October 2012
Intermediate to advanced
256 pages
10h 39m
English
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CHAPTER FOUR
Bounded Awareness
Over the course of three decades, Bernard Madoff intentionally stole from his investors. In December 2008, he confessed to his crimes, and his Ponzi scheme cracked, wiping out $64.8 billion in paper profit. Madoff sold most of his investments through feeder funds—that is, other funds that either marketed their access to Madoff to potential investors or claimed they had access to some exotic investment strategy. The feeder funds often did nothing more than turn the money they collected over to Madoff. These intermediaries were extremely well paid, often earning a small percentage of the funds invested plus 20% of any investment returns. As Madoff claimed a consistent record of success, the feeder funds profited handsomely.
This chapter is not about Madoff's deeds but rather is about our amazing ability to not notice things that happen right under our noses. There is no actual investing strategy that could have produced the returns that Madoff claimed. Did the managers of the feeder funds know that Madoff was running a Ponzi scheme, or did they simply fail to notice that Madoff's performance reached a level of return and stability that was impossible? While some may have noticed (Markopolos & Casey, 2010), ample evidence suggests that many feeder funds had hints that something was wrong but lacked the motivation to see the evidence that was readily available. Beyond the managers of the feeder funds, professional investors, government regulators, and ...
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O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.