Sentences to ponder

by on February 4, 2009 at 6:30 pm in Law | Permalink

From the ponder-worthy Felix Salmon:

Ray Pellecchia
is right: if Harry Markopolos had taken all of his evidence about
Bernie Madoff and put it on a blog, instead of submitting it to the
SEC, there's a good chance that would have been the end of Madoff right
there.
All the time Markopolos was talking to the WSJ, trying to get them to
run a story about Madoff, would have been much better spent setting up
an anonymous WordPress blog and just putting the information and
analysis out there himself

15 comments

Silas Barta February 4, 2009 at 6:42 pm

You know, this is EXACTLY what people say about me. Well, if you replace:

“evidence against Madoff” with “arguments defending IP”

“submitting it to the SEC” with “posting on the mises.org blog”, and

“starting an anonymous blog” with “writing a journal article”.

eman February 4, 2009 at 7:35 pm

Yeah, but then he’d have a hard time getting credit for this when it eventually hits the fan…

Anonymous February 4, 2009 at 7:59 pm

Felix is a very smart guy, but this is a silly revisionist and anachronistic idea.

Financial blogs have only come into their own since the start of the credit crunch. Three years ago, when Markopolos first approached the Wall Street Journal, they still called them “weblogs”; nine years ago, blogging had barely gotten started and most people had never heard of the concept. Yes I know someone will cite some obscure blogging pioneer from the mid-1990s; that’s not the point.

Only in the last year or so could this muckraking blogging strategy have had a remote prayer of success, and even then, do you think that Madoff’s investors read blogs? Even most financial industry professionals don’t: if Bill Miller had kept up with the most authoritative blogs, do you think he would have kept doubling down disastrously?

William Ackman, a prominent and influential hedge fund manager, went public in 2002 with his claims that the bond insurers MBIA and Ambac had a disastrously flawed business model and didn’t deserve their AAA rating. For years he proclaimed the emperor had no clothes and produced arguments supporting his position, but he was basically ignored as “talking his book” and (arguably) got hassled and investigated by the authorities for his trouble. In the end, of course, he was absolutely right.

If a prominent hedge fund manager who went public and put his name and reputation on the line couldn’t get the world to believe him (MBIA and Ambac stock prices stayed high for years until the crisis), it strains belief that some anonymous blog could have accomplished anything. And anonymous blogs don’t stay anonymous in the face of subpoenas and IP address traces; recall that Markopolos feared for his personal safety and that of his family.

Even now there are surely some blogging Cassandras shouting into the wind, who will be proven right in a few years time. How will Felix explain their failure to persuade the world?

John B. Chilton February 4, 2009 at 8:43 pm

How about, “if Harry Markopolos had taken all of his evidence about Bernie Madoff and put it IN TYLER COWEN”S HANDS…..”

gregg Somerville February 4, 2009 at 9:11 pm

you must see this and post it

http://www.youtube.com/watch?v=64g_g22iEe8

Hopefully Anonymous February 4, 2009 at 9:22 pm

It’s good to see a defense of anonymous blogging.

I’ve been promoting anonymous blogging for years … on my anonymous blog.

Prof. Cowen, you should set up an anonymous blog yourself. For all your good ideas that would harm your near term reputation, or simply not be in your near term comparative representational advantage to blog about non-anonymously.

Hopefully Anonymous February 4, 2009 at 9:26 pm

“Welllll, I don’t know about that. If YOU had put it on YOUR blog then sure he would have been busted. But if I go and start a blog right now, it doesn’t matter if I’m uploading the meaning of life or the secret to the philosopher’s stone or Obama’s iPod playlist, I’ve got a readership of zilch. Taking a blog from zero to somebody-gives-a-crap probably would have taken just as long as the SEC/WSJ approach.

Posted by: Noah Yetter at Feb 4, 2009 7:43:58 PM”

No, you’re wrong. It’s not that hard to get notice by the interested public in an anonymous blog. If I want someone to notice my blog I just put their name in it. Almost everybody google searches their own name, goes triple for people of influence.

Also, one can post links to one’s blog in highly read blogs and message boards, like this one.

Anonymous February 4, 2009 at 10:48 pm


If I want someone to notice my blog I just put their name in it. Almost everybody google searches their own name, goes triple for people of influence.

President Obama, notice me. Just scroll down to the 653,234,739th page of the Google search for your name.

Chris February 5, 2009 at 1:49 am

Pfft. It wasn’t so long ago that there were a LOT of folks making too much money to care. Now that everybody’s apparently broke or something, now we care. Whatever.

It really wasn’t that long ago that lots of folks thought everything was pretty darn good.

Jose February 5, 2009 at 8:08 am

Markopolos was clearly after the whistler-blower SEC reward payment. This is how he made his money. Most probably for him the Madoff case was merely one of many cases he was shooting at. Surely his primary concern was the cash not the publicity. Why expose himself? Better a bird in the hand ….

But of course, in hindsight, if only had he known that he had actually hit the jackpot!

Jon Kay February 5, 2009 at 3:11 pm

Yeah, I DO remember bloghistory. Big blogger numbers dates back to 9/11/01. Many people didn’t find the mass talking-heads to be enough on that day and many following. They wanted to see some thinking and chat, and, especially, be able to chat themselves about what was happening.

Bloggers’ first victim, bwahaha, was Trent Lott, a little over a year later. Remember him? No small fall there.

Plenty of stories’ve gotten major audience by posts in relevant threads googled for and email to big bloggers.

Curt Fischer February 5, 2009 at 7:10 pm

Mark – Perhaps I chose my words unwisely when I wrote *permanent, public, searchable, written*. A blog may not exist in perpetuity, but while it does exist, it is always there. And always public.

Contrast that with a phone call to a WSJ reporter. Eventually your phone call ends. Then you are completely reliant on the reporter to remember what you said, to take it seriously, investigate it, and report the results (if not in the WSJ then to someone else).

If you post the information on a blog, and send a link to the WSJ reporter, though, the reporter knows that your information is there for all to see. If he doesn’t follow through on your tip, he knows that someone else might, because the information is public. And it’s “permanent”ly there. And there’s a chance that an interested party might search for “Madoff investments” and click on hit #13.

I agree that the risk of facing legal action is real and definitely a disadvantage to the blogging approach. And, I don’t know for sure that having posted anything on a blog would have helped. But I think even back then it would have been very likely to bring more scrutiny to Madoff’s operations than was brought.

Of course, you don’t know for sure either, so I wonder how you can be so confident in your conclusions.

Libertarian Girl February 6, 2009 at 8:30 pm

I agree it could have been an interesting way for Markopolos to go. Jose says that Markopolos was only interested in the SEC reward money.

However, if you read the “Bernie Madoff is running the world’s biggest Ponzi scheme” report that Markopolos submitted to the SEC, you’d see that he said that he was submitting his name for any reward payment, but he didn’t expect to see one because there are no reward payments for exposing Ponzi schemes. The only reward payment he had a hope of getting was if Madoff was involved in front-running investments; Markopolos says this is a possibility, but he is overwhelmingly sure that it is instead a Ponzi, not front-running, and gives his reasons why.

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