Human beings generally have a difficult time incorporating highly improbable events into their thought-processes. Improbable events, specifically black-swan events - like Madoff's epic fraud, are generally ignored, or regarded as irrelevant before they occur. But after these events precipitate, human consciousness moves to the opposite extreme of ignoring these events; obsession with these 'improbable' events takes-over beyond any justifiable degree of concern; like what is happening right now. Understandably, this current hypersensitivity to extreme-tail-events is being induced by recurrent news stories about the Madoff saga and the uncertainty surrounding it.
Nevertheless, it is important to begin exploring these questions: (1) How did he manage to pull this off for such a longtime?; (2) How did he manage to live with himself, while he was committing those frauds? (Where was his conscience?); (3) Why did he do it?
The answers to those questions will help us prevent similar events from occurring in the future, and will provide direction to the regulatory establishment's efforts to curb illicit activities in the largely-unregulated hedge fund industry.
The answers to those questions will help us prevent similar events from occurring in the future, and will provide direction to the regulatory establishment's efforts to curb illicit activities in the largely-unregulated hedge fund industry.
