Saturday, June 23, 2012

The mathematics of scamming

A fascinating report in the New Yorker on those Nigerian scam emails following a recent quite wonkish paper which asked the question "Why do Nigerian scammers say they are from Nigeria?"
"Why not also pretend to be from a place that is not known for e-mail scams? Why don’t they make the whole scheme seem a little less ridiculous at the outset?"
"The report’s answer, which involves a lot of math, is fairly simple: scammers only want really gullible people to respond to their initial query. These scams are complicated—they involve lots of negotiations, charm, and conning. Many of them fall through. If Mr. Mutumba sends out fifty thousand e-mails, it’s going to make his life much easier if his claim is so ridiculous—and so easy to debunk through Bing or Google—that only ten, and not a hundred, potential suckers respond. Scammers, like the rest of us, have other stuff to do. Or as the report, which is packed with charts, says, “For a single attacker the return is given by (1). This is maximized when dE{R}=dfp = 0.”"
I guess the same would apply to the more common 'get-rich-quick' and 'seminar spruiker' schemes. These are still frequently advertised here in Cairns and elsewhere, usually depending on what is currently 'hot' whether it be property or currency trading. Again, the advertising claims are such that most people would be immediately sceptical and not respond. The usual follow up is some form of free seminar.

Mining towns in the past have been a strong focus for this kind of activity with high incomes not necessarily matched by financial sophistication. My own experience in CQ some years ago now included an entire dozer team with investments funded by substantial foreign currency loans, and a mine where many workers were attempting to wipe out all their tax with ti-tree schemes. Both these later came unstuck.

I wonder what are the current investment preferences in the booming mining towns?

 

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