Ed Helms (1:22)

who said that for the first time. I actually, I thought it was. I got that.

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Ed Helms (2:07)

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. Don't fact check that. He's also a best selling 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 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.

Adam Grant (3:19)

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

Ed Helms (3:27)

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?

Adam Grant (3:47)

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

Ed Helms (3:58)

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

Adam Grant (4:01)

I try to reform the Michael Scott's the world.

Ed Helms (4:03)

That's one I can. I get. I can latch onto 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?

Adam Grant (4:18)

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

Ed Helms (4:20)

Okay, good.

Adam Grant (4:21)

Thanks for writing my lines for me, Ed.

Ed Helms (4:23)

Well, I. I also just copyrighted that, so.

Adam Grant (4:25)

So I can't use it?

Ed Helms (4:27)

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

Adam Grant (4:29)

Damn.

Ed Helms (4:29)

I should start by saying I think you're the perfect guest for today's story because we're going to 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?

Adam Grant (4:46)

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

Ed Helms (4:50)

Okay. It makes you more arrogant as you walk right into them.

Adam Grant (4:55)

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.

Ed Helms (5:03)

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

Adam Grant (5:10)

I don't think I've fallen for, you know, a major scam like and Prince email or a Ponzi scheme, but I've definitely been duped by people who take advantage of my tendency to trust other people. So I sure 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.

Ed Helms (5:36)

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 all this. 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, I'm adhd, 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.

Adam Grant (6:33)

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.

Ed Helms (6:44)

Yeah, well, it's targeting your shame. It's like the thing that. 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.

Adam Grant (7:01)

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

Ed Helms (7:07)

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. We're gonna 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 Tebaldo 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, with his rich friends in cafes and drawing down what little cash he had upon graduation. Broken, restless, he did what generations of dreamers have done. He bet on America. 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 a spell on us. So I'm just curious, like, from your vantage point, how do you see that level of charisma? Like, what do you. 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.

Adam Grant (9:06)

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

Ed Helms (10:29)

Wow, that is fascinating.

Adam Grant (10:31)

I mean, I've. Look, we were talking earlier about like, have I ever been scammed? Like, the closest I've been to scammed is kind of falling, like, falling for the, the spell of somebody who's very charismatic.

Ed Helms (10:43)

Sure.

Adam Grant (10:44)

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, the irrelevant information that they might use to seduce you.

Ed Helms (11:01)

Right.

Adam Grant (11:01)

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.

Ed Helms (11:14)

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, the game, which was essentially a verse version of this. Right. A kind of teaching of teaching people to like, pick up women, was a, a very sort of skeezy version of charisma, I guess a twisted version of

Adam Grant (11:44)

it where you, you wear odd clothes, like goggles on your head to signal I, I'm above worrying about what other people think of me, I set my own trends, I'm a non conformist. 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, I need to go take a shower right now. Can you hold?

Ed Helms (12:18)

No. We can't wait for you to take a shower. We're going to 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 Zorossi lured depositors with absurdly generous interest rates. And amazingly, he would pay them, of course, by funneling new deposits straight to the earlier investors. It was a beautifully unsustainable system. So when the bank inevitably crashed and Zarossi 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, do you see, like, sociopathy at play, 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?

Adam Grant (13:44)

So 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, they're being a narcissist, being Machiavellian, and being a psychopath. 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 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, if I can keep it going, actually, I'm going to profit. And no one else is going to get hurt because each former investor is going to get their money back because of a new one. 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 require much more than a little bit of Machiavellianism.

Ed Helms (15:06)

Now we're still in Montreal. Ponzi happened to wander into one of the former client's office from the failed bank he had been working at, 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.

Adam Grant (15:40)

Right.

Ed Helms (15:40)

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. So 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, 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, which not a great return on investment so far. Here's a mug shot 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. This is a mug shot, and he looks like someone I want to just have a beer with.

Adam Grant (16:34)

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

Ed Helms (16:36)

There's something about his smirk under that mustache that's like. It's got a little charm to it.

Adam Grant (16:41)

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

Ed Helms (16:46)

Mr. Bean.

Adam Grant (16:48)

He could be Rowan Atkinson in love, actually.

Ed Helms (16:51)

There you go.

Adam Grant (16:51)

That's what I'm seeing.

Ed Helms (16:53)

That's not as flattering a depiction.

