Why Madoff Is Not a Symbol of Our Times

Lots of attention has been paid to the sentencing of Bernard Madoff, and rightfully so. There are no words for his actions. He was epic in his perfidiousness. His behavior was monstrous.

But when we talk as business people about the times we are living in, we do ourselves a disservice if we pay too much attention to the 71-year-old former chairman of the NASDAQ who pulled off one of the largest investor frauds of all time. Sure, Madoff was a creature of Wall Street who lied to his investors, betrayed the trust of his friends and disgraced his family. But Madoff is not to our times what Enron was to 2001. He is not a symbol of the collapse of Wall Street, the global financial crisis, greed, dishonesty or anything else. He is one-of-a-kind. Thank goodness.

If we pay too much attention, we risk missing the bigger or more important story of how the U.S. wound up in the longest recession since the 1930s. There's no one company and no one person whose story summarizes the economic crisis we are still struggling to overcome. Our problems are wider, deeper and rooted in a crisis of values that has affected thousands if not millions of people, very few of whom were crooks or thieves.

Consider the chain of poor decisions that led up to the collapse of housing prices across the country. People borrowed money to buy homes, unsure if they could pay it back. Lenders were reckless, pushing money out of the door and inventing products like NINA (No Income, No Asset) loans. Investment banks packaged the loans into complex financial instruments — the collateralized debt obligations that we've heard a lot about. The ratings agencies carelessly certified those mortgage bonds as safe and sound. Global investors chasing high yields bought in. Regulators turned the other way.

Then the house came tumbling down.

During each one of these transactions, people were disconnected from values. They didn't stop to ask themselves some fundamental questions: Am I doing the right thing? Am I creating sustainable value? Am I behaving in ways that will benefit others, as well as benefit me?

During each of these transactions, people were trying to outsmart the system instead of outbehaving their competitors. They were operating in the shadows, rather than embracing transparency. They were thinking short-term, instead of trying to create sustainable value.

For me, at its essence, this crisis is the result of countless misguided attempts to disconnect — in our now-connected world — from the fundamental values and principles that propel and guide human endeavor. And it is also the result of countless misguided attempts to abstract and obfuscate — in our now-transparent world — responsibilities and obligations that make mutual relationships possible and sustainable.

And these actions are not limited to the housing crisis. There is a deeper and more systemic problem in business — in our habits of thought and behavior.

We have falsely linked size and scale with sustainability. Companies for decades have pursued size and scale, equating bigness with success. No longer is a company "too big too fail." Size alone does not make something sustainable. To the contrary, the aggressive pursuit of scale — whether it's more revenues, profits, customers or stores, or a bigger market capitalization — is exactly what tempted some companies to lose sight of the values and principles that lead to true sustainability.

Bernard Madoff will go to jail for many years, and that's good. (Frankly, I had hoped to see a significant sentence for the man who not only swindled people of their money, but who stole our trust and robbed from the world all the good works that won't be completed by the many nonprofits he defrauded and destroyed.) But the rest of us still have a lot of work to do. As I've said before, sustainability is not about size and scale, but how we do business, and how we do what we do is an untapped source of competitive advantage in business. This economic crisis hit us hard because too many people didn't get their "Hows" right. Let's do the hard work now so that we don't make the same mistake again.

Dov Seidman is the founder, chairman and chief executive officer of LRN, a company that helps businesses develop ethical corporate cultures and inspire principled performance, and the author of HOW: Why HOW We Do Anything Means Everything...in Business (and in Life). Learn more at HOW Online.

Comments

[Les1Mis]

I am glad this author has a conscience and wants to promote integrity in business dealings. What he does not realize is that greed and scandal is part of both American history and the American character. Needless pain and agony has been part of the American experience since the birth of the country and has been exported to other countries in pursuit of profits. Cyclical attempts to teach ethics are short lived and always become comprimised during the next speculative bubble foisted on the general public so that a few can enrich themselves. American capitalism has always and will always be corrupt and exploitative, making a mockery of what are purported to be American "values" but in actuality are just opium for the masses.

