According to Wikipedia, the current definition of a social network is "... a social structure made up of individuals (or organizations) called 'nodes', which are tied (connected) by one or more specific types of interdependency, such as friendship, kinship, common interest, financial exchange, dislikes, relationships, or relationships of beliefs, knowledge or prestige." And no one knew how to create a social network quite like Bernie Madoff. He was one of the "original" social networking pioneers, light years ahead in his abilities to create "nodes" of disciples who carried his messaging forward and created a thought-leadership and visibility among investors of hedge funds who are supposedly even more sophisticated investors. They religiously followed the Bernie Madoff "brand." Today, that concept is sometimes called "word of mouth" networking and the disciples are called brand ambassadors. It is their mission to create brand awareness and allegiance and to monetize opportunities. In Bernie's case, it was getting people interested in investing in his fund and then denying them access to it. A social networking pioneer!
He did offline social networking in a brilliant, calculating way from which we can learn some good and bad lessons in engagement and brand strategies. He created a social structure (think of Google+ Circles) among high net worth individuals in two enclaves: Long Island and Palm Beach. By limiting the number of "investors," Madoff cleverly engineered a competition among the wealthy, fighting for a chance to be in Bernie Madoff's "Google+ Circle." His client list became a status symbol. Invitations to invest in the fund were coveted among his community. In his case, his social scene centered around the two private golf clubs that he and his wife belonged to. He was so successful in social networking efforts that it is estimated that around 1/3 of his Palm Beach social network had invested money with him. He created relationships with current clients that he was able to leverage into a future client base -- one which consistently supplied him with a pipeline of prospects. He masterfully created demand for his funds by limiting investors.
As with Google+ circles and informal social networking, there are many opportunities to go viral as connectors/brand ambassadors become more persuasive and the visibility of the product increases. In Madoff's case, its estimated that 13,000 people were ultimately caught in the social networking web of investors which Bernie created around hedge funds which didn't exist.
Today's social media marketers are obsessed with creating links and eco-systems to boost visibility to a variety of brands, services, missions, people, etc. Bernie Madoff did it the "old-fashioned" way by creating a pent-up demand for a product which was essentially like "The Emperor's New Clothes." He turned down so many investors that those who were close to him dared not to ask how he achieved his returns or what was the nature of the investments. The "warm handshake" of his referral network had pre-vetted investors. He had investors lined up waiting to hand over money to a man who they had met through social networking. And, I don't mean that they were following him on Twitter or that they were LInkedIn with Bernie or even "Liked" his Facebook group.
Also according to Wikipedia, social network analysis views social relationships in terms of network theory consisting of nodes and connections. Valdis Krebs, a Cleveland-based network analyst, has created an interactive map to show Madoff's connections at work.
There can be many kinds of emotional, financial, dislikes, etc. that can create the ties between the nodes. As we all know, social networks operate on many levels, from families up to the level of nations. Each of the nodes and connections play a critical role in determining the way problems are solved, organizations are run, and the degree to which individuals succeed in achieving their goals.
So next time someone asks you what you think about the power of social networking combined with today's technology tools, perhaps you think twice! Remember the story about Bernie Madoff -- who used his social networking power to dupe his friends.
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