The Big Con: Book Review

The Big Con by David Merkel, CFA of the Aleph Blog

This is an unusual book for me to review.  This is a book about Confidence Men, first published in 1940, and recently republished in 1999.  It was written by David W. Maurer, who was a professor of linguistics, and used his skills to analyze the slang of the underworld.

The Big Con deals with Con Men — men who try to gain the confidence of another man in order to get him to hand over money to them.

I have often said, and many grifters would agree, that it is very hard to cheat an honest man.  Honest men know that there are no easy pickings in life, and if there are some holes in the system, no one will share them with you for free. Grifters trick those who think that the world is unfair, and want to be cut in on the inside action.

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Sam Israel was tricked in that way in the book “Octopus.”  Clever actors convinced him that there was easy money to be made, and they milked him and his hedge fund clients, while he lost it all.

The Big Con takes you through the human systems that con men create in order to convince their targets that they can make easy money, until the con men fleece them.  The two key characters are ropers, who attract victims, and the insiderman, who is the boss and is the one who directs the whole scam.

They design a system that delivers a few small wins to the victim, who gets greedy and puts up a lot of money, and then the rigged system delivers a loss, cheating him of his money.  Mot often, since the victim was an willing participant in an illegal scheme, even though he was cheated, he will not be willing to press charges, even though was cheated, because he wants to protect his reputation.

The Big Con describes the many players involved as actors, to make the enterprise look legitimate.   It also describes the games that they played, and how they would entice a victim into an unfair scheme in which they would profit off others, but end up cheating the victim.  The book talks about how the justice system was often bought by the insiderman, thus protecting the activities of those he employed.

It also describes how the ropers would figure out whether a victim would go along with a scam or not.  It gives the history of confidence games — how they developed, and how some faded, and others grew, at least for a time.

Along with all of that, it describes the lives of the grifters, and how few of them truly prospered.  Most wasted the money that they earned in riotous living. As Proverbs 13:11 says, “Wealth obtained by fraud dwindles, But the one who gathers by labor increases it.” [NASB]

To the Modern Era

Breaking from the book review, is our era so much different, or do we have the same problems in different ways?

I’ve been down enough roads in the investing world to know that there are a lot of parties who try to get people to take bad deals.  It can be as simple as guys who use the “straight-line” pitch to get people to invest with them.  It can be institutional investors who try to trick naive institutions.

It can be seminars with shills and other accomplices like Rich Dad and their ilk.  We still have Nigerian Scams and other Scams on the Internet, many of which involve identity theft.  We have promoted penny stocks, structured notes, and Ponzi schemes.  I have written about all of these.  Is the current era less prone to con men than the era from 1890-1940?

I would argue no, though it was more colorful and personal in the past.  Today’s scams are more virtual and anonymous, leaving aside Madoff’s Ponzi Scheme which was highly personal, and psychologically design to harvest money from those that wanted a high yield with safety.

Why you should consider this book

By reading about all of the ways that people get cheated, you will be deterred from greed, and distrust those who incite greed.  These problems are alive and well today.  Can you learn that there are no free lunches, and no free money?  If you can learn that, you are well on the way to not being cheated.

Quibbles

The book is repetitive.  It does not condemn the grifters for the sins they commit against others.  The book is almost amoral.  At least, it posits a human morality, where there is a code of honor among thieves, but thievery is not in itself wrong if the victim is a greedy person.

Summary

This is a classic book that if you read it should make you more skeptical about “sure things,” and “get-rich-quick schemes.”  Away from that, it is a commentary on the human condition, showing how many men are willing to compromise their ethics in order to make a lot of money.  Anyway, if you want to, you can buy it here: The Big Con: The Story of the Confidence Man.  It’s not expensive for what you get, and it is a colorful book.

Full disclosure: I bought a copy with my own money.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.