Tag Archive for: Bernie Madoff

The Messenger Can Make All the Difference

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Sometimes it’s not what you say but how you say it that can make all the difference. And sometimes it’s not what is said but who said it that makes all the difference.

I bet most of you would agree that our children are vitally important to our future. After all, at some point each of us will be retired and the fortunes of our investments and the direction of our country will be in the hands of the next generation – our children.

The late Whitney Houston said as much in her enormously popular hit song, Greatest Love of All. The song opens:

I believe the children are our future
Teach them well and let them lead the way

There’s another well-known quote that goes like this, “He alone who owns the youth gains the future.” Any idea who said that? If you’re like most people you probably didn’t know it was Adolf Hitler. I’m guessing despite the reality that children are our future and that you might have even agreed with the quote, it probably doesn’t sit well with you now that you know who said it.

Sometimes the messenger can make all the difference! If Whitney Houston had sung, “He alone who owns the youth gains the future,” and Adolf Hitler had said, “I believe the children are our future.

Teach them well and let them lead the way,” we’d all feel exactly the opposite about the quotes.

This comes to mind because a church in Alabama used the Hitler quote on a billboard to advertise their youth group! There may be truth to Hitler’s words but no one with any gumption about how to persuade would try to use Hitler’s words in a positive way because he’s considered one of the most evil people to ever walk the planet. Would you want to send your kids to a youth group that’s quoting Hitler?

In persuasion the principle of authority tells us it’s easier for people to say yes to those who have superior wisdom or knowledge. To effectively use this principle of influence you need two things – expertise and credibility. Without both you’ll never succeed. For example, Bernie Madoff has expertise. Despite his pyramid scheme, he does know about investing. But would you trust him with your money? I hope not!

On the flip side, you probably have friends you’d trust your life with … but not your money, because they have no expertise when it comes to investing.

Whether it’s investing, taxes, legal advice, etc., we want people we can trust and those we view as having expertise if we’re to do what they suggest.

Authority can also be borrowed. When I present I use lots of quotes from well-known people. I do so for a couple of reasons.

First, if I say something, people might agree with me, but if Dale Carnegie, Ronald Reagan or Dr. Martin Luther King say it, people will more easily agree because their reputations precede them.

Second, my use of quotes shows I’m well-read and that does add to my personal authority. If people view me as well-read then they naturally assume I’m smarter for it and are therefore more willing to listen to what I have to say.

However, when I choose to use a quote I’m conscious of what it says AND who said it. Many infamous people have made true statements (even a broken clock is right twice a day!) but I would almost never use them because the reaction would be the same as your reaction to Hitler’s quote.

Here’s the bottom line if you’re looking to be a master persuader. Keep your reputation intact so people trust you and continue to develop expertise in your chosen field. When you need to borrow authority, make sure the quote and messenger will both be acceptable to your audience. Do these simple things and your ability to get to yes will go up rather dramatically.

How Bernie Madoff with our Money

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We all know the name Bernie Madoff, perpetrator of the biggest Ponzi scheme ever in American business. It’s estimated that $36 billion was invested with Madoff’s firm and that upwards of $18 billion is still missing.

A few weeks ago I was in Cleveland to speak at the local chapter of the Chartered Property Casualty Underwriters (CPCU). I was asked to talk about ethics so I decided a unique approach for this insurance group would be taking a look at Dr. Cialdini’s principles of influence and how they were used by Bernie Madoff. The title for my talk was “How Bernie Madoff with our Money.”

When I talk about the principles of influence I usually refer to ethical influence and persuasion so talking about the unethical use was an interesting change for me. The principles of influence tap into the psychology of human behavior – what causes someone to say “Yes” to a request – and they are powerful! Social scientists and behavioral economists have been scientifically studying human behavior for more than five decades so there’s plenty of data to back up that statement.

Con men may not know the science but through trial and error they quickly figure out how to use the psychology to their advantage. I think it’s important that people understand the principles not only to become more adept at ethically influencing people but also to avoid being manipulated by con men such as Bernie Madoff. I’m going to briefly describe each principle then share something Madoff did that helped him continually bring in new investors for decades. After all, Ponzi schemes depend on a continued inflow of investors and money or else they quickly collapse, so landing new clients was of the utmost importance for Madoff.

Reciprocity – We feel obligated to give back to those who first give to us. When someone does us a favor we want to return the favor in some way and silly as it may sound Bernie made it seem like he was doing his clients a favor by letting them invest with him. After all, his clientele were the rich and famous, he’d been a glowing success for decades and he was well respected. It was a privilege to let him handle their money. The favor was returned as people told others about him and new clients came by way of referral.  

Liking – People like to do business with people we like, especially those who are similar to them. Madoff tapped into this principle based on his similarities to many of his clients. For starters, he recruited from his country club. That’s not out of the ordinary at all because men gauge one another’s character a lot based on shared experiences like golfing. In addition to this, Madoff tapped into similarity through his Jewish heritage because many of his victims were Jewish and trusted him more based on this.

Consensus – We feel more comfortable doing what everyone else is doing or doing what people just like us are doing. If you’re rich then you hang with people who are rich too. Inevitably conversation turns to business so undoubtedly Madoff’s name was passed around like the offering plate at church. If you know many of your most successful friends invest with someone that’s going to give you pause to consider making a switch.

Authority – People tend to trust those who are viewed as experts and Bernie had this one down! He’d been investing successfully since the early 1960s, but what was more impressive was that he helped start the NASDAQ. His trustworthiness was impeccable because he also served as the Chairman of the Board for the National Association of Security Dealers. Why wouldn’t you automatically trust him with those credentials on his side?

Consistency – We like to be consistent in what we say and do because when you do something you usually do it because you believe it’s the right thing to do. If someone asks who you invest with and whether or not you’re doing well of course you’ll respond positively. Being the con-man he was, I’m sure Madoff occasionally asked his biggest clients for referrals and recommendations which they were probably all too willing to do. After all, it would be inconsistent not to.

Scarcity – People want more of what they can’t have or something that is hard to come by. I don’t think Madoff’s firm was one in which any person could pick up the phone and ask to open an account. When you’re dealing in the billions like he was it tends to be a very exclusive club and the more exclusive, the more people wanted in. How would you feel if you knew a business only took on a limited number of new clients each year and you were one they were considering? Most people would jump at the chance.

So there you have it, a quick overview of some of the psychology of How Bernie Madoff with our Money. Hindsight is 20/20 so it’s easy for us to look back and think we’d never be fooled in such a way. However, think about the kinds of people who invested with him – the rich and famous – people who were smart or had smart people managing their money. No, the reality is we’re all susceptible because we’re human and the same psychological pull would be at work in us. Madoff’s situation and science both confirm that. Here’s my advice to you; continue to learn about influence, keep your eyes and ears open, and learn to trust your gut because when something seems too good to be true it usually is.

Brian, CMCT
influencepeople 
Helping You Learn to Hear “Yes”.