Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes. _ Jesse Livermore

Confidence men are hardly criminals in the usual sense of the word, for they prosper through a superb knowledge of human nature; they are set apart from those who employ the machine-gun, the blackjack, or the acetylene torch. - David Maurer

There are old-time classics every investor should read: Reminiscences of a Stock Operator by Edwin Lefèvre, Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay. Maybe Theory of the Leisure Class, The Way We Live Now, Only Yesterday.

We can add David Maurer’s 1940 The Big Con. It’s an incredibly rich sociological and linguistic study of the underworld of grifters and marks in their heyday, and the basis for the all-time great movie The Sting.

Wall Street is the land of castles in the air. Every few years, you get a con job seemingly as brazen as The Sting: John Law, Gregor MacGregor, Charles Ponzi, Ivar Kreuger, Tino De Angelis, Eddie Antar, Bre-X, Barry Minkow, Jordan Belfort, Bernie Madoff, Sam Israel, Allen Stanford, the list goes on. And those are just the big ones; small-time schemes and vanilla accounting scandals are a dime a dozen.

Let’s review the elements of the big con as exemplified by The Sting, and see if it teaches us how to avoid becoming victims.1

The Mark:

Every con needs marks, of which there is no short supply. The keys to being a good mark are overconfidence and greed.

You think you are a better judge of investments and people than most. You think you deserve something for nothing.

You put unwarranted trust in people who look and act the part (authority, social proof), who like you and flatter you (liking).

You may be pretty clever, but you think you are a little more clever than everyone else. Perhaps not perfectly honest and amenable to a little chicanery, willing to cut a corner to make a buck.

Religion can make people more vulnerable. You believe the supernatural holy man or psychic, you think God has granted you this heaven-sent opportunity. Faith can go hand-in-hand with trust of authority, affinity scams. You think you are more deserving than the wicked, an instrument of vengeance against the evil casino, bookmaker, or Rothschild conspiracy.

Lack of self-awareness and ability to give in to strongly motivated reasoning makes you more vulnerable. When you really need the money, when you had a life-changing event that causes you to not think clearly, that helps.

Marks are typically older, typically men. A high status bumpkin, maybe. But no one has a monopoly. Maybe a salaryman with a gambling problem, who thinks he deserves the good life more than his bosses. Maybe a woman with too much faith in the good in people and her intuition about them.

Brains don’t immunize you. Marks con themselves. The smarter you are, the more ability you have to conceive a complex narrative and make yourself believe it. The more confidence in your understanding of the world and attachment to the positive outcome (greed), the more vulnerability to exploitation.

“There’s a mark born every minute, and five to trim him and five to knock him.” Knock, meaning try to warn him. Usually unsuccessfully, because you can’t knock a good mark. Marks have gone to court to defend the con artist who has taken their money, say he was set up, innocently vilified, the authorities messed up a good thing.

The Grifters:

The stars of the show are the roper and the inside man.

The roper locates and researches well-to-do victims. (Puts the mark up.) The roper gains the victim’s initial confidence and passes him to the inside man for a percentage. (think, the sketchy broker and the fraudulent CEO).

Good con men have elements of the dark triad: narcissism, psychopathy, Machiavellianism. (Via Maria Konnikova’s The Confidence Game, a thorough study of the psychological elements of the con.)

Narcissism: Grifters get off on putting one over on everyone, showing they are superior and everyone else is a mark.

Psychopathy: Inability to feel empathy for the marks. But a con man needs enough empathy to get inside the mark’s head, to relate, and to fake it.

Above all, Machiavellianism: It’s a dog eat dog world and it’s just being realistic that everyone is doing their best to fleece everyone else. People just play the hand they were dealt as best they can to survive. Don’t hate the player, hate the game. Never mind that they are playing completely outside the rules of civilized society and spreading misery. The marks probably had it coming.

Psychopaths and posers abound in legitimate business, con men just go the distance. Maurer: If confidence men operate outside the law, it must be remembered that they are not much further outside than many of our pillars of society who go under names less sinister. They only carry to an ultimate and very logical conclusion certain trends which are often inherent in various forms of legitimate business.

The Hook:

The key to a good hook is to understand what will motivate the mark into a frenzy of greed. Doyle Lonnegan’s Five Points insecurity, false pride, and ruthless drive for revenge are his undoing.

