If you were to receive an email from a Nigerian banker, business tycoon, or government official seeking your help in transferring a fortune from that country into your bank account, you would probably be skeptical.  For this scam to work, the victim must be gullible and greedy.  Gullibility makes one susceptible to cons, and greed makes one behave stupidly in situations involving obvious financial risk. 

The Nigerian 419 scam ensnares some people by exploiting their weaknesses—gullibility and greed.  And that’s precisely the reason it wouldn’t trap you or me.   If we are not that gullible, and if we are not greedy to the point of stupidity, then appealing to these weaknesses won’t work.  In fact, such an approach would tip us off to the scam.

Master manipulators understand that the wrong approach won’t motivate you and might even expose their scheme.  They need a tactic that will not arouse your suspicion, that you will accept (or even welcome), and that motivates you to do the manipulator’s bidding.  By exploiting your strengths, Machiavellians may be able to manipulate you in ways they could not achieve by appealing to your weaknesses.

Bernard Madoff didn’t pull off the largest Ponzi scheme in U.S. history by appealing to the weaknesses of sophisticated investors.  To accomplish that feat, he had to exploit their strengths.  A few of his victims were the Royal Bank of Scotland, Steven Spielberg, Yeshiva University, Senator Frank Lautenberg, Royal Dutch Shell, Sumitomo Life Insurance Company, International Olympic Committee, Bard College, HSBC, Kevin Bacon, Larry King, Diocese of St. Thomas, and New York University.  As diverse as this list of victims is, it manifests a uniformity in one key aspect:  These institutions and individuals are either financial experts or are financially astute (i.e., they know how to do their own due diligence) or they can afford the best legal and financial experts to advise them.  And yet they all trusted Madoff and lost massive sums.

If you had tens or even hundreds of millions of dollars to place with an investment firm, what might you look for in that company?  How about longevity?  Madoff’s firm had been in business since 1960.  What about reputation? Madoff’s firm was one of the top over-the-counter market makers on Wall Street.  It had helped develop the electronic trading platform that eventually became the NASDAQ.  Madoff himself served on the board of governors of the National Association of Securities Dealers and for a term as chairman of that board.  He donated liberally to political campaigns and enjoyed access to leading politicians in New York and the nation.  How about the firm’s performance history and track record?  Just look at the impressive returns reported on Madoff’s phony account statements.  And what about the company’s own financial reputation and stability?  The company had been investigated again and again by the Securities and Exchange Commission, with no enforcement action deemed necessary.

This is exactly the kind of information that would resonate with prominent and powerful investors.  Not only did Madoff’s impressive history keep the scam well-concealed, it also served as a victim magnet, drawing more and more wealthy prospects to the slaughter.  These investors expected to hear that the company was solid and that it was one of the best on Wall Street.  When their due diligence revealed precisely that, they were satisfied.  They were betrayed by their own confirmation bias, which caused them to lower their guard.

As I mentioned before, any attempt to exploit your strengths means that you must be approached in a way that does not arouse your suspicion, that you will accept (or even welcome), and that succeeds in gaining your willing cooperation.  But it can’t work until you give your trust.  That doesn’t mean you should be implacably suspicious, cynical, or paranoid.  However, it does mean that in situations involving risk, you should know your “doomsday option” before you give your trust:  What's the worst that could happen, and what could I do about it if it did happen?

In the Madoff case, victims' investments weren’t government insured.  Some victims put substantially all of their wealth under his control, rather than diversifying among investment providers.  Apparently no one wanted to look this gift horse in the mouth by questioning the perennially sunny account statements. 

When an attempt to exploit your strengths is in play, there are rarely flashing red lights and sirens.  But if you are listening, there are whispers.

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