Reaction Paper OneBased on of empirical research findings, Granovetter states, people’s social context and social networks matter for behavior and economic outcomes (Lecture). For Bernie Madoff, economic life was embedded in his social relationships which made it possible for him to manage to swindle 65 billion dollars of investors money from around the world. Madoff was not always so affluent, once he made his first dollar, he used it to start trading stocks, but it all started with the social relations responsible for producing the trust Madoff needed (Granovetter). Madoff made his way to richer areas to attract richer clients with more cash, but he was not making the big money he wanted.

Madoff chose rich country clubs, he built weak network ties (Granovetter) with richer investors and became a part of these clubs’ close community, befriended them, to gain their trust. He became a pillar of their community (P.1) and created a regular set of contacts between individuals, groups, and organizations. Clients fell for his charisma and charm, he and his wife, Ruth, never chose or made it of importance to be “social climbers” and in part of this characteristic, it made people want to be more involved with them and created this “hard-to-get” strategy which enabled Madoff to carry central control with investments. Some wealthy investors joined the country clubs he was involved with in hopes that they would potentially become a part of Madoff’s investments. But Madoff was very particular about who he worked with, this was also a reason as to how his Ponzi scheme survived so long, he used he refused clients who asked too many questions, created secrecy within his own company to deter any speculations and rid of who he could also not trust (search embeddedness).Such Ponzi schemes usually end rather quickly, but Madoff managed to keep his going for decades by avoiding withdrawals from investors.

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Madoff avoided investors likely to withdraw money back soon, which also contributed to this “hard-to-get” strategy. There was always a continual investment, Madoff built up a sense of elite that attracted investors to his company, a plethora of investors continually willing to invest, he just needed to pick the right ones within (his) network exchange. This included a segment of the wealthy Jewish community and Jewish charitable organizations. Such crimes would not have been possible without the social interactions and client trust Madoff gained, Granovetter’s main point is that trust is central and Madoff made it possible through the social relations within his communities which created the stainless persona of integrity and trust for Madoff (Pg.1). Trust was built between Madoff and his first initial investors, but soon people willingly, without question, started handing over large sums of money. This led to the beginning of Madoff’s hedge fund, he gave clients 12% back on their investments every year, without fail. This was incredibly attractive and impressive given the instability of the stock market and only increased Madoff’s potential future networks.

 Philanthropy, family, and finance were all of equal importance, he had a strong kin network involving his sons and other family members who had been brought into the business, but Madoff was finally exposed, by his own sons. He was defeated and could no longer keep up with the economic climate, people needed to make withdrawals but of course, the money wasn’t there.