Ponzi schemes and pyramid schemes & the cognitive biases: how our brains can trap us

On the first Sunday of Advent, we would like to shed some light on the matter – a light that might encourage people to critically question their own behaviour. If you have invested in systems such as Lyoness, Lyconet, myWorld, HyperVerse, GSPartner, Karatbars, Safir, Zeniq, Xera, XeraPro or XPro, the following Advent posts might help you reflect on your decision.

From university professors to insurance brokers to supermarket sales assistants, we often hear the same stories from victims: bewilderment at their own carelessness and the question: ‘How could I be so stupid?’

But instead of self-reproach, we would like to offer those affected comfort and at the same time provide clarification: what often appears to be carelessness or naivety can be explained by psychological mechanisms. So-called cognitive distortions are often the reason why we continue to invest time, money and effort in questionable projects despite clear warning signs – even when the fraud is obvious to outsiders.

Perhaps this will help you see the light, in keeping with the holiday season.

1. Why we continue with such systems even though we are losing

Have you ever wondered why you continued to invest despite clear warning signs? Our brain tells us, ‘This can’t be for nothing!’ – even if it would make more sense rationally to stop.

This is not a sign of weakness, but a natural reaction that fraudsters deliberately exploit. Psychologists know this phenomenon as loss aversion. Losses hurt us emotionally more than gains of the same amount please us.

An example: Even if a crypto project proves to be dubious, many affected people hesitate to withdraw their investments for fear of having to accept the loss for good. In multi-level marketing systems, where victims are often defrauded again, it is even worse. They are asked to move their assets, convert them or invest further sums in order to allegedly ‘save everything’.

Our advice:

Stay alert. Listen when others warn you and get independent advice!

Further food for thought awaits you on the second Sunday of Advent.

Your BEK team