La Comédie Humaine
Somewhere out there a new, doubtless different, Balzac is furiously clipping newspaper pieces for his 21st century update of the 19th century cycle of manners and morals. He/she would find some useful tidbits in today’s New York Times.
Ian Urbina takes us to a “Palm Beach Enclave, Stunned by an Inside Job.” Here, in Bernie Madoff’s private preserve, a sense of being duped and a spreading mistrust prevail.
The shame of the Madoff scandal seemed especially bitter here in part because the club is known for its noblesse oblige in requiring members to give tens of thousands of dollars each year to charity.
The attention was also particularly unwelcome for a community whose grand homes sit hidden behind 20-foot-tall ficus hedges and steel gates.
In cultivating an aloof mystique, Mr. Madoff had fooled those who fancied themselves the wiser.
Typically, investors needed at least $1 million to approach Mr. Madoff. Being a member of this club also helped.
But even with those prerequisites, there was little guarantee that Mr. Madoff would take the client.
But the dis-ease is spreading beyond the confines of the exclusive club:
Ross B. Intelisano, a lawyer representing a collection of its members, said he thought relations at the country club and on the island generally might never be the same again.
“He had this reputation that he’s one of these guys, that he’s what Wall Street’s all about,” he said about Mr. Madoff. “It’s all about a handshake, and people trusted him.”
That sort of trust may be gone now, Mr. Intelisano said.
“People may not really trust the guys they play golf with,” he said.
One observer sums up the Palm Beach condition:
“Palm Beach is a place of fantasy,” Mr. Leamer said. “There are no hospitals, funeral homes, people don’t talk about the negative.”
Aspiring Balzacs may find the whole saga here. But try to keep the negativity down.
This is actually the way that many of the big decisions are made in big business. In a commodity “fund of funds” that I worked for years ago, we were able to improve our stature among investors and significantly increase the rate of investment by raising our minimum investment from $10 million to $20 million without doing anything else differently (including continuing to lose money).
Of course, Madoff had to put up some large returns. But what better way to do this than to run a silk glove Ponzi scheme in an American market addicted to short term returns. All one needs to do is find an unlimited supply of greedy short sighted people and one could run this sort of thing for, like, decades.
Will these big investors ever be able to trust again? The recovery will be very hard, I’m afraid and closure will not be achieved until someone comes up with another quick way to make a buck in a way that looks respectable.
I’m thinking some time next spring, after the fairways thaw out.
It really gives pause about how we make important decisions. People work from their gut as much as (or more than) examining hard data, whether it’s buying a car, deciding who to vote for, or picking an investment adviser. There are a million nonverbal and intangible cues that make us relax our defenses and tell us, ‘he’s someone I can trust’, and unfortunatley, grifters have mastered them all.
Although it failed in this instance, I think nonrational judgment is part of human nature, and I suspect most people would claim that it works quite a bit of the time. E.g. has your gut ever told you, ‘They shouldn’t get married – he’s wrong for her’? It’s a prediction that is fulfilled distressingly frequently.
And we won’t even get into faith. :-)