The tricks and psychological blows of Cialdini
The modern world in which we live today always has those who make money from the weaknesses of others, a system of traps that are spread everywhere both in real life and on the internet, where someone in our social network is bound to fall prey. Warren Buffett and Charlie Munger (two legendary investors, chairman and vice chairman of Berkshire Hathaway) have spoken out about the unethical behavior of the group of fake gurus, those who glamorously appear on YouTube, television, and now probably on Facebook (or TikTok) to stimulate public greed through promises of getting rich, investing 300%, or the prospect of luxury cars and designer goods. This also occurs in investment sectors such as private equity (PE) or venture capital (VC), where investment experts or founders have the ability to transform poorly performing businesses or operations into extraordinary, magical organizations or unicorns (such as the Theranos or FTX scandal). The history of mankind is not lacking in unethical behavior, as it is part of the inherent bad nature or dark side of human beings.
The ability to avoid these traps depends heavily on experience, calmness (understanding the weaknesses or psychology of people), and the level of wisdom accumulated over time. We can read the book “Influence: The Psychology of Persuasion” by psychologist Robert Cialdini, published in 1984. The work delves into some psychological reasons that control people and make them fall into fraudulent schemes. Cialdini’s perspective has deeply influenced Charlie Munger and Warren Buffett, two investment legends who sent A-share stock of Berkshire as a gift to the psychologist: “This is how we say thank you. Warren and I have read your books, which have helped me earn hundreds of millions of dollars. This is our sincere gratitude.”
Below are the 6 psychological principles of influence that Cialdini delves into in the book, which are often used by scammers, and I have incorporated some recent fraudulent cases that my relatives and friends have encountered:
Firstly, the principle of reciprocity suggests that when we give something small, like a cookie, we may receive something in return, or at least the opportunity to do so. People tend to reciprocate kindness and favors they have received, and nobody wants to feel indebted to others. Scammers often use this enforced indebtedness to manipulate and lead people to make foolish decisions. For instance, receiving unexpected money from a stranger may cause us to feel obligated to follow their instructions and unwittingly give away sensitive information like our OTP code, resulting in a loss of all the money in our bank account.
Secondly, people have a deep-seated need for consistency and commitment. We tend to observe things in a consistent manner and base our behavior on commitments we have made. When we publicly commit to doing something, we feel an obligation to maintain consistency and follow through on our promises. Multi-level marketing schemes and get-rich-quick scams often rely heavily on this tendency. Scammers must make their victims commit to something, like a promise to earn millions of dollars, to put them under immense pressure from their social network to pursue that goal.
Thirdly, social proof: when unsure of what to do, humans tend to imitate others. Searching for validation around what others do is very strong, as it makes us feel safer. A famous (and funny) elevator experiment from 1960 (https://youtu.be/TrTk6DsEJ2Q) demonstrated this, where those standing in the elevator made different gestures than the rest of the group, who usually observed and gradually adjusted their posture to the majority (e.g., facing the wall or taking off their hat). Scammers often exploit this weakness by taking advantage of the reputation of others (based on social proof of credibility), such as the Anna Bac Giang case, the insurance contract of an actress (signed based on the reputation of the introducer, without carefully examining the terms), or numerous cases of stealing or impersonating credible personal pages, user accounts on Facebook, Telegram, Zalo to request money transfers.
Fourthly, liking: humans tend to do what is requested by those they like. If the feeling of liking someone dominates the mind, when negotiating with them, we are very susceptible to manipulation and influence. Human nature often directs liking towards those who praise and cooperate with them. Of course, the feeling of liking is complex and full of prejudice, such as liking those who look like us (skin color, ethnicity). The highest level of liking, love, is often exploited by scammers, such as the case of a girl on Tinder who shared the secret of picking pockets of her boyfriends or the flirtatious messages on Whatsapp, Zalo, Tinder, or Telegram about a multi-national romance (a foreign brother or sister) sending gifts back and forth and requesting payment for shipping fees. Exploiting good intentions to scam charitable money is also a form of this group. The feeling of loneliness or entanglement in relationships is very likely to make us act foolishly.”
The fifth principle is authority: humans often feel persuaded when receiving orders or information from those in authority. The general tendency of humans is to submit to authority, even though it may cause discomfort internally. The LinkedIn network and email signatures are nothing but ways to increase the authority of each individual. Dentists and doctors wear white coats to sell toothpaste or medicine, flight attendants wear uniforms that remind us of their own authority. A recent example of a scam that exploits authority is when scammers impersonate tax authorities and require victims to download an app (from the tax agency) and then request full access to their phone. Another trick that exploits authority is to scare the victim, such as calling to report an emergency (as a fake doctor) or involving them in drug-related crimes (as a fake police officer or court).
The sixth principle is scarcity: everyone races to acquire rare items that others cannot have. The rarer the item, the higher the desire to possess it, especially if a limit is set for the number of produced versions. This approach is often used in the physical product world, such as Dior, LV, or Chanel. Scarcity is associated with the fear of missing out (FOMO), which plays on human greed. Multi-level marketing scams, cryptocurrency investment, binary options, Forex, deep discounts on cosmetics, or invitations to become sales affiliates for trading platforms all rely on this psychology.
Charlie Munger relied on Cialdini’s research to build “mental models” to guide Berkshire’s investment portfolio from one victory to another. In this model, psychological aspects play the most important role. Each of us has “mental habits” that are pre-programmed, like unpolished heuristics, which sometimes help humans act quickly, take advantage, or save time, but sometimes leave us vulnerable to a network of scams that are everywhere. Only by being vigilant and alert can we save ourselves from the attractive but dangerous influences beneath the surface of professional con artists.
By Quan Nguyen Ha
