No One Would Listen

Recommended on Reddit, a story about how Madoff ran his Ponzi scheme undisturbed. Similar to The Big Short.

I don’t like Harry’s writing much; it feels pedantic and repetitive. A dull book once you get the main point (revealed in the first chapter, which was already known). The book’s point is that anyone could see Madoff was lying (or doing insider trading), that his strategy could not deliver 1% a month consistently, even in down periods, yet no one did anything. Investors and providers did not care because they had to stay in the game, and the SEC was too disorganized. Harry wrote them letters and tried to be heard for several years.

The gist, quite repetitive, is that they did not listen to him, and now so many people have been defrauded.

Notes

• Very little, just two takeaways on business schools and the financial market:
• The financial industry is a business of contacts and relationships. No one ever buys a product and says, “That product is the sexiest thing I’ve ever seen. I don’t care who’s selling it.” Generally people do business with people they trust and like, or people who are recommended by someone they trust.
• Although I don’t dislike business schools, I believe half of what they teach students will be obsolete within five years and the other half is just outright false. Generally, they teach formulas that no one uses, case studies that no longer apply in the real world, and concepts that are just going to get people into trouble if they try to apply them. These formulas are an attempt to model the financial world in a simplified form, but they can’t possibly take into account the extraordinary complexity of the markets. It’s important to know these formulas, though; once you’ve mastered them you can begin to make the necessary adjustments for the real world.