Unpacking the OG Ponzi Scheme (with Adam Grant)

Adam Grant is a thinker. The kind of thinking that makes you think twice. Which is precisely what the victims of a certain financial fraud deployment have been told throughout history. But today, Ed and Adam head to the top of this pyramid, to unveil the origin of the ultimate form of foul play: The Ponzi Scheme. Subscribe to the SNAFU YouTube channel: www.youtube.com/@SNAFUPod Buy the SNAFU book: www.snafu-book.com http://www.snafu-book.com/ See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

• 0:01Speaker 00

  That's exactly the kind of weaponization of charisma that makes me extremely uncomfortable. In fact, I need to go take a shower right now. Can you hold?

• 0:11Speaker 01

  No, we can't wait for you to take a shower. We're gonna have to go with you into the shower, I'm afraid. It's just the rules. That's also very creepy.

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• 2:01Speaker 01

  All right, welcome to Snafu, your favorite podcast about history's greatest screw-ups, and a little bit of reflection about what those screw-ups say about us as human beings. Spoiler alert, most of it's not good. Most of the podcast is very good. What it says about us, not so good. I'm Ed Helms, your host, and today I am joined by someone I've gotten to know over the past several years, mostly through a delightful pattern of us helping each other out with our book events. And last spring, he even hosted me at Wharton in Philly to talk about my Snafu book, which I think makes me a visiting scholar at Wharton.

• 2:42Speaker 01

  Don't fact-check that. He's also a bestselling author, a tenured professor at the Wharton School of Business, an organizational psychologist, and truly one of the most thoughtful, perceptive voices on human behavior and culture. His latest book, Hidden Potential: The Science of Achieving Greater Things, debuted as a New York Times bestseller, which, by the way, is his sixth book to do so, I believe. He is the wise, witty, and dangerously insightful, Adam Grant. Adam, thanks so much for being here.

• 3:13Speaker 00

  Wow, that's quite an introduction. I feel like if I fail, I'll be living up to the podcast, but not my bio.

• 3:20Speaker 01

  I gotta ask, the work you do falls under this rubric, organizational psychology, which to me, like, I do, I feel like I have a sense of what you do, but that term is still kind of cryptic to me. How do you define it exactly? Like, what is, what is your area of expertise exactly?

• 3:41Speaker 00

  Yeah, I'm here to figure out why your closet is a mess, and then clean it up. No, I think the easiest way to describe what I do is I study how to make work not suck.

• 3:52Speaker 01

  And do you have a pithy answer? Is it just pay people more?

• 3:55Speaker 00

  I try to reform the Michael Scotts of the world.

• 3:57Speaker 01

  That's one I can, I get. I can latch on to that. In your capacity as a business school professor, it's about sort of just deconstructing why and how people behave in good or bad ways, I guess. Is that fair?

• 4:12Speaker 00

  Well put. That's what I should have said.

• 4:15Speaker 01

  Okay, good.

• 4:16Speaker 00

  Thanks for writing my lines for me, Ed.

• 4:17Speaker 01

  Well, I also just copyrighted that, so.

• 4:20Speaker 00

  So I can't use it?

• 4:21Speaker 01

  You can, but you just have to pay me, that's all.

• 4:23Speaker 00

  Damn.

• 4:24Speaker 01

  I should start by saying, I think you're the perfect guest for today's story, because we're gonna talk about scams. And it strikes me that your training and research and expertise in human behavior and psychology, would that make you bulletproof from scams?

• 4:40Speaker 00

  No, it just makes me better at analyzing why I fell for them.

• 4:44Speaker 01

  Okay, it makes you more arrogant as you walk right into them.

• 4:49Speaker 00

  Surely I'm immune to this, this will never affect me, and then, oh, I have the language and the evidence to explain exactly the error I just made.

• 4:58Speaker 01

  Yes. Wait, so have you ever, have you fallen for any scams, you've been taken in in some way?

• 5:04Speaker 00

  I don't think I've fallen for, you know, a major scam, like those Nigerian prince emails, or a Ponzi scheme. But I've definitely been duped by people who take advantage of my tendency to trust other people, so I overpaid for my first car, did not realize it was possible to negotiate my first job offer, I don't know if those are scams, but I definitely got the short end of the stick in those situations.

• 5:31Speaker 01

  I feel like some of that stuff kind of rides into scammy territory, like, I agree with you, I feel pretty vigilant about this kind of thing in general, but I had a plumber upsell me on this huge water filter system, and, like, I had hired him to do this thing, and then he was like, by the way, you don't have a water filter in your house, and have you thought about it, and in your neighborhood, you should have it, and I was like, yeah, yeah, okay, great. And then I wound up having to hire another plumber like six months later for a different little job, and he immediately launches into his water filter speech, and I was like... Oh, God. And I felt like kind of a sucker. I don't know. And also, as in, I'm ADHD,

• 6:13Speaker 01

  and I feel like there's so much out there that sort of tries to prey upon the ADHD mind in a way that's like supposed to help an ADHD person.

