Tuesday, January 14, 2014

Scam Psychology: The Need for Self-Delusion

English: Saul Bellow
English: Saul Bellow (Photo credit: Wikipedia)
MLM Skeptic has tracked various scams over several years, and it is always amazing to the MLM Skeptic how much self-delusion can the victims of a scam engage in, refusing the believe they were involved in a scam. Instead of probing for the truth and understand how they had been deceived, they instead invest their intelligence into justifying their own delusion that they could not possibly be involved in a scam.

The following quote seem to illustrate the point perfectly.
“A great deal of intelligence can be invested in ignorance when the need for illusion is deep.”
Saul Bellow, To Jerusalem and Back
And indeed, the victims of a scam, so shocked by the news, have a deep need for illusion, or delusion, to prove to themselves that somehow, they could not have made a mistake, that everybody else must be mistaken.

Let us explore our cognitive biases, and understand how we came to behave irrationally.

Self-Serving Bias

Self-serving bias is a personal tendency to take credit for anything good that happened, but blame external factors for failures.  (See Psychology Today article)

"I made great moves and bought stock for XYZ last year, and it went up, but this year, XYZ tanked because the CEO is a moron."

Note how he took credit for buying XYZ when it was going up, but when XYZ went back down it's someone else's fault.

Scam victims do the same. When the scam paid them, they congratulate themselves on "finding the perfect opportunity". When it was revealed to be a scam, they blamed the government for shutting it down and ruined a good thing.  Because they need to believe they had NOT made a mistake, that they had NOT be conned.

Don't believe that happened? Here's one example:

"Curt Miller" claiming, days after Zeek Rewards was shut down by SEC in August 2012,
that there were no victims until the government came around, and Zeek was not a Ponzi. 

Mr. Miller was referring to Zeek Rewards, only a few days after it was closed by US Secret Service and SEC in a joint raid. He claims that there were no victims, and government ruined a good thing. And there are many like him. Of course, they probably gotten more money out of that Ponzi scheme than they put in, i.e. they're a "net winner", which means they don't want to give up their 'winnings'. They prefer to live in the Matrix like Cypher, eating that "juicy steak"...  That "ignorance is bliss".

Personally, ignorance is just ignorance, and if you wish to live in ignorance that's your personal choice, but don't try to convince other people that ignorance is for everyone, esp. when it makes you look like a loon when compared against reality of life.

However, some of these people can go absolutely... irrational when it comes to their delusions. In case of Zeek Rewards, some affiliates have retained their own lawyers with claims that they want to sue the SEC and restart Zeek Rewards. It's believed that some donations were even accepted for this cause.

Contrafreeloading and Ikea Effect

Modern scams have moved beyond pure Ponzi schemes and now adds some minimal busy-work to make you feel more involved with your new "opportunity".

The idea of making you "work" for your reward, even though it can be given out for free, was discovered by zoo keepers, when they discovered that a lot of animals, when fed without doing any work, go into a depression and sometimes, died. Modern zoos use "enrichment", which basically means they hide food in containers, dispensers, and such and forces the animals to figure out how the food's released.

Turns out, humans work the same way. Instead merely giving out the scam money such as those done in pure Ponzi schemes or pure pyramid schemes, modern schemes makes you do some busy work, such as take surveys, watch video ads, or post ads online. Not only this makes the victims feel more involved, it also kept them busy and made the scam seem more legitimate, i.e. "What I did is helping the company earn the money that I get a share!"  When logically, what they did should have had no noticeable effect on the company's revenue.

The effect of doing some work and thus "own" your project was noticed by Dan Ariely, and termed "Ikea Effect", which refers to the furniture you had to put together yourself as you buy unassembled kits from Ikea. Even if the final result is not as pretty as the Ikea catalog showed, you love the furniture because you had put it together. You took ownership of it, and you feel pride for it.

Organic Vanilla Cake Mix
Organic Vanilla Cake Mix
(Photo credit: artizone)
The effect was actually noticed back in the 1960's by General Mills, when they started to notice that the "cake mix", a sort of all-in-one pouch of powder with which you can help you quickly make a cake, is not growing its market fast enough. They did several focus groups, where they were surprised to learn that the housewives felt that the recipe is TOO EASY. Ernest Dichter was head of the study. Sometimes, the story was told as if they merely took the dried eggs out of the recipe, and made the housewives add a fresh egg or two instead, but it was more than that. It was full recasting of the role of the cake mix, not as a product, but merely as shortcuts to cooking masterpieces. If you can customize the result and have a hand in the creation (but not too messy or difficult!) you'll love the product more (and thus buy more of it).

Scammers know this, so they invented these busywork (posting one ad per day, or watch a few video ads per day) to make you feel involved in the fate of the company, when they contribute virtually nothing to the company's revenue, either directly or indirectly. The busywork's purpose is to keep the victims' mind occupied so it does not question the system, much like cult mind control, as well as to feel involved and not to question the scheme itself.

Once the victim convinced themselves, the rest is just reinforcement and maintenance, as the victim will seek to reinforce his/her own self-delusion due to the self-serving bias, in order to maintain their own self-esteem. They now have to need to keep believing the self-delusion, as their self-esteem is now tied to it.

All in all, the need for self-delusion in a scam is deep. There is a Chinese saying... Those inside the strategem are confused. Those outside the strategem see clearly. Part of the problem is those people inside, blinded by the biases noted above, no longer see reality, but their own delusions.

Getting people out of their delusions can be difficult, but one thing that seem to help is get them AWAY from the elements that enticed them into joining in the first place. Those "friends" or "group" would be a good start. However, that requires the victim to understand his/her role... that s/he was DEFRAUDED. If s/he won't admit to that, then helping him/her will be difficult. Once acceptance of that fact was done, you can use that wean him/her from the "communal enforcement" and disengage from the bad influences.
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