Sunday, November 11, 2012

Psychology of Ponzi Schemes and Schemers: part 2, the victim

In this multi-part series, the issues around Ponzi scheme will be discussed. Read Part 1

Ever wondered what exactly makes a person vulnerable to being scammed by Ponzi scheme or any other scheme? Scientists have worked on this for a long time. It all depends, but a 2006 UK study has identified 7 primary vulnerabilities. They are:

1) Distraction -- you don't see the deception if you are told to watch for something else at that time. This is known as the "invisible gorilla" phenomenon, and it's pervasive.

[ See "The Invisible Gorilla" website ]

2) Social compliance -- you defer to someone with authority, even though it could just be appearance of authority. So by appearing authoritative to you, you follow like sheeple.

[ See Five Ways Bullsh**er Hold Power Over You ]

3) Herd principle -- you like belonging to a herd, even if it's heading over a cliff (and esp. if you don't know it's heading over a cliff)

[ See "You are all sheeple until you choose not to be" ]

4) Dishonesty and fear -- psst... want to hear a secret? By making you complicit in something (potentially illegal? even better!), you are less likely to question it... or go to the authorities.

[ See "Three Ways a Ponzi Scheme Disguises itself" ]

5) Deception -- they show you what exactly you expect to see, though it's probably NOT the truth, much like a magician do it... by playing with your expectations.

[ See "What is Magician's Choice?" ]

6) Need and Greed -- Deception and lie takes two... one to send it, and the other to receive it. If you don't care about the message (which may be a lie), then it has no power over you. Scammers know that and craft their message to appeal to your need and greed.

[ See "It takes two to be gullible" ]

7) Time pressure -- limited time offer! Everybody else is in it! You need to buy this now! I'm going to offer it to someone else! Come on! Open your wallet! This is once in a lifetime chance!

Ponzi and pyramid schemes use all vulnerabilities, albeit not all in equal portions. Scammers can read you and tailor their "narrative" to fit you and your existing narrative.


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