefine a Madoff, or any other, ‘winner’, as someone who has gained self-understanding, who compresses loss into a trifle, who shrugs and insists no matter, who finds the risus purus, the amor fati, and who faces the present unblinkingly.
A Sucker: “Give me an American businessman every time,” declared one of the most successful of the present generation of ropers, “preferably an elderly executive. He has been telling others what to do for so long that he knows he can’t be wrong.”
With credit to David A. Maurer’s The Big Con, introduction by Luc Sante.
LIMONE TATATJAVY may be reached at tatajavy@gmail.com