One of the most basic parts of the Bernie Madoff story seems very dubious. According to the widely circulated legend, Madoff founded his securities firm with $5000 he earned working part time as a lifeguard and installing sprinkler systems. As far as we can tell, this “pulling himself up by his own boostraps” story has never been verified or even closely questioned. It ought to be.
First, we have no reason to trust anything Madoff has ever said. He lost the privilege of having the benefit of the doubt when he admitted his firm was a giant Ponzi scheme. Right now we should wonder whether any part of the the Madoff story is myth or truth.
More importantly, this particular story is implausible. While a college student might be able to save $5000 now by working summer jobs or doing part time home improvement work, there’s almost no way that could be done in 1960. Why couldn’t a 1960 college student save $5000? Because back then that was a lot of money. Adjusted for inflation, it was the equivalent of $35,0000 today. To look at it differently, the median income in the US in 1960 was just $5,600. The idea that Madoff made this much working part time jobs while going to college doesn’t pass the sniff test.
But if Madoff couldn’t have raised his startup money from working in the part time jobs he describes, where did his money come from? Why did he feel like he needed to lie about it? These are questions that we hope investigators are asking.