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Hello, and welcome back to Inc.'s 1 Smart Business Story. Why are intelligent people so likely to fall for a scam artist’s tricks? J Mase III, a self described “scam artist junkie” says scammer don't deceive us; they make us deceive ourselves.
Analyzing famous cases like the Margaret Keane art fraud, Theranos, and Anna Delvey, he shows how our cognitive biases work against us. We believe information matching our existing views (confirmation bias), assume wealthy people are financially smart (halo effect), and accept things we desperately want to be true (wishful thinking). Find out how these self-deception traps work and whether you're falling into one right now.
In this piece you’ll find:
Ways to hone your sense of skepticism
Why investors are likely to make big bets on scam artists
How and why we form cognitive biases
Here’s Why Smart People Get Fooled by Manipulators and Scam Artists
BY MINDA ZETLIN, STAFF REPORTER
A clever TED Talk explains why some scams are so effective.
How do scam artists fool people out of hundreds of millions of dollars? We may believe that victims of deception are dumber than the rest of us, but the evidence suggests they aren’t. The truth is, most of us can be fooled if the deceiver knows how to play on our own cognitive biases. In fact, we may do the hard work for them—we may deceive ourselves.
Though he doesn’t quite come out and say it that way, this is the subtext of a fascinating TED Talk, “Three money lessons from infamous scam artists” by J Mase III, a transgender artist and educator. Mase is fascinated by scam-artist lore, and his talk analyzes three famous cases, uncovering the false beliefs that can lead intelligent people to get sucked in. By the end of the talk, he connects the dots between these famous scams and the deceptive practices that contribute to economic inequality throughout our society. Whether or not you agree with his larger point, it’s well worth considering the lessons you can learn from the stories he tells.
1. We believe information that aligns with our preconceived ideas.
If you already believe that your company’s new marketing plan is a great idea that will more than pay for itself and someone shows you a financial projection in which the campaign leads to substantially higher revenues, you might be inclined to believe that forecast simply because it matches your own. But let’s say someone else shows you a different projection in which, despite the campaign, revenues stay flat. You’ve already concluded that the campaign will raise revenues, so you might dismiss that second projection as wrong. You might not take the time to explore why it could be correct.
That’s confirmation bias, and it happens to all of us. In the 1960s, Margaret Keane painted pictures of people and animals with large, sad eyes. Her husband Walter sold them as his own paintings, telling her no one would buy them if they knew a woman had painted them. Eventually, she divorced him and announced that the paintings were hers. But when he claimed otherwise, USA Today believed him and published a story saying Margaret was the fraud. She eventually proved her point when a judge ordered both Keanes to paint a picture in court. She completed hers in 53 minutes; he refused to paint at all, claiming that his shoulder hurt.
Mase says people believed Walter because they thought of artists as male—he looked the part. If you think that kind of bias doesn’t still happen today, consider that at least 90 percent of venture capital funding goes to companies headed by White men.
The only way to fight confirmation bias is to constantly ask yourself whether something aligns with a belief you already have. It’s not easy, but be skeptical and double check that information. Better yet, find someone in your life or at your company who disagrees with you on this topic and get their opinion. You may be surprised at what you learn.
2. We believe wealthy people must be smart about money.
Mase debunks this myth by describing the very wealthy business leaders who poured a total $945 million into Theranos, the startup headed by Elizabeth Holmes, who famously pretended her company’s blood testing device worked when it didn’t. She is currently serving an 11-year sentence for fraud.
The question is, why did so many sophisticated investors give her so much money? Mase cites an interview with Don Lucas, one of Silicon Valley’s first venture capitalists. He had bet on companies like Oracle and National Semiconductor. Why did he invest in Theranos? Mase paraphrased the explanation he gave in an interview with a Berkeley student: “‘Well, her great- grandfather was an entrepreneur. And it turns out the hospital near where her family lives is named for her great-uncle.'” Mase added, “Yeah, so she was supposedly the best of both worlds and had supposedly learned both medicine and entrepreneurship through osmosis.”
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