The Science Of Gullibility: Why We Get Duped Bernard Madoff's Ponzi-style scheme fooled many clever people, including an expert on the science of gullibility. Psychologist Stephen Greenspan, author of Annals of Gullibility: Why We Get Duped and How to Avoid It, explains what psychology can teach us about the scam.
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The Science Of Gullibility: Why We Get Duped

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The Science Of Gullibility: Why We Get Duped

The Science Of Gullibility: Why We Get Duped

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You're listening to Science Friday on NPR News. I'm Ira Flatow. We're going to be switching gears now and talk about the science of the swindle. Can psychology explain why some swindlers, like Bernie Madoff, why are they so successful? Well, my next guest has some thoughts on the subject. He lost a sizable chunk of his retirement savings in Madoff's swindle scheme and - get this - he's a psychologist specializing in gullibility. Stephen Greenspan is author of "Annals of Gullibility: Why We Are Duped and How to Avoid It." He's emeritus professor of educational psychology at the University of Connecticut. He joins us from the studios of KCFR in Denver. Welcome to Science Friday.

Dr. STEPHEN GREENSPAN (Psychiatry, University of Colorado; Emeritus, Educational Psychology, University of Connecticut; Author, "Annals of Gullibility: Why We Get Duped and How to Avoid It"): Thank you, Ira, very happy to be here.

FLATOW: How do you feel about all of this? I mean, are you going to be the only person who makes money on this because your book is out now?

(Soundbite of laughter)

Dr. GREENSPAN: Very possibly.

FLATOW: Do you feel, like, more ashamed that this happened to you, or do you feel like I was duped or swindled myself?

Dr. GREENSPAN: Well, I'm in very good company, Ira.

FLATOW: Yeah, you are.

Dr. GREENSPAN: A lot of people a lot smarter than me have been duped, including people who are extremely knowledgeable about finance. I look upon this as an opportunity to learn something from - personally. Certainly, I know a lot more about finance and what to do or not to do in the future, but hopefully, I will also be able to help other people. And I...

FLATOW: Take apart what happened to us here. How did all these very, very smart people get duped?

Dr. GREENSPAN: Well, I'm interested in the duped, because, in fact, most of the literature on swindles focuses on the swindler, and obviously, I would like to know more about Madoff, and obviously, it's important to know something about swindlers. But there has been very little work on the duped and on gullibility generally.

FLATOW: Mm-hmm.

Dr. GREENSPAN: In fact, it's a bit of a misnomer to call this a segment on the science of gullibility. It's really the pre-science...

FLATOW: Because we don't have much science...

Dr. GREENSPAN: Of gullibility.

FLATOW: On gullibility yet.

Dr. GREENSPAN: No, there's very little research. Actually, there's one preeminent researcher in Japan named Professor Yamagishi at Hokkaido University; he's really one of the few people who's doing research on gullibility. He's very interested in the relationship between trust and gullibility. And what he found is really very interesting. There's a general belief, certainly in Japan, that distrusters are less gullible because they're more suspicious and more socially effective than people who are high on trust.

But in fact, it's quite the opposite, Ira. People who are high trusters are generally less gullible and more socially effective. And it's not that they have been gulled; everybody has been gulled at some point or another. It's just that they look upon a gulling episode as something to learn from. And they don't apply it to people in general; they only apply it to the situation or the person who took advantage of them. So, they can grow from experience, and that's what I hope I can do, and that's what I hope listeners can do.

FLATOW: Why is it that even a psychologist like yourself was able to be - who studies gullibility - was able to be duped by this?

Dr. GREENSPAN: Well, I may know a lot about psychology, but I don't know a lot about finance.

FLATOW: So, you're...

Dr. GREENSPAN: And all of us have...


Dr. GREENSPAN: All of us have our areas of strength and weakness, and we tend to be - and this was also extraordinarily difficult scam to see through. I would not have fallen for the Nigerian Internet scam...

(Soundbite of laughter)

Dr. GREENSPAN: Inheritance scam, and in fact, have resisted that, but when everybody I know is jumping on the bandwagon, it seemed too good to pass up.

