In high school, I tried to get a summer job across the river
in Manhattan.  A bull market raged in the summer of 1987 and
Duran Duran was on the soundtrack.  I’ll
never forget the morning of my interview, walking down McDonald Avenue toward the F train wearing
a fresh-pressed suit and spiffy-shined shoes. 
It was still early yet and Mrs. Pulaski was sweeping off her stoop, as
she did each summer morning, with an ancient straw broom that looked like she’d
brought it over from the Old Country. 
Seeing me coming, she offered me a banana and some advice: “little
Chris, always remember: the gangsters and thugs may live in Brooklyn,
but the real crooks work in the City.”

Of course, Brooklyn’s convicted get all-expense paid stays
in places with foreboding names like Attica,
Dannemora, Rikers, and The Tombs.  The
City’s crooks, on the other hand, get to wear that fashion accessory of the
once-rich and now infamous: the ankle bracelet. 

And boy, do they get to wear those bracelets in some fancy
places.  Look at this (do I need to say,
“alleged?”) scoundrel, Madoff.  Where’s
he serving his house arrest?  The Upper East Side?  Maybe
Montauk?  But hey, those December winds
howl on Eastern Long Island.  I mean, that place may be fancy in-season,
but in the winter it’s positively hard time. 
Just dreadful, Lovey!

Anyhow, I got to thinking about a lecture I’d heard in
college about the transformation of punishment in America .  Since the earliest colonists focused on
community above all else, crimes and deviations from norms were seen affronts
to society and punishment took the form of publicly-assigned shame.  Think pillories, stocks, scarlet letters.

During the industrial revolution, society became more
mobile, more dynamic  Family supplanted the community and the primary
unit of organization.  Punishment became
more guilt-oriented, more inwardly-focused; guilt, after all, is a matter of
conscience while shame is a matter of reputation.  Guilt seeks forgiveness while shame seeks
concealment from view.  As we became more
guilt-focused as a society, shame lost it sting.  We’ve literally and figuratively become shameless
(Exhibit A: Hilton, Paris.)

So what does this have to do with PE?  I’ve often said that managers who are
intrinsically motivated to build portfolio companies are the ones I want to
hire; ones for whom the pride of building something greater trumps it all.  If they fail, it'll hopefully be because of poor execution or bad luck, not because of mislaigned interest.  Of course, it’s very tough to test for that
mindset, but that’s the essence of the voodoo I try to do.

As for Madoff, let’s find some suitable public punishment
once he’s found “guilty” in a court of law. 
In the markets, as in a democracy, there must be trust.  And Madoff’s (ahem, alleged) fraud makes him
the poster child for this era’s breakdown in trust.  Since punishments should fit crimes, maybe he
should also become the poster child for a return to shaming?  Let’s set up some pillories in Times Square and have the people come with buckets of
slop, entrails and dung to hurl his way.  Sure, I’ll line up to huck a tomato or two,
but I’m guessing I’d be near the end of a very long line. 

And I think the whole thing could be cathartic, a sloppy
capstone to an era whose closing headlines were all provided by grifters and slicksters.  And who knows?  If people started again worrying about being
shamed, worrying about the effect of their actions on the community, maybe the next scalawag might think twice before messing with our
trust.