• 6:27Speaker 00

  So interesting. I never connected this to neurodivergence before. But yeah, I can see the shiny object sort of put in front of you. Ooh, I want one of those.

• 6:39Speaker 01

  Yeah, well, it's targeting your shame. It's like the thing that that has brought you this like sense of discomfort or shame or or sort of fear in the world. And they're saying like, here's a like, this app will fix it for you or this whatever.

• 6:56Speaker 00

  Well, I feel like this is the appropriate time to tell you about the productivity app that I've been building.

• 7:01Speaker 01

  I would trust you. Today's story is about a man whose legacy is so shady that practically every major grift of the last century bears his actual name. And yes, we are talking about the patron saint of financial flim flam. Ladies and gentlemen, the one and only Charles Ponzi. So buckle up.

• 7:29Speaker 01

  We're going to dive into sort of the origin of the term Ponzi scheme. And it is, it all starts with this guy, Charles Ponzi, born in 1882 in Lugo, Italy as Carlo Pietro Giovanni Guglielmo Tabaldo Ponzi. And that's, that's a lot of name right there. They're not messing around with that. His family had once been comfortable, but by the time he was in college at the University of Rome, they were not so well off. Instead of studying, the young Ponzi spent most of his time schmoozing with his rich friends in cafes and drawing down with little cash he had. Upon graduation, broken restless, he did what generations of dreamers have done. He bet on America.

• 8:15Speaker 01

  And so off he went, landing in Boston in 1903. After a few years bouncing between odd jobs, he drifted north to Canada. And that, as it turned out, is where his real financial education would begin. Now, Adam, people who knew Ponzi described him as unbelievably charismatic, like he's the kind of guy who could charm the paint off a wall. And I feel like we've all known these people, and they can really cast the spell on us. So I'm just curious, like, from your vantage point, how do you see that level of charisma? Like, is it an innate wiring? Or is it conditioning? Or is it something we can sort of learn? I would imagine in a business school charisma is an extremely hot commodity.

• 9:00Speaker 00

  It can be. So it is being a mix, like everything else in human psychology, of nurture and nature. Some people are born more naturally charismatic than others. They exude energy and enthusiasm, and they're very quick on their feet, and flattering, and they often have superficial charm. But it does turn out to be a teachable skill. Wherever you start, you can improve from that baseline. There are actually some experiments by John Antonakis and colleagues where they take students and they teach them kind of the memes of charisma. They teach them to use the right vocal inflection, and to make eye contact at critical moments,

• 9:39Speaker 00

  and to master the nonverbal cues in terms of their gestures. And then they show that even six weeks later, when those students are giving a speech, their judge is more charismatic. And I think I'm more and more reluctant to teach that skill, because I think your description of Ponzi is foreshadowing. It can be used for evil as well as good. And even if the intentions of the person wielding it are good, it tends to shut down the critical thinking of the audience. There's a paper on the awestruck effect that I loved, showing that if you're talking to somebody who's charismatic, you actually scrutinize their message less carefully. And so I like to think of that as the dumbstruck effect. And I think we should all be cautious about that.

• 10:24Speaker 01

  Wow, that is fascinating.

• 10:25Speaker 00

  I mean, we were talking earlier about, have I ever been scammed? The closest I've been to scammed is kind of falling for the spell of somebody who's very charismatic. And I think the best defense against that spell is is not to interact with somebody directly, it's it's to read their writing, because then you strip away a lot of the a lot of the kind of the irrelevant information that they might use to seduce you.

• 10:55Speaker 01

  Right.

• 10:56Speaker 00

  And frankly, AI tools have made that much more difficult now. But I almost only want to teach charisma to people who have already demonstrated generosity, humility, integrity, the basic foundations of character.

• 11:09Speaker 01

  Wow. That's really cool. I have to say, if we could teach those people to be the most charismatic, then we might have hope for humanity. There was that famous Neil Strauss, right? The Game.

• 11:23Speaker 00

  The Game.

• 11:24Speaker 01

  Which was essentially a version of this, right? A kind of teaching of teaching people to like, pick up women was a very sort of skeezy version of charisma, I guess.

• 11:37Speaker 00

  A twisted version of it, where you you wear odd clothes, like goggles on your head, to signal, I'm above worrying about what other people think of me. I set my own trends. I'm a nonconformist. And then you go and insult women, because it suggests that you're out of their league. And then all of a sudden, they, in some cases, seem to take an interest in you. And that's exactly the kind of weaponization of charisma that makes me extremely uncomfortable. In fact,

• 12:08Speaker 01

  Right.

• 12:09Speaker 00

  I need to go take a shower right now. Can you hold?

