The spectacular fall of Bernard Madoff, blue chip investment
manager, past stock exchange chairman, alleged Ponzi scheme operator, and
bearer of a surname which is curiously appropriate for bad puns under the
circumstances, may be a business opportunity in disguise for entrepreneurs.
Of course, the Luddites who could never bear the truth about
the effectiveness of free markets are using his alleged fraud as an excuse to
re-heat their discredited predictions of the death of capitalism. In fact, what
we might see is a move towards a new capitalism in which markets are actually
If that sounds too good to be true, follow this line of
Those with surplus wealth have traditionally thought it
safest to invest it through the financial Establishment.
No one was ever more Establishment than Bernard Madoff, a leader
of New York society, a generous philanthropist, a big donor to the ruling
Democratic Party, and a founder of the National Association of Securities
Dealers Automatic Quotations (NASDAQ) stock market, who later served as its
So if investors cannot trust such a pillar of the financial
Establishment, who can they trust?
To blame a lack of “regulation” is to miss the point that no
one in the history of business was ever more regulated than Bernard Madoff.
Investors should not rely on regulation – it will let them
Instead, the lesson they should learn from Madoff is not to
rely on Establishment types like him but to invest directly and keep an eye on
This means more investment in small and medium sized
enterprises, with more investors serving on boards of directors, which benefits
The opportunity here is for entrepreneurs to seek out
investors disillusioned by the Madoffs and to convince them to invest in their
The opportunity for politicians and other leaders is to establish
mechanisms and laws to encourage that process – and thus renew our free market