The Psychology Behind Bernie Madoff

Q: I don't understand the Bernie Madoff situation? I know it has been written about and discussed, but I don't understand how a person can do such a thing. Wasn't he living amongst the people that he screwed? Wasn't he involved with charity himself? Why would he threaten so many other charities? It really makes me scared to trust anyone or anything that one believes is legitimate. Are we all now going to go through a period of mistrust?

A: If I only knew the answer to that question. Wouldn't life be so much easier if we knew what the future held? Wouldn't it be better if no one could fool us and we could see through all deceptions? But because we are all unique individuals we will respond differently to a given situation. There is no consistent theory of how to read another person. Psychology has been called a soft science for precisely that reason. There is no solid chemical reaction or mathematical formula that predicts a person's future. It is mostly the therapist's ability to listen and have a gut feeling about the issues that are being presented by the patient's. Only then can a therapist determine goals for the patient's future.

At the same time, psychology likes to label people and their problems. So, we have been hearing a lot about Bernie Madoff being a sociopath. In many ways I agree with that. As you said, he certainly was able to exist within worlds where he was lying to everyone. A sociopath feels no real love toward others. They feel power over others precisely because they are capable of lying without any remorse or second thoughts. Many sociopaths are also quite intelligent and quite charming. So they, or any rogue, can convince people to trustingly hand over their life savings, which is what Bernie Madoff did. In some respects, then, the sociopath depends on the need of their victim to get whatever it is the sociopath is promising. In this case, the victims were all hoping for a sure bet and for membership in an exclusive investment club. And, the last couple of years have been filled with high flying returns that bring out, as market psychologists will tell you, all of the market's tendencies toward greed and a lack of aversion to high risk situations.

But, at the same time, and something that is very peculiar, Madoff shows some kind of responsibility and guilt toward his family. I, for one, am not certain that his sons knew nothing of what was happening. They may not have been personally involved, but they must have realized in certain situations that they did not know the full story. And yet, they turned their father in. Doesn't it actually sound like he told them that he will take the full brunt of the punishment, and that they should portray their innocence by showing shock and dismay? If that's the case, Madoff was not completely detached from all people. Amazing!!! Perhaps he sees his children as an extension of himself - a need to continue his legacy in some way, and not a sign that he is being protective. In other words, it's not about them. It's about him.

My conclusion is that Madoff certainly had sociopathic tendencies that bloomed in the proper environment. That environment is us -you and me. As has happened many times throughout history, the culture needed a lift, a sense of elation at the possibility that lots of money could come real fast - not a slow and steady process, but through luck or connections or financial nimbleness. This explains the Tulip Bubble of yore as well as the Enron debacle of just yesterday and, even, the thrill some people feel at Caroline Kennedy going from Upper East Side housewife to, possibly, New York senator in a flash.

The years since 9/11 have certainly been tough and unpredictable. We live with so much uncertainty. Madoff personified certainty. He gave a lot of people, charities, and bankers the answers they needed. But it appears Madoff had already been a successful investment manager. Why would he threaten all that he had already accomplished for bigger rewards? Maybe, for precisely that reason - bigger rewards. But the rewards were not money, or not just money. More people found him brilliant, more people depended on him as a wise man and more people wanted to be around him. That is what he needed.

At the same time, his clients were getting what they needed. They got rewards and security. They sought what you once did--security, predictability, certainty. For that, they looked away. They ignored warning signs -those remarkable earnings -and believed in a sort of wizard. But when the curtain was pulled back, there was Bernard Madoff, a sociopath -and the till was empty.

You are right. We all need to be less trusting, a bit more cautious, and certainly a bit more respectful of simple and long-term success.

Comments

[Owlygirl]

Blah-blah-blah with all your words. Bottom line the man was/is a greedy and weak coward. Greedy because he believed he needed more and more money to feel powerful; cowardly because he was too weak and afraid to stop this huge disaster.

[Luca]

He duped all he knew, and made millions for himself and his family. My diagnosis: 'gelt' by association.

[mamacat]

This guy stole almost three times as much money as was needed to save the 3 million jobs related to our home-grown auto industry, about 16 times as much money (not adjusted for inflation) as was needed to bail out Chrysler three decades ago, but the Republicans only want to talk about the need to let Main St. die. Why are there no Republicans protesting day-and-night about the system they created that made it so easy for Madoff to build his ponzi scheme?

[SeriousBlack]

Because he is the prototypical Republican: Unadulterated greed and total lack of empathy for others are their most prominent traits. One only has to look at the reign of Bush/Cheney and the Republican party from 2000 to 2006 (plus Republican obstructionism since then) to see that (plus the consequences of that reign and its last-gasp, grab-every­thing-you-­can-while-­we're-stil­l-in-power culmination of Reagonomics and Republican philosophies of the last 30 years in the current meltdown of our economy).