• 12:10Speaker 01

  Uh, no, we can't wait for you to take a shower. We're gonna have to go with you into the shower, I'm afraid. It's just the rules. That's also very creepy. So, in 1907, Ponzi landed in Montreal, and scored a job as an assistant teller at a small bank serving Italian immigrants. And it was there that he witnessed the original model of the scam he would later perfect. His boss, Luigi Zorosi, lured depositors with absurdly generous interest rates, and amazingly, he would pay them.

• 12:44Speaker 01

  Of course, by funneling new deposits straight to the earlier investors. It was a beautifully unsustainable system. So when the bank inevitably crashed and Zerosi bolted for Mexico to avoid accountability, Ponzi was left behind unemployed, but newly educated in the fine art of financial tomfoolery. Now, most of us would look at this whole mess and think, okay, well, that backfired. Maybe crime doesn't pay. What can you tell us about the psychology of someone who definitely does not learn that lesson? In fact, sort of learns the opposite lesson of like, here's more opportunity. I mean, is, is, do you see like sociopathy at play?

• 13:29Speaker 01

  Or is it just sort of that healthy? Or maybe unhealthy ego with a kind of rules don't apply swagger? I mean, how dark is that?

• 13:39Speaker 00

  So there, there are three traits that would normally predict being attracted to that kind of, that kind of scheme. And psychologists call them the dark triad. And you hit on one of them pretty closely, anyway. There being a narcissist, being Machiavellian and being a psychopath.

• 13:56Speaker 01

  Hmm.

• 13:57Speaker 00

  And I think we're probably talking about Machiavellianism here more than we are being a narcissist or a psychopath or sociopath. Because what this kind of scheme is really about is it's about manipulating other people and using them for personal gain. And you don't have to have a giant inflated ego to want to do that. You don't have to feel no empathy for other people. You just have to be a little bit callous around feeling like, you know what? I can, I can use other people a little bit. And in fact, I think part of the appeal of a Ponzi scheme is you look at that and you say, well, you know, if I can keep it going, actually I'm going to profit and no one else is going to get hurt.

• 14:40Speaker 00

  Because each, like each, each former investor is going to get their money back because of a new one. And so all I have to do is perpetuate it. And, you know, I'm just, I'm exploiting a loophole in the system. I'm not exploiting people so much. And I think if you tell yourself that story, you probably sleep at night and it doesn't, it doesn't require much more than a little bit of Machiavellianism.

• 15:00Speaker 01

  Now, we're still in Montreal. Ponzi happened to wander into a, one of the former client's office from the failed bank he had been working at. And, and he found it completely unattended. Peak early 1900s security at work. He poked around, spotted an unguarded checkbook and thought, well, no mind of a do. And he wrote himself a check for $423.58, which I love the specificity because that seems so official. It's like, that's like such a, an amount, right? It seems like something that would, that would be like, oh, that's a, no one would just make up that number. But that's a lot of money. It's worth about 15 grand in today's money.

• 15:42Speaker 01

  So, um, he forged the manager's signature and he strolled out just like he'd been picking up dry cleaning. He was caught almost instantly because he spent the stolen money so loudly that Montreal police were basically like, they, how is this broke guy suddenly like flashing wads of money and eating in fancy restaurants? So Ponzi was arrested and he spent the next three years in a bleak penitentiary outside of Montreal, um, which not a great return on investment so far. Here's a mugshot from 1910. Let's take a look. I mean, how do you not love this guy? Look at the twinkle in his eye and the mustache.

• 16:25Speaker 01

  This is a mugshot and he looks like someone I want to just have a beer with.

• 16:29Speaker 00

  I will not be joining you for that beer, Ed.

• 16:31Speaker 01

  There's something about his smirk under that mustache that's like, it's kind of a little charm to it.

• 16:36Speaker 00

  Yeah, he's, he's sort of reminds me of Mr. Bean.

• 16:41Speaker 01

  Mr. Bean?

• 16:42Speaker 00

  He could, he could be Rowan Atkinson in Love, actually. That's, that's what I'm seeing.

• 16:48Speaker 01

  That's not as flattering a depiction.

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• 19:52Speaker 01

  Now, this part kills me. Rather than tell his mother that he was in prison, Ponzi rode home to Italy proudly announcing he'd landed a job as a special assistant to the warden, thus explaining his, the letters coming from a prison. I think we all lie to our parents, right? Just to kind of make ourselves feel better or look good in a situation. Any memorable occasions? Memorable occasions? Yeah. Adam Grant lying to mom or dad.

• 20:19Speaker 00

  Oh, I told a white lie to my mom after, after Halloween one year that I didn't sneak candy with a friend from the candy drawer.

• 20:28Speaker 01

  That's as bad as it gets?

• 20:30Speaker 00

  It's the worst one. I felt so much shame after that. Never again.

