OP-ED: Why are we so gullible?

Recently, the trickery, fraud, irregularities, and embezzlement of e-commerce sites are coming to light in Bangladesh. However, while accusing the owners of the companies like Evaly, e-orange, Dhamaka, and the like of wrong-doings, the policy-makers, authorities, and many of us are also blaming the people at risk of losing a lot of money for being irresponsible. The public is blamed for falling to their greed and eyeing a shortcut to wealth. In a way, the public is charged for being gullible.

The question of human gullibility is a straightforward one to raise, because the fraudulent schemes are not new. Previously, companies like Jubok and Destiny used multi-level marketing strategies to drain out cash from people. Globally, such schemes of fraud are termed Ponzi schemes. The word Ponzi comes from Charles Ponzi, an Italian con artist who conned many and accumulated massive wealth in the early 20th century by promising higher financial gains than traditional investments. 

In such schemes, the profits to earlier investors are usually paid with funds from more recent investors, and the cycle continues until busted. Nonetheless, people are lured by the promise of the fraudulent Ponzi schemes’ great returns. 

People typically do not realize the consequences. Instead, they support such schemes -- as we see, many people still support Evaly and others, citing that they had enabled them to make a living. These people invested money to buy products and received some products at a much lower price than the open market. With massive discounts and cashback offers, people could buy a motorcycle, car, TV, air conditioner, and other luxury items at a significantly lower price. They did not care to wait for two to six months to get the product. 

Their goal was to re-sell the product at a much higher price and eventually to make a profit. It took the form of business investment. With the pandemic, many people invested money to profit during the last one and half years while other businesses and job opportunities were low. As some people could make a profit, the possibility of profit lured many others into investing money. Thus, the schemeshave gradually gotten to a size of no return. 

These schemes have more to analyze; just pointing to human gullibility is somehow superficially hiding the real causes. But, of course, the lure of big money attracts people towards Ponzi schemes. As everyone wants to make money quickly, such schemes appear the most convenient way to do it. 

Besides, this impulse to make too much money too fast indicates that people have spare cash or need money -- looking for quick and high returns but facing difficulty in doing so in the usual business environment. This imbalance between the demand and the supply or, in other words, the existing structural settings is the breeding ground of Ponzi schemes. The Ponzi schemes often pay the returns to older customers/investors from the money they get from new recruits in the systems. 

Hence, people start getting benefits initially, and others usually know of such schemes through word-of-mouth. The early investors in the Ponzi schemes seeing fantastic returns often become its representatives to aid their sales efforts. They share positive information about it to friends and relatives, usually not always with the intention of fraud but because of an urge of sharing something that they have found very fruitful.

But as the scheme requires uninterrupted expansion, they continuously take a grander appearance to attract more new customers or investors. To make this happen, as evident from Evaly and others’ activities, they employed celebrities as brand ambassadors, became a sponsor of the Bangladesh men’s cricket team and other national events/activities, and advertised in social and mainstream media. Moreover, to lure more people, huge discounts and cashback offers continued. As a result, many similar companies started operating to seize the opportunity, turning the e-commerce business into a vicious circle.

People who usually come from financially weak backgrounds fall prey to Ponzi schemes. Also, unemployment plays an important role. Owners of these schemes, such as Evaly, involved many bright unemployed youths. 

As stated in some recent news reports, while working for the scheme/platform, many employees recruited new customers/investors/merchants from their network, but they were unable to ensure their pay or product before the system of Evaly crashed. 

Lack of institutionalized investment options can be seen as another reason. One could argue, for this institutional lack, Ponzi schemes have made inroads into rural areas, as evident from the activities of the Ehsan group. They have also ingeniously used the frame of religion to attract pious people who believed it to be a better alternative than other current investment opportunities. 

In many religious gatherings or waz, some preachers also supported and promoted, thus, convinced people to invest in the Ehsan group. These people always have more say and convincing power among the villagers than any outsider -- thereby playing significant roles in popularizing specific Ponzi schemes.

So, to point to the greed of customers/investors is to be overlooking the whole picture. People’s gullibility depends on certain factors, such as how well the story is told and/or who is telling the story. Lack of investment opportunities is another reason; those with very little savings try to gain from the Ponzi schemes. Even those not in dire need take a chance, as in contemporary society, the more we have, the better it is. 

People’s gullibility arises from several socio-economic features; if we cannot address such issues, blaming people for their naivety will not do any greater good. 

Mohammad Tareq Hasan is an anthropologist and teaches at the University of Dhaka. Currently, he works as a research fellow at the International Institute for Asian Studies (IIAS), Leiden University, The Netherlands.