I wrote a few weeks ago about how, in my opinion, trucker Edward Stobart was driven by fear of failure. His determination to be judged by his spotless and ubiquitous trucks, and his shyness when dealing with people, all said to me that here was a man with fear-based insecurities.
Yet fear of failure can also drive bad behaviour. In fact, it can turn us into criminals. Such can be the mental terror of low achievement that – instead of indulging in avoidance tactics (as with Stobart and his reluctance to meet people) – we go full-throttle in the other direction, eventually (but wilfully) crossing the line with respect to acceptable behaviour. Even here, however, it may be possible to, in fact, see a person so desperate not to fail, or so desperate to be accepted, that they’ve made calamitous choices that can be explained by frustration or perceived (or real) prejudice or lack of opportunity.
This can certainly be the case when examining those that break the law in order to cover up their failures. Seen through the lens of fear of failure, some obviously criminal acts become more understandable, even if not more justifiable. Two cases stand out for me, perhaps because of my background in finance. In the UK there’s Nick Leeson, the “rogue trader” that brought down Barings, and in the US there’s Bernie Madoff, the daddy of all Ponzi schemers.
Leeson brought the venerable Barings Bank to its knees in 1995 due to a series of failed bets on Japanese equities. Rather than declare his equity derivatives losses, and confess his failure, Leeson set up a series of secret accounts to hide the losses. Meanwhile, he furiously tried to gamble them away – a tactic that can, and did, spiral out of control. The bank collapsed after Leeson’s bets crumbled in the dust of the Kobe earthquake in January 1995.
In Rogue Trader, Leeson’s own account of his actions, he claimed no malicious or criminal intent, and I believe him. He was a state-educated lower middle-class lad from Watford working for a posh bank in a senior and trusted role (as one memo from a board member famously stated: “he knows what he’s doing”). There was a clear touch of “imposter phenomenon” about him, where (in his head) his strong performances counted for nothing because he was not of the right stock.
Indeed, when the losses were uncovered and he went briefly into hiding, one of the directors revealed that Leeson’s assumptions regarding snobbery were not so far off. “One of our barrow boys has gone missing,” he declared, which at least did me the service of not having to invest any sympathy for a bank that had so little understanding of the motivations of its employees.
And, in my opinion, it was this insecurity that drove Leeson to criminality. He never intended stealing the money. His aim was to make money for his employers and thus prove his worth. He was also concerned for his team, and the blame that may be apportioned to them. Yet fear of failure destroyed his judgement – resulting in the hidden losses, the collapsed bank and his arrest and imprisonment.
The US example is more controversial because his crime is greater, the victims true innocents and it is more recent – indeed the corpse is still warm on this one. My evidence for Bernie Madoff’s fear of failure comes from the Wizard of Lies by Diana Henriques, who covered the collapse of his US$50 billion Ponzi scheme for the New York Times. Like Leeson, Madoff grew up in a lower-middle class neighbourhood on the edge of the metropolis – this time in Queens, New York. His father’s business ventures usually failed, which created a great impression upon the young Bernard. At all costs he wanted to succeed – and was determined to avoid the negative judgement from others that was the fate of his father.
This led him towards his first fraud – when managing money for around 20 clients. Trying for higher returns to please sceptical investors, he lost money on risky stocks. Yet rather than own up, he borrowed US$30,000 to erase the losses for his clients, allowing him to impress them with the brilliance of his money management. In Madoff’s mind he had done the honourable thing – taking the hit but covering his losses. Of course, the loan was repaid from renewed investment on the back of his enhanced reputation. And the pyramid developed its all-important second layer.
That was in 1962. After the 1987 stockmarket crash he found himself in a similar position and, again, used new investor’s cash to cover the losses and, again, to maintain his strong name. The pattern was repeated again in 2001-02. Indeed, only the scale of the redemptions from the 2008 crash prevented his flawed model from surviving the latest bear market, although by then the losses were vast. Indeed, he was nearly wiped out in 2005 when he managed to raise US$92 million with just three days to spare.
According to Henriques, Madoff always saw himself as an outsider and was determined to over-compensate. He served as chairman of NASDAQ and was on the board of governors from the National Association of Securities Dealers. He even gave office space to the regulator’s legal team when they had to abandon their home after 9/11. Some have put this down to the criminal mastermind, conducting grand fraud under the noses of the authorities. But, as a High-FF (someone with a high fear of failure) I think I can spot an alternative motive. I think it reveals an insecurity – of a man desperate to be accepted as an insider in a world he admired but was not part of.
He was determined to succeed where his father failed, so he had zero tolerance for failure. Failure, to Madoff, was not feedback or a temporary setback. It was condemning, a confirmation of his irretrievable and final awfulness. And this allowed his unethical behaviour (which was to hide his failings) to build to destructive levels. In his head he knew this, of course, but – in my view – he never viewed himself as a criminal, just as an outsider.
Henriques is perplexed by Madoff despite her deep research. She finds his criminality difficult to fathom – citing an interview in jail in which he complains about feeling “burned” by investors withdrawing their money in the 1987 cash. “I was hung out to dry,” he claimed – a mentality that Henriques struggles to explain although is absolutely clear to me, as a self-declared High-FF. It is typical of the extreme High-FF to blame his victims for his misfortune (assuming they were never on his side), not dissimilar to Hitler’s bunker denunciations of the German people. These are usually the very people the megalomaniac High-FF envied and emulated: the posh, the rich, the Aryans. He has spent his life trying to be deemed worthy of this group – sometimes going to ridiculous extremes in order to do so. And, ultimately, they have been the very people that have castigated or rejected him, or simply let him down.
When I lived in New York I often passed Madoff’s Midtown building – a preposterously ugly tower in brown marble called the Lipstick Building. I didn’t know who occupied it but I used to joke to friends that – whoever it was – they were trying way too hard to make an impression. It really does stand out from the skyscraper crowd for all the wrong reasons (and is also one of two blocks in the wrong place). When I heard it was Madoff’s, I was delighted. There was a building that was desperate to be an icon – yet it inwardly knew it was ugly and never likely to be accepted as a New York landmark: not so far removed from the man himself.
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