• 20:35Speaker 01

  Yeah. It's funny, these formative things like at that moment, how old were you? You were young enough that the stakes felt catastrophic.

• 20:44Speaker 00

  I think I was 10 and the friend started it and then the drawer was open and I felt like, okay, I'll go for it.

• 20:52Speaker 01

  I remember my friend took, like stole a pack of his mom's cigarettes. And we were, I think I was about 10 and, and he was like, let's smoke a cigarette. And I was like,

• 21:08Speaker 01

  Are you insane? This is cra- we can't smoke cigarettes, we're children. Cigarettes and candy, the things that get us in trouble as children. Okay, Charles gets out of prison and he heads back down to Boston. And this is where he would hatch the truly epic scam that would make him a legend. And it all began with a quirky little nugget of postal bureaucracy known as the international reply coupon. This was basically a prepaid postage voucher. So you'd buy one at your local post office, stick it in your letter to someone overseas, and then they could exchange it in their country for the stamps needed to write you back. So it was kind of like putting a prepaid envelope in your letter to someone so that

• 21:53Speaker 01

  they could write you back more easily. Here's where things got interesting. The system was created in 1906 with fixed exchange rates, but after World War I, those rates went completely out of whack across Europe. So, cut to 1919, Ponzi received a reply coupon from Spain, which had been purchased for about one cent in Spain, but it was redeemable for six cents worth of US stamps. And that tiny arbitrage flicked a switch in Ponzi's brain. So, he launches a company to buy reply coupons in bulk overseas, send them back here to America, and then redeem them for a tidy profit.

• 22:36Speaker 01

  Not a bad idea, but then comes the big leap. Ponzi scales up like bigly. He invites investors, promising an eye-popping 50% return in 45 days. Bostonians are flocking to him, and soon he started a company called the Securities Exchange Company, which has a very sophisticated and legit ring to it. And he had offices stretching from Maine to New York. Now, it's worth pointing out that this business model was definitely cheeky, but it was not illegal. Investors were getting paid as promised. In fact, and this is very wild, a few government officials who went poking around to verify

• 23:19Speaker 01

  the legitimacy of Ponzi's operations actually ended up investing with him.

• 23:25Speaker 01

  For a while there, everything was coming up Ponzi. You know, he's got all this newfound wealth and a tasteful new mansion with enough room for his wife, Rose, and his mother, who he brought over from Italy. I mean, come on, this guy is a, what a gentleman. He's taking care of his own mother. But Ponzi's projected squeaky clean charitable image was not going to last. What's happening behind the scenes is actually getting pretty shady and even the pros who are coming to investigate him are missing the signs. So I'm just curious, like, from your Wharton perspective, like, what are the red flags that you can actually, you know, like, you talked about the, what was it, the triangle

• 24:10Speaker 01

  of?

• 24:11Speaker 00

  The dark triad.

• 24:13Speaker 01

  The dark triad, excuse me. But those are things that might exist in someone that we can't immediately perceive. So what are red flags that we, that we might jump out at us when somebody might be perpetrating a scam? Apart from the obvious, like, you know, mustache twirling, et cetera?

• 24:31Speaker 00

  Yeah. The best data on this actually are hedge fund managers being interviewed, where you see that the, the most self-centered ones, the ones who are most likely to take advantage of other people, are the ones who just spontaneously start grinning when talking about other people failing. If you feel that kind of schadenfreude and you, you, you enjoy seeing other people flop, in your language, Ed, if like seeing somebody else's snafu makes your day, that is, I mean, that, that to me is a huge red flag.

• 25:07Speaker 01

  Wow. Yeah, that feels, that feels like pretty much everyone we see on the news these days. There's just, like, gloating is a real problem right now. Gloating, which is essentially sort of like the, the, what, it's like the bragging response, the, the bragging articulation of schadenfreude.

• 25:28Speaker 00

  Yeah, and then there's a, there's a cousin of that in some ways, moral grandstanding, you know, kind of, like, sort of self-promoting as, you know, just morally superior to other people, which tends to go hand in hand with narcissism. And I think we also see a lot of that today in scammers. If you believe that you operate a higher moral plane than other people, then it's very easy to justify and rationalize what you're doing.

• 26:02Speaker 01

  Eventually Ponzi's activity caught the canny eye of New York City Postmaster, Thomas G. Patton. Now, being a master of the post, Patton knew a thing or two about international reply coupons, like, for instance, there simply weren't enough in circulation to explain the magnitude of Ponzi's outrageous earnings. So it just, like, his business model was completely incompatible with the amount of money he was making objectively, just by the math. Patton wasn't the only one to notice funny math here. It seems one of the business secrets Ponzi kept closely guarded was that he was not buying many reply coupons at all.

