Both fairly innocuous, small-stakes cons. Except for one thing: the siblings could spot the scam and the gullibility a mile away when it came to each other’s stories. When it came to themselves, though, they were certain, in the moment, that they were the exception. Sure, Dave knew all about Craigslist scams. But he really wanted to go to the show, and the chances of him, personally, falling for a scam were slim to none; he had been careful. Debbie, however, would never buy e-tickets from a stranger—how silly could you be? Sure, Debbie knew that there were many impostors claiming false hardship for easy cash, but she wanted to donate more to worthy causes, and his story seemed on the level. The chances of her, personally, falling for someone who wasn’t sincere were slim to none. Dave, however, would have done his due diligence before he parted with any cash—how trusting could you be? When it comes to you, I see clearly. When it comes to myself, I see what I want.
Marie Jahoda—Mitzy, as she was known—had a nose for prejudice. She had to. A Jew born in Vienna in the winter of 1907, she found herself in prison in 1936—not yet for her Jewishness (Austria was yet to be annexed by Hitler) but for her political views as a social democrat. She managed to escape and make her way to London. Her first book, however, which had expounded on her research to date, was rounded up and most of its copies summarily burned. This time, because its author was Jewish.
When she made it to the United States and was teaching at NYU, she focused not only on mental health but also on social prejudice. And there she came to a very different conclusion from her earlier view that an accurate perception of reality was a prerequisite of solid mental health. “People with prejudices seldom like to admit it,” she wrote in one study of opinion researchers who had themselves used biased questions to detect bias in others. What she then failed to deduce was that it wasn’t just anti-Semitism that they didn’t like to admit. If you can’t see one shortcoming, chances are you don’t accurately see any, or at least many, of them. If you tell someone they are prejudiced, they will laugh in your face and give you all the reasons why they aren’t. If you tell people they aren’t superior in all the ways they think themselves to be—that they aren’t objective, aren’t exceptional, and actually do exhibit many biases in their worldview—they will promptly dismiss what you’ve said.
Or, to put it in other words, after reading this chapter, you will be intrigued by all of these forays with exceptionalism. But you will remain convinced that you, personally, have already properly taken them into consideration. Your present understanding of yourself and of the world around you is now fairly objective. Everyone else, however, is a potential sucker.
Cons work so widely because, in a sense, we want them to. We want to believe the tale. And we want to believe things that are too good to be true more than anything. Cons aren’t about money or about love. They are about our beliefs. We are savvy investors. We are discerning with our love interests. We have a stellar reputation. We are, fundamentally, people to whom good things happen with good reason. We live in a world full of wonder—not a world of uncertainty and negativity. We live in a world where good things happen to those who wait. The teller of the tale has us hooked.
In August 1835, Sir John Herschel, son of the astronomer Sir William Herschel, made a remarkable discovery. Using the latest in telescoping technology, he had been able to view the moon in unprecedented detail. And what a view it was. Beaches of white sand abutting lakes and oceans of blue. Buffalo-like beasts wandering through lush forests over a rocky marbled path. There was, too, something disturbingly like a unicorn, with a single horn and a goat- or horse-like appearance, but blue in color. And a beaver-like animal that walked as humans did, on two feet. And best of all, there were what seemed to be a species of human: batmen, with semitransparent wings sprouting from their backs. Their lives, it seemed, were much like ours. Herschel had seen some bathing in the waters, shaking out their wings “as ducks do theirs.” He’d seen others sharing a meal—fruit from the wondrous trees. They seemed to be altogether happy, prosperous, and peaceful. Or so wrote Richard Adams Locke for the New York Sun, as he reported on Herschel’s incredible findings.
And incredible they were, in every sense of the word. The whole thing had been an elaborate hoax, planned over multiple installments to goad credulous readers. It worked better than expected. Not only did the news consumers fall for it completely, but so did the rest of the media. According to the New York Times, the story was “probable and plausible.” At Yale, students and professors alike discussed the news. And when it was revealed for what it was—a hoax—many refused to believe it. It wasn’t a hoax. It was a conspiracy and cover-up. The men existed, but when word got out, the government had moved to cover it up. It’s an all too familiar course of events: spectacular news, spectacularly covered, spectacularly accepted. At least in this case, it was an in-good-fun con without any real victims or repercussions. But the persistence with which readers clung to it despite its obvious outlandishness underscores the power that the aptly told tale has over our minds. Our world is an incredible place where incredible things happen.
“The secret of rulership,” wrote George Orwell, “is to combine a belief in one’s own infallibility with the power to learn from past mistakes.” The con artist has learned that; the rest of us would do well to catch up.
Paul Frampton, in the end, was exceptional. In January 2015, two years and six months before his sentence would have been up, he was allowed to leave Buenos Aires for London—a luxury not afforded to many prisoners. He’s currently seeking another academic appointment, if you happen to hear of anything.
CHAPTER 6
THE CONVINCER
I was the realization of their dreams. The idol. The hero. The master and arbiter of their lives.
