International Law

Beyond Fear and Greed in the MarketPlace

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Anthony Pratkanis testified to the US Senate's special committee on aging, answering in part a question about how fraud is possible.

"We find that con criminals profile their victim's psychological and other characteristics to find their Achilles' heel (and we all probably have one) to construct the exact pitch that is likely to be most effective with each victim.

For example, in one of our surveys, we found that victims of lottery fraud (which emphasizes luck) believed that the world controls them (a psychological trait known as external locus of control) whereas victims of investment fraud (which emphasizes mastery of one's fate) believed that they control the world (or a trait of internal locus of control).

The con pitched the exact scam to take advantage of the person's psychological characteristics."

In his free book Weapons of Fraud, which was co-authored with Doug Shadel, and published the AARP, Pratkanis further described his concept of Phantom Dreams, and how they enabled fraud.

"Con criminals identify the target of the scam.  The next step is to select the right pitch to use and to do that, the criminals need to offer the possibity that a phantom dream will come true.  The basis of every scam is the phantom.  A phantom is something that a person desperately wants, but is normally completely unavailable -the hope of things unseen becoming real."

We believe the the con criminals because we want what he offers to be true - we become complicit in our own downfall.  Accounting for the personal devastation when we learn of the fraud.

Typically, in the telemarketing short cons, the phantom is about basic desires:obtaining health, wealth, or popularity, and avoiding death. 

In the longer cons, like the Madoff Fraud, the basic desires are still targetted, but different social influences are in play, beyond the simple commands available over the telephone. 

Cognitive dissonance, or resolving the tension between "I am a smart, capable and reasonable investor" and " I have been defrauded" extends the phantom's iron grip through time.

"The victim may become so obsessed with the possibilty of obtaining that phantom that he or she may reallly be able to live their fantasy or "phantom" dream and thus become disconnected from reality and logical reasoning."

Weapons of Fraud also contains a cd, tapes of short con telemarketing pitches. Get the book, and move beyond the simple idea of fear and greed generating irrational behaviour.

Full post as published by Misleading Advertising Law on January 14, 2009 (boomark / email).