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History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff Hardcover – September 7, 2010


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Product Details

  • Hardcover: 398 pages
  • Publisher: Wiley; 1 edition (September 7, 2010)
  • Language: English
  • ISBN-10: 0470601809
  • ISBN-13: 978-0470601808
  • Product Dimensions: 9.1 x 6.3 x 1.2 inches
  • Shipping Weight: 1.4 pounds (View shipping rates and policies)
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (8 customer reviews)
  • Amazon Best Sellers Rank: #1,213,142 in Books (See Top 100 in Books)

Editorial Reviews

Review

Greedology: Why greed is good 
"the book... chronicles some of the biggest and perhaps, most interesting securities scandals ever." bit.ly/91vGcp
--Economic Times

Bloomberg.com
Gekkos Get Tips on Ponzis in 'History of Greed': Books
"the diversity of the scams still boggles the mind"
"a veritable guidebook on how to build your own financial weapon of mass destruction."
bit.ly/cXKMeq
--Bloomberg

"the book analyses the philosophical and psychological aspects of greed-an important topic, seldom discussed." --Phil's Stock World

The Street.com Interviews David Sarna
bit.ly/aNUxdt
--TheStreet.com

Wall Street's Greedy Legacy
Yahoo Finance yhoo.it/aGsgaf
--Yahoo Finance

‘It is sure to make any reader gasp at the sheer inventiveness and persistence of the world's fraudsters.' (Irish Independent.ie, january 2011). ‘…a potted history of human greed is indeed to be found here.' (Diplomat, February 2011).

From the Author

In my book, History of Greed I pointed out that at least $11 trillion was lost in 2008 alone.
Greed had a lot to do with it. 

Compared to these cumulative losses, Madoff, causing losses of $64 billion or less, was a piker.

Mostly, the huge losses in household net worth are due to the sharp drop in housing prices.  

To look at why, here is an excerpt from my book, History of Greed, reprinted with the kind permission of John Wiley & Sons, Inc.

What happened?
Fraud and Greed had a lot to do with it.
In general, pundits, seeking simple answers, blamed it all on sub-prime mortgages, or on credit default swaps, or on auction-rate securities, or whatever, but these answers are unsatisfying. They are at once both too complex and far too simplistic.  For the real explanation of what happened, however, we need to look to the experts, to history, to literature and even to my Grandma Rachel.
My Grandma Rachel
Grandma Rachel Leah Horowitz, born on Christmas Day in 1893 at the end of the 19th century, was a very wise lady who lived until the age of 92. Her husband had died young of esophageal cancer when she was only 39, leaving her with nine children and a run-down liquor store. Overcoming many obstacles, she raised her children well, and built up the store into a very successful enterprise where she bought and sold wine, whiskey, liquors, and schnapps. She liked the business, she said, because the bottles were real. You could hold them, smell them, drink from them, and enjoy them.
There were other businesses in London that didn't make anything or sell anything but just traded paper, which turned into more paper. "This is not a real business!" she used to say. "It is luftgeschaeften," which, in German and in Yiddish, means "air business" or "ethereal business." Someone who engaged in luftgeschaeften she called a luftmensch (an "air" person or schemer), whom she would have nothing to do with.  My beloved Grandma Rachel Leah lived through the Great Depression, and survived her home being bombed by the Nazis during The Blitz.
Little did she know back then how amazingly prophetic her words would prove to be for the 21st century. What happened in the United States of America was essentially the result of all the luftgescheften run by the luftmensch  financial wizards who turned money into paper and then supposedly back into even more money, siphoning off outrageous profits in the process. When the music stopped, the entire house of cards suddenly collapsed, and all that was left, of course, was luft (air) and worthless paper.
Tevye the Dairyman
In her dislike of luftgescheften, my Grandmother, who was steeped in Yiddish literature, was (at least subconsciously) influenced by the Yiddish literary giant, Sholem Aleichem (the literary pen-name of Sholem Rabinovitsh). He, unforgettably, wrote about luftmenschen in his novel, Tevye der Milkhiker (Tevye the Dairyman). First published in 1894, it's known throughout the world, largely because of its adaptation into a play by Arnold Perl called Tevye and his Daughters, which became the famous Broadway musical and film, Fiddler on the Roof.
Menachem-Mendl, a distant relative of Tevye, the (impoverished) dairyman, is a luftmensch  sans pareil. He begins talking to Tevye, who made a little bit of money helping out a wealthy lady, about stocks and options in a way that Tevye, a simple man, can't possibly understand. Then, he gets to his point. Menachem-Mendl promises Tevye that he can turn 100 rubles into 1,000, and Tevye would be a fool to forfeit the opportunity. Tevye agrees to give Menachem-Mendl his last hundred rubles in order to enter into a "shutfus," or "partnership," with him--"I put in the money, and Menachem-Mendl put in the brains"--with the two of them splitting the profits (and thereby neatly sidestepping the age-old Jewish prohibition against lending with interest).
You know what happens. It was all lost. Sholem Aleichem also describes in detail Menachem-Mendl's ultimate failure at various other ethereal (luft) money-making schemes--such as his attempt at selling "Londons," an apparent reference to a currency speculation, which Menachem-Mendl describes to his wife as "a very refined substance" in that "you can't see it." Classic luft.
Luftgescheften Then and Now
One of the early documented examples of luftgescheften, which presages many other episodes was recounted by Josseph de la Vega, a Portuguese Jewish trader who emigrated to Amsterdam to avoid persecution from the Spanish Inquisition. He famously wrote in 1688: "This year too was a year of confusion for many unlucky speculators declared in one voice that the present crisis was a labyrinth of labyrinths, the terror of terrors, the confusion of confusions..."  He could just as well have been speaking about the state of the national and global economy in 2008.
The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to Claudio Loser, a former International Monetary Fund director. 
"This crisis is the first truly universal one in the history of humanity," former IMF Managing Director, Michel Camdessus, said at an ADB forum in Manila. "No country escapes from it. It has not yet bottomed out."
Savvy investor, George Soros, said that the world financial system has effectively disintegrated, and that there is as of yet no prospect of a near-term resolution to the crisis. Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union. He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.
"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."
Who knows what other "unthinkable" turbulence is yet to come?

