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The Frauds that Calm Me

Updated: Nov 25, 2023

I've had trouble falling asleep or staying asleep these past few weeks. Nothing against getting a little chemical help, but I'm afraid that if I take sleeping pills, I'll grow increasingly numb. Life right now has very sharp edges, but as long as I feel I can take it, I will.

So, I fall asleep listening to podcasts. I then wake up, realize I'm in the next episode, press pause, take my earphones out, and go back to sleep. It can take three nights to go through a one-hour episode, so I guess it lights out after 20 minutes or so.

The one podcast that never fails to calm me, while it educates me at the same time

It’s hosted by two CPAs, one of whom is also a stand-up comedian. It is meticulously researched, and the guys know their stuff. But you don't have to be in the finance business to listen and enjoy.

Hearing about scams and frauds that take place (mostly) in America just works for me. Maybe because it is so far removed from my current reality. Plus, the crimes, though painful to many people who get swindled, are bloodless. And the bad guys are always caught and dealt with.

I loved listening to the case of Rita, a loyal \local public servant in Dixon, Illinois, who, for twenty years, managed to steal nearly 54 million dollars. This is still the largest municipal fraud in US history. Or the case of Fat Leonard, who bribed navy admirals into signing off on his inflated invoices. I incorporate financial scams in the books I write, usually the classic “pump and dump” scheme (buy a security, jack up the price, then sell it onward). But these guys touch on art frauds, fake expensive wines, and nuns that steal scholarships from kids. It’s entertaining stuff.

In a recent episode, the Oh My Fraud guys spoke in length about an Israeli guy I met in real life, Professor Dan Arieli. He was once one of their heroes, and their disappointment made them dedicate not one, but two whole episodes to his academic research fraud, which involved data manipulation.

Arieli is a magnificent speaker and a striking-looking man: half his face got burned, and he grows a beard on the other half. He was the undisputed star of behavioral economics, a field that studies why people make the financial decisions that they do. In the talk I attended, he told us of the study he'd done on how to incentivize people to save money in Kenya. The results weren't intuitive - people saved more when they got a real golden coin to show for it than when they got a text message reminder from their child or when their savings were matched. I really hope the data here is accurate. It was a brilliant experiment.

But he lost my respect long before the scandal of false data broke.

He tried to sell me a mutual fund in which he invests according to behavioral economics. He claimed to have algorithms that point with precision to companies that will succeed.

I mean, come on. There is no such thing.

There is no replacing hard work and professionalism. If anyone tries to tell you they've cracked the future of stock prices with math -it's a scam. They might tell you they deserve their inflated management fees because they found the surest way to generate alpha (that means to beat the benchmark and perform better than the index, i.e., the S&P 500), but I would highly doubt them. There are investors who deserve our trust: Warren Buffet analyzes companies (micro) while taking into account macro conditions. He doesn't claim he found a shortcut or that he has a machine that tells him where to put his money.

Stay safe, and don’t fall for scammers,

Yours,

Mia

For further reading on behavioral economics and Dan Arieli:

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