Madoff: Case Study of a Master Seducer
Two more Madoff profiles, one in New York Magazine, one in Vanity Fair. Naturally they focus not on the technical aspects of his fraud but on how he maneuvered among and affected Society (not to be confused with "society").

Bit by bit, little details emerge about Madoff's seduction tactics, which worked remarkably well on a group of people you would have thought was not vulnerable to it. Either he was extremely good at the art of con, or his victims were more gullible than I thought, or a little of both. Most people concentrate on the latter, but don't discount the former.

(What makes it even more amazing is that, unless I'm missing something, his taxable investors didn't earn all that much more investing with him than they would have in municipal bonds. The idea that Madoff "made people rich," as the VF article in particular states, doesn't seem plausible. Per the NY article his returns averaged 12% a year, which as I understand his trading strategy would have been taxed near the top marginal income tax rate. For most of his NY investors that's about 50%, so their net returns after tax were not that much more than what they could have earned in NY munis. But there's no country club for people who invest in NY munis.)

Seduction--in the non-sexual sense of persuasion based on something other than the pure merits of something--is not taught in school, and it's a highly undervalued part of investment manager selection. It's a dark art, but I think it's ultimately amoral, not immoral. Legitimate investment managers, especially those looking to raise money, should probably study Madoff's methods. Unfortunately, they work.

Not on me though . . .
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