Comments on: 3 irrational lessons from the Bernie Madoff scandal

By: Cheating과 관련된 2 가지 실험 결과 | Creativity, Innovation, and Tech – 변지석

Cheating과 관련된 2 가지 실험 결과 | Creativity, Innovation, and Tech – 변지석 — Sun, 12 Sep 2010 18:47:46 +0000

[...] Source: 3 irrational lessons from the Bernie Madoff [...]

By: Alex Cooper

Alex Cooper — Sat, 05 Jun 2010 19:26:15 +0000

Great Blog. I will check back for new post soon.

By: Noah Harris

Noah Harris — Fri, 27 Mar 2009 06:02:16 +0000

Professor Ariely,
Interesting blog!
Regarding the small cheaters, is it possible they all even out in society?
For example, the stockbroker is overcharged by his lawyer, the stockbroker overcharges the plumber, and the plumber overcharges the lawyer.

By: Jay Steinfeld

Jay Steinfeld — Mon, 23 Mar 2009 21:08:56 +0000

Maybe when Bill Clinton ‘cheated’, he should have thought about what effect it would have on all the other politicians from his same ‘group’. Or was his single pail of water nothing compared to the wave of all the existing cheating in politics?

By: Katie Alender

Katie Alender — Sat, 21 Mar 2009 03:13:25 +0000

The irrationality that gets me the most is the other side of the coin–Madoff’s behavior. I’m assuming here (and we all know how dangerous that is), but it’s a fair bet the man had all he needed to live out his life in peace and comfort. Instead, he concocted a monstrous scheme that has made him the most detested and rejected of men. He’ll die in misery and infamy.

Why? I can’t figure it out.

By: uday

uday — Fri, 20 Mar 2009 10:14:31 +0000

I believe cheaters are “evolutionary subjects who seek and see opportunities to exploit”. This starts as a positive trait for the beholders and the exploitative trait obviously gets them to develop great focuses PR and people skills that are necessary for cheaters to stay occupied. The points made about more or less cheating when exposed to different dimensions means that the ‘environment” plays a great role and can be temporarily suppresses with “exposure” to say religious or other inputs.The cheater defers the decision to cheat because these events “enjoins a person to society”. This observation applies even to atheists because is because a cheater is basically a lonely person and must insure that he remains a secretive person. That is why in most cases even the closest friends and family are shocked when the cheater is exposed. A professional cheater would cheat a friend or family almost at the end of his tenure.

THIS trait requires him or her to get silent endorsement and seek “external support” that distances the cheater from the victims. If we list the corporate biggies who have been running scams a KEY issue has been made by Mark. This is important.

If there are agencies who will AUDIT your books and help you FUDGE your accounts, or rating agencies who will take a fee and RERATE or help in renaming or repackaging a worthless asset so as to be able to sell it forward; THEN then WHY should cheaters be our focus for condemnation.They are small time players who happen to have been lucky with repetitive success based on the external support that they must exploit as often as possible. Let us say that they have an “exploitative” genome issue that forces them as an addict to “exploit the permissive enviroment”. So clever guys like Madoff, Sanford or even the Indian Raju of Satyam fame are smart BUT they must be seen to be minority players within their own scandal.

Conservatives in America may not be able to understand this as their linear logic still prevents them from seeing a gun or a violent play game as “facilitators and a part of the environmental dimension that frames perceptions” and creates the process of thinking about killing fellow students.

The facilitators in this case are the audit companies, the account professionals, and the rating agencies who have specifically derailed the basic norms of economics. They have shifted everyones vision from current realities to future virtual worlds and thus very subjective values.

Without these professionals cheating would stay at street level and the longevity would be restricted to two or three scams before getting caught. paradoxically it is democracy that allows “exploitative brains to vacillate between creative ideas that BUILD and GROW or “extract and cheat”.

I believe that these examples do not deter more from cheating but give intelligent and over ambitious individuals to tip towards the short term return. The era of uncertainty and complexity does not help.

India has an unblemished record of “progressive corruption” where even the honest get corrupted. the facilitators are at every corner and every stage of commerce and day to day to life.

This is leading me to develop a simple explanation of what i believe must be “good corruption and bad corruption”. I hope to complete this next month.

By: mark

mark — Tue, 17 Mar 2009 06:20:17 +0000

Credit agencies. This issue has not been addressed and will lead to history repeating itself, AGAIN.
The agencies are still paid by the people they are rating. The CDO’s were given good ratings because it meant more business for the agencies and their clients, the banks. No one was motivated to look at the actual value of these products and they still aren’t. There will be new products with new names that can have the same effect if we do not seperate the rating agencies from their client the banks.
Also, Credit default swaps and CDO’s are still sold. They still do not have a good system for valuing these products. Nothing has changed other than public perception of these products. So, the names will change and the products will be repackaged and it can all happen again!
Throwing money at this issue is not solving the underlying problem! We must regulate derivative products like swaps and cdo’s and change the way Credit agencies are compensated. If we do not. THIS WILL HAPPEN AGAIN!.

By: jbuford39

jbuford39 — Mon, 16 Mar 2009 20:57:58 +0000

Investors believed that he could beat the market year after year because they wanted to. The easiest person to fool is always yourself. The “sensible” approach is probably never to put more money outside of T-bills and state-guaranteed munis than you can afford to lose. If a money market fund could “break a buck”, then nothing is 100% safe. I would also suggest that no more than 10% of your folio be with any one investor or firm, because most of us could psychologically survive a 10% “hit” but 20% is too close to the bone.

By: carlos

carlos — Mon, 16 Mar 2009 20:10:03 +0000

Dear irrationals,

maybe another lesson that we should learn from Maddof’s scandal is that even in the face of evidence we are capable of ignoring it. Since 2000 there was hughe and clear evidence available for authorities that showed the great fraud that was having done by Maddof. But instead of being investigated and taken out of bussines, Maddof got the highest consideration by rating agencies and could presume of having the most important costumers around the world.
We need cues to decide, and is clear that if someone is the adviser of the vips and gets the maximun financial calification, which one of us could ignore the oportunity of investing with that guy?
But if we have documents, data a reliable declarations from expert blaming him for fraud, how can we ignore it?. Even more, if we are experts having and understanding all that information, how can we ignore it and prefer not to question rating credentials and the glamour of the vips?

By: Steve Ryan

Steve Ryan — Mon, 16 Mar 2009 16:22:44 +0000

Interesting! A “small” bit of cheating by the many, perhaps such as bundling high-risk home loans into opaque toxic securities that then bring their risk to roost after several degrees of separation? Fits the “people will cheat 100% if they are dealing with tokens rather than cash” hypothesis from the cafeteria experiment. And look where it gets us. Chasing a few bad apples (or not chasing anyone, as the SEC kinda did for about a decade), missed that one entirely.