Several great Damon Runyon stories take place in a little speakeasy called the Gingham Shoppe run by a guy named Good Time Charley Bernstein. The running joke is that neither Good Time Charley nor any of his friends ever drink the whiskey he sells. That rotgut is strictly for customers. When Charley and his friends want a drink, they go someplace else.

The Good Time Charley Theory of Customer Relations came to mind when we learned that Goldman Sachs had shorted collateralized debt obligations in its own account at the same time it was promoting them to its investors. That is to say, when the firm was betting its own money, it took positions directly opposite the advice it was giving its customers. And apparently Goldman wasn't the only firm that did this.

How surprised should we be by this, and what can we do about it?

The question takes us back to Adam Smith: "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest." Now, we should add your broker. Put simply, your stockbroker is not motivated by a desire to see that your kids have money for college. He is motivated by a desire to see that his kids have money for college.

The same principle applies to your lawyer. Some time back, two friends of mine served as counsel to co-defendants in a complex litigation. Both clients had deep pockets and deeply entrenched positions. The case went up on appeal several times, and my friends billed lavishly on the case for years. Finally they won.

If you think my friends were happy about winning a long, difficult case, you haven't been reading closely. When it was over, they had to go back to much less glamorous and far less lucrative work. Winning was better than losing, but not nearly as good as continuing to litigate would have been.

Another law school friend represented the family of a man who died in a fiery car crash. I remember talking with him one night while he was waiting for the results of tests that would show whether there was smoke in the dead man's lungs. If not, he died instantly in the crash. If there was smoke, he was burned alive. Because juries are likely to award more money to the families of victims who were burned alive, and because my friend was working on a contingency fee ... let's just say that my friend's motivations and incentives did not line up perfectly with those of the man's family.

This is not because my friends are crooked or sadistic. The same is true of your doctor, your dentist, your butcher and your barber. You are not their friend; you are their customer. They are not the same. So the answer to my first question is: We should not be at all surprised by the behavior of Goldman Sachs.

As to the second question, there are three ways we can protect ourselves. One is to live in communities where we know everyone and only do business with people we know. Join the Amish.

The second way is to support governmental regulation that monitors fraud and punishes crooks. That's what government is for — from meat inspectors to Securities and Exchange Commission regulators. Yes, it costs money to regulate business, and yes, some regulations are silly or pointless and some are onerous, burdensome and intended solely to harass. And some regulators are stupid or corrupt or both. But if you reduce government regulation, you get increased fraud. If you deregulate business, you get Bernie Madoff, Enron, E. coli and worse.

The third way is to remember that the best defense against fraud is skepticism. When the voice on the phone tells you he's got an investment that will double your money in 30 days, ask yourself: "Why is he calling me? If I knew about an investment that would double my money in 30 days, would I call him?"

There are two philosophers whose observations on this subject are worth keeping in mind. The first is B.B. King: "Nobody loves me but my mother, and she could be jivin' too." The second is Lily Tomlin: "Remember, we're all in this alone."