Inside Track LINDA MALLON
Heads on Pikes
SHoW oF HANDS: How many of you remember the moment late last winter when you learned that
certain executives at the foundering insurance giant AIG were due to receive nice bonuses as a reward for
all their hard work?
I was sitting at the kitchen table where I usually digest my
breakfast and the Washington Post. To put it simply, I was outraged. This was unacceptable. My tax dollars were going to pay
for these scoundrels’ country club dues? I wanted names and
addresses. I wanted pictures posted above the fold on Page 1. I
wanted heads on pikes outside the city wall.
I wasn’t alone in my outrage. President Obama and legislators from both sides of the aisle quickly joined together to
express disgust and vow action. Busloads of protesters descended on exclusive Connecticut subdivisions to picket executive
manses. Pundits had a field day.
It can be argued, and it has been, that this visceral reaction
was misplaced and inappropriate. It probably was. But at a time
when some people were losing their homes and their jobs and
nearly everyone’s personal net worth seemed to be plummeting
and beyond control, it was certainly understandable.
When the news broke about Bernie Madoff, the reverse
Robin Hood whose con game eclipsed that of the eponymous
Charles Ponzi, my reaction was rather more complicated. I felt
sorry for those unfortunates who chose to sink a fortune into
his investments—but only up to a point.
Assuming, just for the sake of argument, that I had enough
money to attract Madoff’s attention and that he had concluded
it was worth his while to separate me from this nonexistent nut,
I wonder whether I would have been tempted by his blandishments. As Susan Forray points out in her article on Page 32,
Madoff’s reported returns were clearly too good to be true. So
why did (presumably) financially astute people believe him?
Were they blinded by the dream of amazing returns? Or was
it more the thrill of being considered part of an elite group of
The Madoff debacle is just the headliner in an endless
stream of cautionary tales arising out of the recent economic
downturn. It seems that the climate of greed in which we were
all living asphyxiated prudence in many sectors of the population. Few, it appears, really understood the risk they were
undertaking. Fish both big and small were caught gasping when
the economy finally imploded.
It’s clear to me, as we stagger forward from the financial
abyss of 2009, that our collective economic savvy needs some
tweaking. I would argue that the actuarial profession can (and
should) play an important role in that process. Actuaries know
risk like Ahab knew whales. And the profession is recognized,
deservedly, not only for the rigor of its examination process but
©THE NEW YoRkER CoLLECTIoN 2009 MICk STEvENS
FRoM CARTooNbANk.CoM. ALL RIGHTS RESERvED.
for the value it places on honest analysis. Policymakers and the
general public seek the advice of actuaries precisely because
they know that they can count on them to play it straight rather
than play favorites. Everybody, from legislators and regulators
down to the average individual who is trying to invest his 401(k)
in a way that will forestall a diet of cat food in retirement, could
benefit from what the actuaries know.
On Page 54, Mark O’Reilly makes a start with his thoughtful assessment of whether traditional retirement investment
advice is applicable in the current recession. Read it and see
what you think. And if you are so moved, consider jotting down
some of your own thoughts about the best way to proceed as we
feel our way forward into a post-recession economy. While it
is the magazine of the actuarial profession, Contingencies isn’t
simply a trade publication. Its readership includes a broad
cross-section of financial professionals, federal and state legislators and other policymakers, all of them interested in what
actuaries have to say.
I’m not promising that your article will result in a grateful
public laying flowers at your feet. But educated mobs rarely
come brandishing pikestaffs.