In a December evening in 2008, Harry Markopolos told his wife Faith to go into battle drill. They had rehearsed it many times. If someone entered their premises, he would go down to the first floor to confront the intruders, armed with offensive and defensive weapons. Meanwhile, Faith would wait upstairs, fully loaded. Her instructions were simple: if anyone approached who wasn’t him, she would start shooting and continue shooting until she ran out of ammo.
To the outside world, Harry Markopolos and his wife Faith seemed like the last people to become violent. Harry was the portfolio manager for a respectable options trading company and the former President of the Boston Security Analysts Society. Faith also worked in the financial sector.
The action that prompted their battle drill had begun earlier that evening, when Harry was at a Boston-area karate studio where his twin sons were having a lesson. To pass the time, Markopolos started listening to his voice messages. A couple of messages told him that Bernie Madoff, a financier and respected market maker in S&P 500 stocks, had surrendered to the police, admitting that his $64.8 billion investment management business was a Ponzi scheme.
A Ponzi scheme is an illegal business model in which a money manager pays existing investors with funds collected from new investors. This can work as long as there is a continual flow of new investors and actual withdrawals are kept to a minimum. This was the type of business Bernie Madoff had been running for at least four decades. Because he provided investors with false statements of earnings, they were incentivized to keep their money in the fund. Meanwhile, occasional withdrawal requests could always be covered using money from incoming investors. But after the economic crash of 2008, withdrawal requests exceeded the actual money in the fund, leaving Madoff with no choice but to admit that the whole thing was, as he put it, “one big lie.” He confessed to his sons who turned him in to the authorities the next day.
And that brings us back to Harry Markopolos. When he was at the karate studio and learned that Madoff had been arrested for securities fraud, he immediately concluded that his family was in danger. He had to rush home and get ready to protect his home and family. You see, eight years earlier, Markopolos had discovered that Bernie Madoff was a fraud. He initially realized this just using basic math: quite simply, the numbers Bernie reported didn’t make sense. From there, Markopolos had begun sleuthing around, until he acquired a mountain of evidence proving that Madoff was running the largest Ponzi scheme in history.
Markopolos handed his findings over to the Securities and Exchange Commission (SEC), the government body responsible for investigating fraud and regulating the financial sector. He delivered formal complaints to the SEC in 2000, 2001, and 2005, in addition to using his contacts in the financial industry and media to try to force the SEC to investigate the veracity of his complaints. Yet the SEC failed to respond. They even failed to act when Boston SEC investigator, Ed Manion, desperately tried to convince them to consider Markopolos’s reports.
What could explain the SEC’s failure to act after receiving proof of Madoff’s criminality? The only explanation Harry Markopolos could think of is that the SEC must have been complicit in the corruption. Having discovered that Madoff took money from criminal gangs and drug cartels, Markopolos understood that this was a widespread criminal conspiracy involving very dangerous elements. Madoff obviously had inside people at the SEC. That is why, once the scandal blew up and became public, Markopolos assumed the SEC would want to cover their backs and destroy his documents, especially those showing that they failed to act when he provided evidence of Madoff’s crimes. They would probably want to take him out of the picture as well, and perhaps even his family.
Bureaucratic Incompetence at the SEC
But Harry was wrong. His family had never been in danger. The real explanation for what happened at the SEC was more mundane. The SEC had failed to respond to the evidence from Markopolos, not because they were criminals in cahoots with Madoff, but because they were incompetent bureaucrats. Quite simply, the SEC—like most government bureaucracies—had procedures in place that stopped things from actually getting done.
For example, they had internal policies that prevented them from pursuing cases against investment managers, even though the law required them to investigate such cases. Also, there were turf wars happening between the Boston and New York branches of the SEC, leading to inefficiencies and gross incompetence. Moreover, the SEC was mainly staffed by lawyers, rather than people who actually understood the financial industry. For another thing, Markopolos wasn’t actually a “whistleblower” according to the strict definition of the term, since he didn’t work for Madoff’s organization but had discovered the fraud through facts in the public domain; consequently, the normal procedures the SEC used for dealing with whistleblower complaints didn’t kick in. And on and on. In short, the incompetence at the SEC had reached unthinkable proportions.
In the days following the Madoff scandal, Markopolos became a national hero and appeared on numerous talk shows. He was approached by every major movie studio about doing a film based on his story. He was asked to testify before Congress about the SEC’s failures. But unfortunately, the attention he received was too late, after $64.8 billion had been stollen from unwitting victims.