[NGuarente]

Can anyone quantify the stock appreciation realized by Cheney on his
Halliburton stock after their massive contracts in Iraq given by the
Bush-Cheney administration?

[LordMoon]

Actually, it's not very complicated. We live in a society that rewards sociopaths. They tend to to easily rise through corporate America, unchallenged, and unscrutinized. The qualities that make them suceed in corporate america, are the very ones that ensure that actions they take while enriching themselves, and their corporations, create disasters for mankind as a whole.

Yet each time it happens people seem surprised, somehow they can't seem to connect the dots.

The destruction of the planetary ecosystem, the Amazon rain forest, the poisioning of the food we eat, the air we breath the water we drink, the ruination of our health care system, have all been done in the name of share holders profit.

They are never subjected to any psychological testing or evaluations, of the kind we demand of our social workers or our police.

And so here we are... again and again.. Enron, Lincoln Savings and Loan, and on and on and on...just when you get over the shock of the last one, there's an even bigger more shocking one the next day..

Why try and understand someone that has no empathy for others, for their pain or their suffering, instead we should focus on how to keep them out of positions of responsibilty in our society.

[SeriousBlack]

Well said.

[SoAppropos]

Has anyone considered his name? Bernie "Made Off" with millions.

[LazyLearner]

- He did not own extreme houses or yachts. Pure greed does not seem to be the motive
- He was not actively seeking for investors, some lobbied him more than one year to enter his fund.
- He was not a predator, it seems he was only cashing in in order to keep his lie undiscovered.

imo, he created his fund sincerely but after the first big failure that should have brought him down with his reputation and career, he made the lie hoping things will get in order.

The march became a sprint, he needed that nobody had any reason to leave the fund, he sets higher interests, socialized to reassure.

Then the sprint became a marathon, his attempt to secure his lies turned him in a guru that everybody wanted to be associated with. He carried on, between the image of a successful and generous businessman and a crook that has not to be discovered. I suppose that at this time his only relief was death, he knew he could never go back, his audacity has to be higher than the fear or being caught.

He is no crazy sociopath acting outside his will. He was a man running on a rope, smart enough to keep the facade of an extraordinary businessman and at the same time to run a complex business whose sole purpose was its survival.

What comforts me in this opinion was his smile... he went from the court he was smiling, relieved

[QueenOfViolets]

"- He was not actively seeking for investors, some lobbied him more than one year to enter his fund.
- He was not a predator, it seems he was only cashing in in order to keep his lie undiscovered."

I disagree. I think he was a predator.

How does a predatory pedophile act? Often they carefully engage with their potential victims and pick out the most vulnerable.

He was and still is a predator -- and an incredibly skilled one. I'll bet he's still recruiting victims and conning people in prison.

[wanked]

hes not in prison.

[imsosure]

what's to figure out, he's most likely related to Cheney and Castro, it's inherent lifeforms of corruption

[pc51]

Can't imagine how exhausting it must have ben, on any number of levels, to pull off a charade that massive.

[marysandra]

After reading a great deal about this, it seems like a "don't ask, don't tell" situation to me. Anybody with even a few bucks in mutual funds in the last two decades has experienced some terrible lows, some, like myself, never recovered. But 10%a year, every year, for decades? Didn't these people read the papers or watch television? If they were supposedly smart enough to make all that money to invest in the first place, I will never believe they didn't smell something wrong, they just didn't want to know, because they didn't want to be involved in whatever "magic" Mr. Madoff was practicing.

[Glamorosa]

There were no victims in this scenario, everyone was filled with greed, self importance. You can not cheat an honest man.......­..........­..........­..........­.......and there but for the grace of God go I.

[pc51]

Glamorosa - Excellent! One could not have functioned without the other and anyone that tells you that they are "above" anything is begging to be tested - and those tests are HARD- perfect even.

[ndem]

A narcissist and those who invested with him narcissists too!

[nah415]

It would also be fair to assume that Mr. Madoff has some very strong narcissistic tendencies. He seems to have used people as objects -- that is, rather than seeing people for who they are having compassion and empathy for their human struggles and frailties , he used them as instruments for his own purposes.

He clearly lacked empathy and compassion. If he was smart enough to concoct this great scheme, he was smart enough to know it couldn't continue indefinitely. However, he appears to have made to viable effort to stop luring suckers into his elaborate trap.

He also appears to have a grandiose sense of self importance and a need for admiration. He did attempt to portray himself as the great philanthropist, earning admiration and respect from many wealthy individuals.

And, in his sense of entitlement, he has exploited others in an attempt to advance himself.

One can only hope that there is a special place in hell for people like this... It's going to be a very crowded but exclusive club!

[booboo111]

I've never trusted anyone and I'm doing alright, of course I don't have any friends...­..........­........