The economy collapsed due to derivatives, strips, collateral debt obligations, credit default swaps, auction rate securities and all manner of exotic financial instruments that dominated the financial markets, beginning in the '80s in a feeding frenzy that reached its apex during the two-terms of George W. Bush, the 43rd president of the United States. 
What happened is yet another chapter in the sad but recurrent story of greed gone wild. Greedy financial wards, promoters, investment bankers and the rapacity of their cohorts and all-too-willing accomplices were all allowed to run unchecked by a complacent government.
Society apparently forgot the famous words of Hank Rearden, the hero in Atlas Shrugged, the great novel by Ayn Rand (1957), "I work for nothing but my own profit -- which I make by selling a product they need to men who are willing and able to buy it."  Instead, of making and selling products people need, we in the United States mostly imported other people's products and we sold luft. Now, we all must pay the price. Selling luft honestly is bad enough. Selling it dishonestly just makes things worse. As an anonymous blogger wrote, "Piracy made lots of money. Slave trading made plenty of money. The Robber Barons made money. The problem is that it's somebody else's money - taken, not made.
As the Financial Times remembered, the famous economist John Kenneth Galbraith once proposed a measure of the economic cycle called the "bezzle"; it is a measure of the inventory that has been purloined from investors. n fat years, the bezzle grows as auditors relax. In the lean years, it shrinks as investors become cautious. The allegations against Bernard Madoff, and now Sir Allen Stanford, suggest the bezzle is large - but shrinking.

More About the Author

David E. Y. Sarna is CEO of WoodallTech, which makes hydrogen on demand by splitting water. He is the author or co-author of six books, including Evernote For Dummies, PC Magazine Windows Rapid Application Development, Implementing and Developing Cloud Computing Applications, and History of Greed, 120 articles published in professional magazines, and national newspapers and he holds several patents.

Mr. Sarna has over thirty-five years of experience as a management consultant and as an executive of high-technology companies, and is Managing Director of Hendon, Stamford Hill & Co., Inc. (HSH). His blog, EyeOnTheCloud.com (SM) is devoted to On-Demand and Cloud Computing and GoogleGazer.com (SM) tracks the comings and goings of Google, its friends, and its enemies. He also has experience in detecting and avoiding financial fraud. His popular blog, GreedWatcher.com (SM) covers financial greed, including securities fraud, money laundering, insider trading, Ponzi schemes, pump and dump, and related white-collar crime.

Mr. Sarna has been involved in several start-up companies, primarily in the areas of technology, biotechnology and medical devices. He has been a director of publicly traded companies specializing in computer technology and has served as chairman of audit and compensation committees, as well as in advisory position to the boards of directors of public, private, and not-for-profit boards of directors. Prior to founding HSH, Mr. Sarna served on the Advisory Board of Hudson Venture Partners, a New York venture capitalist.
He has been a board member, director and executive officer of the Ramaz School, and on the Board of Yavneh Academy, both not-for-profit schools.

Mr. Sarna was founder, Chairman, Chief Executive Officer, and a director of ObjectSoft Corporation, a publicly-traded company which he founded in 1990, and Image Business Systems Corporation (IBS), a software company specializing in document image processing which he founded in 1988 as a spin-off of International Systems Services Corp. IBS was the first large-scale client-server software for document image processing. IBM and Warburg Pincus were major investors in IBS, Both companies were listed on the NASDAQ.
Prior to founding Image Business Systems Corporation, Mr. Sarna was Executive Vice President and a co-founder of International Systems Services Corp. (ISS), a management consulting firm. There, he architected ISS Three, a computer capacity planning tool which ISS successfully marketed and ultimately sold successfully to UCCEL Corp., now part of Computer Associates. ISS was successfully sold to a public company.

