Thursday, March 07, 2019

If it Sounds too Good to be True …….

I like to think of myself as an honest man, who would make a very poor crook. My mother made it a point to drill it into me and my siblings that lying and taking things that we shouldn’t take was not only criminal but morally wrong. She took great pride in the fact that on her side of the family, people, particularly her father, were “incorruptible.” She also stressed that it wasn’t her side of the family that was rich in moral fiber. She made the point of drilling it into me that my father’s family were also decent people.

Yet, despite the valiant efforts of my parents to keep away from the nasties in life, I’ve somehow run into more than my fair share of nasty people or as they say – the people who make a living exploiting the weaknesses in others.

Scams can take many forms. You could say that the China girls in Geylang, Singapore’s Red-Light district are running a scam, especially the ones who pick up an old man and somehow persuade him to spend his entire pension on them. You could also say that the street sellers trying to flog you second hand goods or the old people selling you tissue paper of the street are running a scam.

To a certain extent there might be some truth in the sense that these people are not working in conventional jobs. However, in many cases you got to salute these people who do what they do and their existence is in actual fact a blight on society as a whole rather than on the individuals doing the task.

If you look at who the “working girls” from third world countries “con,” it’s usually people who shouldn’t be easily taken in (especially older white men in senior corporate positions – or Chinese shop owners who in many cases have highly educated children who make up for their lack of education). If you look at the guys peddling fake goods on the streets, you have to credit them for trying to make a living no matter how “degrading” and how much “rejection” they face on a daily basis. I’d rather have these guys than the better educated ones who have too much pride to be seen sweeping the streets but have no problem mooching off the guys working lowly jobs. As for the old folks trying to sell you tissue paper – all I can say is what does it say about us as society that our old folks need to sell tissue paper to pay their utilities? 

Real scams are in many ways very respectable in appearance and the success of a “good” scam is the fact that it contains a high element of probability or at least the things that a reasonable person would assume are credible.

One of the cases I dealt with involved a man who worked on the principle of getting people to invest in “food production” through hydroponic farms, which is particularly appealing thing in land scarce Singapore, which depends on importing its food. In the 60s, the government was all about getting rid of farms to acquire land for housing development. Today, the government is investing in new technologies like vertical farming because the “talk” is about how we need to be self-sufficient and not be bullied by the outside world.

So, when the government, which to all intents and purposes is the most credible organization in the country talks about the importance of food security and technologies to create it, you’re a bound to think that a person talking about technologies to create food security is onto something.

Another example of a scam in Singapore was called “Profitable Plots,” which worked on the premise of buying land in the UK and waiting to be bought out by property developers. They were asking you to invest in the UK, the country whose laws are the basis on Singapore’s (I mean, it would have been a bigger challenge to sell land in Botswana for example).

Let us never forget that the 2008 financial crisis was not created by an obscure financial institution in Palau. It was created by the most credible financial institutions based in the most credible financial centres (namely New York and to a lesser extent London).

Good conmen always have an element of credibility. I make no secret that I don’t like Donald Trump the politician but as a “con-job” he’s going a fantastic job. He’s at the right place at the right time and whenever you see him, he seems to be living in vulgar luxury. Who am I, for example to question him when he declares himself to be a brilliant businessman? He’s living in the most outlandish suite on Trump Towers, while I struggle to pay my HDB housing loan. You have to give him credit for making you think that he’s doing something right.

A healthy degree of skepticism is always required when approaching an investment or someone who is telling you something that you are instinctively drawn to. The most common point that con artist hit on is your greed.

The scams that always seem to hit the mark are those that promise high returns. I live in Singapore where the average interest rate paid on a savings account is 0.025 percent a year, so anything that pays above on

Well, it sounds good – too good in fact. What people often forget is that great rewards are tied to great risk. Lotteries work on people forgetting about this inconvenient fact. The average Joe earning 10 bucks an hour and working 8 hours a day for six days a week gets excited about at the thought of winning several lifetimes earnings in an instant but forgets that the odds of winning the 5-number toto is about 1 in 2,330,636. By comparison the odds of being struck by lighting are around 1 in 3,000 in a lifetime. People buy tickets religiously in the hope that they strike it rich just once (religious buyers do win something from time-to-time – the win encourages them to buy more).

If something offers high returns, its likely that there is a “risk” to it. A gambling win pays off better than anything else but as mentioned, your odds of winning are very slim. The same is true of any other investment.

Then there’s the principle of understanding what you’re investing in. How many of us ask the vital question – what is this business about or how does it work. Warren Buffet, the world’s most successful investor has made it a point of never putting his money into anything he doesn’t understand. If you look at his investments like Coke or Gillette, you’ll realise they’re very basic and simple.

Most of us get too caught up in trying to be clever or we’re simply too afraid to be stupid. Hence, when someone says something that you think its deep and meaningful, most people will nod and say “Yes, I understand – that makes sense and its brilliant,” even if the speaker might as well be speaking a foreign language.

I’ve had to reach my forties to understand that its OK to be less than stellar smart and only doing things my limited intellect understands, helps. Let’s remember a small fact – Forrest Gump had a less than average IQ but did better than his more intelligent peers because he wasn’t afraid to be who he was. The clever guys end up getting screwed because they end up trying to be smarter than they actually are. Stick to what you know or find people with your interest at heart who know.

It’s heart breaking to see retirees lose their shirt to the “clever” things that have impressed them and appealed to their worst nature. Helping someone remember certain facts of life can save them a lot of heart ache latter on in life. 

No comments

© BeautifullyIncoherent
Maira Gall