[popse1]

In December 2007, when Countrywide Bank and others had been exposed, I was face to face with an empolyee of Countrywide Bank. I asked him, "Is Countrywide still writing those subprime mortgages?" His blunt reply: "We will write any kind of loan we can sell."

I fear that there are a lot of Americans, including but not limited to Wall Street bankers, with that kind of "conscienc­e." Alan Greenspan expressed his shock when he learned that Wall Street bankers didn't have enough conscience or even enough pride in preserving the good name of their firms, to counterbalance their greed.

[MichaelLittleBig]

I disagree; Madoff is a product of his environment.
The Banking system is a product of their environment.
Both Madoff and the Bankers lack conscience.

It is ironic that the Madoff investor looked down on the homeowner who lost everything
through foreclosure because they were living "beyond their means ".
Conversely, those foreclosed homeowners look at those Madoff investors as the well connected who would get a pie in the sky return for their money to live within their means.

Both the Homeowner and investors were victims. Victim is someone who trusted their banker or broker who betrayed that trust.
Both looked to the courts and government for protection and retribution.
The government heard the wealthy class Madoff investor and responded with accountability.
The government heard the banker’s foreclosure victims and gave billions to save their tormentors from accountability.

[Balloonman]

"Both the Homeowner and investors were victims. Victim is someone who trusted their banker or broker who betrayed that trust.
Both looked to the courts and government for protection and retribution.
The government heard the wealthy class Madoff investor and responded with accountability.
The government heard the banker"s foreclosure victims and gave billions to save their tormentors from accountabi­lity." Precisely.

BERNIE MADOFF IS a symbol of our unregulated laissez faire times. 'Overlooked' by our watchdog regulators. Rare only in not even investing for his investors. Wow. Disregard if not contempt for regulations and regulators he was licensed to uphold. Embedded policeman himself, investment scholar. Nasdaq Chief. All that credibility and the fantastic size of his swindle, self admitting to it, makes him rare alright. But rare to our corrupted times, no. Dov Seidman has an agenda to uphold. A business ethicist in business to preach business ethics to business. That's good. How that works with DOW CHEMICAL and RAYTHEON clients I'd like to know. How not to cheat investors and perhaps secondarily consumers of course. Nothing to do with alleged dubious contributions to society naturally. See my reply post to ALEC BALDWIN's Madoff piece. Page 10: http://www.huffingtonpost.com/alec-baldwin/150-years-for-madoff_b_223505.html

[Sundialsvc4]

Crime, gentlemen: crime. And I am not talking about Bernie. You can hear Bernie's pathetic bleating as it fades off into the distance: don't worry, once the ceremony is over we'll quietly let him out again.

We'll drape pictures of his Manhattan condo all over the papers, write stories to fuel the public's outrage, and in a matter of days they will forget about the trillions of dollars worth of worthless paper we sold; will resign themselves to continuing to get ripped off by our accounting (which by the way earns about $1 trillion a year in profits for about 20 banks... and that's just what we admit to).

This is the way that we manipulate the plebeians. Oh yes, everything is going exactly according to plan...

[Weathermaker]

They're not called NINA loans (no income, no asset)... they're called NINJA loans (no income, no justification of assets). Nina is a cute name for a cat, while ninja imply some rogue behavior. That was the whole point. Oh well...

[RandVictims]

For the record: I do acknowledge good, hard working people were victims of him too.

[RandVictims]

You're kidding, right?

Madoff is the quintessential Capitalist, the evolved idol of Friedman's wetdream.

The Capitalist culture not only approves of this kind of behavior, it celebrates and encourages it in media, academia and social behavior.

The working class lost everything in the con game but, when it affected those inside the top 3%, the establishment took notice. But Bernie broke The Code, didn't he? He went after his own, THAT is Taboo.

Bernie turned the wolves into the lambs, he turned Capitalists into *victims* of Capitalism like the invisible 98% of the planet.

What makes Bernie the "Monster" to you is not *what* he did but *who* he did it to.

[JBS]

I beg to differ. Comparing Madoff's dishonesty to the current state of Wall Street, particularly Wall Street investment banking is only a matter of scale.

Madoff was one person, primarily working alone.

Wall Street has created a pandemic of fraud, where EVERYONE is engaged in the deception.