Why Suggest A Bridge Between Scotland and Ireland?

Popularity develops through the snowball effect and the bandwagon effect. Some things or people are popular because they're useful, solve a real problem or are widely appreciated for some intrinsic quality: the wheel, a rock song/group, the telephone...  But what if you have nothing genuine to offer? How do you create your own snowball and bandwagon effects out of thin air? 

You do what every snake oil salesman in the Wild West did, what Bernie Madoff did, what every religious sect leader has done, what reality TV show producers do - and what the likes of Farage, Johnson and Gove have done...

You create or 'boost' something hugely ambitious, unique, deceptively simple, vaguely plausible but not actually 'real' in the sense of being achievable or demonstrable. Something in which your victims can only have faith.

Committing to solve a really big, actual problem is out of the question. Firstly, it's really hard and will take a long time, because it involves changing actual behaviour and fighting inertia - the resistance to change. Secondly, it won't make you exclusively popular because you'll likely be competing with lots of others trying to solve the same problem. You won't stand out in the crowd. You won't capture peoples' attention.

And real problems won't capture your followers' imagination or their faith.

To make your victims cling to their belief for a long time, you also need a goal that’s really big and ambitious - because, if they go for it, a big project will commits lots of people, money and resources that can't easily be redeployed.

And if the goal isn't 'real' it can never quite be achieved or delivered or found (think the Holy Grail): the quest is never-ending. Once you’ve got your popularity snowballing it's just about the journey, not the destination. Nobody wants to stop believing (and spending). Negotiating trade deals is an endless process - the job of leaving the EU successfully will literally never be "done". There's no easy way to leave the cult. Inertia is now on your side!

Here are some examples of projects that were or are hugely ambitious, deceptively simple, vaguely plausible but not actually achieved or achievable that seem to have been conjured up to boost someone's popularity... You'll see that Johnson's proposal for a bridge between Scotland and Ireland fits right in - get that feasibility study started!

• an airport in the middle of the Thames;

• long term stock market returns of 11% (not the widely accepted 8%);

•  Farage's decades long quest for Britain to leave the EU;

• the 'Leave' campaigns, as backed by Johnson/Gove and Farage/Banks;

• the garden bridge;

• donate X% of your income for eternal salvation;

• build a bridge between Scotland and Ireland. 

And finally, a word from the perpetrator of the biggest fraud of all time... (or is it?)...

Who Warned Whom About Madoff?

As noted by FTAlphaville, a fascinating aspect to the Madoff Trustee's case against HSBC is that accountants KPMG were asked by the bank to investigate Madoff's operation twice, and issued a damning report on both occasions, in 2006 and 2008 respectively.

This adds to the evidence that suggests Madoff's Ponzi scheme was quite a poorly kept secret from about 2000. Harry Markopolos said it took him four hours to spot the Ponzi scheme in 2000, using publicly available documents. Michael Ocrant published an article after a series of interviews in 2001, as did Barrons (see paras 215-220 of the Trustee's Amended Complaint against HSBC). And according to the Telegraph, Goldman Sachs banned its asset management and brokering divisions from dealing with Madoff's funds about the same time, while "a raft of blue-chip financial institutions have suspected something was wrong for years."

As the Trustee's cases unfold, it will be interesting to discover how far and how fast word spread, and who warned whom.

But the big question is why supposedly sophisticated financial institutions appeared to ignore the warnings? The Trustee claims certain activity occurred with the "intent to hinder, delay, or defraud creditors". But why? He cites the desire for fee income (at para 16). Perhaps the banks and other intermediaries may also have thought that all was fine, so long as their more valued clients got their 'magic' returns paid or their principal out, regardless of the fact that the money came from other participants. They may also have concluded, however unwisely, that it was too late to let go of a balloon that had risen to such lofty heights, and their best chance of recovering their more valued clients' funds was to risk putting more in... If that's the case, then the business of working out where those new funds came from must have been very bloody indeed. Note the Trustee's allegations (at para's 146-148) that Madoff's involvement was deliberately kept out of the 'feeder fund' promotional documentation.

Ugly.

Yet, as is apparent from "Fooling Some of the People All of the Time", investors can remain in denial even in the face of the most dogged attempts to convince them they're being foolish.

The Magic Of Madoff

Ever since the news broke that Bernie had made off with his investors' money (did you see what I did there?), I've been waiting for the forensic accounts of what happened. Well here they are.

Because US courts tolerate relatively florid language in their pleading, these court filings do not disappoint in their sense of outrage. The case against HSBC is the juiciest, complete with a 'smoking gun' email from February 2006 (at para 20 of the Amended Complaint), largely redacted, in which certain unnamed officials reacted to almost a full alphabet of "red flags" (listed at para 18) with the immortal refrain:

"It's the magic of Madoff."

In summary, the trustee alleges that:

"21. Ultimately, as custodians and administrators, the HSBC Defendants oversaw the infusion of no less than $8.9 billion into [Bernard L. Madoff Investment Securities LLC (“BLMIS”)'s fraudulent investment advisory business] through a network of feeder funds. The HSBC Defendants funneled even more money into BLMIS in connection with derivative structured financial products that they issued and sold to their customers.

22. For their efforts, the Defendants received billions of dollars to which they are not entitled. Many of these Defendants received tens, if not hundreds, of millions of dollars by selling, marketing, lending to, and investing in financial instruments designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme."

Now I can't wait for the hearing - and the movie!

Image from The Memphis Flyer.