How Society Incentivizes Incompetence
Looking at these events fifteen years later, it seems hard to fathom how the SEC could be so incompetent. Yet the problems at the organization serve as a cameo for a larger malaise that has become endemic throughout the modern world whereby bureaucratic cultures incentivize a type of learned incompetence.
Throughout government and much of the professional sector (including large sections of academia, law, criminal justice, and the social sciences), there is a type of managerial mumbo jumbo that functions as code-speak for the skills necessary for the successful administrator. These work cultures encourage a type of stunted vision in which workers become hyper-fixated with proceduralism and red tape at the expense of common sense. The result is an obscurantism that functions much as sophistry did during the time of Socrates and Plato.
In the 5th century BC, the sophists were itinerant tutors that treated rhetorical skill as a type of magic that could increase a person’s power. By helping someone become more “sophisticated,” these teachers promised to increase a person’s standing in society, and even increase the odds of making a losing case appear legitimate in court.
The Greek dramatist, Aristophanes, parodied the sophists in his comedy The Clouds. A character named Strepsiades decides to enroll in a school called “The Thinkery,” where sophists teach students how to make inferior arguments appear as winning arguments. Strepsiades is confident that by mastering these techniques, he will be able to use his newly acquired skills to accomplish otherwise impossible feats, such as finding a way to indefinitely dodge his debts.
In the Spring 2021 edition of City Journal, Theodore Dalrymple, observed that “social-managerial gibberish” has become the hallmark of the successful bureaucrat. Dalrymple, who is a retired physician and senior fellow at the Manhattan Institute, suggested that we have built a world in which success is correlated with the ability to speak poorly and to think in muddled ways.
As an example, Dalrymple considers the British police. In autumn 2020, townspeople in Okehampton in Devon raised concern about vandalism in their local park. While the town is normally peaceful, park staff felt intimidated by disorderly young people. Consequently, the town council asked for more policing in the park. A reporter with the Okehampton Times responded to the council’s request by asking Sergeant Walker of the Okehampton police “How often are you able to patrol the park? Which times do you choose and why?” Here is Walker’s reply:
At present we recognise that there is an increased interest in the use of the park and the behaviour of young people while they are there. As a result we have created a tasking plan which aims to prevent crime and reassure people using the Simmons Park throughout the day. We are specifically targeting times during the afternoon following increased reports during this period. This is a whole team effort for the West Devon policing team, all of the teams including my own neighbourhood team in Tavistock and Okehampton are briefed every day on the issues that are reported and we are all working together to address this challenge. You will see us in the park discussing the issue with park users and encouraging people to report their experiences, you will also see us talking to the young people. As part of our response to this challenge we are working closely with Okehampton College, the local Space youth service team, our own youth intervention officer and the youth offending team in an effort to provide lasting solutions that help young people recover from their poor decisions and prosper as adults.
The journalist then asked Sergeant Walker whether the police felt short-staffed following the council’s call for more policing. Here is his answer:
The staffing of our beautiful county is carefully considered by Devon and Cornwall Police and there are many factors that influence the decisions that are made. At present West Devon is proportionately staffed for the demand on our service and I am pleased to say that we have a very positive and proactive team but I am aware that numbers of police is a very emotive subject. I am really encouraged by the teams’ approach to all of the challenges we face as an organisation. It is important that we remember and focus on the pressures faced in specific areas of the community but as a policing team we also need to take a broader view of the difficulties faced across a broad range of issues. We work really hard to do this and when specific challenges are identified we take action and seek support from other teams to help. At the moment the Okehampton neighbourhood team are focusing on the park and the anti-social behaviour because the public report this to be a significant challenge.
This type of mumbo jumbo might be funny if it were not a microcosm of a larger problem. To use a lot of words to say nothing, to attain a deliberate muddiness of mind, to speak so that every sentence dies the death of a thousand qualifications – all this has become the hallmark for many professional cultures in the modern world. Dalrymple comments:
Sergeant Walker’s muddiness of mind and inability to speak in a direct manner did not arise from any natural incapacity but is highly trained and even programmed—for no one, even the most inarticulate, would speak spontaneously in the way that he spoke. On the contrary, it takes a certain skill and much practice to produce an effortless flow of this socio-managerial gibberish, which constantly approaches, but never quite reaches, meaning. If you don’t believe me, try to speak it for yourself.