Danny Trejo (16:57)

I went and sat on the little ottoman in front of him.

Carlos King (17:01)

Hi, dad.

Danny Trejo (17:02)

And just when I said that, my mom comes out of the kitchen. She says, I have some cookies and milk. This is badass convict, right? Just finished five years. I'm gonna have cookies and milk at mom. Yeah.

Steno Show Host (17:18)

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Ed Helms (20:24)

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?

Adam Grant (20:51)

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.

Ed Helms (21:00)

That's as bad as it gets.

Adam Grant (21:02)

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

Ed Helms (21:07)

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

Adam Grant (21:16)

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

Ed Helms (21:24)

I remember my friend took, like, stole a pack of his mom's cigarettes, and we were. I think I was about 10. And he was like, let's smoke a cigarette. And I was like, are you insane? This is crazy. We can't smoke. Say 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 these stamps needed to write you back. So it was kind of like putting a prepaid envelope in your letter to someone so that 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 1 cent in Spain, but it was redeemable for 6 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. 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's started a company called the securities Exchange Company, which has a very, like, 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 the legitimacy of Ponzi's operations actually ended up investing with him. 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, 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 of the dark triad. 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 might jump out at us when somebody might be perpetrating a scam? Apart from the obvious like, you know, mustache twirling, etc.

Adam Grant (25:04)

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. And if you feel that kind of schadenfreude and you enjoy seeing other people flop. In your language, Ed, if seeing somebody else's snafu makes your day, that is, I mean, that to me is a huge red flag.

Ed Helms (25:40)

Wow. Yeah. 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, the bragging articulation of schadenfreude.

Adam Grant (26:01)

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 on a higher moral plane than other people, then it's very easy to justify and rationalize what you're doing.

Ed Helms (26:34)

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. 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 going to fall over. Why do smart people convince themselves that somehow it won't?

Adam Grant (27:51)

I think that there are a couple of ways to explain this. One is 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 may be 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. And if you've never seen somebody go down for a Ponzi scheme, you can persuade yourself, I'm not going to get caught. You know, this, like, this is not even something people go to jail for. Right. But it's especially surprising in Ponzi's case because he's already done time.

Ed Helms (28:49)

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

Adam Grant (29:00)

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

Ed Helms (29:07)

I'm clear, you know, to your point about sort of the dark side of charisma, sometimes I think there are people who believe they can charm their way out 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 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. And shakes your hand and can just look you in the eye and crank through all of it. It's so bewildering to me.

Adam Grant (30:07)

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. 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 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 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. 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.

Ed Helms (31:29)

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

Adam Grant (31:34)

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 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 whatever guilt he feels ends up quickly evaporating.

Ed Helms (32:06)

And also, you get so much reinforcement as your sort of. As your wealth increases, so does your position in society and your physical presentation, your clothes, your style, your cars, all these things, these sort of signals of success just being a successful human. You're well groomed. All these things, these sort of, like, ancillary. Just details of your life start to have this, like, resonant vibration of like, you're fantastic, you're just a great person, and you can kind of convince yourself of that.

Adam Grant (32:45)

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 actually, they're fueling your narrative. They're making the rationalization easier. Wow, look at all these people I've helped.

Ed Helms (33:02)

Yeah, 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 2, 1920, penned by Ponzi's own publicity man, William H. Mcmasters. In the multi page spread, McMasters 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 try to get your nose clean, I guess. But here's the thing. McMasters, he had only worked for Ponzi for one week at that point. And during that one week, McMasters had accompanied Ponzi to various meetings with his investigators and had been privy to what he determined to be damning inconsistencies. McMasters 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 gonna be a lot. Millions and millions upon millions. It all came crashing down on August 9th. The Massachusetts State Commissioner of Banks, Joseph T. Allen, ordered the Hanover 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 11, when the Boston Post definitively identified Charles Ponzi as a former convict and further revealed his past alias, Charles Bianchi, under which he had committed all kinds of various tomfoolery and flim. Flammery and pick your period euphemism for a crime. Adam, is there a kind of sense of dissociation that comes from using an alias?

Adam Grant (35:04)

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

Ed Helms (35:14)

I do use an actual alias 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.

Adam Grant (35:31)

Yep.

Ed Helms (35:33)

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

Adam Grant (35:39)

Wait, I'm going to guess it. It's too Price, isn't it?

