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From Madoff to Stanford: A Question of Charisma?

Updated: Jan 8, 2022

How do people get so easily taken in by power and charisma? It's an age-old problem. It's understandable to get caught up with the glamour of wealth and status. It happens to the smartest of individuals. It's a combination of circumstances, the messenger effect, and an unconscious default to truth What you fall for as a teenager is a lot different to what you believe as a professional. Or is it? Sometimes, history just repeats itself. While much attention has been paid to Bernie Madoff. But at the same time, for nearly twenty years, Sir Allen Stanford was also replicating a massive Ponzi scheme that involved ten times more investors in a $7billion fraud. But the FBI was on the case following a tip-off. How could Stanford International Bank be so flat for a billion-dollar company? Why was the leadership team so inexperienced with limited financial experience? For example, Jim Davis was hired from a grocery store as the CFO. Jim worshipped Stanford and possibly, even the reflected glory and success. CIO, Laura Pendergast-Holt was relatively inexperienced, starting off as a research analyst. Laura was naively optimistic and never suspected that her two seniors were masterminding a fraud. It also cost her three years in prison. The messenger effect indicates that people believe the person before the message. Stanford and Madoff had a charisma which often overpowers rational thinking. Challenge gets lost and information is taken at face value. Stanford was idolized by the people of Antigua where he set up offshore operations and invested significantly in the infrastructure. Infamous for funding a match with a $20million prize between the England and East Indies cricket team, his notoriety spread. Most people bought the story and never suspected ulterior financial motivations. By understanding how we default to truth and are vulnerable to the messenger effect, it can help people to probe doubt, inconsistencies, and things that just don't make sense.

Clues are always there in hindsight.


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