Odd ideas will not help you win friends but they might help you beat the odds

Harry Markopolos spoke hesitantly. He wore badly fitting suits. He was not at all like Bernie Madoff, who wore immaculately tailored clothes.

Madoff spoke imperiously. He was fabulously wealthy. He worked from a plush office tower in Manhattan. He was on the board of leading financial industry associations. He socialised among the rich elites of the Hamptons and Palm Beach.

Markopolos had grown up far from anyone of influence beside a lake in Pennsylvania. His family ran fish and chip shops.

Markopolos thought Madoff was a crook running a scam known as a Ponzi scheme. He told the US Securities and Exchange Commission in 2000. And when they did not believe him he told them again – in 2001, 2005, 2007 and 2008.

Near the end of 2008 Madoff was arrested, though not because of anything done by the SEC. Madoff had been running a Ponzi scheme. Investors lost $50 billion.

A Ponzi scheme pays dividends to old investors from the deposits of new investors, who are paid dividends from the deposits of still newer investors – until there are not enough of those, or until someone with authority is persuaded of what is going on and is willing to act.

The story of Markopolos and Madoff is told by Malcolm Gladwell in a book called Talking to Strangers. All the facts quoted here come from there. You should treat the inferences drawn from them as mine. Gladwell might disagree with some.

Gladwell wrote: “In Russian folklore there is an archetype called the Holy Fool. The Holy Fool is a social misfit – eccentric, off-putting, sometimes even crazy – who nonetheless has access to the truth. Nonetheless is actually the wrong word. The Holy Fool is a truth-teller because he is an outcast. Those who are not part of existing social hierarchies are free to blurt out inconvenient truths or question things the rest of us take for granted.”

Markopolos was an outsider. He acted strangely. If you want to know how strangely you will have to read Gladwell’s book. Perhaps, though, it helps to be strange – to spot fraud, and for some other things, such as being good at betting.

In the late 1980s Markopolos worked for a hedge fund. They asked him to copy Madoff’s strategy. Madoff was reporting spectacular profits. Markopolos could not figure out what Madoff’s strategy was.

Madoff claimed to be trading derivatives. Markopolos said: “I was trading huge amounts of derivatives every year. So I called the people that I knew on the trading desks: ‘Are you trading with Madoff?’ They all said no. Well, if you are trading derivatives, you pretty much have to go to the largest five banks to trade the size that he was trading. If the largest five banks don’t know your trades, then you have to be a Ponzi scheme. It was that easy. It was not a hard case. All I had to do was pick up the phone, really.”

This is an important point, I feel. Whenever something bad happens there will be somebody somewhere who warned of it. There is a negative theory out there about everything. Markopolos, though, did have a good reason to accuse Madoff of running a Ponzi scheme. The numbers did not add up.

Gladwell says it is better to trust everyone than to doubt everyone, and that most people do trust everyone. I wonder whether in some settings it is best to question what you are told – accept it if the answers make sense but reject it if they do not. Doing that would make you unusual.

Working for the Racing Post I have been lucky enough to meet a few successful gamblers. They were all nice people. It was a pleasure to be in their company. They did not behave oddly. But they could think oddly.

In almost every market on almost every event most bettors go the same way. More often than not it is the wrong way. Bettors collectively lose billions of pounds a year.

Nearly all bettors are likeable people. When you are able to again, you would rather spend a night out with one of them than with a social outsider like Markopolos.

Bettors tend to think that teams who have been getting good results will carry on getting good results. They think that teams who have been playing badly will keep playing badly. They think the players everyone is praising this week are the players everyone will be praising next week. It all sounds perfectly plausible. And many times it is right. But not enough times. Accepting things at face value seems normal. When betting it is normal and wrong.

Liverpool made a good choice but not the obvious choice

If you heard pre-season that Liverpool were going to sign a player from Wolves, who would you have said they should sign?

For most people, Diogo Jota would have been third choice – behind Adama Traore and Raul Jimenez. And then only if they had been told Liverpool wanted a forward.

Jota started the season as a substitute, and may become one again, but he made such a big impact from the bench that now he has been included from the kick-off in several Liverpool games. Pundits have described Jota as a “game-changer” delivering “incredible” performances.

Many seasons the best transfers are not ones that were heralded with a fanfare. And vice versa. Some of the worst transfers are ones that were trumpeted loudly.

Time for a change at the FA

Football Association chief executive Mark Bullingham said an ex-player “might not be the right person” to become chairman of the organisation because they would have to “run a board of a £450 million business”. Businessmen were the previous chairmen and they did not make a great job of running this £450m business.

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