Question

Why do you think Bernie Madoff was able to get away with his scheme for as long as he did? What does what he did teach you about the relationship of risk and return? What lessons fregarding his issues can you apply to your personal and professional lives?

Answer 1

Bernie Madoff got away because he ran a Ponzi scheme in which he collected money from investors and guaranteed very high returns without any risk. So, customers were attracted to this scheme since they would get guaranteed high returns without any risk. This led to a big scam which resulted in a large stash of cash finally being busted.

The relationship that we learn is higher risk will always give higher return. One cannot get higher return with lower risk. And secondly, high returns cannot be "guaranteed". Hence when we come across such schemes in future guaranteeing higher returns without any risk, then we can confirm it to be Ponzi scheme. Anything guaranteed will only have low risk and hence lower returns.