Schemes, Scams and Sense

I RECOMMEND last night's Four Corners report into the fifty billion dollar scam run by Wall Street identity Bernie Madoff.

Madoff convinced people to invest in his share trading company which promised above market returns. Somehow Madoff always brought shares when they were at their lowest and sold when they were at their peak.

The trouble was that Madoff never brought or sold any shares. He was running a classic Ponzi scheme - taking new investors' money and using it to pay existing investors their promised returns, all the while schiponing off some for himself.

The first lesson from the Madoff affair is that if something looks too good to be true, it almost certainly is.

It's amazing how many people are looking for short cuts in life. But there are no get rich quick schemes or shortcuts.

Proverbs 21v5 counsels: "The plans of the diligent lead surely to plenty, but those of everyone who is hasty, surely to poverty."

In other words, there is no short circuiting hard work and careful planning.

Many of the people who invested with Madoff told Four Corners that his scheme "seemd too good to be true". That, in itself, should have alerted them to danger. If something seems to good to be true - that is, you are promised the opportunity to streak ahead without having to plan, to work or to be diligent - then it almost certainly is not true.

The second observation about the Madoff scheme, as presented on Four Corners last night, was that when people want to get something for nothing, they regularly end up getting nothing for something.

There are no short cuts in life, nor are there any free lunches. Paul had to tell the early church that if they didn't work, they didn't eat ... and in 2000 years, human nature has not changed. People still want to consume without having to ever put anything in.

Certainly Madoff's victims invested with him, but part of Madoff's attraction was that he promised people could withdraw their money from his company at any time. No investment company offering anywhere near the size returns Madoff promised allowed investors to access their funds at a moment's notice.

Madoff's clients felt like they were getting something for nothing. For almost no risk, they were getting huge returns. Instead, they were getting nothing for something. There were no share trades despite the fact people invested tens of billions of dollars. There was only a Ponzi scheme which, like all Ponzi schemes, must eventually collapse on itself.

A final, and heartening, observation from the Four Corners expose was that honest people rarely get cheated.

The documentary makers interviewed a few people who chose not to invest with Madoff. These people baulked at investing because they could not reconcile in their own minds how Madoff could possibly be making the sorts of returns he was promising.

When they asked for explanations they found they were ignored or given the run-around. And so, they told Four Corners, they were unwilling to invest their money in something that felt unseemly.

None of them had any evidence that wrong was being done. Infact, none of them had much more than a gut feeling. But each of them were wary of becoming caught up in something that wasn't right. If it seemed like it wasn't right, they avoided it. And consequently, they kept their savings whilst people all around them fell victim.

We are constantly offered a myriad of opportunities. Not all are genuine. The lessons of Madoff's scheme are universal and stand the person who observes them in good stead to avoid disaster.