My wife and I watched the television series on Anna Delvey. She was the fraud that tricked the elite class in NYC with a scheme to start a higher-end SoHo House like private club. Delvey was really Sorokin. She was from Germany and didn’t come from a lot of money, though she was able to act like she did. We also started watching the Hulu series on Elizabeth Holmes. She started the company Theranos as a Stanford undergraduate.
My first thought is there is no difference between the two women.
Not that they are both fraudsters, they are. No, the similarity is more subtle than that.
Both were able to show they had “network” which gave them agency to run in the circles they needed to run in. Both surfed on the misunderstanding that women never have the same shake in the United States. I never really understood this until I took a class by Professor Ron Burt at Chicago Booth. He studies networks. They are amazing.
Both were “female entrepreneurs”. You know, that class that is discriminated against actively by a cabal of white male venture capitalists.
Everyone that was defrauded by both first had the willingness inside themselves to be defrauded. They took some facts at face value and just believed them without objectively thinking about them. Once the momentum that each “entrepreneur” started got going, they were caught up in it.
In the Delvey case, all it would have taken is one plane trip to Germany to meet face to face. Or, utilize your contacts in Germany to run down the situation. A phone call didn’t work since Delvey manipulated the phone call with intent to deceive the people she was speaking with.
In the Holmes case, once she declined to allow you to do any due diligence on the firm, as an investor you walk away.
Instead, investors were captivated by their own dreams.
We see this a lot these days. The other day, former President Obama gave a speech at Stanford. In it, he endorsed censorship and limiting speech. However, the genius is in the words he used to deliver the speech. Instead of truly understanding the meaning of what he said, people who follow Obama had an entirely different takeaway.
People like me, or people like venture capitalist Marc Andreesen saw the speech as a call to limit freedom.
Others made excuses because internally their confirmation biases wouldn’t let them see the same thing. Or, their fundamental belief system is diametrically opposite.
People like me are told we don’t understand the “nuance”. You know, we just aren’t smart enough to “get it”. I think we “get it” just fine.
When you accept the “current thing” as gospel without objectively questioning it, bad things can happen. You can get swept up in the current. You will do all kinds of things to make whatever you are thinking to seem rational and logical. You will find facts that support your conclusion and disregard everything else.
I know, I have my own confirmation biases. When I put trades on, put investments on, I certainly have fallen prey to them. We all make mistakes.
The tough thing about investing, or investing in early-stage startup companies is you often have to go against the current thing. It’s hard to do. The current thing logic is right there and everyone is repeating it.
When you do invest like that and lose money it is really really hard to forgive yourself. It leaves a deep wound. I have some wounds I haven’t recovered from and they hurt. It’s hard to find your mojo.
In hindsight when you realize your investing mistake or in the cases of Delvey/Holmes that it was all fraud, it is really really easy to see the light.
Confirmation bias now is just a click away. And truckloads of it! A never ending river! As we deepen into our given tribes (of all sorts, human, economic, political) this, I think, makes it harder for us to accept we may be wrong.
Even more powerful than confirmation bias is 'motivated reasoning'...this occurs when a person has a strong reason..other than the fact that he already believes it...for wanting a thing to be true. For example, there was a study in which coffee drinkers and non-drinkers were given a study which purported to show that coffee was harmful. The pro-coffee people spent a lot more time reading the study and trying to poke holes in it than did the anti-coffee people.