Davos 2019 – The Psychology Of The Con: How Not To Get Fooled

Empathy, trust and compassion have driven the growth of healthy societies for millennia. For just as long, confidence tricksters have exploited these traits to great effect. Join psychologist, author and champion poker player Maria Konnikova to explore the psychology of the con and what it reveals about every one of us.

Speaker: · Maria Konnikova, Author, USA.

Moderated by: · Gregory Warner, Host, NPR, USA.

Davos 2019 – The Psychology Of The Con: How Not To Get Fooled

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Transcript

Today so we're here today to talk about how not to get fooled but I actually want to start somewhere a little bit counter-intuitive which is the importance of trust. Trust is one of the fundamental forces of good in the world. It's the basis of globalism. It's the reason that we're able to believe that the person sitting next to us isn't going to betray us and ultimately Trust is one of the things that keeps society together. Trust is the belief that even though things might appear to be Zero-Sum they could actually be positive some in the long term. So here's what we know about trust from the research side. Societies with higher levels of trust tend to do better. They have stronger institutions. They do better economically. So over time across the world across societies it seems that cooperation actually ends up winning out over antagonism. On a personal side we know that higher levels of generalized trust that is trust in your fellow human beings that people sitting in this room are also correlated with all sorts of good things.

People who have higher levels of generalized trust tend to do better academically they're happier they're healthier they take more risks they start more businesses. They seem to be smarter. In one study from Oxford University higher levels of generalized trust were associated with a 34 percent increase in verbal IQ scores. So trust is good. And it seems that trust is natural that this is actually our default state and that it's distrust that is learned. Let me give you an example in one study at Stanford University the psychologist Roderick Kramer had two groups of people play a game of trust. One group wasn't told anything they just said Play the game to the best of your ability. The other group was was told. Keep an eye out on your fellow participants feel a little wary of them. Who knows what tricks they might be up to.

What Creamer ended up finding was that the first group inherently trusted their fellow participants and did much better had much better results in the study whereas the second group spent all of their time being suspicious of each other and ended up not doing well at all. So not only trust is trust the default but trust leads to good things. Right now though we're living in a very peculiar moment in time we're living in a moment in time where generalized trust is actually on the decline even in societies where traditionally it's been highest. So we're living in a world where we have this rise of populism this distrust of facts people are undermining the media journalism expertise is no longer valued the way that it has been in the past. People when I write something distressed my job and say fake news hashtag fake news. So what do we do. How do we recapture trust.

But do so in a way so that we're trusting in the right people in the right things and not the wrong people and the wrong things. So I have a slightly nontraditional background I'd like to call it one of the more creative uses of psychology Ph.D. in recent memory. So first I spent a long time studying how people make decisions in the lab that I wrote about it. Then I spent a few years with con artists figuring out how I hope how trust how deception how all of these things we're talking about today play out in the real world. And then I became a professional poker player. So I like to call it one of the best uses of a Harvard degree of all time. And it's actually arguably in that transition to the world of games that I've learned more about strategic decision making about the nature of trust and distrust than I have in years of research in a psychology lab. Poker is a really interesting game. If you trust too much you are going to go broke so quickly it's not even funny. People try to bluff you all the time. They try to bully you at the poker table. Everyone is always telling you stories about how strong they are. What an advantage they have over you. And guess what happens if you believe them every single time you end up folding.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver