How did Bernie Madoff get away with it for so long? He did it with secrecy, confusion, and above all else he cultivated trust in the right people who would do most of the influencing for him. I’m not so interested in the financial instruments and securities details of the situation; that was mostly a fiction anyways. The man behind the curtain eventually was revealed as a simple con-man but the story of how people came to invest in him is not so simple. Watch this great video by the Wall Street Journal and notice the connection between trust and persuasion that is undeniable. It is essential to his game.
“If it was good enough for the Palm Beach Poobahs, then it says something about me too” is my favorite line from it. I think it summarizes completely the psychological reality that Madoff exploited. At first it sounds simple but it’s far more elaborate of a con game because that kind of trust wasn’t built overnight. It was trust built by status anxiety. If I was good enough for Bernie Madoff, then I am as esteemed as his famous clients whom might have reason to see me as an equal. He was a legitimate member of the inner workings of the stock market industry for nearly 40 years, but chose investor victims who were not familiar with the industry. He took advantage of the asymmetry of information that enables all abuses of power and it only came to light because the economy made folks want to pull their money faster than he was collecting it from new victims. I have no clue as to why the SEC didn’t see this coming. I suspect his pillar of the trading establishment status put a bias on the SEC who were called to investigate his investments as early as 2001.
