Professor Paul Frampton is an outstanding particle physicist. After receiving an Oxford education up to his Phd, he joined the faculty of the University of North Carolina at Chapel Hill as an Assistant Professor in 1981 and was promoted to a full Professor in 1985. Since 1996, he has held the chair of the Louis D. Rubin Jr Distinguished Professor of Physics. According to his curriculum vitae, he has taught 57 courses, and has mentored more than 37 doctoral students over the years. He has also published more than 500 papers in the field of theoretical physics, received close to 10000 citations for his articles and has authored three books of his own.
Professor Paul Frampton is also a convicted criminal serving out his sentence for drug trafficking in Argentina. Newly divorced, the lonely Frampton was befriended by a Denise Milani on an online dating site. Milani was a bikini model from the Czech Republic, and her online persona turned out to be an irresistible combination of salaciousness and vulnerability. Their friendship grew, and the 68 year old Frampton was made to believe that he has found love. Within a couple of months, and upon Frampton’s urging, Denise finally agreed to meet him in Bolivia where she was doing a photo shoot. Professor Frampton left home hoping to return with his future wife in tow. Whilst he was in transit in South America, Milani got called away on a last minute assignment. They made new plans to meet in Europe, but not before Frampton agreed to detour, pick up a suitcase and bring it along to Europe for Milani.
All this while, Frampton was in correspondence with an old friend from Canada. Against sound advice, he continued to disregard the risks and ignored all the warning bells as he persisted with his quest to rendezvous with his future wife. Just before he flew out of the Ezeiza Airport in the Argentinian capital of Buenos Aires, he was met by the police. The suitcase contained cocaine, and he was arrested on the spot.
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
Why do smart people do stupid things? What caused a well educated, undoubtedly intelligent and widely regarded academic to ignore all alarm bells and end up falling for the oldest trick in the book? According to Professor Keith Stanovich from the University of Toronto, it is not about intelligence at all and IQ tests are but incomplete measures of rational thinking and behavior. This is because real world demands require more than intelligence but rational thinking styles and skills.
Stanovich was fascinated by the research of Daniel Kahneman and his collaborator Amos Tversky. The duo suggested that human thinking is the product of two different channels or systems. System 1 thinking is instinctive, emotion based and faster, while System 2 thinking is more deliberate, effortful and hence slower. We switch between System 1 and 2 subconsciously all the time. Building on the work that won Kahneman the Nobel Prize for Economics in 2002, Stanovich suggested that human beings are irrational primarily because we are cognitive misers who prefer to rely on System 1. Cognition requires effort, assimilating information and processing them is taxing and we do all we can to reduce the effort needed, including using heuristics and shortcuts. What this means is that even though we can, often we choose not to think.
At first glance, it would be easy to say that an intelligent person would display more rational thinking. After all, their intelligence allows them to process more information in a shorter time, recognize more complex patterns and examine more possible outcomes. However, studies conducted by Stanovich found the converse to be true – intelligence is not a strong predictor of rationality, and there are some rational thinking skills that are totally dissociated from intelligence. In other words, it is perfectly normal for intelligent people to do dumb things.
To better understand the concept, it is helpful to imagine thinking as a physical activity. We could jog half an hour to the mall for dinner, or we could hop onto a cab and get there in five minutes. We all know that we need a workout, but traveling by car is more comfortable, requires less time and less effort and more often that not that is the option we end up going for. In a nut shell, human beings try to minimize thinking, as they would with other physical activities. Unfortunately, as we know, lack of exercise makes us fat and unhealthy. Lack of thinking on the other hand will inevitably lead to irrationality.
And in the midst of this irrationality lies the perfect environment for financial scams to fester and exist. Everyone has heard of the adage ‘If it is too good to be true it probably is’, but when confronted with an actual ‘too good to be true’ deal, it is all too easy to let System 1 processing take over and succumb to the lure of easy and fast money. Victims of Sunshine Empire, Genneva Gold, Bernie Madoff just to name a few can very well attest to that.
It is not how well we think, but whether we choose to engage our brains for deliberate thinking that determines our rationality. In Mar 2013, Professor Stanovich was awarded a 1 million dollar grant to develop a measure of rationality. The Rationality Quotient (RQ) will be able to fill in major gaps in the understanding of human behavior that IQ fails to address. It is interesting to see how we stack up in that measure and to discover if RQ is a determinant of who falls for scams and who does not. And once we have a meaningful measure, we might even be able to devise methods of upping our rationality.
Until then, it seems like the best way to guard against scams is to give the good old brain a workout!