—CHARLES PONZI
In March 1889, William Franklin Miller asked a group of friends for an investment of ten dollars. Affable and boyish looking, coming in at just under five and a half feet, with a touch of gravitas lent him by a dark mustache that framed a nose broken in some other life, Miller was a prominent member of the community—a congregant of the Tompkins Avenue Congregational Church, a leading church in Brooklyn, and past president of its charitable arm, the Christian Endeavor Society. It was there that he had met the three young men—Hartman, Bergstrom, and Bragge, the youngest just turned seventeen, the oldest twenty—to whom he now posed his plan. If they each gave him a tenner, he told them conspiratorially, he would make them a promise. Each week, they would receive a full 10 percent return on their stake. They huddled closer; 10 percent seemed an awfully large amount.
Miller spoke in low tones. He had, he told the men, an in at the New York Stock Exchange. His “inside information” would allow him to not only guarantee the promised 10 percent return, but also to protect the initial investment through a mysterious “surplus.” Later, he would elaborate that his “inside tips” were “from the fountainhead of speculative interests, and never fail us.” And any time they wanted to stop, well, all he needed was a week’s notice and they would receive all the money they’d placed with him, safe and sound. The men were intrigued. It seemed a bit too good to be true, yes, but then again, Miller was a trusted man—at twenty-two, he had far more worldly experience than they. And he had been in the markets before. (What he failed to mention was that it was as an office boy for Jacob A. Cantor, a job that paid him five dollars a week.) He even had that office, on the corner of Marcy and Park, just above the Heber & Brandt store. Clearly, he could afford it. Who knows. Maybe he really did have an edge. They withdrew to think it over.
On March 16, Oscar Bergstrom arrived at 144 Floyd Street, Miller’s new headquarters. Up a flight of stairs, into a room furnished sparsely but well. It was a former bedroom, in the front hall. A desk, strewn with important-looking financial papers. A small table, a handful of chairs. And, of course, a large, prominent safe. This was, after all, a place that saw real money. Miller greeted him alone. He was being careful with his funds and wasn’t going to t
hrow money away with needless overhead; this was a man to be trusted to be frugal and measured in his approach to your hard-earned currency. He would not frivolously waste it on things like an assistant.
Ten dollars in hand, Bergstrom approached the desk. With great care, Miller took the money. It would be safe with him, he assured the slightly anxious young man. In return, he gave him a small strip of paper. The money was received, it said, for “speculation in stocks. The principal guarantied against loss. Dividends weekly from $1 upwards till principal is withdrawn.” Miller had his first client.
And he was true to his word. Each week through early April, Bergstrom made the trip to Floyd Street, and each week, as promised, he received his 10 percent return. Impressed, Bergstrom gave Miller a further ten dollars.
By August, business picking up, Miller hired a few extra hands: John and Louis Miller and Charles Scherer, fourteen-year-old boys. He’d been a clerk himself and now he was training others. By October, he’d taken over the entire house—and the house’s owner, Gus Brandt, had become an investor. Twenty dollars in April. One hundred in June. Ten more in August. Another fifty to follow in November.
The clients grew. Now, Miller wasn’t handing out just any stray slips. He had letterhead. “An Investment of $10.00 will Net You a Profit of $52.00 a Year,” it read. And below, “William F. Miller, Mgr. Franklin Syndicate, Bankers and Brokers. Stock Exchange, daily, from 10 a.m. to 3 p.m.” A picture of Ben Franklin adorned the page, with his wisdom imprinted below. “The way to wealth is as plain as the road to market.” By the late fall, his certificates were being professionally engraved, and he’d added “Investments, Stocks, Bonds, Wheat, Cotton” to his qualifications.
In October, his investments a runaway success, Miller decided to incorporate. Beginning December 2, he wrote his investors, his company would be officially known as the Franklin Syndicate and would be launched with an initial capital of $1 million. It was as much for their benefit and protection as his, he said. They could turn in their investment slips for stock certificates—and all who helped him would, in turn, be helping themselves. By March 1, 1900, he predicted, shares would be selling for between $400 and $500 each. Together, they would grow rich. Oh, and from now on, fifty dollars was the minimum deposit. “In conclusion I desire to congratulate all those who have been depositors in the Franklin Syndicate on the wonderful success the Franklin has had under my management.”
The incorporation was taking a bit longer than expected—unforeseen obstacles, you understand. Some of the investors began to express their impatience, but in short order they were reminded that “My intention is to make the Franklin Syndicate one of the largest and strongest syndicates operating on Wall Street, which will enable us to manipulate stocks, putting them up or down as we desire, and which will make our profits five times more than they are now.” And as always, they were completely, utterly, totally guaranteed against any losses. “Our business is honest, safe, legitimate, and profitable.” To the doubters, he had only one thing to say: “This may look almost impossible to you, but you know there must be a way where one can double their money in a short time, or else there would be no Jay Gould, Vanderbilt, or Flower Syndicate, and other millionaires and syndicates who made their fortune in Wall Street starting with almost nothing.” He was right, of course—what about them?
The impatient investors calmed themselves. Convinced of his sincerity, many handed over more cash.
