Saturday, September 8, 2012

Cognitive Bias: Attribute Substitution

Daniel Kahneman
Daniel Kahneman (Photo credit: Wikipedia)
Technically speaking, attribute substitution is not a cognitive bias in itself, but is actually CAUSE of several such biases.

Your mind has two sides, an "intuitive system", where you can make snap judgments, and a "reflective system", where the pros and cons are carefully evaluated using computations, logic, and such. If you are presented with a complex problem, and you are required to give an answer quickly, you can be induced into using the intuitive system that knows the answer to something very SIMILAR, and gave the wrong answer. That's attribute substitution.

(Daniel Kahneman is considered to be the first to explore attribute substitution)

Here's a quick example. "A ball and a bat together cost $1.10. Bat cost $1 more than the ball. How much is the ball?" You have 3 seconds.

Time's up! What is your answer?

If you answered $0.10 (10 cents), you are wrong!

In this case, the mind need to answer the question, and there's 'no time' to do a full evaluation where you need to solve the algebraic equation with 2 unknowns with the reflective side. Instead, you know you can do 1.10 - 1 in a snap and your mind unconsciously did teh attribute substitution, and substituted $0.10, which came from the INTUITIVE side.

Those with a bit skepticism (i.e. reflective side) would have checked whether 0.1 is the right answer, and realized it's NOT.  The answer: x+y=1.1 and x-1=y. y turned out to be $0.05 (and x=$1.05).

So what does this have to do with a scam? Everything.

Scammers deceive you by giving you answers that seemingly make sense (engaging your intuitive side), and ask you NOT to verify what they said using your the reflective side.

In other words, Scammers want you to "Only trust, do not verify."  (My apologies to Ronald Reagan)

How does this apply to a Ponzi and pyramid schemes? Scam recruitment meetings are prime examples of Attribute Substitution at work. They don't actually want you to study their business model in detail. Instead, they will depict their business as similar to something you already know, and understand intuitively. Whether they actually operate that way is questionable, but that's part of the scam, and real data are impossible to obtain, thus reflective side had nothing to operate on, so you are stuck with the intuitive answer, which was given WITHOUT full evaluation.

Here are some of the Q&A presented of the ZeekRewards Ponzi. Note how each answer seems to make sense, and does not encourage any sort of follow-up questions, or even doubt.

1. Is it Ponzi or Pyramid Scheme?  No actually the money paid each day is from the the retail profit pool only,it consists only of daily profit nets, not the money affiliates are putting in to buy bids.
Note the answer *seems* to make sense, that they make plenty of money and they will share it with you, if you recruit them some customers. However, there's NO PROOF that this was actually done. As the SEC shown in their complaint that shut the company down, this turned out to be a complete fabrication.
2. Are they in danger of going broke? They are actually a debt free company that has been around for 14 years
Note the answer *seems* to make sense, but again, there's a bit of weasel in here. Zeekler, the auction form was only in business since June 2010, and ZeekRewards only since January 2011. Their alleged parent company, Rex Venture Group, may have been around 14 years, but that's more of a paperwork thing, as he had had a string of barely surviving ventures for 14 years. Yet they are not telling you this. They want you to think Zeekler and ZeekRewards is an old company, when it is NOT. Also note that instead of yes/no, they tacked on this "history" to "answer the wrong question" and make you feel more confident.
3. Where are they based? North Carolina which is great as it falls within US Jurisdictions
 Note the answer here is truthful, but also implies that they are COMPLIANT with the law, without actually saying it. Again, "answering the wrong question" instead of yes/no answer.
4. Do I have to sell anything: Absolutely not.
Most people are very annoyed of MLMs and constant nag of sell, sell, sell. While not having to sell is great, one begs the question: how the heck *do* they make money then, and what do I have to do to get a share? This "absolutely not" thing also begs the eternal question: "why isn't this too good to be true?" This is where that explanation in (1) comes in. You're given this explanation, which seem to intuitively make sense, so your reflective side was not engaged. You then don't ask questions like "if it's so profitable, why do they need us?"
5. Do I have to sign up affiliates to make money: no you get paid daily as long as you place one free add which takes 1 to 4 minutes
This answer is accurate, but it again, begs the question: is that it? This is WAY TOO EASY! Is there really such thing 'easy money'? The fact that this requirement of recruiting people was removed in March 2012 makes people wonder: is this really true? Remember, intuitive answer shuts down reflective analysis.
6. There website is currently ranked 203 in the world for traffic and is still growing.
Ah, the bandwagon fallacy... popular and legal are completely separate things.  But again, intuitively you'd think if it's that popular it can't be fake... that's why scammers use this fallacy, over and over.
7. It has the highest bonus pool in the direct networking marketing industry.
There is no proof of that... Yet it was spoken by an "authority" therefore it is assumed to be true. Where did he get the numbers? The intuitive side says "trust the expert, because I don't know how to analyze this.".
8. They have the highest rate of customers to affiliate’s that network marketing business journal has ever seen.
There is no proof of that... Yet it was spoken by an "authority" therefore it is assumed to be true. Where did he get the numbers? The intuitive side says "trust the expert, because I don't know how to analyze this.". 
9. What can you do next? I will show you how to make money every day, just by placing one free ad which takes 1-4 minutes and without sharing this with anyone else. Sharing is “NOT REQUIRED”and regardless if you tell a million people or keep this a secret, you “WILL BE PAID DAILY!” 100% of our active members are paid daily within their first 24 hours 100% of the time.
Is there any proof of that? Nope. They are shown some numbers that increased on a computer screen. Yeah.

By now it's clear this FAQ writer wants to recruit you, by telling you only the parts you want to hear, and none of the "troublesome details".

Once you got the intuitive side engaged, and constructed a model of how you think this business works, and how you can share in its riches, you will no longer engage the reflective side, except as confirmation bias: accept stuff that confirms your intuitive side, and reject stuff that does not.

You could even say that the reflective side is your "skeptical self" and the intuitive side is your "intuitive self".

The two selves need to exist in balance. When you let the intuitive self override the skeptical self, you make rash decisions, and scammers WANT you to do this to make a rash decision beneficial to them, not you.

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