• 26:47Speaker 01

  Rather, to maintain the illusion of abundant prosperity, Ponzi was using deposits from new investors to pay out the returns to old investors. And there you have it. The classic Ponzi scheme. Adam, what blows my mind is that the Ponzi scheme isn't just risky. It is literally impossible to sustain. Like, it's a financial Jenga tower, and it's definitely gonna fall over. Why do smart people convince themselves that somehow it won't?

• 27:19Speaker 00

  I think that there are a couple of ways to explain this. One is, you know, it's just sort of tunnel vision, right? You're only focusing on getting the next investor on board, and you're not looking far enough into the future, or maybe wide enough to see that somebody's about to come and knock over your Jenga tower. Or if even one block gets pulled out, you're screwed. I think that's that maybe one one factor at play. I think another one that that stands out, though, that we don't talk about enough is what psychologists call the availability bias, which is the tendency to weigh events in terms of how easy they are to think of instead of how likely they are.

• 27:59Speaker 01

  Hmm, wow.

• 28:00Speaker 00

  If you've never seen somebody go down for a Ponzi scheme, you can persuade yourself that I'm not going to get caught. You know, this like this is not even something people go to jail for.

• 28:11Speaker 01

  Right.

• 28:12Speaker 00

  But it's especially surprising in Ponzi's case because he's already done time.

• 28:16Speaker 01

  Yeah, he's paid for it. Well, he paid for a false check, but his his previous boss was was, you know, caught for it.

• 28:27Speaker 00

  Yeah, and I wonder I wonder if then he saw his boss make some really obvious mistakes and thought, well, if I avoid those, I'm clear.

• 28:36Speaker 01

  You know, to your point about sort of the the dark side of charisma, sometimes I think there are people who believe they can charm their way out of anything, right? Or charm or sort of bulldoze, like they can rely on their personalities to just plow through anything. I don't know, there's something unhinged about that and the ability to kind of keep going and doubling down further and further. I mean, he was opening branch offices up and down the East Coast, like just scaling up in this massive way, and then eventually just not even buying the coupons anymore, just fully Ponzi scheming. If I were trying

• 29:18Speaker 01

  to run a Ponzi scheme, the guilt would be weighing on me so much, I'd just be this sweaty, blubbering mess the whole time. But then you have someone like Ponzi, who just like smiles and shakes your hand and can just look you in the eye and crank through all of it. It's so bewildering to me.

• 29:35Speaker 00

  Well, I just think you you just hit on something really critical here, which is we often describe someone like Ponzi as shameless, but I think they're better characterized as guiltless.

• 29:47Speaker 00

  Being guiltless is, I don't even know if I've ever heard the term guiltless. But when you, when you said, I would feel guilty, I, I think about the psychology of guilt versus shame. And the basic distinction is when people feel guilt, they think I did a bad thing. When they feel shame, they think I'm a bad person. And shame actually tends to have pretty negative effects in most cultures. You know, when, when you start to feel ashamed, you either attack or you withdraw altogether. You feel small and you either want to obliterate whoever's making you feel small, or you want to withdraw from the situation. Guilt is much more functional. When you feel guilty, you think, okay, I've got to right my wrongs.

• 30:31Speaker 00

  I have to repair whatever harm was done. I have to try to recover my reputation. And Ponzi sounds like somebody who just was maybe immune to guilt. Or, you know, at least didn't have a normal human response to it. Because from the pattern of behavior you're describing, it doesn't sound like he, he really felt any remorse around the people that he was screwing over.

• 30:57Speaker 01

  But isn't that like, isn't that the definition of a sociopath or a psychopath?

• 31:02Speaker 00

  It's, it's certainly one of the foundations of it. But I think, I think it's possible to be guilt free without being a sociopath. Basically, I think most sociopaths would be guiltless, but not all guiltless people are sociopaths would be.

• 31:21Speaker 01

  Right.

• 31:22Speaker 00

  Maybe the way to capture it. Maybe he has convinced himself that he's taking care of each investor as he brings on the next investor. And so that, you know, whatever guilt he feels ends up quickly evaporating.

• 31:34Speaker 01

  And also there, there, you get so much reinforcement as your sort of, as your wealth increases, so does your position in society and your, you know, your physical presentation, your clothes, your style, your cars, all these things, these sort of signals of success, just being a successful human, you know, you're well groomed, all these things, these sort of like ancillary.

• 32:00Speaker 01

  Just details of your life start to have this like resonant vibration of like, you're fantastic. You're just a great person.

• 32:09Speaker 00

  Yeah.

• 32:10Speaker 01

  And you can kind of convince yourself of that.

• 32:13Speaker 00

  Yeah, that's validating. And you also have all these clients who love you. Right? Your, your investors, they're so pleased with you. Like, they're, they're actually, they're fueling your narrative. They're, they're making the rationalization easier. Wow, look at all these people I've helped.

