Think Twice

INTRODUCTION

Smart Is as Smart Does

IN DECEMBER 2008, two seemingly unrelated events occurred. The first was the release of Stephen Greenspan’s book, Annals of Gullibility: Why We Get Duped and How to Avoid It. Greenspan, a professor of psychology, explained why we allow other people to take advantage of us and discussed gullibility in fields including finance, academia, and the law. He ended the book with helpful advice on becoming less gullible.

The second was the exposure of the greatest Ponzi scheme in history, run by Bernard Madoff, which cost its unsuspecting investors in excess of $60 billion. A Ponzi scheme is a fraudulent operation in which a manager uses funds from new investors to pay off old investors. Since there is no legitimate ...