Don’t Fall For It: A Short History Of Financial Scams, by Ben Carlson

There are at least a few aspects of this book that makes it a worthwhile one. One of them is the way that the author seeks to discover some of the larger overarching themes of financial scams and their history for a reader, and the other is a sense of brevity which is truly admirable, as this book simply does not waste space when it comes to its content. It definitely lives up to its subtitle as a short history, and that is a good thing. Just because it is a short history, though, does not mean it skimps on the history of financial scams. It discusses two types of financial scammers, namely those who are victims of their own hype, both self-deceived and deceiving others, often because they believe what they are pushing about investments that inevitably go bad because of bubbles, whom the author titles as “Type 1 charlatan” and the truly sociopathic sorts who delight in pulling the wool over the eyes of others, the more dangerous “Type 2 charlatan.” Similarly, the author points out the various ways in which people are often victimized by scammers because of their envy and greed and the way that other people are able to receive trust that they really do not deserve through association with other trusted people who often become their dupes.

One of the more sobering aspects of this book is that wealthy people are not really good when it comes to money. People who have a great deal of wealth, rather than being content with it, tend to be especially sensitive to envy when it comes to other people having more than they have, and are easily hooked by being a part of the “in-crowd” to profit off of some sort of scheme that is not generally accessible to the wider public. The author seems to hint that a great deal of the crony capitalism trends of recent decades, and even recent centuries, are aspects of financial fraud, and that Ponzi schemes and financial mismanagement are far more common than one might think. Even Johnny Depp comes in as being dunned for his failure to deal well with his finances, him having sued financial managers for squandering funds while wasting huge amounts of money himself, despite having earned the staggering sum of $700 million as an actor over the past few decades, and wasting a lot of that on a bloated staff as well as drugs and alcohol, and likely has more than one person who hopes that the actor will waste some money on her. Are people who fawn after the rich and hope for their patronage scammers in their own way? That might be worthy of another book.

In terms of its contents, this book is pretty compact with fourteen chapters and other material taking up less than 200 pages. After a short introduction, this book launches into its discussion by reminding us that no one sells miracles (1), dealing with goat Viagra, radio, the placebo effect, and the truth that correlation does not equal causation. The author discusses how to sell everything (2), including the Eiffel Tower (twice), and the problem of fast money (3). After this the author discusses cognitive dissonance and the value of admitting ignorance (4) as well as the problem of sleight of hand when it comes to financial investments (5). A discussion of the failure of successful people (6) involves a talk about how Grant was defeated by his own decency, while a longer chapter follows on how and when fraud flourishes in corrupt societies (7). The author discusses the siren song of new technologies as encouraging some types of scams (8), while also reminding us of the seductive power of the fear of missing out (9). The author talks about John Law as a classic example of the Type I Charlatan (10) while contrasting this with the South Sea Company and John Blunt as classic Type II Charlatan (11) situations. The author discusses how people can be fooled by intelligence (12), that people in general are often gullible (13), and that the easiest people to fool (14) are those who get rich but don’t know how to stay rich. The conclusion gives six sensible signs of financial fraud [1], after which the book ends with an index.

[1] The six signs are:
1. The money manager has custody of your assets.
2. There is an aura of exclusivity in the pitch.
3. The strategy is too complicated to understand.
4. The story is too good to be true.
5. The returns are ridiculously good.
6. They tell you exactly what you want to hear.