By the time Bernie Madoff was arrested in December 2008, it was estimated that his Ponzi scheme had grown to $64.8 billion.
Madoff admitted to have stopped actual trading in the early 1990s, but investigators argued he may have begun his scam to some degree since founding his firm in 1960.
What’s notable about the case, writer and psychologist Maria Konnikova told Business Insider, is that Madoff didn’t con a bunch of rubes, hidden from the public eye.
He took hundreds of millions of dollars from banks like the Royal Bank of Scotland, schools like Stony Brook University, and individuals like New York Mets owner Fred Wilpon.
Rather than preying on inexperienced investors, Madoff took advantage of confident ones with years of experience. It taps into a fundamental truth that Konnikova found when researching her book “The Confidence Game,” about the psychology of the con.
“I think sometimes people who are more intelligent actually make even better victims than people who aren’t quite as sophisticated and who aren’t quite as educated,” she said. Essentially, if you’re absolutely certain you’re too clever to fall for a scam, then you’re actually the perfect mark.
This is true for a couple reasons, Konnikova explained.
“If you look at a lot of Bernie Madoff’s victims, these were really sophisticated people who you would think would know better, but they didn’t,” she said. “Because they had that over-confident glow that comes from being intelligent, from being educated, from being sophisticated, and an accomplished person.”
It’s the same reason why sceptics often make the best customers for skilled con artists claiming they have psychic abilities; in any other situation, the mark thinks, this would be a scam, but I’ve come across the real deal.
“The other part of it, which actually really surprised me as I dug into the psychological research, is that trust is correlated with intelligence,” Konnikova said. “And obviously it’s correlation, so we’re not really sure what’s going on, but we do know that that exists.” This may be related to the idea that from an evolutionary standpoint, humans flourish when building relationships with each other. And so successful individuals will have achieved their stature in life from having created a network of those they trust. Great con artists can tap into that.
“Good con artists, you never ever see them coming,” Konnikova said. “And sometimes you don’t even realise you’ve been conned after they’re gone.”
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