The Franklin Syndicate kept growing. Fueled by word of mouth, fabulous returns to new investors, and hundreds of ads in papers throughout the country—Miller spent upwards of $32,000 making sure the ads went out regularly, interspersing self-placed media coverage with headlines that wouldn’t be out of place in any modern click-bait forum, like “Wall Street Astonished. William F. Miller’s Franklin Syndicate a Big Winner . . . Financial Operations Eclipsed by a New Wizard”—the business flourished. By November, Franklin had over twelve thousand subscribers, and each day between $20,000 and $63,000 was deposited into his account by new eagers.
The lines stretched down the stairs, out the door, serpentining around Floyd Street. You could see the lucky ones who’d already gotten their dividends descending down the stairs, satisfied smiles on their faces. And you would jostle just a bit closer for your own chance. One crisp winter morning, the line had grown so thick that the stoop of 144 Floyd collapsed.
The office, too, had turned sleek and professional. Two rolltop desks, a large table with impressive-looking circulars professing the Franklin Syndicate’s prowess, a wooden railing down the middle to separate the deposits from the returns. To the right, a small booth with a glass window through which to pay investors their dividends. Piles of bills, gold and silver coin lining the shelves, for all to see. It made a pretty picture.
By November 24, Miller’s deposits closed in on $1.2 million.
* * *
In 1988, Shelley Taylor, a psychologist at the University of California at Los Angeles, proposed that humans have a strong bias toward misperceiving the world. We don’t just think ourselves exceptional. We predict our lives will always go well—better than before, even. We are programmed, in a sense, to think a bit too positively about how things will turn out—even the things we have no actual control over. It’s a tendency known as the positivity bias or optimistic bias, and it is a version of our belief in our own exceptionalism, but one that centers on our life outcomes: how we’ll fare, how things will go for us, the extent to which we control our environment and the events that transpire therein. Even pessimists experience it; it’s optimism not about the world or people in general, but about yourself. The most sour skeptic still thinks he will come out on top.
One of the key elements of the convincer, the next stage of the confidence game, is that it is, well, convincing: the convincer makes it seem like you’re winning and everything is going according to plan. You’re getting money on your investment. Your wrinkles are disappearing and your weight dropping. That doctor really seems to know what he’s doing. That wine really is exceptional, and that painting exquisite. You sure know how to find the elusive deal. The horse you bet on, both literal and figurative, is coming in a winner.
The tale made us fully aware of our own exceptional nature: we are good, and we deserve great things. And lo and behold, precisely that now seems to transpire; we are indeed justified in putting our initial trust in the game. That 10 percent return is coming in strong, just as promised. No self-respecting con artist is complete fluff. There needs to be something real there to anchor the whole thing. Just for a moment, the grifter needs his mark to feel as if he is holding a winning ticket.
Glafira Rosales, the master art fraud perpetrator, had some legitimate paintings in the midst of the dozens of fakes she dumped on the market. Rudy Kurniawan and Hardy Rodenstock, the wine forgers par excellence (the first convicted, the second still alleged), threw lavish dinners where the fine wines they served were quite real. All Ponzi schemes, of course, work until they don’t. And so on.
We are terrible at predicting the future. It’s unpredictable by definition, true, but that doesn’t keep us from thinking it isn’t. When things are going well, we tend to think they will continue doing so—and, quite possibly, even improve. We tend to think, as Taylor puts it, that “the present is better than the past and that the future will be even better.” When Americans were surveyed about their thoughts on the future, most expressed confidence in continued improvement. In one study, when college students were asked to list future possibilities for their lives and careers, the positive outcomes outnumbered the negative four to one. “In effect, most people seem to be saying, ‘The future will be great, especially for me,’” Taylor explains.
When it comes to our own lives, we tend to be especially certain that good things are coming our way, and bad things will avoid us—especially if an event is hard to forecast with certainty. We become unrealistically optimistic about events that have to do with us—I’ll definitely be able to get thi
s book done before the deadline; nothing stands in my way—and we become unrealistically optimistic that we’ll avoid any obstacles. Really? Nothing will stand in my way?
In 1990, psychologist Robert Vallone and his colleagues asked students to make forty-one predictions about themselves in the coming semester. The list involved things like joining a fraternity or sorority, visiting San Francisco, playing a sport, voting in the November election, dropping courses, studying more than two hours a day, having a higher GPA in certain subjects, having a steady boyfriend or girlfriend, calling their parents at least five times, changing career goals, changing political affiliation, making post-graduation school or job plans, feeling homesick, continuing in a bad relationship, and so on. Some of the predictions were positive; others, slightly more negative. At the end of the semester, the researchers once more caught up with the students to see how it had all played out.
On twenty-nine of the predictions, or 70 percent, the students had been overconfident by at least 10 percent—that is, there was a 10 percent or more difference between what actually happened and what they had predicted would happen. On another eight items, the gap was over 20 percent. And the confidence error was always in the students’ favor: they were much more likely to think positive events would take place and that they would manage to avoid negative ones than was actually the case. For instance, they had predicted with almost full confidence—80 to 85 percent—that they would remain with a long-distance love through the end of the semester. Their actual accuracy: a coin toss, or worse.