What the British media has in common with Bernie Madoff

A bonus issue by Mike Stafford.

Cast your mind back to 2008. As the sub-prime mortgage crisis reached its logical conclusion, the sky was falling in on the heads of the banking industry, and - by extension - the rest of us too. In December, financier Bernie Madoff was arrested and later charged with running the biggest Ponzi scheme in history. Estimated losses to victims were estimated to have been $18bn.

Madoff was not a small-time huckster made big; he was a former chairman of the Nasdaq, and at the time of arrest, the sixth-largest market-maker on Wall Street. And yet, this financial big fish was running nothing more than a glorified pyramid scheme. His incredible returns to investors were paid not through the profits on well-executed trades, but using the investment of the next batch of victims. Madoff claimed his operation became a Ponzi scheme in the early 1990s, after decades of legitimacy.

However, opinion is divided, and liquidators suspect Madoff may have been running a Ponzi scheme as early as the 1970s. Ultimately, the best-case scenario here is that one of Wall Street’s most high-profile figures only got away with running a Ponzi scheme in broad daylight for two decades. 

So how did Madoff do it? Well, Madoff’s was the ultimate ‘black-box’ trading operation. Citing the need to retain his competitive edge and guard his intellectual property, Madoff revealed no information about his investment strategies to investors. He had, he claimed, found a way to exploit market inefficiencies and make big bucks for his clients in doing so. In reality, this was nonsense.

Potential investors who wanted to scrutinise Madoff’s methodology were turned away, and successful investors largely didn’t care about the methods as long their returns were good. Investors were also invited not to speak to each other about their returns, lest authorities do the maths and work out that there was not enough volume in the markets to sustain the kind of returns Madoff was claiming. 

Madoff’s fraud was based on a lack of scrutiny. He disguised the inner workings of his operation so as to prevent his audience recognising that his ‘output’ was nothing but distortion and lies. It’s easy to get the historian's fallacy here and assume Madoff’s investors were easy dupes, but it’s unfair - particularly when most of us take the exact same approach to scrutiny of media. 


In the UK, reasonably media savvy people understand that figures like Rupert Murdoch, the Barclay Twins and Richard Desmond have an uncanny way of seeing their own political agenda well-served by the newspapers they own. Exceptionally media-savvy people might understand the incestuous relationship between Fleet Street and Downing Street.

However, let’s face it, if you’re reading this, you are in a tiny minority. Most people are not stupid, but they’re also not all politics or media junkies. It is more than possible to live a fulfilling and productive life without ever truly scrutinising Johnson’s climb to power up a tower of his own Telegraph columns, or understanding the trajectory of Andy Coulson’s career.

And so, without any large-scale scrutiny of the media-industrial complex, it can continue belching forth its output, regardless of whether or not that output is created for the benefit of its audience or its owners. When we consume news, we keep the news operation going, whether the black box of Fleet Street is executing complex operations dedicated to the public interest, or whether it’s puking up puff pieces to suit the agenda of the paymasters. 

Unfortunately for us, though, we don’t get to opt-out of the media landscape. We can’t walk away and choose not to invest. The media is the prism through which we understand the world beyond our own direct experience. It is critical for our ability to function as citizens; we are all deeply invested, even if we don’t consume it ourselves. The remotest, off-grid hermit can still not escape the media’s control over the course of his life.

So ask yourself, do you know how media output is constructed? Do you understand the biases, prejudices, rivalries, processes and funding structures that contribute towards its creation? In the case of each and every piece written, can you understand the editing process that led to its inclusion - and to the kind of decision-making that goes into excluding pieces?

Consider this - Rebekah Brooks allegedly turned down the data which exposed the full scandal of MPs' expenses for £60,000, citing the prior spending of £250,000 on Jordan’s autobiography. ‘The public interest’ is far from the only criteria on which newsworthiness is judged. 

It’s time we started taking a look inside that black box.

Mike Stafford is a writer and tweets as @faithfulpundit.