A VIEW FROM
In 1990, I was doing a recording with Adam Faith, the pop star.
Adam fancied himself as an entrepreneur and began talking about investments.
GGT had become a public company and I had money sitting in the bank.
Adam said I was nuts – you don’t leave money in the bank, you put it to work.
He had all his money with an expert and I should come and meet him – all Adam’s famous friends invested with him.
So, after the recording, Adam took me in his Rolls-Royce to see the expert.
He had impressive offices in the West End, smoked a cigar and offered me a glass of champagne – he told me about his impressive list of famous clients. The whole thing made me very uncomfortable. It didn’t feel professional, it didn’t feel business-like. So I said I’d think about it, and left it at that. A few months later, I saw in the Evening Standard that the company had gone bankrupt and “the expert” had been arrested.
He was £34m in debt (around £75m today) and looking at 10 years in jail for dozens of counts of fraud.
Among the famous people who lost a fortune were Michael Winner, Sebastian Coe, Frederick Forsyth and Adam Faith.
People invested with him because of all the other famous people doing it. They didn’t want to be left out. Stephen Greenspan was professor of psychology at the University of Colorado. He was fascinated by what makes people gullible. He wrote a book: Annals of Gullibility: Why We Get Duped and How to Avoid It.
His book was a comprehensive study on the subject of gullibility, published in 2008.
Two days after it was published, he found he’d been defrauded of most of his life savings by Bernie Madoff.
Madoff ran the largest ‘Ponzi’ scheme in history and his clients lost about $18bn.
Everyone trusted him because of his famous clients – noone wanted to be left out.
Famous people who lost a fortune included Stephen Spielberg, Kevin Bacon, John Malkovich and Jeffry Katzenberg.
Isaac Newton was probably the most intelligent person who ever lived.
In 1720, he invested in the South Sea Company, the hottest stock in England.
When he’d seen 100 per cent growth in the value of his shares, he cashed them in. He walked away with £7,000 profit (around £1.3m today). But everyone continued buying the stock and he didn’t want to be left out. So he used every penny he’d made to buy more shares. When the crash came, he eventually lost £20,000 (nearly £ 4m today).
As he said: “I can calculate the motion of the heavens but not the madness of man.” If Newton is gullible, what chance have the rest of us got? So we shouldn’t be surprised when otherwise intelligent people in our business are gullible.
If everyone else is shifting their budget online, they don’t want to be left out.
Even though, as Bob Hoffman shows, 43 per cent of mobile ad impressions are fraudulent.
Even though it’s accepted that only 52 per cent of web traffic is human.
This from a study of a billion ad impressions across a thousand mobile apps.
A further study shows that 88 per cent of marketers confirm online advertising has no measurable impact on their business.
But despite this, everyone does it because everyone does it.
The rational mind might fear failure, but the emotional mind fears being left out.