FLATOW: 1-800-989-8255 is our number. 1-800-989-8255, if you'd like to talk about gullibility, talking with Stephen Greenspan, author of "Annals of Gullibility: Why We Are Duped and How to Avoid It." And it does seem to be that - as you mention, trust - people went to this - from the news reports we hear - people went into it from word of mouth from people they trusted.

Dr. GREENSPAN: Well, there're four factors in my theory of gullibility. And my hope is - and so far, psychologists and certainly all the investors who've emailed me have - feel that this framework, which was in the Wall Street Journal piece last Saturday, helps to explain it. And there are four factors, and in any given individual or situation, it might be a little different, but I believe these explain, pretty much, the Madoff phenomenon.

FLATOW: What factors are there?

Dr. GREENSPAN: One is situations. What has been described by Robert Shiller as the feedback-loop theory of Ponzi schemes, as well as investment manias in general, is that when everybody you know is saying this is a great deal; it's tremendous pressure. It's sort of "The Emperor's New Clothes" phenomenon. In fact, I start off my book by talking about folktales, such as "The Emperor's New Clothes," as sort of the archetype for gullibility.

And cognition, very few people have the skills to see through something this complicated, and that certainly explains my - part of my trust. And then, I happen to be a somewhat trusting person and also somewhat impulsive, and that's not a good thing to be when you're talking about your lifesavings. And finally, emotion enters into it. Not necessarily greed; it could just be fear of losing money. And people who invested in the Madoff scheme - I don't think they were truly greedy. What they wanted was the safety and security, and that's sort of the irony here: by seeking something safe, they wound up losing everything.

FLATOW: And I guess you can apply these four factors of gullibility not just to the Madoff scheme, but to other kinds of gullibility, other kinds of situations.

Dr. GREENSPAN: Oh, absolutely. I mean, I devote five pages in my book to financial gullibility and about another 200 pages to many other different kinds of stories about gullibility. And the theory, this four-factor theory, of gullibility applies to all these situations. In fact, what really got me interested in this topic, Ira, had to do with the problem of false confession to murder, particularly in young people and also in people with cognitive disabilities. My primary reputation as a scholar is really in the area of intellectual disabilities. And I got into this because of the case in 1982 in Connecticut involving Richard LaPointe, the man with the congenital brain malformation, who, in a very stressful interrogation, confessed to a murder that nobody - none of his friends, of which I consider myself one - believes he could have possibly done.

FLATOW: Hmm. And you...

Dr. GREENSPAN: And the situations involved are simply, when you're in an interrogation, they use extremely effective techniques - they have something called the Reed method, which can break down anyone. Anyone listening here could be broken down by that method. And the cognitive aspects of it, people - police officers pretend to be your friend, they want you to come in and help them solve the case, or they tell you that they want to help you, but in fact, that's not really what they have in mind. Very people - few people, including a very educated friend of mine, doesn't understand, you don't have to talk to the police. When they suspect you of a crime, you have the right to walk out of there. It doesn't matter what - whether they like that or not.

And then personality, people with cognitive impairments, including the elderly - to cover up their limitations, they tend to become very compliant and willing to participate. And finally, emotion enters in because there're few situations more terrifying than being interrogated for a murder. And also exhaustion; these interrogations typically start late at night, and they go for hours and sometimes for 12 or 20 hours. And we've known from research that when you're exhausted and sleep-deprived, you'll agree to anything, and you don't think very straight.

FLATOW: Yeah. But we can - can't we be gullible as a society, too? As a mass of people and we think something is true or not, like you said, "The Emperor's New Clothes"? I mean, there are some people who say we're gullible to believe that $700 billion is going to solve this financial crisis.

Dr. GREENSPAN: Possibly, but I mean, here are two good examples: Mark Twain wrote a novel called "Pudd'nhead Wilson" about the gullibility of a whole town that believed that an African-American child was white. And of course, he was the great genius of gullibility in his fiction, all of his books, certainly, Mark Twain - certainly "Tom Sawyer," with the fence-painting scene, certainly "Huckleberry Finn," which is all about gullibility. And then of course, look at the political situation in this country. After the second victory of George W. Bush, a huge headline in London's Daily Mirror said, how can 92 million people - whatever the number was - be so dumb? A lot of people consider the belief in weapons of mass destruction in Iraq is a form of mass gullibility. In fact, the New York Times in its mea culpa actually said, you know, we were gullible.

