Remember the adage, “the customer is always right?” Well, it articulates a psychological truism called the “Law of Effect”. Simply put, the meaning of an action is in what it does.  Our adage reflects on one meaningful dimension of a transaction, motivated ,of course, by the desire for a smooth business deal from the perspective of the seller. Its how good salesmen operate.

Two articles in last week’s  New York Times reminded me of the complexity of  such effects: the range of consideration and accountability on both sides of the sale. The first, by John Eligon, describes a saleswoman at Saks Fifth Avenue who earned $400,000 last year while producing $27,000,000 in sales. Problem is, she is alleged to have falsely credited $1,400,000 back to her clients in her pursuit of good will.

Here is an example of “the customer is always right” that bends over backwards. But it presents us with a difficulty. While the article centers on the saleswoman’s alleged wrongs in processing the credits as well as the stores’ incredible revenues contingent upon the giveaways, it doesn’t mention the full set of effects in relation to the customer. I don’t mean the explicit effect— the customers’ continued shopping at Saks and at this salesperson’s counter— I mean the moral effect of the customers’ complicity in fraudulent behavior.

We have here numerous effects: 1) customer pleasure; 2) customer criminality; 3) salesperson’s success; 4) salesperson’s criminality; 5) store’s success as function of saleswoman’s production; 6) store’s suit against saleswoman. Oddly absent is a reciprocal suit against complicit customers. Indeed, it seems as if the old adage rings true in the end. Customer greed and criminal complicity is soft pedaled.

The second article details a symposium of Madoff clients, and centers on the specific victimization of Nobel Laureate Elie Weisel. The article begins with Mr Weisel’s characterization of Madoff as a “psychopath”. And its clear intent, given in its title, “Elie Weisel Levels Scorn at Madoff”, is to give the aggrieved customer his due. But here the tragic levels of meaning become significant . Weisel’s reknown derives from his survival of the Holocaust; yet his economic tragedy, like that of so many of Madoff’s clients– results from the actions of a community member. While the sensation of this story is in its elements of ruin, its pain is in the tearing of a durable social fabric by one of its own members.

We read some of what is on Mr. Weisel’s mind; as well as his view of Madoff. But unknown and unprobed is what is and was on the salesman’s mind.  Simple greed? Power? Betrayal of the customers’ unquestioning trust? Of course, an expert on the panel reminds us that the buyer must beware—  due diligence is the password of the moment. We are reminded that the customer (and his financial advisors) must be vigilant.

But for this customer, much more than personal savings and a foundation’s endowment have been stolen. Perhaps equally terrible is that fundamental trust and belief in the integrity of the trusted “other” have been shaken— an “other” only one degree of separation apart from a trusted friend.  Due diligence seems a feeble defense when we consider how many of our actions are based simply upon our trust in knowing experts (though perhaps not in the presentations of annual reports…).

These articles on greed and criminality are the human interest stories of our day: when more generalized consumer faith in banks and bank regulators have been shaken: and worse—– real damage has been wrought to 401ks and life savings of us all. While the Madoff affair is epic, for the average investor, almost  as much damage has been inflicted by index funds. Underlying each is a terrible realization: that the trust necessary to risk the transaction—that decisive element in the customer’s saying, “yes”— is itself to be questioned rather than affirmed.

The Saks lady profited while acting deceitfully, as did her customers. Mr Weisel and Madoff’s legion of clients believed themselves to be in the black until loss was total. Two variations in the basic transaction we make each day between ourselves and others and ourselves and instititutions.

Embedded in trust, the terrible effects of its erosion expose our multiplicities of motivation to full public view and cause us to reapproach both ourselves and our culture in terms of entitlement, acquisition, and loss. Good will, greed…..effects both anticipated and unanticipated…. will continue to embroider our thinking about trust and interpersonal business transactions. It is hoped that we will emerge from these experiences, wiser.

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