Why some people fall for scams
The arrest last week in Batangas of scammers victimizing lawyers, OFWs, and policemen, and the recent gathering of thousands in Los Baños to receive the 1st installment of the promised millions from the Marcos Family, reminded me of the so many scams that have victimized thousands of people and wasted billions in pyramiding and other "get rich quick" scams over many years. While this is not peculiar to or only in the Philippines, we have a sizable share in the last 30 years as pyramiding scams cost and lost billions of pesos, with the government through the Philippine Deposit Insurance Corp. shouldering part of the losses to cover the insured deposits of the rural banks involved in the scams. In 1965, I read a book called the "Greatest Scams in the World" and Ponzi, the oldest known originator of the pyramid scam was already featured. Still, in the last 50 years all the scams in that book are resurrected and are victimizing people.
There are three reasons people fall for these scams. First, is lack of knowledge or ignorance which dovetails with the lack of financial literacy of majority of Filipinos. There is a lack of understanding that the promised "return on investment" (ROI) is just too good to be true, and cannot be achieved in a normal business given the economic conditions prevailing in the country. To be offered an ROI that is even higher than usurious rates of the illegal money lenders is impossible. The economic and educational level of people that fall for the scam is inversely related to the probability of getting scammed. But this is not always so, as a number of educated and well-off people have been scammed as well. Some 16 years ago 90 percent of the people in Albania were involved in a pyramiding scam that almost bankrupted the government that had to bail out the victims. It involved people from all social and economic strata and some very educated people. Here in the Philippines I know of many who lost money to various scams but were too proud or ashamed to admit it.
The second reason is overestimation of one's ability. In a survey a few years ago on driving ability, it was found out that 80 percent of drivers overestimate or believe that they are better drivers than they really are, and this was for both sexes and all economic classes. Reading some of the Facebook and Twitter posts and even listening to phoned-in comments in radio and TV, people do overestimate their intellectual ability and are quite overconfident. I personally know of a group of guys who invested in a pyramiding scam knowing it was a scam, but they believed they could outwit the operator and come out ahead. In the end when the pyramid collapsed, they still lost millions.
The third reason is greed. I do not know if people are hardwired to want something for nothing, or to get something for the least cost or effort, but we all want to win the lotto or a raffle. The windfall mentality or the "fast buck" is so embedded in us, we have to discipline ourselves out of this mental attitude. Religion, the right moral and ethical values are the tools that should straighten our thinking, plus a dose of actual experience as a victim. But a philosopher who I forgot had said, "It is easier to fool people than to convince people that they have been fooled." And this is true in the scam business and in our choice of political leaders.
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