Originally posted by Kewpie
I came across this article when looking for material on the processes which humans use to manipulate other humans. I have seen a lot of network marketing schemes come and go, and some that stayed on and on, and often wondered about the psychology involved. First, how do people get persuaded to join these schemes? Second, how are they persuaded not only to ...[text shortened]... the whole article here because it isn't very long, but for some reason robomod won't allow it.

Yeah sounds like a pyramid scheme in a very thin disguise. The value of the products are somewhat irrelevant the whole point is getting as big a pyramid as possible, with as wide a base as possible. Obviously at some point the pyramid collapses and well you have the figures yourself for those left holding the baby shampoo. The psychology involved is an old fashioned appeal to ego and greed. all you have to do is convince your target that they have the attributes to be a diamond and make a lot of money, that is how all confidence tricks work.

Originally posted by Kewpie
I came across this article when looking for material on the processes which humans use to manipulate other humans. I have seen a lot of network marketing schemes come and go, and some that stayed on and on, and often wondered about the psychology involved. First, how do people get persuaded to join these schemes? Second, how are they persuaded not only to ...[text shortened]... the whole article here because it isn't very long, but for some reason robomod won't allow it.

Try "Thinking Fast and Slow" by Kahnemann. He studied the way people make decisions and this book (not the review, sadly) summarises his findings, which are highly entertaining as well as disturbing.

http://www.guardian.co.uk/books/2011/dec/13/thinking-fast-slow-daniel-kahneman

The problem is that we actually know quite a lot about why people are persuaded to do dumb stuff, but unfortunately that knowledge is more effective in the hands of people seeking to manipulate us and is not really working on behalf of the innocent.

An exception may be the idea of "nudge theory"

http://en.wikipedia.org/wiki/Nudge_%28book%29

but when you notice that David Cameron's Tory government has a "nudge unit" you have to lose that initial optimism and sigh, if not weep.

A good example (mine, not in either book) of the way we are manipulated is called "framing." You need to know that, faced with a difficult problem, we are inclined to translate that into a simpler one that we feel more comfortable with. So politicians can take a difficult issue in economics, frame it as a moral choice, and suddenly people think they are driven to a particular type of moral answer. In reality, the economic choices we face are frequently not moral ones at all, but questions about what works and what fails in economics. Thus politicians can and do peddle a failed or at least uncertain economic policy by framing it as a familiar moral choice. It goes on all the time and it works brilliantly. If you try to tell people it is not a moral issue, they go crazy with you.

Kahnemann certainly demonstrated that investment outcomes are a pure lottery. Winners and losers definitely exist, but only by chance and not by skill. It is not just dishonest scams we should worry about. The whole investment banking system is a scam and we are too scared to accept the evidence.