Falling victim to fraud not mental weakness

“What makes one vulnerable to fraud? Is it a sign of weak mental strength?”

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Your question is answered in great detail in a recent book by the celebrated author Malcolm Gladwell. If you are able to get hold of the book Talking to Strangers, you will begin to understand how complex your question is. In many ways, it is a matter of how human evolution has taken place by putting a premium on man believing what he is told by another man, and the ‘presumption’ of truth, at the core of human relations.

So, when one gets a call from a person claiming to be from Kenya Power and threatening to disconnect power if ‘something small’ is not paid, many people fall for the fraud because their instinct is to believe what they are told.

At the other extreme, are all aware of the Ponzi schemes that have over the years made many people lose their savings. Charles Ponzi was a businessman in Boston (USA) and is the man associated with origins of this type of scheme that is based on monetary deception. The principle helps us understand the old saying ‘if it sounds too good to be true, that’s because it is’.

The scheme works like this; you pay say Sh1,000 to the expert in finance and after three months, you get one Sh1,3000 back, no questions asked. This unbelievable rate of return is what makes you invest the Sh1,300 back to the scheme.

When you look at all other investment opportunities, non in the world seems able to match this type of business return.

In the initial stages of the scheme, the returns are ‘real’ in the sense that you can get your money back at any time. In many cases people borrow, others sell land and some have been known to steal from employers, in the hope that when they get their money they will be able to pay back.

Though similar to gambling, this type of investment is different because the returns are guaranteed. The return is ‘guaranteed’, unlike in gambling where the return is a gamble. All Ponzi schemes are the same to the extent that as long as more and more people keep investing and the ‘fund’ continues to increase, the money obtained from the new investors goes to pay the old ones. No real investment needs to take place as new money keeps coming in. Ponzi schemes collapse if a number of regular investors wizen up and take their money from the scheme leading to the drying up of the fund.

One would think that because we have all heard about Ponzi and related schemes, we would all be very careful about the lies that lead to the loss of so much money through fraud.

The book, Talking to Strangers addresses this point and concludes that we take all that we are told by others to be true until real evidence shows it to be untrue. Put another way, we are wired to default to the truth.

So if a person calls and tells you to give him your credit card details, your instinct is to believe that he is from your bank. It goes against human nature to doubt and ask for the evidence that he is indeed from the bank.

The same happens when people call and promise to give you free air time or indeed to show you how to get gold and or mercury from the Congo. Many are the people who were promised commodities such as rice and sugar during times of shortage. Many are the victims of fraud.

This rather long explanation is intended to show you that falling victim to fraud is not a sign of ‘mental weakness’ as you call it. That said however, there are some people who fall into the traps of fraud more often than others and indeed there are instances where people can fall victim.

At the end of the day, it is important to remember that it seems too good to be true, that is because it is in most probably too good to be true. The greater the promise is from what others are able to offer the more likely that the risk is too high to be sustainable.