Wednesday, September 16, 2015

Scam Psychology: How Context Makes You Irrational (even though it made sense to you... at the time)

Obamacare Protest at Supreme Court
Obamacare Protest at Supreme Court (Photo credit: southerntabitha)
We are all affected by context of a question than we care to admit, and by presenting certain things with the wrong context, scammers lead us into making irrational decisions, such as join a scam and hand over money.

Let's take the subject "Affordable Care Act", for example, otherwise known as "Obamacare".

Did you know that more people support "Affordable Care Act" than "Obamacare", even though it's the SAME THING? 46% oppose Obamacare, but only 37% oppose Affordable Care Act. People even protested at the US Supreme Court.

[Source: USA Today quoting CNBC poll]

This is ignorance. And this is in the general public.

Scammers LOVE this, which is why there are Obamacare scams.  Just as there are scams about everything.

So why are more people against "Obamacare"? Because the term was used by Republicans as as derogatory term. Never mind that it's actually Mitt Romney (Republican) that really came up with it for his own state of Massachussetts, leading to a new term, "Obamneycare".

In short, Affordable Care Act doesn't have the "context", the derogatory meaning that Obamacare has.

The lesson is very simple: you have to be knowledgeable and ignore context to make rational decisions.

In business and investment, that's called due diligence, which is really just "fact checking" and "critical thinking". You get all the facts and look beyond the context.

And scammers want you to throw due diligence out the window... by hitting you with slogans to ignore due diligence as well as give you skewed context (that are half-truths, misunderstandings, embellishments, conflicting info, logical fallacies, outright lies, etc.) to lead you into their scam.

Let us take a very classic example: Zeek Rewards ponzi scheme.

Zeek Rewards claim to be the rewards program of the Zeekler penny auction.

Except it doesn't work that way. You don't get 'rewarded' for playing Zeekler penny auctions. You get 'rewarded' for buying Zeekler bids, and GIVE THEM AWAY, and get daily reward (up to 1.8% of the amount you bought, for up to 90 days) (but weekly withdrawals)

That makes absolutely no sense at all. But the promoters (such as the now settled scammer Dawn Wright-Olivares) provided a new context "Oh, it's for promotion! You are giving away the bids to people who signed up to receive free bids!"

Most people just accepted this context and stopped asking questions. Never mind that this makes absolutely no sense.

Think about it... if there are long lines of people waiting to give away bids (to participate in the daily profit share), where is the profit coming from? If there are this many bids being given away, who's actually buying bids? Answer: just these people who's participating in the "rewards program" are buying bids.

Then some scammers started floating another context... That penny auctions are profitable.

That's a half-truth. Penny auctions may be profitable, but there's no proof that Zeekler is profitable.

Indeed, just by counting the number of auctions, and the bids spent on each, proves that it could NOT be generating the amount of revenue that the "profit share" is paying out.

Turns out Zeekler didn't even have an auction license until April 2012, even though it had been operating auctions, both as itself, and as FSC Auctions since 2009!

There are too many red flags around Zeek Rewards before it was finally closed by SEC in August 2012, and the red flags had been there all along. However, the victims had been presented with skewed context to lead them into participating, often by "judas goat" promoters, with a dose of FOMO (fear of missing out). And once they are in, sunk cost, Ikea effect, and other cognitive biases kept them in.

Some even invented skewed context to delude themselves.

Do your due diligence. Research the information, and look beyond the context, so you can think critically and make the proper rational decisions. That is the way you can outsmart scammers.

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