Search
  • John Shrawder

Examples of Bad Decisions that Hurt People Financially

Examples of Bad Decisions that Hurt People Financially


Earlier postings were based on large samples like the World Happiness Report or the American Time Survey. This posting will use a different approach. It will use single stories of extreme examples of persuasion led to victims feeling swindled. It will not suggest that all persuasion is bad or that all persons are susceptible to being deceived by the powers of persuaders. These examples can be used to study how deception can lead to harmful decision making.


In this Unit we will explore examples of deception increasing misery by scamming wealth and savings from many people.


The following will be based on Maria Konnikova’s 2016 book the Confidence Game: Why We Fall for It...Every Time


Purchasing Defective Products – Products provide a variety of services. We have some familiarity with most products we buy. Some products are better than others. Sometimes victims are deceived into buying products or services that are overpriced or do not provide the service expected. Sometimes products are not delivered at all. Sometimes they are dangerous. Multiple Consumer groups monitor consumer scams. In some instances misrepresented products is considered fraud and is protected by law particularly by the FTC. However, we need to be critical when buying products and services.


Financial Decision Making – Common financial products include Credit cards, loans, investments, and insurance. As with defective products, some of these are fraudulent. These persuaders can be prosecuted by the government. However we still need to be critical.

One of the largest financial scams was run by Bernard Madoff. He ran one of the largest investment firms in the world. Between 1960 and 2009—almost fifty years, he created a scheme that persuaded 4,800 charities and individuals to trust him to invest $64 Billion of their savings all which was lost.


Bad financial decisions are not just the result of deceit. Sometimes people suffer losses because they do not understand these products. Loans and credit card debt are a particular problem. Over 22 percent of student loans are in default; credit card debt by persons age 25-34 is ten times higher than in the early 1990s.


Identity Theft and Imposter Scams. In addition to face to face deception, telephone, mail, and internet scams are growing. They can be perpetrated from anywhere in the world. Identity theft is when a persuader assumes to be another person and uses information about the victim for personal gain like taking out a loan or buying things. A person usually steals an identity from having a small amount of information on the victim. According to the US Department of Justice about 10% of the American population over age 16 were victims of identity theft in 2016. This is an increase from 7% in 2014.


Total losses were estimated at $17.5 billion. About 36% of victims took over six months to resolve financial problems associated with identity theft. Identity theft is the second most frequent fraud reported to the US Federal Trade Commission (FTC).


An imposter scam is a special form of identity theft. It is when a persuader assumes the identity of another more trustworthy person to gain favors from believers. While an identify thief acts in the shadows, an imposter carries out his or her deception in face to face situations.


One of the most famous imposter scams was Ferdinand Waldo Demara who was the basis for Robert Crichton’s 1959 book “The Great Impostor”. A motion picture was later written about him. Demara impersonated a Doctor on a Navy Ship during the Korean War and performed 19 surgeries with only the aid of a medical book. Demara would also take on the identities of psychologists, professors, monks, and the warden of a Texas prison. He impersonated a civil engineer and bid on a contract to build a large bridge in Mexico. This could lead to dangerous medical treatments and bridge failures. Imposter scams are the third most frequent fraud reported to the FTC.


Normally an identity theft occurs when someone is careless about personal information. An imposter scam occurs when people with a special problem trusts someone who appears quite confident. This confident appearance keeps the victims from thoroughly reviewing the person’s credentials.


Deception Using Family Members- Besides people who exhibit great confidence, we are also likely to be more trusting and less critical of information provided by family members and community leaders. Con artists can use this trust to swindle the families of their victims.

Ghislane de Vedrines was a member of a centuries old French aristocratic family. A man persuaded her that he was the protector of an ancient secret that was threatening her family. To guard her family’s reputation, Ghislane unwittingly helped persuade eleven other family members to turn over $6 million in assets to the persuader.


Scam Artists Claiming Supernatural Powers – Many can be persuaded that there are supernatural forces. 2005 Gallup poll found that 73% of Americans believe in one or more supernatural phenomena like ghosts, astrology or haunted houses. Others believe in psychic healing, demonic possession, or visitation from extraterrestrial aliens. Deceivers can use this to take the income of wealth from people. This is especially true if they can use magic tricks to create illusions of supernatural power.


In the 19th century America persons starting with the Fox sisters in New York used the belief in the supernatural to persuade many people that the ghosts of dead relatives could communicate through them to the living. They and other “spiritualists” charged admissions to their shows and would charge grieving families to contact their dead relatives. Magicians especially Harry Houdini saw that they were just using magic tricks to prey on vulnerable people and wrote a book explaining how the spiritualists deceived their victims.


People can become quite loyal to persuaders who have used magical talent to demonstrate supernatural skills. In the early 1950s, Psychologist Leon Festinger and his colleagues infiltrated a group that prophesized that the world would end before dawn on December 21, 1954. On that night, aliens would arrive in a flying saucer to rescue the true believers.


The persuader was a Chicago woman who used automatic writing to communicate with the aliens. Believers were persuaded to leave their jobs and families and gave away all their money and possessions to the leader.


The believers assembled at the persuader’s house at 12 am December 21 awaiting the space craft. Nothing happens. At 4:45 AM the leader says she has received a message that the Earth has been spared. Rather than doubting the leader, Festinger records that the group believed that their gathering has saved the world from destruction. Sometimes victims trust the opinion of a persuader regardless of the truth of their claims.

0 views0 comments