FLATOW: Mm-hmm. How can we, as parents, then - our kids who are watching all of this and learning about the Madoff scandal and living through the Gulf War in Iraq, how can we train our kids to avoid getting hoodwinked, then?

Dr. GREENSPAN: Well, actually, it was a famous philosopher - I think it was Epictetus who said, if you use clear thinking, you won't be hoodwinked. I mean, children are more gullible than adults. That's the reason we don't allow them, as a society or as a legal system, to marry or to sign contracts or to be interrogated, for that matter. And Richard Dawkins, in fact, says that gullibility is something that's built in through evolution, because if there's a gullible gene or a meme, you're less likely to be run over or touch a hot stove because you tend to listen to your parents when they tell you not to do these things. The problem is, where's the turn off system? And in fact, there are some people who argue, such as Stuart Vyse and others - he's a professor at Connecticut College - who would argue that a lot of the gullibility of adults is a function of being conditioned through these memes, which Dawkins calls toxic memes, rather than - a meme is a unit of information that's imparted socially, and that's how we learn to be competent in society.

FLATOW: Let me go to the phones. 1-800-989-8255. Maya in Englewood, Ohio. Hi, Maya.

MAYA (Caller): Hello, how are you doing?

FLATOW: Fine. How are you?

MAYA: I'm great. I was calling to ask the psychologist, what exactly did you fall for, just so that, you know, hopefully I don't fall for the same scheme. Because I heard you talking, and your didn't discuss the financial situation that you fell for and lost your - some of your retirement savings.

Dr. GREENSPAN: Thanks for asking that, Maya. Actually, my situation is even more complicated than just investing with Madoff, because I don't remember even being told - Madoff's name even being mentioned when I invested. In fact, when I got a call from my financial adviser saying - telling me that this Ponzi scheme had happened, and he mentioned Bernie Madoff. I said, who is Bernie Madoff, and what does he have to do with me? I was invested in one of the 15 feeder funds. Mine is the Rye Fund, which is part of the Tremont, Oppenheimer, MassMutual, so it's a very reputable fund. And that's another situational aspect that kind of sucked me in, because I was dealing with, you know, extraordinarily reputable companies, and they were getting management fees. I assumed they were doing due diligence, and they - at the very least, they could recognize fraud. And they didn't.

FLATOW: Mm-hmm. You know, there are scientists who say that it's the experts who have the hardest time realizing that they're being duped.

Dr. GREENSPAN: Well, and you know, one universal aspect of human psychology is we all try to cover up our limitations and pretend we know more than we don't. And a lot of these experts, such as Mr. Chase in Los Angeles, who apparently was a major - I mean, basically, what we have here are cults around individual advisers, rather than around Mr. Madoff, and...

FLATOW: Well, I'm trying to imply something a little different. For example, when you have people who are gullible about pseudoscience, you know, when you have Uri...

Dr. GREENSPAN: Oh, yeah.

FLATOW: Uri Gellar, people like that, who scientists try to test out, and they get - they can't find, you know, where the problems are occurring, it's the other magicians who step up and say, well, you have to be a magician to understand a magician, you know?

Dr. GREENSPAN: Absolutely.

FLATOW: Or James Randy says, I can find that - I can do that same sort of stuff, but you go in a scientist, you don't know what to look for.

Dr. GREENSPAN: Yeah. Well, I mean, there's a myth about scientists as being incredibly rational and resistant to hokum. But in fact, there's a psychologist at the University of Oregon named Ray Hyman, who actually was a professional magician earlier in his life, and he tells an interesting story about a professor of astrophysics at a university in Germany. He's sort of the father of astrophysics, wrote the initial book on astrophysics. He went to a demonstration by a spiritualist from New York and - named Slade - and he did all these amazing things, like making a rope tie and untie itself and a tablet with writing appearing, and he was so persuaded by this that he went out and wrote a book on spiritualism as involving a fourth dimension that only certain sensitive people can tap into.

