“There are far more good salespeople in the world than worthwhile investment opportunities. Think and act accordingly.”
– Ben Carlson

One of my favourite films from the 1990s is The Grifters (which I now see is on Netflix – adding that to My List 👍). Starring Angelica Houston, John Cusack and Annette Benning it’s the tale of a trio of sleazy con artists hell-bent on out-conning each other. I loved its mix of glamour and seediness – there’s undoubtedly a certain allure to the lifestyle.

Grifters have been around forever. From the eponymous snake oil salesman to the ‘African prince emails’ to highly complex stings which have been visited on entire countries, you do have to admire the successful grifter’s imagination and ingenuity.

What makes a good con artist? Without any shadow of a doubt, above guile, hutzpah and a complete lack of a moral compass, they can spin a good yarn. Because humans, as we know, LOVE stories. We have to – it’s intrinsically linked to our ability to learn and survive as a species.

I’d be willing to bet that there are very few people who manage to get through life without being conned at least once, even if only in a minor way, and without their knowledge. Our default setting is to trust people and believe that they have our best interests at heart. Gullible, maybe, but it’s hard-wired into most people’s DNA.

And because we love stories, we love stories about scams. We can read about that guy who transferred $25,000 to the bank account of an ‘African prince’ on the promise of a share of millions of dollars smug in the knowledge that we would never fall for something like that. And yet. All it takes is the right story to push your buttons…

In ‘Don’t Fall For It – A Short History of Financial Scams’, Ritholtz Wealth’s Director of Institutional Asset Management, Ben Carlson, has compiled an amusing and thoughtful selection of some of the best.  Not all are investment scams – there are outlandish medical treatments, the art of illusion and ‘The End is Nigh’ doomsday cults. So it’s not, strictly speaking, an investment book. It’s a book about us.

Written in Ben’s trademark, conversational style this is nevertheless a book that contains a lot of hard-headed advice on how to avoid finding yourself in the situation of having an empty bank account and egg on your face. One of my favourite pieces of advice was this: Don’t try to get rich twice.

“You only have to invest all your money in something you don’t understand ONCE to see it all vanish. You only have to turn your life savings over to a charlatan or huckster ONCE to see them bleed you dry.”

This is so true, and it’s remarkable how often it’s the wealthiest people who tend to get hit hardest by these scams.

As Ben points out throughout the book, as with so many ways in which our monkey brains lead us, our ability to fall for scams is directly linked to our deeply rooted behavioural traits – greed, envy, overconfidence, hope and fear.

Ben ends the book with a useful chapter covering ‘Six Signs of Financial Fraud’. If you’re dealing with a money manager, there are some great suggestions here for ensuring the appropriate checks and balances are in place.

I enjoyed this book. It’s well written and gets an important message across in an entertaining way while managing to avoid being in any way preachy about it. We’re all the same, we’re all susceptible to these biases and we ALL need to be on our guard. The book’s title says it’s a ‘short history’ and it is – just 170 pages, which I know was the length Ben was aiming for and although those 170 pages include an average of at least one page of notes per chapter (15 including conclusion) it’s not too short. It’s just right. Most of the books I read average about 320 pages and there are very few where I get to the end and don’t think “Well you could have got that across in at least 100 fewer pages.” It’s just the right length – gets the message across with minimal waffle.  Definitely worth a read (although shop around – the hardback, with a list price of $29.95 is a little pricy, in my opinion, although you can get it much cheaper at you know where).

And to end, there was one line (on page 78) which absolutely stopped me in my tracks:

The British view of Sir Francis Drake – “…the most renowned seaman of the Elizabethan Age.”

The Americas (and Spanish, to be fair) version of Sir Francis Drake – pirate  🤣  🤣  🤣