What Bernie Madoff Can Teach Us About Meritocracy

Believe it or not, my dear, sweet husband had never heard of Bernie Madoff until a friend recommended the new-ish Madoff documentary on Netflix. And he was uncharacteristically willing to watch this financial true crime story—so we did.

One of the leitmotifs of the docuseries, along with much of the coverage of the Madoff fraud generally, was the regular reminder that many of the “victims” of the scheme were savvy investors. ‘Don’t forget,’ a commentator would chime in helpfully lest you begin to think these folks weren’t very smart, ‘these were wealthy, successful people who knew how to make their money make more money.’ Even they didn’t see Madoff for the con man he was.

About the 312th time someone mentioned this, I paused the show, turned to Sean, and exclaimed, “That’s some BS.”

Falling for a con that promised all gains, no losses, with rates of return far higher than traditional markets is the nadir of financial savviness. People who know how money and the market work know that there will always be losses and that outperforming the average is a rare thing indeed.

Not everyone who bought into the fraud was (or is portrayed) as a shrewd business or finance person. But it’s a persistent theme nonetheless.

When the inconsistency between the obvious scam and the savvy investor is revealed in most stories about Madoff, as in the Netflix series, it’s often attributed to greed. That lust for more causes people who should know better to ignore all the red flags.

I buy this. Sure. But I also think it’s more complicated than that.

The story of “savvy investors” falling for Madoff’s blatant lies reveals another trick of the myth of meritocracy.

The concept of meritocracy is baked into the American experiment. Everyone has the same access to opportunity in the US. Anyone willing to work hard and apply themselves can “make it.” The best, brightest, and most industrious rise to “the top.”?

Of course, there are few things (if any) that are truly meritocratic about American society. The wealthy tend to pass on their class status via social capital and generational wealth. The poor tend to remain poor. Today, the middle class—if one still exists—feels the constant pressure of downward mobility. The tests designed to find kids with the most potential are biased, reproducing long-standing social hierarchy.

It's worth noting that the sociologist who coined the term "meritocracy," actually did so to critique the system (or lack thereof) as he saw it.

When critiquing the persistent myth of meritocracy, we typically focus on how equal opportunity and merit-based success don’t match our reality. This is an essential aspect of the criticism because it can alleviate some of the self-blame we put on ourselves for not being “good enough” to climb the ladder.

But another less critiqued aspect of the myth is how we project merit on those who have won in the game of life.

We want to believe that Madoff’s wealthiest marks were savvy investors. We want to believe that their smarts and hard work earned them their money. Someone with millions of dollars to throw at a too-good-to-be-true scheme must know their stuff, right?

Does greed make someone ignore the most basic truth of investing all on its own? Or is it possible that these wealthy, successful investors just weren’t that bright in the first place??

Is it possible that the people who should have known better by virtue of their status just didn’t because their status was a product of chance rather than achievement?

Yes, I believe it’s entirely possible—likely even.?

When we don’t interrogate this possibility, we miss out on a much bigger and more relevant lesson to most people: just because someone is successful doesn’t mean they know what they’re doing. Just because someone has amassed wealth, power, status, or followers doesn’t mean they have something to teach us. It doesn’t mean they are someone to emulate.

“Success” doesn’t tell us nearly as much about someone’s bona fides as we’d like.?

Make your podcast remarkable.

I'm teaching a 6-week workshop on how to craft an audio essay starting in mid-March. I'll guide you step-by-step through the process of producing an 8-12 minute audio piece for your podcast. Whether you're looking to take on a "public radio style" format for your show or want to expand the audio toolkit you apply to simpler formats, this workshop is for you!

Click here for all the details.