Smart Folks Can Be Really Dumb, WSJ Says
December 14, 2008
Jason Zweig writes for The Intelligent Investor, a title that struck me as ironic in the context of the current economic downturn. I don’t have an online link to this column because I refuse to use the Wall Street Journal’s online service. The dead tree version is on my desk in front of me, and you can find the full text of “How Bernie Madoff Made Smart Folks Look Dumb” on page B1 at the foot of the page on December 13, 2008. Just look for the drawing of Mad Magazine’s mascot, and you will be ready to read the full text of Mr. Zweig’s column. For me, the column said, “Smart people were not smart.” The fact that wealthy people who are supposed to be more intelligent than an addled goose fell for a Ponzi scheme is amusing. However, as I read the column, I thought about search and content processing, not the self satisfied millionaires who were snookered.
Let me run down my thoughts:
- The scam worked because the alleged Ponzi artist emphasized secrecy. Quite a few vendors take this approach. I can’t name names, but in Washington, DC, last week I heard a vendor emphasize how easy it was to use a certain system. The system of course was super secret but not to worry. It’s easy because of the magic in the code. I think I saw people in the presentation quiver with excitement. Secrecy is a variant of catnip.
- Mr Madoff played the “exclusivity” card. The idea is that not everyone can get the inside track on a deal. In London, at the International Online Show on December 4, 2008, I heard this pitch in a trade show booth. The angle was that this particular content processing tool was available only to customer with the knowledge and insight to use a special approach. I saw folks eagerly crowding around a tiny laptop to get close to the exclusive technology.
Mr. Zweig taps an academic for an explanation of how baloney suckers supposedly intelligent people into a scam. The phrase “sophisticated investor” sums up nicely how one’s perception of one’s own intelligence combine to make a Ponzi scheme work. The black art of Mr. Madoff can be found among the search and content processing sector as well. I suppose Enterprise 2.0, search is simple, and we have magic technology won’t catch the attention of governmental authorities. In a way it is reassuring that some basic sales techniques work better than some enterprise software systems. On the other hand, is it inevitable that the methods of financial charlatans work in the information services business? Thoughts?
Stephen Arnold, December 14, 2008
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