John Gentile and Lorn Leitman met in the Army Reserves in the early 1970s and quickly became best friends. After their military service, Gentile graduated from medical school and established a successful chiropractic business in South Florida. Mr. Leitman became a licensed attorney and CPA. For almost four decades they strengthened the bonds that were formed during their Army days—they traveled together, called themselves brothers; Gentile even became a godfather to Leitman’s daughter.
In 2012, this storied friendship came to a bitter end when Leitman received a 17.5-year prison sentence for operating a Ponzi scheme that defrauded investors, including Gentile, of a total of $4 million dollars.
Mr. Gentile’s ordeal was in many respects similar to the experiences suffered by other victims of fraud. Yet, a pervasive misconception about financial fraud victims is that they are most often elderly, naïve, greedy, passive, socially isolated or uneducated people—when in fact, research suggests the opposite. The truth is that fraudsters and scammers target all people, regardless of their demographics.
In fact, having a brain makes you a good candidate for being scammed because the human brain is wired for persuasion. Humanity’s susceptibility to persuasion, like much of our behavior, is a product of evolution. From an anthropological perspective, the ability to be persuaded was a biological necessity required in order to get a group of individuals to act in the interest of the collective. In exchange for giving up a strongly held opinion, a tribe member would receive protection and inclusion into the tribe. In addition, there are a series of human tendencies and needs—our belief in the goodness of others, the desire to please, the need to be cooperative, our affinity for and willingness to believe in stories, etc.—that, if satisfied or met, can be exploited by skillful and unethical individuals.
Here are some of the mental mechanisms by which our brains can expose us to scams.
But I’m Too Smart
Believing that you are incapable of falling for a scam leaves you in a highly vulnerable position because your guards are already down. Social scientists call it the “illusion of invulnerability”—the belief that you are free from a danger because of a perceived advantage or a false sense of optimism. The invulnerability illusion was illustrated in a Better Business Bureau study that found that younger and educated people—more so than elderly people—were more susceptible to scams because they never expected to be targeted. In the study, which surveyed more than 2,000 adults, 69% of victims were under the age of 45, and 78% had a college or graduate degree.
The Need to Please
We supposedly live in an age of cynicism and selfishness. The nightly news airs a string of negative and sensationalized stories, Facebook can be a blackhole of toxicity and the neighbor rants about how there is no decency anymore. But the fact is that most people are nice. Not only are people nice but they are driven by a need to be generous and giving, especially when others have been generous to them. This need for reciprocity can be a dangerous weapon in the hands of a con artist.
For example, if someone were to offer you a lucrative investment opportunity you may, in turn, see it as an act of goodwill. In exchange, you may be pressed into listening to a sales pitch or, worse yet, into making a misguided financial commitment.
The Captive Audience
Through storytelling, early man was able to build community and maintain social order. And even today, when we hear a compelling story, our brain becomes measurably more engaged. When this happens, the neurochemical oxytocin is synthesized in the brain, causing us to develop and associate trust with the storyteller. In movies, this causes us to identify and feel for the characters, but the same principle applies in interpersonal relationships. This is known among neuroscientists as the “you seem trustworthy” signal, and research suggests that “emotionally engaging narratives” inspire prosocial, cooperative behavior in response. Con artists who are good performers or storytellers have an easier time connecting with victims, and victims are prewired to emotionally respond, identify and empathize with them.
A Wolf In Sheep’s Clothing
Humans are social creatures that enjoy spending their time with people who share the same values, passions, beliefs and worldviews. The problem arises when you automatically regard everyone within your group as having the same goodwill and intention as you do.
Scammers regularly target religious communities—aptly termed “affinity frauds” by law enforcement—because they can easily exploit the trust level that exists between members. Bernie Madoff, who orchestrated the biggest investment fraud in history, stealing close to $65 billion dollars from investors, was able to gain the trust of the Jewish community by exploiting his Jewish affiliations.
In the case of Dr. John Gentile, the chiropractor and Army veteran, he relied on his close relationship with Leitman and never properly vetted the financial investments he was offered. Gentile saw in Leitman a like-minded individual. It never occurred to Gentile that his friend (and fellow veteran) was capable of scamming him.
F.O.M.O. (Fear of Missing Out)
People are generally afraid of missing out on a “good thing.” And if a “good thing” is available in limited quantities or for a short period of time, people tend to want it even more. Fear of missing out can be a driving force behind many ill-advised financial decisions. Con artists can present opportunities in ways that make it hard for an investor to decline. Scammers may say that the offer must be accepted after the pitch or that there is a cap on the number of investors and that swift action must be taken before it’s too late. In the end, the victim concludes that the opportunity is too good to miss out on without properly verifying the offer.
By no means an exhaustive look at the way the mind can sometimes make it easier to fall for scams, this post can help with recognizing some of the cognitive pitfalls that can make anyone vulnerable. It is important to remember that if you have been defrauded it is not because of a shortcoming on your part. Naturally, the emotional toll of falling for a scam can be tough to overcome. But it helps to remember that anyone is susceptible to financial fraud—even the best and the brightest.
Check back for more white-collar crime and fraud news, including the the biggest cons capitalizing on the global Covid-19 pandemic today, and how to spot one when when you see it.