You see that fella in the red sweater over there? His name’s Donnie McCoy. Works a few of the protection rackets for Cunnaro while he’s waiting for something better to happen. Donnie and I have known each other since we were six. Take a good look at that face, Floyd. Because if he ever finds out I can be beat by one lousy grifter, I’ll have to kill him and every other hood who wants to muscle in on my Chicago operation.

Billie (Eileen Breenan) picks Lonnegan’s pocket and takes his wallet. Gondorff (Paul Newman) cheats Lonnegan at cards and embarrasses him in front of his peers. Then Hooker (Robert Redford) returns the empty wallet.

This hook is genius:

_ Losing and being unable to pay off the bet humiliates Lonnegan, puts him in a vulnerable position.
_ Hooker returning the wallet, ostensibly against his own interest, restores order, flatters him, establishes trust.
_ Lonnegan’s first reaction is a rage to kill Hooker and ‘Shaw’ (Gondorff), but Hooker’s payback plan hooks him (natch).
_ Birds of a feather: Hooker pretends to be from Five Points, like Lonnegan. Someone from the old hood wouldn’t con you, you’re familiar with their ways and can tell they are straight, right?

If you want to hook someone, do them a favor, like returning a wallet out of the goodness of your heart (reciprocity). Even better, let them do you a favor, like showing mercy and not killing you. If I’m helping you, it’s because you’re worth it, right? Once I do a small favor, I’m vulnerable to a slightly bigger ask (consistency and commitment). That’s why the subway panhandler makes a ludicrously tiny ask, like a dime, a nickel, or penny. You don’t want to be the cheapest bastard, right? And now you’re hooked.

In for a dime, in for a dollar. The hook just needs to get the mark to the next stage of the con.

The Rope, The Tale:

The rope is where the roper steers the hooked mark to the inside man, who tells the tale, a great story, a sure thing, so they rush to the inevitable conclusion on their own, or so they believe. Make the mark feel like he is in control.

Show the mark a way to get what he wants most. Show them the shady clerk and Western Union office where the tips generate. Make them see it’s a foolproof plan. In The Sting, Hooker and Gondorff share roper/inside man duties. In the classical, archetypical big con, the roper happens to know a guy with a foolproof plan, who takes over. And then we’re all in this together, sticking it to the real bad guy.

The Convincer:

The pump-and-dumper lets the early suckers take some profits, to rope them into even bigger investments, get them to tell their friends. When you let the mark make a small score to set up the eventual touch, that’s the convincer. In The Sting, they have to do it twice to convince Lonnegan. The second time, he demands to pick the time, and they don’t have the money, so they stall him at the window until he misses the post time. Sometimes a near miss excites you more than a win, which is why slot machines show a lot of near-jackpots.

The Big Store:

For the convincer, you move the mark to the big store, a casino, bookie, brokerage, a place that puts the mark a little outside his comfort zone, gives the con men the home field advantage, gets the mark emotional and fired up. There is noise and confusion, time constraints (scarcity). Buy now because it will double tomorrow! There is social proof _ other people making huge bets and winning big. The 3-card monte dealer has a crowd, a shill or two, placing bets and making money. The mark wants to show he’s a big shot, that he knows the lingo, that he can run with the big dogs.

The Breakdown, The Send:

Next thing you know, it’s the mark’s idea to bet half a million on Lucky Dan to win. This is the breakdown: negotiating how much the mark will get fleeced for. The small con just takes you for everything you have on you. The big con takes you for everything you can scrape together. The difference is the send, getting the mark to cash in, to beg, borrow or steal all they are good for.

Taking Off The Touch:

Finally, the mark gets fleeced, but somehow in a way that has plausible deniability. It was all just bad luck! Or it was the mark’s fault, like Lonnegan betting on the horse to win instead of place.

The Blow-Off:

After the flim-flammers have the mark’s bankroll, they need put distance between themselves and the mark before he gets wise. They need to distract him so he doesn’t know what just happened. Your broker got sick, got called away on business and he can’t return phone calls. The boss or the authorities won’t let him do anything for you, the victim. In The Sting, it’s having the law on everyone’s tail after a shootout.

