More Cognitive Biases

This article is part of SCARS continuing commitment to helping the victims of scams (financial fraud) to better understand the psychology of scams. In other words, why are victims vulnerable and how do Cognitive Biases relate to that?

How Do Cognitive Biases Make People Vulnerable To Scams, Fraud, and Deception

How do cognitive biases play a role in making people vulnerable and susceptible to scams, fraud, and deception?

Cognitive biases are mental shortcuts that allow people to make quick decisions and judgments based on their past experiences and memories. These biases can be helpful in many situations, as they allow people to process large amounts of information quickly and efficiently. However, they can also make people vulnerable to scams, fraud, and deception.

One reason why cognitive biases make people vulnerable to scams is that they can lead people to make judgments that are not based on evidence or logical reasoning. For example, Confirmation Bias (a major bias that makes people vulnerable) is the tendency to seek out and interpret information that supports one’s preexisting beliefs, while ignoring or dismissing information that contradicts them. This can make people more susceptible to scams that appeal to their beliefs or biases, as they are more likely to believe the scammer’s claims without critically evaluating the evidence.

There are several ways that people can protect themselves from scams, fraud, and deception. One way is to be aware of common cognitive biases and how they can affect decision-making. This can help people to be more mindful of their thought processes and to question their own judgments.

Another way to protect oneself is to be skeptical of claims and offers that seem too good to be true. It is important to carefully evaluate the evidence and to ask questions before making a decision. This can help people to avoid falling for scams that rely on emotional appeals or incomplete information.

It can also be helpful to seek out additional sources of information and to consult with trusted friends, family members, or professionals before making a decision. This can provide a more balanced perspective and help to identify any potential red flags. But if you do not understand your Cognitive Biases then you will not even see the red flags!

Overall, cognitive biases can make people vulnerable to scams, fraud, and deception by leading them to make judgments that are not based on evidence or logical reasoning, and by causing them to make irrational or risky decisions. However, by being aware of these biases and taking steps to protect oneself, people can reduce their risk of falling victim to these types of scams.

Sunk Cost Bias or Chasing The Money

One of the Cognitive Biases that can make people vulnerable to scams is the “Sunk Cost Bias” (also called “chasing the money”). This bias occurs when people continue to invest time, money, or other resources into something because they have already invested a lot into it and don’t want to feel like that investment was wasted.

This can make people more likely to fall for scams that promise high returns or to continue giving money to someone who is scamming them because they don’t want to accept that they have been duped.

Availability Heuristic Bias

The Availability Heuristic is another of the Cognitive Biases that can make people more vulnerable to scams. This bias occurs when people make judgments based on information that is easily available to them rather than considering all of the available evidence. For example, if someone is considering investing in a company and only looks at information that is readily available on the company’s website, they might not be getting a complete picture of the company’s financial health.

This could make them more likely to fall for a scam if the scammer has provided misleading or false information on the website. Which of course, they do!

This bias helps Pig Butchering scammers defraud their victims. The scammers show their website or their app and lock the victim into relying only on their information.

Anchoring Bias

Finally, the Anchoring Bias can make people more susceptible to scams. This bias occurs when people rely too heavily on the first piece of information they receive and anchor their decisions to it. For example, if someone is offered a product at a high initial price and then offered a discount, they might be more likely to purchase the product because they are anchored to the high initial price. This can make them more vulnerable to scams if the initial price is inflated and the final price is still more than the product is worth.

The anchoring effect causes an individual’s decisions to be influenced by a particular reference point or ‘anchor’.

Both numeric and non-numeric anchoring have been reported in research (meaning numeric/numbers, text-written information, and even visuals – images & video).

In numeric anchoring, once the value of the anchor is set, subsequent arguments, estimates, etc. made by an individual may change from what they would have otherwise been without the anchor. For example, an individual may be more likely to purchase a car if it is placed alongside a more expensive model (the anchor). Prices discussed in negotiations that are lower than the anchor may seem reasonable, perhaps even cheap to the buyer, even if said prices are still relatively higher than the actual market value of the car.

Another example may be when estimating the orbit of Mars, one might start with the Earth’s orbit (365 days) and then adjust upward until they reach a value that seems reasonable (usually less than 687 days, the correct answer).

In other words, it is a bias that shows up in comparison. You shift your answer one way or the other based on what you are comparing it to. Often excluding information because it was not what you found first.

Summary

Cognitive biases do make people more vulnerable to scams, fraud, and deception by causing them to ignore warning signs, pay more attention to information that supports their preexisting beliefs, rely on incomplete information, and anchor their decisions to easy and often incorrect information.

By being aware of these biases and making an effort to overcome them, people can be better equipped to avoid falling victim to scams and other forms of deception.

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