Sunday, May 22, 2016

Scam Psychology: Luck Blindness, or why lucky people see it as skill, not luck

Success is dependent on many different factors, but it can usually be summarized as at the right place, at the right time, with the right training to spot the opportunity, and have enough resources to call upon to take advantage of the opportunity. 
It should be readily obvious that rich people have a better chance at success because they started out with better starting positions. Donald Trump was practically born with a silver spoon (his father was a real estate tycoon). Conversely, poor people can't succeed if they don't find the right connections to make their talent known, no matter how hard working they are.

Outliers (book)
Outliers (book) (Photo credit: Wikipedia)
In the book "Outliers", Malcolm Gladwell reported that a good portion of professional hockey players found success due to their birthmonth, not solely via their talent. Why? If they were born in January, an arbitrary line used by the youth hockey leagues to divide up the years, they would enjoy physical advantage over the other kids who were born later in the year (generally speaking, of course) but still in the same league. And this physical advantage would lead to success, which would lead to them developing a taste for hockey, and eventually, into a pro career. Of course they trained hard, and they got some physical skills, but luck of having been born in month of January played a part in their success... They may not be aware of it, but that doesn't mean it didn't affect them.

Yet when you ask successful people how did they succeed, they will rarely if EVER mention luck. And in fact, some get downright offended if you try to bring up the role of luck in their success. This known as the "luck blindness" cognitive bias.

A few years ago Cornell economist Robert Frank wrote an opinion column for New York Times about luck and fairness, and for that he was invited on the air by Fox Business host Stuart Varney to talk about it. Varney opened the show by introducing Frank, then immediately jumped down Frank's throat: "Do you know how insulting that was, when I read that? I came to America with nothing 35 year sago. I've made something of myself, I think through hard work, talent, and risk-taking, and you're going to write in the New York Times that this is luck."  As you can imagine, it didn't go well for the rest of the interview.

Many people can look past their luck blindness though. Warren Buffet readily admits that he had won the 'genetic lottery' to have been born in the US to a loving family. And in a way, "gratefulness" (thanking God and the universe) is a way to acknowledge luck played a role.

How Luck Blindness Can Mislead You

Scammers know luck blindness is a button they can push to make you behave, along with sunk cost fallacy, hindsight bias, IKEA effect, and so on. By making you believe you are on your way to success, scammers will continue to take money from you, and you'll be happy doing so, because you believe you have learned skills, when it was either luck, or "arranged" success.

Humans are rational beings, and want the world to fit laws, even if laws had to be non-sensical (such as superstition). Luck blindness exists because luck cannot be explained, so most simply ignore it. It does not fit into the narrative of hard work and talent.

Yet the world is full of stories about luck. Bill Gate's Microsoft got the nod to create DOS for the IBM PC because his competitor didn't like the deal IBM offered.  Bruce Willis, a nobody in the movie business (known only for his role in Moonlighting TV series) was picked to star in Diehard after practically EVERY major Hollywood star turned it down. Were Bill Gates and Bruce Willis lucky? Not just that though. Were they at the right place, right time, with the right resources?  Of course they are. Luck is one of the factors.

Yet when you tell this incontrovertible truth to someone's face, such as Stuart Varney earlier, many of them didn't hear the truth, but rather, they hard something else, that they were just "lucky", a "fluke", and they were actually failures, because admitting luck had a role in one's success is a serious blow to one's self image.

How does this apply to MLM? If you look at each MLM's income disclosure statement, it is clear that 90+% of participants failed to earn any significant amount of money (maybe $1000 a year for US participants). Yet every year MLMs hold giant conventions in large stadiums and parade those who succeeded in front of the minions who did not with a clear message "you too can be like them" despite the odds are less than 1 in 100 to make a living wage.

(Take NuSkin as an example, 2014 income disclosure says roughly 1% of all "active" distributors earn 30K or more a year)

If you ask those who, say, make 100K or more, will they attribute their success to luck... or hard work? It'd clearly the latter.  People who enjoy success (or want success) see no role for luck in their success. They think American is a meritocracy, even though luck clearly played a role.

Indeed, this often played into survivorship bias, in that only people who succeeded will write memoirs and how-to books and teach classes, and since you can't teach luck, the impression they give in their classes and memoirs and books will be "just do what I did", since even they don't know how much did luck affect their success.

How Luck Blindness Can HURT YOU

Luck blindness is often used backwards in MLM and pyramid schemes, in that "there is no luck, there is only hard work."

If you did not succeed in MLM, according to some coaches, it was not bad luck, it is because you did not work hard enough. In fact, somebody came up with a bogus "gym analogy", basically claiming that joining a MLM does not guarantee success, just as joining a gym does not guarantee fitness. It makes sense, until all the analogy start to fall apart once you look a little closer. Some "coaches" even go as far as claiming that all the negative perceptions about MLM were spread by lazy people who decided MLM is too much work, even though there clearly are scam MLMs such as FHTM (shut down 2012 by FTC) and Vemma (shut down 2015 by FTC) in just past few years, not to mention various pyramid schemes that claimed to be multi-level.

When you think about it, it's really victim blaming and no-true-Scotsman.
A: Hard work + MLM = Success!
B: But I worked hard at this MLM and failed.
A: Obviously you didn't work hard enough!  
Remember that in MLMs (and some pyramid schemes) the "successes" was paraded to "inspire" the minions to keep going. So the minions, losing money, are taught that this is a part of "working hard" (while making your upline $$$), that this "failure" is supposed to be temporary (it isn't), and they stay in... until their wallet is empty, and then they are shamed for their lack of luck, because luck has no place in the success narrative.

So not only you fail, you fail with a sense of shame... so you are less likely to complain, because you were taught that it cannot be the system.

Why not? What if you were PROGRAMMED to fail? What if you need connections to succeed? Did you know that high-flyers in various MLMs often have insider connections?

How does luck fit into YOUR success narrative?

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