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.