• 32:30Speaker 01

  Yep, that tracks. All right. So the suspicions that Ponzi's business were fraudulent were eventually confirmed with a damning expose that ran in the Boston Post on August 2nd, 1920 penned by Ponzi's own publicity man, William H. McMaster's. In the multi-page spread, McMaster's condemned Ponzi as hopelessly insolvent and fessed up to his own contribution to Ponzi's confidence campaign. Definitely kind of a dick move here. Just selling out Ponzi to, to try to get your nose clean, I guess.

• 33:09Speaker 01

  But here's the thing, McMaster's, he had only worked for Ponzi for one week at that point. And during that one week, McMaster's had accompanied Ponzi to various meetings with his investigators and had been privy to what he determined to be damning inconsistencies. McMaster's claimed that Ponzi was well over $2 million in debt. And I haven't done the present day calculation on that, but it's a lot. It's going to be a lot. Millions and millions upon millions.

• 33:44Speaker 01

  It all came crashing down. On August 9th, the Massachusetts State Commissioner of Banks, Joseph T. Allen, ordered the Hannover Trust Company to cease paying out checks signed by Charles Ponzi. They said the account was overdrawn. But the final nail in the coffin of Ponzi's reputation came two days later on August 11th, when the Boston Post definitively identified Charles Ponzi as a former convict and, and further revealed his past alias, Charles Bianchi, under which he had committed all kinds of various tomfoolery and flimflamery and.

• 34:23Speaker 01

  Pick your period euphemism for a crime. Adam, is there a kind of sense of dissociation that comes from using an alias?

• 34:32Speaker 00

  Potentially, yeah. I mean, you're, you're basically trying to separate your identity from your actions. And if, if you're playing a character, that becomes really easy to do.

• 34:42Speaker 01

  I do use an ale, an actual alias like in my life sometimes. If I, if I feel like, if I'm attending a scheduled event and I know that autograph seekers might be there, then I might use an alias for my hotel reservation or what, you know, restaurant reservation or whatever.

• 34:59Speaker 00

  Yep.

• 35:01Speaker 01

  And I'm not going to tell you what it is, but.

• 35:06Speaker 00

  Tell me, wait, I, I, I'm going to guess it. It's Stu Price, isn't it?

• 35:11Speaker 01

  Stu Price. Good guess. It's a good guess. It's a little too close to home, though.

• 35:16Speaker 00

  But actually, here's, to me, the most interesting version of this question. So, you know, I watched you during your entire run as Andy Bernard. Do you ever take on some of Andy's qualities and, and feel like, you know, whatever you do, if you just came from a long day of shooting or a couple of weeks where you were in character a lot, do you start to feel some distance from Ed Helms?

• 35:38Speaker 01

  Like, I've often said that Andy Bernard is a, is me, but with less, uh, less self-control and less of a kind of self-editing mechanism. So I sort of have Andy Bernard's similar instincts, um, which I'm not proud to admit, but it's true. And I just, in Andy, in playing Andy, I was able to sort of like, just exorcise all of those demons and get it all out there. And then in, in the real world, I'm a much more sort of like, you know, I just carry myself with more self-awareness and presence or whatever. But if anything, it's more the opposite, where playing Andy Bernard makes me realize

• 36:21Speaker 01

  that there's more of Andy Bernard in me than I want there to be sometimes, or than, than I might care to admit.

• 36:32Speaker 00

  Therefore, makes you less like him, it sounds like.

• 36:35Speaker 01

  What do you mean?

• 36:36Speaker 00

  Looking in the mirror and saying, I don't like this reflection. Does that then motivate you to, to overcome whatever those, those tendencies are?

• 36:44Speaker 01

  Yes and no, although I think. Yes, certainly, I was able to sort of bring insights that Andy Bernard gave me into my therapy sessions and unpack things a little bit. But I'll also say this, which is that I very consciously tried to endow Andy Bernard with a good heart and like good intentions and an underlying warmth. And I was at times more or less successful in doing that, but it was my intention. And I think that actually opened a little window from additional self-compassion for myself.

• 37:24Speaker 06

  I love that.

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• 39:24Speaker 00

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• 40:25Speaker 01

  August 12, 1920, Ponzi was arrested and later charged in federal court with 86 counts of mail fraud. Despite thinking he could charm his way out of it, he pled guilty at his wife's urging and took a five-year sentence. He assumed that plea would shield him from state charges. It did not. While in federal prison in Massachusetts, hit him with 22 counts of larceny. He appealed all the way to the Supreme Court, which ruled he was not immune from state prosecution. It took three trials for the charges to finally stick. In the first, he represented himself and walked on 10 counts. In the second, the jury deadlocked. And in the third, his luck ran out.

• 41:08Speaker 01

  He was convicted and given another seven to nine years. Do you think the hubris of representing oneself might have been his downfall?

• 41:16Speaker 00

  I don't think it, I don't think it did him any favors from what I've heard.

