If you're young, pay attention to Madoff.
- Thread starter flytiger
- Start date
These guys said it better. I see a better civilization after we endure this pain. Watch some movies from the twenties, including 'Baby Face' with Stanwyck. Get the pre- Hays version. Hayes came out and destroyed the pretense of the woman who turns to the flesh to make her way. Great period piece. Then, see, when the country is in Depression, and then the War, how 'innocent ' everyone becomes. The women start wearing underwear, movies have morals, (Lewis B Mayer made Van Johnson stop shacking up with his girlfriend), etc. This awful period will return the public to a more parochial mode. I think we may even start to demand some integrity from Politicians. Anyway, say what you want about me. Doesn't bother me. But I'm no bystander. The question is, 'are you?'. And, if you run on hard times, can you expect other folks to care?
*Guilty Bystanders*
By Nassim Nicholas Taleb and Pablo Triana
On March 13 1964, Catherine Genovese was murdered in the Queens borough
of New York City. She was about to enter her apartment building at about
3am when she was stabbed and later raped by Winston Moseley. Moseley
stole $50 from Genovese's wallet and left her to die in the hallway.
Shocking as these details surely are, the lasting impact of the story
may lie elsewhere. For plenty of people reportedly witnessed the attack,
yet no one did much about it. Not one of the almost 40 neighbours who
were said to have been aware of the incident left their apartments to go
to Genovese's rescue.
Not surprisingly, the Genovese case earned the interest of social
psychologists, who developed the theory of the "bystander effect". This
claimed to show how the apathy of the masses can prevent the salvation
of a victim. Psychologists concluded that, for a variety of reasons, the
larger the number of observing bystanders, the lower the chances that
the crime may be averted.
We have just witnessed a similar phenomenon in the financial markets. A
crime has been committed. Yes, we insist, a crime. There is a victim
(the helpless retirees, taxpayers funding losses, perhaps even
capitalism and free society).
There were plenty of bystanders. And there was a robbery
(overcompensated bankers who got fat bonuses hiding risks; overpaid
quantitative risk managers selling patently bogus methods).
Let us start with the bystander. Almost everyone in risk management knew
that quantitative methods â like those used to measure and forecast
exposures, value complex derivatives and assign credit ratings â did not
work and could provide undue comfort by hiding risks. Few people would
agree that the illusion of knowledge is a good thing. Almost everyone
would accept that the failure in 1998 of Long Term Capital Management
discredited the quantitative methods of the Nobel economists involved
with it (Robert Merton and Myron Scholes) and their school of thought
called "modern finance". LTCM was just one in hundreds of such episodes.
Yet a method heavily grounded on those same quantitative and theoretical
principles, called Value at Risk, continued to be widely used. It was
this that was to blame for the crisis. Listening to us, risk management
practitioners would often agree on every point. But they elected to take
part in the system and to play bystanders. They tried to explain away
their decision to partake in the vast diffusion of responsibility:
"Lehman Brothers and Morgan Stanley use the model" or "it is on the CFA
exam" or, the most potent argument, "modern finance and portfolio theory
got Nobels". Indeed, the same Nobel economists who helped blow up the
system at least once, Professors Scholes and Merton, could be seen
lecturing us on risk management, to the ire of one of the authors of
this article. Most poignantly, the police itself may have participated
in the murder. The regulators were using the same arguments. They, too,
were responsible.
So how can we displace a fraud? Not by preaching nor by rational
argument (believe us, we tried). Not by evidence. Risk methods that
failed dramatically in the real world continue to be taught to students
in business schools, where professors never lose tenure for the
misapplications of those methods. As we are writing these lines, close
to 100,000 MBAs are still learning portfolio theory â it is uniformly on
the programme for next semester. An airline company would ground the
aircraft and investigate after the crash â universities would put more
aircraft in the skies, crash after crash. The fraud can be displaced
only by shaming people, by boycotting the orthodox financial economics
establishment and the institutions that allowed this to happen.
Bystanders are not harmless. They cause others to be bystanders. So when
you see a quantitative "expert", shout for help, call for his disgrace,
make him accountable. Do not let him hide behind the diffusion of
responsibility. Ask for the drastic overhaul of business schools (and
stop giving funding). Ask for the Nobel prize in economics to be
withdrawn from the authors of these theories, as the Nobel's credibility
can be extremely harmful. Boycott professional associations that give
certificates in financial analysis that promoted these methods. Remove
Value-at-Risk books from the shelves â quickly. Do not be afraid for
your reputation. Please act now. Do not just walk by. Remember the
scriptures: "Thou shalt not follow a multitude to do evil."
*Guilty Bystanders*
By Nassim Nicholas Taleb and Pablo Triana
On March 13 1964, Catherine Genovese was murdered in the Queens borough
of New York City. She was about to enter her apartment building at about
3am when she was stabbed and later raped by Winston Moseley. Moseley
stole $50 from Genovese's wallet and left her to die in the hallway.
