Cognitive tools for thwarting scams

In an era where we constantly fear being swindled, a book that delves into the psychology of deception and offers guidance on steering clear of fraud becomes essential reading

Nobody’s fool: Why we get taken in and what we can do about it

Authors: Daniel Simons & Christopher Chabris

Publisher: Basic Books (Hachette Book Group)

Pages: 374

Price: Rs 1,903

On May 24, 1971, Rustom Sohrab Nagarwala masterminded an audacious fraud. His target was Ved Prakash Malhotra, a cashier at the State Bank of India. Impersonating then Prime Minister Indira Gandhi, he asked for Rs 60 lakh to be delivered, adding that Malhotra should collect the receipt from the Prime Minister’s Office (PMO). Too cowed to verify, Malhotra made the delivery, only to learn at the PMO that he had been duped. This fraud, practised internationally, is called the “President scam” and employs the leverage of high authority to get lower-ranked individuals to comply.

In the land of Natwarlal (the legendary conman who allegedly sold the Taj Mahal and the parliament multiple times), Indians live in perpetual fear of getting swindled at every turn — by bank relationship managers pushing risky financial products, callers looking to extract sensitive financial information, and so on. Against this backdrop, a book that delves into the psychology of deception and offers guidance on steering clear of fraud becomes essential reading.

The authors, who are US-based cognitive scientists, begin by discussing “truth bias” — our evolutionary inclination to believe what we are told. While facilitating daily interactions, this bias renders us vulnerable to deceit.

Another chink in our armour is the tendency to decide based on the information that is presented to us, without making the effort to incorporate information that is not readily available.

During World War II, on October 14, 1943, the Allies sent 291 B-17 bombers into Germany to destroy its ball-bearing factories. The small number of bombers that returned were riddled with bullets. The Air Force brought in statistician Abraham Wald to study the planes to see if there was a pattern to the bullet marks that could be used to reinforce them with steel plates.

If you thought the bombers should have been reinforced in the areas where they carried the bullet marks, you have committed the classic error called “survivorship bias”. Remember, the evidence before us is from the planes that returned. While they took hits, those were obviously not fatal. Wald made the counterintuitive suggestion of reinforcing the undamaged areas, arguing the planes that had not returned had been hit in those areas. 

Cheats routinely exploit our tendency to focus on immediate, visible information. Take the case of Theranos, a company that hoodwinked investors with its supposedly revolutionary technology that required only a droplet of blood to conduct multiple tests (which had traditionally required a full vial). It orchestrated demonstrations where a droplet was taken from a member of the audience and placed in their machine. While the audience was taken to lunch, the tests were conducted using conventional methods. Investors, swayed by what they saw and failing to probe deeply, suffered monumental losses when the scam came to light.

When deluged with tall claims of success, the authors suggest using a mental tool called the two-by-two grid (used while playing noughts and crosses). Consider the case of an astrologer who claims to have made many correct predictions. Let the top row of the two-by-two grid contain predictions the astrologer made. In the bottom row are those he failed to make. The left-hand column contains predictions that turned out to be true while the right-hand column has those that were false.  

The box in the top-left corner would contain the predictions the astrologer made, and which turned out to be true. Those are the success stories he would tout. But what about the other three boxes? The box in the top-right corner would contain the predictions he made that turned out to be false. In the bottom-left corner box would be the events that occurred but which the astrologer failed to predict (say, the Covid-19 pandemic). And in the bottom right-hand corner would be events that the astrologer neither predicted nor happened.

In future, whenever someone makes claims of success in any field, apply this grid and think of the other three boxes. Once you do so, their track record might seem less impressive than they would have you believe.

In addition, when faced with a sales spiel, train your mind to think: “What are they not telling me?” Make decisions based on holistic information, not just what is presented by an interested party.

The book explores several more cognitive fault lines and biases that make us susceptible to fraud and offers more tools for protecting ourselves.  

The cases of fraud included in the book are from the West, which are likely to resonate less with Indian readers. But the principles it contains are universal. For readers, the lessons are clear: Stay sceptic, verify, and decide based on comprehensive information. This mindset, encapsulated in the motto, “Accept less and check more, especially when the stakes are high”, is pivotal in an era rife with fraud.