• 41:21Speaker 01

  Yeah, it's so wild. September 1925, he finished his federal sentence and was released on bail while appealing his state conviction. And, uh, you know, no lessons learned. He immediately high-tailed it to Florida where he tried to enact the same essential scheme, selling tiny parcels of swamp land. Um, scammers just somehow have this incredible ability not to adapt to negative reinforcement.

• 41:48Speaker 00

  There's a longstanding trend in psychology to talk about the, the bad is stronger than good phenomenon, or it's sometimes called negativity bias, where the same bad experience or snafu or failure is going to weigh on us much more heavily than, you know, an equivalent good event or success. And we, you know, there's a lot of evolutionary hand waving about this. It's like, okay, if you didn't pay attention to the threat in the jungle, you literally could not survive to pass on your genes. But if you underreacted to a celebratory event, nothing bad happens. Instead, we're kind of wired to

• 42:23Speaker 01

  Right.

• 42:24Speaker 00

  to be vigilant in the face of threats. But there's obviously variation in the population. One thing we know is that the kinds of people who, who tend to reverse the, the bad is stronger than good pattern, uh, and really respond to rewards and be extremely optimistic, tend to be highly extroverted and, uh, low in neuroticism. And the, actually, America is, I think, the most extroverted country on earth in the national comparisons. And the, the argument around that is, well, the kind of, the kind of tendency you had to have to sail off for a new land, based on the promise of a very uncertain upside, like you, you

• 43:08Speaker 00

  gotta be pretty reward seeking, uh, and optimistic to do that. And so, you know, we see a parallel in, in Ponzi, jumping ship literally to the US. And I wonder, is this somebody who's extraordinarily extroverted, who, you know, experiences the dopamine rush, um, but not the punishment cues, not the sense of threat and fear, uh, associated with, with being put away even after he's had to be in jail for a couple of years?

• 43:35Speaker 01

  Yeah, a lot of years. He did three years in Montreal, seven years in Massachusetts. It's adding up. And now he's caught and charged and found guilty yet again in Florida, but he gets off on appeal after posting bond. And this time Ponzi tries to flee the country on a ship bound for Italy, but he wound up getting arrested in New Orleans, where the ship was making a final port of call. He was returned to Massachusetts to serve seven more years in prison until his release in 1934, when he was immediately deported to Italy on October 7th. His wife Rose stayed behind and they eventually divorced a few years later. Whatever lucky penny he'd been carrying around for the last decade,

• 44:20Speaker 01

  it finally fell out of his pocket. Charles Ponzi would die in a charity hospital in Rio de Janeiro, yes, all the way down in Brazil, on January 8th, 1949, with only just enough to his name to cover his burial. That dude was just scamming around the world right there, all the way to the end.

• 44:42Speaker 00

  Wow.

• 44:42Speaker 01

  And for their dogged pursuit of the Ponzi story and the investigative journalism that aided in his arrest, The Boston Post was awarded the 1921 Pulitzer Prize in Public Service. And that, Adam Grant, concludes the story of Charles Ponzi. It's quite a whirlwind.

• 45:01Speaker 00

  You know, now that I kind of know the ending to the story, one thing we haven't talked about yet is addiction. I mean, one version of Ponzi's arc is, he is a gambler. He's chasing the next high. Every time he loses, he's like, no, no, no. If I just double down, like double or nothing, right? I can, I can turn this thing around. And, you know, I wonder if this was an outlet for, for a form of a gambling addiction.

• 45:30Speaker 01

  Wow, that's so, that's, that's a really interesting.

• 45:34Speaker 00

  Chasing the thrill.

• 45:35Speaker 01

  It's so interesting to think about someone like Charles Ponzi and.

• 45:41Speaker 01

  How they might fit into modern society. Obviously, there have been so many huge Ponzi schemes, Bernie Madoff being one of the most famous ones. And again, and there's, he's a fascinating study in psychology. Have you, do you know much about his story?

• 46:00Speaker 00

  A little bit, not as much as you do, history buff.

• 46:03Speaker 01

  Well, I know just enough to know that I want to know more. But it's, yeah, he's a fascinating figure. And I think he definitely falls in the category of the delusion that he wasn't harming people, or at least that's what people who've interviewed him seem to think. The scale of his operation, that's what's so mind blowing, is that like, the buy in from so many different people, like the eagerness to want, like, the desire for this to be true, is, and for this all to be like, a functioning, healthy way to make money. It's like, the things we can force ourselves to believe, like, he's the perpetrator,

• 46:48Speaker 01

  Ponzi, or Bernie Madoff, like, they're the perpetrators, they're either deluding themselves, or they're just like criminals, or whatever they're, whatever's going on with them. I mean, there's the investors who are just pure victims. But then there are people who are in the organization, right? They're in the running of these things. And they have to have a sense of like, this is, this doesn't add up. Or it's just like, I'm gonna keep my head in the sand. I'm not gonna, like, this spreadsheet looks weird to me, but I'm just not gonna ask. Because, boy, it feels good to trust this, like, nice old man, Bernie, who's just seems to know, who's been venerated by the great financial institutions for decades.