Shocking as these details surely are, the lasting impact of the story
may lie elsewhere. For plenty of people reportedly witnessed the attack,
yet no one did much about it. Not one of the almost 40 neighbours who
were said to have been aware of the incident left their apartments to go
to Genovese's rescue.
Not surprisingly, the Genovese case earned the interest of social
psychologists, who developed the theory of the "bystander effect". This
claimed to show how the apathy of the masses can prevent the salvation
of a victim. Psychologists concluded that, for a variety of reasons, the
larger the number of observing bystanders, the lower the chances that
the crime may be averted.
We have just witnessed a similar phenomenon in the financial markets. A
crime has been committed. Yes, we insist, a crime. There is a victim
(the helpless retirees, taxpayers funding losses, perhaps even
capitalism and free society).
There were plenty of bystanders. And there was a robbery
(overcompensated bankers who got fat bonuses hiding risks; overpaid
quantitative risk managers selling patently bogus methods).
Let us start with the bystander. Almost everyone in risk management knew
that quantitative methods â like those used to measure and forecast
exposures, value complex derivatives and assign credit ratings â did not
work and could provide undue comfort by hiding risks. Few people would
agree that the illusion of knowledge is a good thing. Almost everyone
would accept that the failure in 1998 of Long Term Capital Management
discredited the quantitative methods of the Nobel economists involved
with it (Robert Merton and Myron Scholes) and their school of thought
called "modern finance". LTCM was just one in hundreds of such episodes.
Yet a method heavily grounded on those same quantitative and theoretical
principles, called Value at Risk, continued to be widely used. It was
this that was to blame for the crisis. Listening to us, risk management
practitioners would often agree on every point. But they elected to take
part in the system and to play bystanders. They tried to explain away
their decision to partake in the vast diffusion of responsibility:
"Lehman Brothers and Morgan Stanley use the model" or "it is on the CFA
exam" or, the most potent argument, "modern finance and portfolio theory
got Nobels". Indeed, the same Nobel economists who helped blow up the
system at least once, Professors Scholes and Merton, could be seen
lecturing us on risk management, to the ire of one of the authors of
this article. Most poignantly, the police itself may have participated
in the murder. The regulators were using the same arguments. They, too,
were responsible.
So how can we displace a fraud? Not by preaching nor by rational
argument (believe us, we tried). Not by evidence. Risk methods that
failed dramatically in the real world continue to be taught to students
in business schools, where professors never lose tenure for the
misapplications of those methods. As we are writing these lines, close
to 100,000 MBAs are still learning portfolio theory â it is uniformly on
the programme for next semester. An airline company would ground the
aircraft and investigate after the crash â universities would put more
aircraft in the skies, crash after crash. The fraud can be displaced
only by shaming people, by boycotting the orthodox financial economics
establishment and the institutions that allowed this to happen.
Bystanders are not harmless. They cause others to be bystanders. So when
you see a quantitative "expert", shout for help, call for his disgrace,
make him accountable. Do not let him hide behind the diffusion of
responsibility. Ask for the drastic overhaul of business schools (and
stop giving funding). Ask for the Nobel prize in economics to be
withdrawn from the authors of these theories, as the Nobel's credibility
can be extremely harmful. Boycott professional associations that give
certificates in financial analysis that promoted these methods. Remove
Value-at-Risk books from the shelves â quickly. Do not be afraid for
your reputation. Please act now. Do not just walk by. Remember the
scriptures: "Thou shalt not follow a multitude to do evil."
Quote from Port1385:
Oh come now.
Madoff and his family have lived a very comfortable lifestyle for decades. They live in expensive apartments and mansions. Drive luxury cars. He has homes in Roslyn, N.Y., Montauk, Long Island, an apartment on Manhattan's Upper East Side valued at more than $5 million, and a 55-foot fishing boat, named "Bull." He also owns homes in Palm Beach and France and is a member of the Palm Beach Country Club.
Do you really think Madoff and his family are living in shame?
Would you rather be a member of Madoff's family living in the house below or a doctor who lives in a cheap $3000 a month studio high rise on the upper east side?
I would rather be a member of Madoff's close family right now. I wouldnt mind living this life of shame.
Just the service houses where the full-time maids, butlers and security people live in the upper left corner of this photo is far more luxury then some elitetraders will ever experience in this forum.
If I didnt know any better, I would think this is one of Saddam Husseins castles and not some securities fraud guy living on Long Island. Oh the shame, the shame of securities fraud...
If you think living like that will make you happy you have alot to learn about life.
I guess greed can't be separated from trading. Just think about it, we all want more even if we get enough to live. I am not saying it was correct, but we can't judge people wanting to get more. What we can judge is when it overcomes the limits and affects people and for that many years.
Psychologists ask a suicidal person "How would you kill yourself" often to determine how serious they are about it. The reason, most people could never even imagine killing themselves, so when you ask them how they would do it, they don't even know how to reply.
The fact that you have even taken the time to think about "how you would pull this off" says a lot about you, and not much of it good.