Ed Helms (35:43)

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

Adam Grant (35:48)

Wait, 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 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?

Ed Helms (36:10)

Like I've often said that Andy Bernard is a is me, but with less self control and less of a kind of self editing mechanism. So I sort of have Andy Bernard's similar instincts, 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 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 that there's more of Andy Bernard in me than I want there to be sometimes or than I might care to

Adam Grant (37:03)

admit, and therefore makes you less like him.

Ed Helms (37:06)

It sounds like, what do you mean?

Adam Grant (37:08)

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

Ed Helms (37:17)

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 a kind of underlying warmth. And I was at times more or less successful in doing that. But it was my attention and I think that actually opened a little window from additional self compassion for myself.

Adam Grant (37:56)

I love that.

Ed Helms (37:59)

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

Adam Grant (38:51)

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

Ed Helms (38:54)

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

Adam Grant (39:22)

There's a longstanding trend in psychology to talk about 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 an equivalent good event or success. And 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. And so we're kind of wired 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 and really respond to rewards and be extremely optimistic tend to be highly extroverted and low in neuroticism. And actually, America is, I think, the most extroverted country on earth in the national comparisons. And the argument around that is, well, the kind of tendency you had to have to sell off for a new land based on the promise of a very uncertain upside. You gotta be pretty reward seeking and optimistic to do that. And so we see a parallel in Ponzi jumping ship literally to the U.S. and I wonder, is this somebody who's extraordinarily extroverted who, you know, experiences the dopamine rush, but not the punishment cues, not the sense of threat and fear associated with being put away, even after he's had to be in jail for a couple years?

Ed Helms (41:09)

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 7, 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, 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 8, 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.

Adam Grant (42:16)

Wow.

Ed Helms (42:16)

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.

Adam Grant (42:34)

It's quite a whirlwind, 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, Right. I can turn this thing around. And, you know, I wonder if this was an outlet for a form of a gambling addiction.

Ed Helms (43:05)

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

Adam Grant (43:08)

Chasing the thrill.

Ed Helms (43:09)

It's so interesting to think about someone like Charles Ponzi and 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 he's a fascinating study in psychology. Do you know much about his story?

Adam Grant (43:34)

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

Ed Helms (43:37)

Well, I know just enough to know that I want to know more. But, yeah, he's a fascinating figure. And I think, like, he definitely falls into 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 the desire for this to be true 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, Ponzi or Bernie Madoff, like, they're the perpetrators. They're either deluding themselves, or they're just like criminals or 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 doesn't add up, or it's just like, I'm going to keep my head in the sand. I'm not going to. This spreadsheet looks weird to me, but I'm just not going to ask because, boy, it feels good to trust this nice old man, Bernie, who just seems to know who's been venerated by the great financial institutions for decades.

Adam Grant (45:02)

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. 10 Brunzel 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 Konnikova, a psychologist turned poker champ who wrote a book called the Confidence Game. And there's a quote in that book that shook me. Maria wrote, the true con artist doesn't force us to do anything. He makes us complicit in our own undoing.

Ed Helms (46:06)

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

Adam Grant (46:11)

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

Ed Helms (46:37)

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 who's just 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 and like us being 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.

Adam Grant (47:50)

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 sort of. Even if you didn't recognize them consciously, you interact with a con artist face to face, and you start to get a gut feeling. Sometimes I don't quite trust this person. I don't know why, but maybe I should verify or maybe I should wait a little bit. And you're just deprived of a lot of those cues over the Internet. 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 New Yorker cartoon on the Internet? No one knows you're a dog.

Ed Helms (48:48)

Yeah, of course. Well, that's more of a catfish joke.

Adam Grant (48:53)

No, but

Ed Helms (48:56)

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 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.

Adam Grant (49:17)

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

Ed Helms (49:25)

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 Gossen and the Collected Works Legal Review from Dan Welch, Megan Halson, and Caroline Johnson. Special thanks thanks to Isaac Dunham, Adam Horn, Lane Klein, and everyone at iHeart podcasts, but especially Will Pearson, Terry Lieberman, and Niki Ator. While I have you, don't forget to pick up a copy of my book snafu the Definitive Guide to History's Greatest Screw Ups. It's available now from any book retailer. Just go to snafu-book.com thanks for listening and see you next week. This is an I heart podcast.

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