Finance - Investing Gullibility
In the worldwide crash of investment markets in 2008 there are many stories and almost as many lessons. Many of them are still unfolding, and the subjects include such complex curiosities as Credit Default Swaps, Hedge Funds, Securitization of Subprimes, and so on in the menagerie.
Closer to home (and to personal control of 401-Ks, IRA, and life savings) is the story of Bernie Madoff, who confessed to defrauding investors of over US$50 billion.
Stephen Greenspan is an emeritus professor of educational psychology at U. Connecticut. Here is an excerpt from his excellent article Fooled by Ponzi (and Madoff) How Bernard Madoff Made Off with My Money
| "In my own case, the decision to invest in the Rye fund reflected both my profound ignorance of finance, and my somewhat lazy unwillingness to remedy that ignorance. To get around my lack of financial knowledge and my lazy cognitive style around finance, I had come up with the heuristic of identifying more financially knowledgeable advisers and trusting in their judgment and recommendations. This heuristic had worked for me in the past and I had no reason to doubt that it would work for me in this case" |
What a succinct insight!