Bernard Madoff and the Confidence to Be Frugal

The Confidence Man, Part 2, by Mr. Dr. Frugal. Eagerly awaited by a few. I THINK I understand what he's getting at. Let him know, dear Readers.

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"We'll survive . . . despite all the polls and the rest, I think there's still a hell of a lot of people out there, and from what I've seen they're--you know, they, they want to believe, that's the point, isn't it?"
--Nixon to Haldeman, April 1973

George W. Bush, clearly, is one of history's great confidence men. That is not meant in the huckster's sense. . . . No, I mean it in the sense that he's a believer in the power of confidence. At a time when constituents are uneasy and enemies are probing for weakness, he clearly feels that unflinching confidence has an almost mystical power. It can create reality.
--John Suskind, The New York Times Magazine, 2004


A little while ago I wrote about “How to Pay for Your Entire Life by Mowing Your Lawn.” Of course I didn’t expect anyone to take the title literally (although I stand by my basic point.)

But now I’m worried. Did any of you quit your jobs to live off the savings from mowing your lawn? I hope not, but I’d forgotten how completely this is a nation is built on an overpowering need to believe, as Richard Nixon (rather hopefully) opined to Haldeman in 1973 (see above). And as John Suskind reminds us, it was the “mystical power” of “unflinching confidence” that kept George Bush afloat during his incredibly destructive eight years. Now we have a new example of someone’s alternative reality, and it’s based on a similar need to believe: Barnard Madoff, and his 50-billion Ponzi scheme.

Confidence is a good thing. In grade school, our children were told to shout out “I feel good about myself” each morning. Fine, but there has to be something tangible to feel good about; otherwise it’s just a moral Ponzi scheme. The same is true of economics, both micro and macro. Mowing my lawn saves me $40. Behind Madoff's investments there was . . . . nothing.

So what does this have to do with frugality? A whole lot. What makes frugality such a hard sell is the kind of confidence that has become common currency—and, to be absolutely historical about the matter, it’s been common currency since John Smith tried to recruit settlers to New England and John Law sold the French elite worthless stock in Louisiana land. So why mow the lawn when one can hang out with the guys in the pastel sweaters and sock-less penny loafers at the country club and realize millions?

I’m certainly not saying anything new here; you, I, Nixon, Bush--we all want to believe we can create some alternative reality in which bounty is everyone’s rightful destiny. As that great philosopher Bruce Springsteen puts it, “Mister, I ain't a boy, no I'm a man, / And I believe in a promised land.” But not all promised lands are the same, or are built on the same foundations. The frugal person’s promised land is fundamentally different from Laws, or Nixon’s, or Bush’s, or Madoff’s. Frugal people believe that small savings are real, are substantial, and that they add up: you believe because you see, day by day. One of the subtexts of our posts is that these real little things not only add up financially, but are valuable on emotional and interpersonal levels. If you live a truly frugal life—one that pays proper attention to value—you’ll never get conned, and you’ll never con anyone else either.

As my good but slightly eccentric friend Ralph Waldo Emerson once wrote, “Let us treat the men and women well; treat them as if they were real; perhaps they are.”