I was recently reading the document Mr Markopolos sent to the American SEC about his suspicions regarding the Bernard Madoff Fraud. At the time Madoff was posting excellent returns, but Markopolos questioned these fantastic results.
Positivity when calculating your financial returns, is a good thing, but the example shows that you have to be negative as well. You have to look critically at things. The only way that Mr Markopolos detected the fraud, was by being negative.
Amazingly, the document showed that a few other financial institutions suspected Madoff of fraud, and so did not invest with him. By being cautious with their money, they avoided big losses.
Its good to be negative when doing due diligence. When assessing a deal go into every last detail and ask yourself what is the worst that could happen, then come up with a counter plan. The Madoff fraud fooled sophisticated investors, and his stunning financial background meant hardly anybody questioned his false results until it was too late.
Sometimes its good to be negative, and scrutinise your deals from that perspective, rather than making a big mistake. The Richest Man in Babylon says "better a little caution than a great regret".
Positivity when calculating your financial returns, is a good thing, but the example shows that you have to be negative as well. You have to look critically at things. The only way that Mr Markopolos detected the fraud, was by being negative.
Amazingly, the document showed that a few other financial institutions suspected Madoff of fraud, and so did not invest with him. By being cautious with their money, they avoided big losses.
Its good to be negative when doing due diligence. When assessing a deal go into every last detail and ask yourself what is the worst that could happen, then come up with a counter plan. The Madoff fraud fooled sophisticated investors, and his stunning financial background meant hardly anybody questioned his false results until it was too late.
Sometimes its good to be negative, and scrutinise your deals from that perspective, rather than making a big mistake. The Richest Man in Babylon says "better a little caution than a great regret".
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