That’s what Scott Carmichael did. He was faced with two alternatives. Reg Brown said that Ana Montes was behaving suspiciously. Ana Montes, by contrast, had a perfectly innocent explanation for her actions. On one hand was the exceedingly rare possibility that one of the most respected figures at the DIA was a spy. On the other hand was the far more likely scenario that Brown was just being paranoid. Carmichael went with the odds: that’s what we do when we default to truth. Nat Simons went with the odds as well. Madoff could have been the mastermind of the greatest financial fraud in history, but what were the chances of that?
The Holy Fool is someone who doesn’t think this way. The statistics say that the liar and the con man are rare. But to the Holy Fool, they are everywhere.
We need Holy Fools in our society, from time to time. They perform a valuable role. That’s why we romanticize them. Harry Markopolos was the hero of the Madoff saga. Whistleblowers have movies made about them. But the second, crucial part of Levine’s argument is that we can’t all be Holy Fools. That would be a disaster.
Levine argues that over the course of evolution, human beings never developed sophisticated and accurate skills to detect deception as it was happening because there is no advantage to spending your time scrutinizing the words and behaviors of those around you. The advantage to human beings lies in assuming that strangers are truthful. As he puts it, the trade-off between truth-default and the risk of deception is
a great deal for us. What we get in exchange for being vulnerable to an occasional lie is efficient communication and social coordination. The benefits are huge and the costs are trivial in comparison. Sure, we get deceived once in a while. That is just the cost of doing business.
That sounds callous, because it’s easy to see all the damage done by people like Ana Montes and Bernie Madoff. Because we trust implicitly, spies go undetected, criminals roam free, and lives are damaged. But Levine’s point is that the price of giving up on that strategy is much higher. If everyone on Wall Street behaved like Harry Markopolos, there would be no fraud on Wall Street—but the air would be so thick with suspicion and paranoia that there would also be no Wall Street.1
4.
In the summer of 2002, Harry Markopolos traveled to Europe. He and a colleague were looking for investors for a new fund they were starting. He met with asset managers in Paris and Geneva and all the centers of capital across Western Europe, and what he learned stunned him. Everyone had invested with Madoff. If you stayed in New York and talked to people on Wall Street, it was easy to think that Madoff was a local phenomenon, one of many money managers who served the wealthy of the East Coast. But Madoff, Markopolos realized, was international. The size of his fraudulent empire was much, much larger than Markopolos had previously imagined.
It was then that Markopolos came to believe his life was in danger. Countless powerful and wealthy people out there had a deep-seated interest in keeping Madoff afloat. Was that why his repeated entreaties to regulators went nowhere? Markopolos’s name was known to prominent people at the SEC. Until the Ponzi scheme was publicly exposed, he could not be safe.
He decided that the next logical step was to approach New York’s attorney general, Eliot Spitzer, who had shown himself to be one of the few elected officials interested in investigating Wall Street. But he needed to be careful. Spitzer came from a wealthy New York City family. Was it possible that he, too, had invested with Madoff? Markopolos learned that Spitzer was going to be in Boston giving a speech at the John F. Kennedy Library. He printed out his documents on clean sheets of paper, removing all references to himself, and put them in a plain brown 9x12 envelope. Then, to be safe, he put that envelope inside a larger plain brown envelope. He wore a pair of gloves, so he left no fingerprints on the documents. He put on extra-heavy clothing, and over that the biggest coat he owned. He did not want to be recognized. He made his way to the JFK Library and sat unobtrusively to one side. Then, at the end of the speech, he went up to try to give the documents to Spitzer personally. But he couldn’t get close enough—so instead he handed them to a woman in Spitzer’s party, with instructions to pass them along to her boss.
“I’m sitting there, and I have the documents,” Markopolos remembers.
I’m going to hand them to him, but after the event, I give it to a woman to hand it to Eliot Spitzer because I can’t get to him. He’s just surrounded by people. Then he heads out the back door. I think he’s going to go to the restroom and go to have dinner next door, all right? I’m not invited to the dinner. He’s heading out the back door to get in a limo to the airport to catch the last shuttle flight to New York.…Eliot never got my package.
It is worth mentioning that at the time Markopolos was president of the Boston Security Analysts Society, a trade group with a membership of 4,000 professionals. He didn’t have to show up incognito at Spitzer’s speech, wearing a bulky overcoat and clutching a sheaf of documents wrapped inside two plain brown envelopes. He could have just called Spitzer’s office directly and asked for a meeting.
I asked him about that:
Markopolos: That’s another regret of mine. I hold myself responsible for that. Spitzer was the guy. I should’ve just called him. Maybe I would’ve gotten through, maybe I wouldn’t have, but I think I would have.
MG: You had standing. You were—
Markopolos: President of the Security Analysts.…If the past president or current president…calls the boss and says, “I have the biggest scheme ever. It’s right in your backyard,” I think I would’ve gotten in.
MG: Why don’t you think you did that?
Markopolos: Woulda, coulda, shouldas. Regrets, you know. There’s no perfect investigation and I made my share of mistakes, too. I should have.
Markopolos sees his mistake now, with the benefit of over a decade of hindsight. But in the midst of things, the same brilliant mind that was capable of unraveling Madoff’s deceptions was incapable of getting people in positions of responsibility to take him seriously. That’s the consequence of not defaulting to truth. If you don’t begin in a state of trust, you can’t have meaningful social encounters.
As Levine writes:
Being deceived once in a while is not going to prevent us from passing on our genes or seriously threaten the survival of the species. Efficient communication, on the other hand, has huge implications for our survival. The trade-off just isn’t much of a trade-off.
Markopolos’s communication at the library was, to put it mildly, not efficient. The woman he gave the envelope to, by the way? She wasn’t one of Spitzer’s aides. She worked for the JFK Library. She had no more special access to Spitzer than he did. And even if she had, she would’ve almost certainly seen it as her responsibility to protect a public figure like Spitzer from mysterious men in double-size overcoats clutching plain brown envelopes.
5.
After his failures with the SEC, Markopolos began carrying a Smith & Wesson handgun. He went to see the local police chief in the small Massachusetts town where he lived. Markopolos told him of his work against Madoff. His life was in danger, he said, but he begged him not to put that fact in the precinct log. The chief asked him if he wanted to wear body armor. Markopolos declined. He had spent seventeen years in the Army Reserves and knew something about lethal tactics. His assassins, he reasoned, would be professionals. They would give him two shots to the back of the head. Body armor wouldn’t matter. Markopolos installed a high-tech alarm system in his house. He replaced the locks. He made sure to take a different route home every night. He checked his rearview mirror.