• 47:29Speaker 00

  There are terms that have been coined to describe what happens to a lot of people in the orbit of a Ponzi or a Madoff. Bandura called it moral disengagement.

• 47:39Speaker 00

  Ten Bronzel and Messick have called it ethical fading, where you just you stop applying a principled lens to the situation you're in, because other people are accepting it and you assume, well, you know, surely these are not bad people. I see them, you know, they're decent parents and partners and caring bosses. And, you know, they couldn't be doing anything bad. And you lose sight of the lines that are being crossed. I think that that could be part of what's happening in their orbit. And maybe the other piece of this is, I was thinking about Maria Konikova, psychologist turned poker champ, who wrote a book called The Confidence Game. And there's a quote in that book that shook me.

• 48:24Speaker 00

  Maria wrote, "The true con artist doesn't force us to do anything. He makes us complicit in our own undoing."

• 48:32Speaker 01

  Adam, what are you and I complicit in right now that we have no idea is part of our undoing?

• 48:37Speaker 00

  I really hope nothing, but you know, just thinking about what happens to the the early employees and the early clients, they start to recruit other people into the scheme.

• 48:46Speaker 01

  Of course.

• 48:46Speaker 00

  You you try to get your friends hired at this great company. You try to get your, you know, your family to invest in this, you know, this fund with incredible returns. And pretty soon, you have a strong incentive to see no evil.

• 49:03Speaker 01

  I want to bring this into the present moment a little bit. I love digging into this story because of how hyper relevant it feels today in the age of internet scammers and just this sort of like new generation of con artists that have emerged. I mean, it's funny to think of Charles Ponzi as perhaps now him being like an Instagram influencer, you know, who's just like taking people in. But here's just a few stats. The FBI reported that Americans lost $16.6 billion to online scams, which is a 33% increase from 2023. Do you think that there is also a way that sort of the online distance from a con artist?

• 49:49Speaker 01

  And like us, when we're in our own bubble and we don't have other people to sort of cross-reference with or bounce an idea off of, does that, does the solitary nature of internet interaction make us additionally more vulnerable or less vulnerable? Or, I mean, it does seem like the internet is just a cesspool of scam.

• 50:15Speaker 00

  Yeah, I would love to see some data on this. I have not seen a good analysis. I think I have a similar hunch to yours, which is the isolation can make it really easy to fall for a scam. I think the other piece of it is you're missing some of the cues that would normally, you know, sort of, you know, even if you didn't recognize them consciously, you know, you interact with a con artist face to face and you start to get a gut feeling sometimes, like, I don't quite trust this person. I don't know why, but, you know, maybe, maybe I should verify, or maybe I should, you know, wait a little bit. And you're just deprived of a lot of those cues over the internet.

• 50:58Speaker 00

  Sometimes you don't even know if it's a human or a bot that's, you know, that's pitching you. And so I think that that probably makes it harder for people to use whatever intuition they have around judging people's trustworthiness. What's the, what's the New Yorker cartoon on the internet? No one knows you're a dog?

• 51:14Speaker 01

  Yeah, of course. Well, that's more of a catfish joke, no? But I guess it's, I guess it works here just as well. Adam Grant, this has been really, really fun and I just love going down these curiosity rabbit holes with you. And, and I love that your response to my questions very often starts with, I'd like to see the data on that. Thank you so much for coming on Snafu.

• 51:43Speaker 00

  Thank you for having me. I leave it to your listeners to judge the number of snafus committed during the recording of this podcast.

• 51:51Speaker 01

  Snafu is a production of iHeart Podcasts and Snafu Media, a partnership between Film Nation Entertainment and Pacific Electric Picture Company. Post-production and creative support from Good Egg Audio. Our executive producers are me, Ed Helms, Mike Falbo, Glenn Basner, Andy Kim, and Dylan Fagan. This episode was produced by Alyssa Martino and Tori Smith. Our managing producer is Carl Nellis. Our video editor is Jared Smith. Technical direction and engineering from Nick Dooley. Additional story editing from Carl Nellis. Our creative executive is Brett Harris. Logo and branding by Matt Gosson and The Collected Works. Legal review from Dan Welsh, Megan Halson, and Caroline Johnson.

• 52:35Speaker 01

  Special thanks to Isaac Dunham, Adam Horn, Lane Klein, and everyone at iHeart Podcasts, but especially Will Pearson, Carrie Lieberman, and Nikki Ator. While I have you, don't forget to pick up a copy of my book, Snafu: The Definitive Guide to History's Greatest Screwups. It's available now from any book retailer. Just go to snafu-book.com. Thanks for listening and see you next week.

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