Page 48 - Malcolm Gladwell - Talking to Strangers

I thought his gut feel was, you know, strange, suspicious. You know, I kept trying to press him. I
thought there was something else…I thought, you know, he was getting some sort of insight into
the overall broad market that other people weren’t getting. So I repeatedly sort of pressed him on
that. I asked Bernie repeatedly over and over again, and at some point, I mean, I’m not sure what
else to do.
Lamore took his doubts to his boss, Robert Sollazzo, who had doubts too. But not enough
doubts. As the SEC postmortem on the Madoff case concluded, “Sollazzo did not find that Madoff’s
claim to be trading on ‘gut feel’ was ‘necessarily…ridiculous.’” The SEC defaulted to truth, and the
fraud continued. Across Wall Street, in fact, countless people who had had dealings with Madoff
thought that something didn’t quite add up about him. Several investment banks steered clear of
him. Even the real-estate broker who rented him his office space thought he was a bit off. But no
one did anything about it, or jumped to the conclusion that he was history’s greatest con man. In the
Madoff case, everyone defaulted to truth—everyone, that is, except one person.
In early February 2009—just over a month after Madoff turned himself in to authorities—a man
named Harry Markopolos testified at a nationally televised hearing before Congress. He was an
independent fraud investigator. He wore an ill-fitting green suit. He spoke nervously and tentatively,
with an upstate New York accent. No one had ever heard of him.
“My team and I tried our best to get the SEC to investigate and shut down the Madoff Ponzi
scheme with repeated and credible warnings to the SEC that started in May 2000,” Markopolos
testified to a rapt audience. Markopolos said that he and a few colleagues put together charts and
graphs, ran computer models, and poked around in Europe, where Madoff was raising the bulk of
his money: “We knew then that we had provided enough red flags and mathematical proofs to the
SEC for them where they should have been able to shut him down right then and there at under $7
billion.” When the SEC did nothing, Markopolos came back in October 2001. Then again in 2005,
2007, and 2008. Each time he got nowhere. Reading slowly from his notes, Markopolos described
years of frustration.

I gift-wrapped and delivered the largest Ponzi scheme in history to them, and somehow they
couldn’t be bothered to conduct a thorough and proper investigation because they were too busy
on matters of higher priority. If a $50 billion Ponzi scheme doesn’t make the SEC’s priority list,
then I want to know who sets their priorities.
Harry Markopolos, alone among the people who had doubts about Bernie Madoff, did not default
to truth. He saw a stranger for who that stranger really was. Midway through the hearing, one of the
congressmen asked Markopolos if he would come to Washington and run the SEC. In the aftermath
of one of the worst financial scandals in history, the feeling was that Harry Markopolos was
someone we could all learn from. Defaulting to truth is a problem. It lets spies and con artists roam
free.
Or is it? Here we come to the second, crucial component of Tim Levine’s ideas about deception
and truth-default.

2.

Harry Markopolos is wiry and energetic. He’s well into middle age, but looks much younger. He’s
compelling and likable, a talker—although he tells awkward jokes that sometimes stop
conversation. He describes himself as obsessive: the sort to wipe down his keyboard with
disinfectant after he opens his computer. He is what’s known on Wall Street as a quant, a numbers
guy. “For me, math is truth,” he says. When he analyzes an investment opportunity or a company, he
prefers not to meet any of the principals personally; he doesn’t want to make the Neville
Chamberlain error.
I want to hear and see what they’re saying remotely through their public appearances, through
their financial statements, and then I want to analyze that information mathematically using these
simple techniques.…I want to find the truth. I don’t want to have a favorable opinion of
somebody who glad-hands me, because that could only negatively affect my case.

Markopolos grew up in Erie, Pennsylvania, the child of Greek immigrants. His family ran a chain