Plausible deniability is the best blow-off. If the loss were just bad luck, or the mark’s fault, betting to win instead of place, the mark may still think the grifters are their best friends, and go back to raise more money for a second touch.

The Fix:

The fix is how the grifters immunize themselves from the law. In the old days, paying off the local cops to give the mark a runaround was a standard trick of the trade.

Cons where the mark does something outside the law make it hard for them to go to the cops. A con where the mark does something stupid, like paying a psychic, cheating on his wife, buying worthless junk, makes him reluctant to go public, because it costs him valuable reputation in real life.


Via Maria Konnikova: our need to believe, to embrace stories that explain our world, is as pervasive as it is strong. We’ve done most of the work for them. We want to believe in what they’re telling us. Their genius lies in figuring out what, precisely, it is we want, and how they can present themselves as the perfect vehicle for delivering on that desire.

Trust is evolutionarily favored. Humans have evolved to operate in and identify with groups, Ayn Rand notwithstanding. Societies with more trust function better, experience more economic growth. Evolution has programmed us to learn heuristics that make us feel confidence in certain situations where it may be unwarranted.

People who can fool themselves into thinking things are for the best function better, are more disciplined, start and finish more projects. Athletes who can visualize success win more medals. And people are predictable, reasonable, good…most of the time.

If you think you are not susceptible to being conned, you are probably wrong. It’s like being hacked, it can happen to the best of them. And if you really are relatively invulnerable to the con, you may be less trusting than is optimal. You can’t play your friends like marks, or expect them to act like con men. If you lose, sometimes them’s the breaks. Better to sometimes be cheated than never to trust.

Probably no one is immune, given the right motivation, circumstances, and an expert con artist. But demanding good independent due diligence, heeding red flags, knowing the history, knowing the elements of persuasion and the tricks of the trade, and above all self-awareness to slow down when you are getting carried away, will make most con artists look for better marks. A Madoff isn’t going to pitch a Warren Buffett. He’s going to pitch the guy who thinks he deserves the Warren Buffett return without going the extra mile.

The con is an evolutionary counter strategy, a game theory exploit that works if people are more trusting than is warranted. The cuckoo that deposits eggs in another bird’s nests, the insect that mimics ant queen noises so ants take care of them, are nature’s con artists.

There’s a natural balance, where there is enough trust to make society work, and enough skepticism to limit con artists’ ability to destroy civilization.

In the heyday of the big con, the world was small, communities were built on a large degree of trust, they didn’t communicate with each other, there was no central FBI. The big con thrived.

In a strange way, the Internet has given the edge back to some con artists. Communities have splintered. Water-cooler and stoop interactions that used to be private are now exposed to interlopers. By connecting people in a ‘global village’, gossip and rumor travel fast, some social dynamics have returned to the old days of pitchfork mobs and public shaming.

Photoshop, even audio and video, can be faked. So, are we doomed to a world of perpetual grift and fakery, and diminished trust? Yes and no.

Yes, because there has always been grift. As long as there are marks with a little too much trust, and con men with the psychology of the dark triad, there will be abuse. There is never full immunity.

But no, because tools evolve, people evolve. Remember when we thought the Internet meant the spread of democracy and color revolutions everywhere? Now we get right-wing populism in democracies, and always-on digital surveillance in autocracies and mafia states.

The system hasn’t developed immunity from fake news fueling extremism, not because immunity is impossible (although perfect immunity is), but because we haven’t really tried yet, by identifying the markers of what fake news looks like, and bad actors who spread it, the difference between viral extremism and astroturf fakery.

The natural balance between marks and grifters has been upset. Over time, we’ll evolve the tools and the skepticism to restore the balance. One hopes, without losing our freedom or grip on reality. In the meantime, be wary.

Referenced books (and a couple more)

The Big Con: The Story of the Confidence Man, by David Maurer

The Confidence Game: Why We Fall for It…Every Time, by Maria Konnikova

Influence: The Psychology of Persuasion, by Robert B. Cialdini

The Grifters, by Jim Thompson

Money: A Suicide Note, by Martin Amis

Grifter movies. (I would add The Last Seduction).

  1. Also worth keeping in mind Cialdini’s 6 principles of persuasion: 1. Reciprocity; 2. Commitment/consistency; 3. Social Proof; 4. Liking; 5. Authority; 6. Scarcity;