Far from impeding his career, Walker’s trained inability to speak in plain language and to answer straight questions with straight answers is a precondition of such advancement. The imposition, adoption, and mastery of this type of language is the means by which ambitious mediocrities gain control over bureaucratic organizations. It drives people of higher caliber, who might otherwise pose a challenge to them, elsewhere.
Dalrymple’s larger concern is that “social-managerial gibberish” keeps entire disciplines insulated from critical thinking and public accountability and at worst, functions as a disguise for corruption and incompetence. Often this type of incompetence is even perceived as a mark of professionalism, since it has become a proxy for the skills required by a successful bureaucrat or administrator.
The New Sophistry
The sophists used rhetorical flourishes combined with logical argumentation to get seemingly impossible things done. The modern-day administrator uses bureaucratic mumbo-jumbo to get nothing done. But in both cases, language is operationalized to advance the interest of a small minority of “sophisticated” people at the expense of the common man.
Exactly how specific individuals stand to gain from bureaucratic busywork is not as straightforward as sophistry was in 5th century Athens and requires a system-level critique of certain work cultures. When viewing systems as a whole, we find that bureaucratic incompetence tends to emerge in work cultures where funding is external and thus not directly related to the efficiency of whatever labor is being performed. Over time this can result in feedback loops in which those engaged in extraneous busywork and mumbo jumbo become incentivized to advocate for greater prioritization and subsidization of this type of work, thus attracting others with a bureaucratic mentality. This, in turn, becomes increasingly attractive to those enmeshed within the system because it creates self-sustaining structures that function as their own justification, in addition to relieving any specific person from accountability. After all, if the shit hits the fan, one can always hide behind the fact that at least the right procedures were being followed. However, sometimes following the “right” procedures can have deadly consequences.
Bureaucratic Incompetence at Uvalde
This same type of bureaucratic incompetence was on full display last May in the school shooting at Uvalde, Texas. After Salvador Ramos began his shooting spree at Robb Elementary, armed police remained on site for 74 minutes before finally storming the classroom where the shooter was located. During this time, parents attempted to go in to rescue their children, but police used force to stop them. Ruben Ruiz, a school district police officer, tried to enter to save his wife who taught at the school. In response to his initiative, Ruiz was detained, had his gun taken away, and was escorted off the grounds.
Although there were a variety of reasons for inaction at the Uvalde shooting, one key factor was that police got bogged down by red tape and bureaucracy. For example, they were ordered to follow the procedure for a “barricaded suspect” rather than an “active shooter.” This protocol required them to wait outside the building for special equipment to arrive, even as victims bled to death inside the building.
As a result of these bureaucratic hurdles, law enforcement officers inadvertently positioned themselves on the side of the shooter, just like the SEC had inadvertently given cover to Madoff. When the police finally did act, 21 people were dead and 17 injured. Among the dead were Ruben Ruiz’s wife, the fourth-grade teacher, Eva Mireles.
Viewed from a macro-level, the problem isn’t that specific individuals enjoy red tape so much that they would rather see innocent people killed. Rather, the problem is that when red tape becomes systemic to certain types of work culture, it attracts and promotes the type of workers who instinctively prioritize procedure over substance, red tape over content, and process over productivity.
Never Sacrifice Trust!
The failure to respond at the Uvalde shooting, like the SEC’s failure to respond to Markopolos’s warnings about Madoff, profoundly disturbs us because it means we can be let down by the very institutions that are meant to be protecting us. When this type of incompetence becomes systemic throughout our government, it leads to a breakdown in the type of trust necessary for a viable society to function in the first place. This is not unlike what happened in 5th century Athens when the trend towards sophistry created widespread distrust of philosophers in general – a fact that many historians believe contributed to the execution of Socrates.
Distrust is particularly disastrous when it comes to our governmental institutions. Without trust in the institutions that create, mediate, and enforce our laws, the relationship between the rulers and the ruled must be renegotiated in terms of mere power. This is because no regime can be sustained over time unless there is self-enforcement of law from a critical mass of citizens. But this requires trust; it requires that a sufficient number of citizens trust their rulers enough to be invested in the survival of the system. Yet this very trust is being steadily eroded by governmental bodies in which obsession with proceduralism, red tape, and bureaucratic mumbo jumbo has become more important than actually protecting citizens.
May God save us from the modern-day sophists.