Greed has been the most notable trait of those involved in this world, famously observed on Wall Street during the 1980s. This insatiable desire for wealth and success drove the formation of groups like the Billionaire Boys Club, led by Joe Hunt, who embodied the ambitions of young men eager to make their fortunes. Time and again, history has proven that greed is a recipe for personal disaster. It can produce massive and systemic swindling that harms millions of Americans.
Finance and economics experts tell us that greed exploits human emotions and creates an overall environment that breeds predation. Anat Admati, a professor at Stanford Graduate School of Business, argues that greed is simply the desire to acquire. It’s the other side of the equation—the desire to buy and use stuff. As David Smith, a professor at Pepperdine Graziadio School of Business, reminds us, greed tends to show its head in various contexts. This insatiable greed can lead individuals to commit fraud or look for ways to avoid financial misfortune.
The Dark Side of Ambition
The 1980s unleashed a firestorm of greed on Wall Street. Tens of thousands of young financiers chased after that wealth, frequently turning a blind eye to the broader impact—or immorality—of their work. Joe Hunt and his Billionaire Boys Club personified this zeitgeist, their fantasies of unimaginable wealth propelling them ever onward. This ambition turns into moral vagueness when the quest for riches becomes an obsession.
People are motivated by all kinds of different things, but one of those is to obtain riches,” explained David Smith. This profit-motive can lead to outcomes where short-term financial gain outweighs long-term sustainability or social justice. The promise of easy returns can obscure the truth and tempt anyone, including the most sophisticated investors, into a position where they can be easily defrauded.
This pattern hasn’t disappeared, rather it has persisted and resurfaced in contemporary financial mechanisms. The Enron accounting scandal and Bernie Madoff’s Ponzi scheme serve as stark reminders of how far greed can lead individuals astray. Madoff, in particular, bilked thousands of investors out of billions of dollars, ultimately highlighting the destructive potential of unchecked ambition.
Cryptocurrency: A New Frontier for Greed
Unfortunately, in recent years, the launch of cryptocurrencies has opened all sorts of new doors to investment and fraud. In 2023, victims lost more than $5.6 billion to cryptocurrency-related scams. This figure, which comes from an annual FBI report, is a shocking 45% increase over the prior year. Experts caution that this supposed decentralization and independence means cryptos are especially vulnerable to manipulation.
Hilary Allen, a law professor at American University, warns that the seductive promise of cryptocurrencies tends to obscure serious risks. She argued, critical as always of what has no intrinsic worth but for her one exception. You think you’ll be able to sell it to someone else down the line for more than you paid for it originally. This speculative nature can easily lead investors to ignore the scams hiding in plain sight.
Recent cases exemplify this trend. Ramil Palafox diverted more than $57 million in investor money into personal expenses including the purchase of luxury assets including Lamborghini cars. The Securities and Exchange Commission (SEC) recently announced that they charged an individual with orchestrating a crypto-based fraud scheme. This elaborate scheme scammed a jaw-dropping $198 million from unsuspecting investors. For example, a Georgia-based company was recently indicted for operating a mind-boggling $140 million Ponzi scheme. This case is a reminder of the many insidious ways that greed continues to morph.
Seeking Guidance Amid Temptation
As financial landscapes change, experts urge caution and thorough research, including following the advice of a trusted, experienced professional, before choosing to invest. As David Smith reminds us, people can’t afford to be siloed on financial issues. Consult and Communicate “Engage with a financial counselor, friends and family—even spiritual leaders. Many times even the most damaging financial decisions are made in a vacuum,” he said.
Greed can overwhelm even the best intentions, so it is imperative for insiders to stay grounded by the eyes of outsiders. Smith recommends, “Make sure that you’ve found yourself some very sound financial advice before you rush into anything.” This piece of advice is especially important as young people chart a course through a world that is growing more attractive but more dangerous every day.
That’s why it’s important to understand and recognize the psychological drivers behind greed in order to inform personal and professional choices. As an economist, I am trained to look really hard at incentives. They are incredibly powerful in shaping human behavior, Smith continued. Maybe not to the extent of $10,000, but by recognizing these factors, investors can be better prepared to overcome temptation and prevent themselves from being scammed.