Leaders Deal
December 26, 2008 by Miki Saxon
In 1992 the SEC investigated a Madoff feeder fund.
In May, 1999 and again in 2005, Harry Markopolos, money manager and investment investigator, presented his research on the Madoff Hedge Fund to the SEC in which he concluded that the fund was a giant Ponzi scheme…
“I used the Mosaic Theory to assemble my set of observations. My observations were collected first-hand by listening to fund of fund investors talk about their investments in a hedge fund run by Madoff Investment Securities, LLC, a SEC registered firm. I have also spoken to the heads of various Wall Street equity derivative trading desks and every single one of the senior managers I spoke with told me that Bernie Madoff was a fraud.”
Nothing happened.
In Warren Buffet’s 2002 letter to his stockholders he said,
“We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
Nothing happened.
But you know all this; you’ve been reading and hearing about it for weeks, so why am I bringing it up yet again?
Because the lesson we all need to learn from this is not to ignore the stuff that makes us uncomfortable; the information that doesn’t fit with our world view; the messy stuff; the unhappy stuff. Large, small or miniscule, it needs to be dealt with, not left alone to grow larger and larger until it overpowers everything around it.
Because when stuff is ignored it doesn’t go away, it gets worse.
Because that’s what leaders do, they deal.
Your comments—priceless
Countless research and anecdotal evidence has shown that people will follow an authority figure even though their actions make them feel uncomfortable. In the case of Madoff he was perceived as an authority and people were afraid to rock the boat. A leader has to first buck that illegitimate authority, and than convince others to do so as well.
I agree. It seems as though it is human nature to deal only with topics that make us feel good (or, at least, on the flip side, to deal LESS with topics that don’t make us feel good). But, leaders will not overlook the scary issues. They will attack them head on. And, I think that point needs to be hit home.
Jeff and Aleksandar, I agree with you both, but the point is that people need to stop looking for a leader and be one, at least for themselves.
If people would adopt adopt so-called leadership skills and each apply them just to their own life many things would turn around or just not happen.
The change might also have more people willing to say out loud that the emperor has no clothes.
I couldn’t agree with you more. It is ridiculous how we don’t just draw a hard line on some of these things are nip them in the bud.
Hi Lela, thank you for taking time to add to the conversation. Although we certainly need a line drawn, the difficulty is deciding who is going to draw it, since the location of the line depends on what is known—and that, in turn, depends on what a person chooses to know.
Unfortunately, ignoring the problem and denying the severity of the problem are two most common counterproductive behaviors that can permanently damage the reputation of any company/institution/individual . It’s enough to remember what happened to Arthur Andersen and Salomon Brothers. Thanks Miki for your post. If you have time check our firm’s blog http://logosinstitute.net/blog/category/leadership/ We write a lot about leadership and reputation. I hope you can find something interesting to read too.
Hi Oxana, You’re right, but ostrich behavior (head in sand) is a common trait in many non-business situations, too—think parenting. And I think the damage to reputation is the least of it in comparison to the material damage done.
I’m glad you enjoyed the post and I plan to take advantage of the leadership link shortly. Thanks!