And what Hyman's explanation is that great scientists, such as this one, are intuitive; they're not rational. They're - all the great breakthroughs occur through intuition. The problem is, when you're intuitive and you move into a field you don't know anything about, such as spiritualism, you can make a fool of yourself. And that's, in fact, what happened with the cold-fusion hoax, which - not hoax, but fiasco - of a few years ago, where two chemists at University of Utah - Pons and Fleischman - decided they had solved the problem of fusion by doing an experiment at room temperature. Turned out to be they were totally deluded, and the problem is, they didn't know anything about physics, they didn't know anything about fusion, and they weren't aware of their own limitations.

Anyone, no matter how smart, can be duped because of their self-deception and because of their failure to talk to others. For example, if they'd talked to others, they would have found out that the same experiment had been done 50 or 60 years ago in Germany...

FLATOW: Mm-hmm.

Dr. GREENSPAN: Earlier in Germany and didn't work, so...

FLATOW: Well, that's part of the swindle, I guess, is keeping you from finding out the truth. We're talking about the psychology of being duped this hour on Science Friday from NPR News, talking with Richard Greenspan, emeritus professor of educational psychology, University of Connecticut. What about, you know, something your mom told you, if it looks too good to be true, it is too good to be true, Stephen?

Dr. GREENSPAN: Well, I'm Stephen, anyway. I'm not Richard, but then...

FLATOW: I said Richard? Oops, I meant Stephen. I'm sorry.

Dr. GREENSPAN: Thank you. Well, my mom had a lot more wisdom in hindsight than I gave her credit for.

(Soundbite of laughter)

Dr. GREENSPAN: And the one thing she told me, my late mom, told me was to - not to be so willing to do whatever my friends told me. And part of that is, I blame my mom, too, because I grew up in the days before polio vaccination. And like Howard Hughes, I didn't know what another kid looked like until I was in school because she was afraid I'd catch polio; that's what made Hughes a germphobe(ph). And because I became so desperate to be liked by others, I would go along with them.

In fact, the first gullibility episode I ever had in, I think, the fourth or fifth grade was when a popular kid told me to go into a store and say a dirty word, which I didn't know the meaning of. And of course, I did it because I wanted them to like me, and I came out and everybody was laughing their heads off. And I should point out, the shopkeeper chased me out of the store with a broom. So, it was the first episode - that was the first instance that I can remember of finding out that someone who pretends to be your friend may not be. And I still have this tendency to want to be a nice guy and that's obvious - and do what people tell me, and that's obviously not a good idea.

FLATOW: And that's...

Dr. GREENSPAN: Particularly when we're talking about...

FLATOW: That's one - and that's one of the keys to gullibility is wanting to...

Dr. GREENSPAN: Absolutely.

FLATOW: Go along with the crowd, being a nice guy...

Dr. GREENSPAN: Yeah, well, it's all four of these factors. They all came together; it was a perfect storm for me. Situation: Everybody was making money. Cognition: Didn't know anything about finance, particularly anything this complicated. Personality: A tendency to be kind of trusting. And an emotion: It seemed like too good a deal to pass up.

FLATOW: Yeah, and so, they all came together at the same time. And you just...

Dr. GREENSPAN: So, I think the one thing I would tell people is don't be impulsive. Take time to think it over. Take time to talk to other advisers, and most of all, when it comes to money, diversify. Don't put everything in one basket. What we have here is a kind of religious faith in Madoff, or even more importantly, in this particular scheme. And we always have to be aware of the possibility that what looks too good to be true could be, in fact, too good to be true.

FLATOW: All right, Stephen, thank you for taking time to be with us today, and good luck to you.

Dr. GREENSPAN: My pleasure, Ira.

FLATOW: Stephen Greenspan is emeritus professor of educational psychology at the University of Connecticut and author of "Annals of Gullibility: Why We Get Duped and How to Avoid It." We're going to take a short break. And this is something you can believe to be true: We're going to come back after this break, I hope - if everything works out - and switch gears and talk about new advances in diabetes research. So, stay with us. We'll be right back.

(Soundbite of music)

FLATOW: I'm Ira Flatow. You're listening to Science Friday from NPR News.

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