WHY WE FALL FOR SCAMS

Our need to be­lieve in mir­a­cles and magic makes us sus­cep­ti­ble to trick­sters, writes

CityPress - - Business -

Iwas re­cently watch­ing the Car­bonaro Ef­fect, a TV show where a ma­gi­cian plays prac­ti­cal jokes on the pub­lic. In this par­tic­u­lar episode, Michael Car­bonaro was im­per­son­at­ing a shop as­sis­tant in a toy store and, as cus­tomers came to the till, he demon­strated some amaz­ing toys.

In one demon­stra­tion, he turned a clay frog into a real one by adding wa­ter and, in an­other, a sticker of a fish came alive when added to a fish bowl. He also man­aged to blow glass bub­bles from a chil­dren’s bub­ble bot­tle.

The stunned cus­tomers im­me­di­ately pur­chased the toys, even ar­gu­ing over who got the last box – be­cause, of course, he al­ways tells them that th­ese are the last items avail­able.

None of them ques­tions what they are see­ing right in front of their eyes. They saw it hap­pen, so it must be true. One scep­ti­cal woman did ask to blow the bub­bles her­self, so Car­bonaro handed the bot­tle over and made a quick es­cape.

No doubt the di­rec­tor edited out peo­ple who saw right through the trick, but there were suf­fi­cient be­liev­ers to make for amus­ing tele­vi­sion.

This struck a chord with me be­cause it is ex­actly what hap­pens when it comes to in­vest­ment scams. Peo­ple so badly want to be­lieve in easy money that they be­lieve in the im­pos­si­ble. Why did the in­di­vid­u­als in that toy store so eas­ily be­lieve a sticker could ac­tu­ally turn into a fish?

Firstly, they were not ex­pect­ing a magic trick – they be­lieved Car­bonaro was just a shop­keeper, so they weren’t watch­ing out for skul­dug­gery. Se­condly, they clearly had no com­pre­hen­sion of sci­ence and why it would be im­pos­si­ble for a pa­per fish to come alive. Fi­nally, I think that we all in­her­ently be­lieve in mir­a­cles; that there is more to this world than we re­ally un­der­stand – the very prin­ci­ples of re­li­gion and prayer are based on this be­lief.

The same ap­plies to in­vest­ment scams. Of­ten you are in­tro­duced to them via a friend who has made money, or claims to have made money, out of the scam. If it was just some ran­dom per­son knock­ing on the door who had a shifty look in their eyes, we would be a lot less likely to in­vite them into our homes, let alone give them money.

Then there is the fact that many peo­ple do not un­der­stand how money works – why a pyra­mid scheme is sim­ply not vi­able, and how sim­ple maths will show that it will im­plode; why any rate of re­turn above that of in­ter­est paid by a bank would in­her­ently carry risk; or why, just be­cause a pas­sive in­vest­ment busi­ness has lots of com­plex spread­sheets, it doesn’t make it an in­vest­ment.

There is also a be­lief that we de­serve bet­ter and that maybe this time our guardian an­gel is smil­ing down on us, and we are one of the lucky few who will be blessed with the knowl­edge of this amaz­ing scheme that will turn us into mil­lion­aires.

It is this be­lief that can make us blind to the ob­vi­ous. So, if you do not want to fall vic­tim to one of the hun­dreds of scams out there, re­mem­ber this:

Peo­ple lie for gain: Do not be­lieve every­thing you hear or read – es­pe­cially through so­cial me­dia. Tes­ti­mo­ni­als can be in­vented or paid for. Pic­tures can be taken next to he­li­copters or fancy cars – it doesn’t mean they are ac­tu­ally owned by the per­son in the pic­ture.

You are not stupid: If you do not un­der­stand ex­actly how the scheme makes money, it is not be­cause you are stupid, it’s be­cause there is noth­ing to un­der­stand. Keep ask­ing ques­tions – if the an­swers sound vague or if you are put un­der pres­sure to “buy now”, walk away.

Get-rich schemes are not mirac­u­lous: Mir­a­cles may ex­ist, but not in get-rich-quick schemes, un­less, of course, you are the per­son sell­ing the scheme. Un­for­tu­nately, many scam­mers use re­li­gion and prayer to con­vince peo­ple of their “hon­esty”. Just be­cause some­one can quote verses of the Bible or claims to be re­li­gious, it doesn’t mean they are.

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