What could have been going on in the mind of alleged arch-fraudster Bernie Madoff? David Faber at CNBC describes him as a “sociopath.” Others have asked how he could have slept at night. The scope and brazenness of his scams certainly put him beyond the experience and capabilities of most people.
Science blogger Melissa Lafsky, who writes Reality Base for Discover magazine’s website, has examined the path of psychology that could lead someone to steal so much for so long.
“Justification, entrenched in narcissism, topped with a heavy dose of self-delusion,” she concludes.
Lafsky cites an ABC interview with reformed white collar criminal Barry Minkow. (For more on Minkow’s scam, click here.) “We all have a cure,” Minkow says. “The irony of white collar crime is we believe that we’re one good week in trading away and we’ll get enough to pay it all back.”
The aligns with our own theory of how Madoff got into this mess. As we wrote on Saturday:
Our guess is that like that of many once-revered figures, Bernie did not set out to swindle anyone. In the beginning, he probably produced the returns he said he produced. Then, somewhere along the line, he probably had a bad month or two that he thought he could quickly offset with a strong one. So he fudged the results and then got back to even.
He probably did this a few times until, eventually, the recovery didn’t get him back to even. Instead of admitting this, however, he kept it up in the hopes that someday it would–and in the hope that he would be able to preserve his life and reputation.