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I am not sure if that many smart people got duped by Madoff, surely not for significant %, of their net worth. It's just who the public considers smart often is

I am not sure if that many smart people got duped by Madoff, surely not for significant %, of their net worth. It's just who the public considers smart often isn't that at all. We had similar scandal in our country with tens of thousands of people being duped into buying some kind of gold secured deposits. We have heard how smart people like doctors, actors, lawyers invested significant % of their net worth on it. I see it differently. They are not smart. If you invest big % of your net worth into one thing, especially if that thing is not a huge publicly traded and regularly audited company/fund then you are not smart. If you're tempted to put a lot of money into some magic fund that trades gold you are just dumb. Not putting all your eggs in one basket, especially if it sounds like some exclusive great opportunity isn't rocket science. It's just that vast majority of the population is clueless when it comes to thinking about money, probability and motivations of others. I think the point about the compassion is great. Very small % of people can understand things like financial instruments, expected value or utility of money. We need a framework to protect less fortunate from scams because that's most people and no one wants the world where scammers reside at the top of the food chain.

simtel20 6y ago
Just wrt Madoff, a lot of people who were smart enough to make real money in their lives were taken by him. Some may not be too bright, but that would be a long tail and there were surely some at the other end of the curved too. I asked a bigwig at a legit hedge fund once how they never spotted that he was a fraud, and his answer was that they couldn't reproduce his returns, so they figured he was smarter than them.
- bluecalm 6y ago
  It might have not been obvious it's a fraud but it was obvious not to put significant % of your net worth in his fund. It's basic risk management. Maybe I am biased coming from a gambling world where it's the very first lesson you get. Betting more than a few % of your net worth on one horse is just a judgement blunder.
AlexCoventry 6y ago
A lot of smart people knew he had to be a kind of fraud, but they thought he was their fraud -- it was assumed he was making money through some kind of front running.

simtel20 6y ago

Just wrt Madoff, a lot of people who were smart enough to make real money in their lives were taken by him. Some may not be too bright, but that would be a long tail and there were surely some at the other end of the curved too. I asked a bigwig at a legit hedge fund once how they never spotted that he was a fraud, and his answer was that they couldn't reproduce his returns, so they figured he was smarter than them.

bluecalm 6y ago
It might have not been obvious it's a fraud but it was obvious not to put significant % of your net worth in his fund. It's basic risk management. Maybe I am biased coming from a gambling world where it's the very first lesson you get. Betting more than a few % of your net worth on one horse is just a judgement blunder.

AlexCoventry 6y ago

A lot of smart people knew he had to be a kind of fraud, but they thought he was their fraud -- it was assumed he was making money through some kind of front running.