Earlier in his career, Mr. Sarna was employed by Price Waterhouse & Co., as a management consultant, and by Honeywell and IBM in engineering and sales capacities.
Mr. Sarna holds a BA degree cum laude with honors from Brandeis University and did his graduate work in Computer Science at the Technion - Israel Institute of Technology.

He is a certified systems professional, a certified computer programmer and certified data processing auditor. He is the author of the forthcoming History of Greed, to be published by Wiley in Spring 2010, and the forthcoming Implementing and Developing Cloud Computing Applications to be published in 2010 by Auerbach Press. He is co-author, with Mr. Febish, of PC Magazine Windows Rapid Application Development (published by Ziff- Davis Press in 1994), which was translated into several languages, four other books and over 120 articles published in professional magazines as well as The Washington Post, The New York Daily News, and The New York Post. He also holds several patents in the fields of bar coding and kiosk technologies.

Mr. Sarna has been honored by the Computer Measurement Group, Inc., by IBM and by Microsoft Corporation, where he was a founding Regional Director of the Microsoft Developers Network.
He is a popular speaker and seminar leader and has appeared on television many times, including multiple national appearances on the Fox Network, CNN, and MSNBC.

Customer Reviews

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Most Helpful Customer Reviews

Format: Hardcover
History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff by David Sarna is a comprehensive history of financial fraud through the centuries and the author aims at teaching the readers lessons on how to spot attempted financial fraud and how to wisely invest, avoiding such fraud.
Madoff, as becomes clear in this book, was not the first financial adviser that used the naivete of investors to defraud them and put more money that most of us can comprehend into his pockets and Madoff will likely not be the last. This book is a series of more than thirty chapters that guide the reader through the history of financial fraud. In between the history lessons, the author includes additional lessons dealing with principles of finance such as insider trading. The reader gets a chance to analyze the various situations and decide how they would act and what is considered legal and when the line is crossed and financial fraud starts.
And while this book is a history of financial fraud, it is firstly intended to be a means to teach the reader the lesson on how to spot financial fraud and to apply the law of investing to situations he may encounter when talking with advisers about investing.
This is an excellent book, both as a history of financial fraud and as a how-to book on aiding the reader in spotting financial fraud.
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3 of 4 people found the following review helpful By Mylinda Elliott on August 23, 2010
Format: Hardcover
History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff

The History of Greed: Financial Fraud for Tulip Mania to Bernie Madoff by David Sarna was an informative and enlightening book to read. I don't typically read books like this but was curious about everything that happened. The book has a detailed index and is thoroughly annotated.

It is simple enough for someone like me to be able to understand what happened and why. The author uses stories and descriptions to make a subject matter that is really complex something I could imagine, see, and feel.

At the same time there are complexities to his explanations that will interest and engage any student of economics and history. If you believe, like I do, that we can learn from our mistakes, people can use this as an important addition to their library. The author goes back through history to describe fraud and the many ways people are cheated.

The descriptions are sometimes hard to swallow but after reflection the reader will realize that they are on target. Whether exploring human motivations or actual criminal behavior the author leads you through what happened and how we got here.

Another technique Sarna uses is case studies. A case study gives a total view of what goes on when a person is being cheated and how. I particularly like the case study of `Crazy Eddie'.

Other chapters explain the complexities of the stock market. It also explains the difference between what instruments that were used and how they should have been used. The many, many ways they were misused are explored in different chapters. Finally at the end of the book there is an afterword devoted to what is our response has been to these issues.
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3 of 4 people found the following review helpful By bookworm on August 21, 2010
Format: Hardcover
History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff is a tour de force on the history of financial fraud by David Sarna.
The author in brief, on topic and focused chapters lays out the history of financial fraud over the last three centuries.
The author draws heavily in his lessons on his family and culture, but that makes this book highly readible. It is not a dry, overly scientific business treatise. But an easy to read, carefully researched and well organized chronology on how financial fraud did not originate with Madoff, but has a history and successful history at that.
Besides a history lesson, every reader of this outstanding book should in keep in mind the lessons it teaches. Foremost, if it sounds to good to be true, do not invest, but take your money and run. Because of you do not, the so-called financial wizard that promises these sure bet investment will run with your money.
I highly recommend this book to any reader who is planning to invest in the stock market and may play with the idea of seeking advice from third parties on investments. It has been a booming business for three centuries, why should financial fraud stop now. So investor, better watch out.
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By E. Corso on February 9, 2014
Format: Hardcover Verified Purchase
Excellent book. Good research and explication of the nature of business in the US and the world. yada, yada, yada
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