The Confidence Game

by Maria Konnikova

  The second time around, three fourths of the students reported having given greater probabilities than they’d actually done to the events that they subsequently believed had taken place. Fifty-seven percent reported lower after-the-fact probability judgments for events that hadn’t actually happened.

  Fischhoff and Beyth, moreover, hadn’t simply been looking at a single group of students in isolation. Instead, they’d given the questionnaires to different classes, at different times (and some had been asked about Nixon’s trip to Moscow instead of China). For some students, the elapsed time from the first to the second was indeed two weeks. For others, though, it could be anywhere from three to six months. Over time, the psychologists found, memory got even worse: fully 84 percent of those in the three-to-six-month group showed faulty recall. They termed the tendency the hindsight bias. In hindsight, we don’t just say we should have known it. We say we did, in fact, know it.

  So what could Norfleet do, once his initial money was lost? Either he could admit he’d been wrong, that he’d fallen for the magic wallet scam—one of the oldest in the book—or he could say he’d known there was risk all along, but that he had made the investment because, fundamentally, the plan was sound. And if the latter was true, then why not continue to show support by giving over even more money? In hindsight, he was being daft. In the moment, he was exhibiting a hindsight bias of the strongest kind.

  Stetson’s show of indignity made it all the stronger: it activated the memory of their shared Masonic bond, of everything that came with fellowship and trust. Of the many good turns he’d done Norfleet, and the many ways he’d trusted him with astronomic sums. Stetson did, in other words, what con artists do best: selectively draw our attention to the things they want us to remember so that we conveniently forget the things that cast them in a bad light—like the fact that Stetson had just walked out with the cash. Besides, everything can be reinterpreted in a positive light, can it not? He was just, he thought, acting according to instructions. How could Norfleet be so untrusting?

  When he handed over his cash for the final time, putting away his gun and letting Stetson depart, Norfleet attempted the third of Festinger’s change strategies: act in a way that attempts to change reality. The reality was that he’d lost money. But how could that be if he’d made a sound investment? It was an accident, a mere fluke. A spot of bad luck. And there’s nothing better to change some bum luck than a little extra financial greasing. Doubling down: it’s exactly the sort of reasoning a con artist relies on as he executes the breakdown.

  In 1796, the Marquis de Laplace observed in his Essai philosophique sur les probabilités that “it is principally at games of chance that a multitude of illusions support hope and sustain it against unfavorable chances.” This became the first known formulation of a bias that in more recent years has become one of the most widely studied tendencies in cognitive psychology: the gambler’s fallacy. The name comes from that temple of chance, the casino. A gambler has just lost a hand. Now another. And another. Why does he keep playing? Why doesn’t he just cut his losses and walk away while he’s not too far behind? We tend to believe that chance has a way of evening things out. If a coin has landed on tails eight times, the next one must be heads. It’s hard for us to wrap our heads around the fact that probability doesn’t care about timing, doesn’t care about what we think, and doesn’t care about what came before. Each event is entirely independent of the one before, and will in no way affect the one after. Still, the gambler insists that the next one will be the lucky winner. It’s been a long time coming, but it’s right around the corner, in the next toss of the die, turn of the wheel, flip of the card.

  Life is not a casino, and often the gambler’s fallacy isn’t a fallacy at all. It’s an accurate adaptation to changing events. As Harvard University psychologist Steven Pinker notes in How the Mind Works, “It would not surprise me if a week of clouds really did predict that the trailing edge was near and the sun was about to be unmasked, just as the hundredth railroad car on a passing train portends the caboose with greater likelihood than the third car.” And so, when it comes to events that really are chance, from gambles on craps tables to gambles in stocks, and events that, while not completely chance, are governed by a high degree of uncertainty, like financial investments, our gambler’s fallacy (now properly fallacious) is all the more likely to persist: after all, at times it’s not a fallacy at all.

  In 1951, Murray Jarvik, a psychopharmacologist at UCLA—who also happened to invent the nicotine patch and test out some of the earliest versions of LSD—asked people to try to do their best to anticipate the future. Every four seconds, he would say either “check” or “plus,” the first to signal the sign for a checkmark and the second for a plus sign. Before each word, he would first say, “Now!” At that point, each subject would need to draw one of the two signs on the page, a best guess for what would come next. Jarvik would then give them the “correct” answer, which they were to note down right next to their guess.

  Jarvik had three groups of students. In each group, the number of checks and pluses wasn’t actually at chance. Instead, checks were relatively more frequent. What differed was that relative frequency: 60, 67, or 75 percent. If people were learning based on actual probabilities and feedback, they should have quickly realized that they should be guessing “check” more often than “plus.”

  Indeed, overall, that’s precisely what happened. The higher the frequency of checks, the faster the learning. But there was one major exception: whenever a participant came across a streak of more than two checks in a row, the guesses for subsequent checks plummeted. No matter the group and no matter the overall frequency of the check, people simply couldn’t believe that runs could go on indefinitely. The next one would surely be a plus; it was about time. Jarvik called this the negative recency effect. “The interference of the negative recency effect with the overall trend of probability learning is so great after three to four ‘checks’ for the various curves that all gains are temporarily obliterated,” he wrote, “and after four or five ‘checks’ the preponderance of anticipations is in the opposite direction, that is, of plusses to come.”

  The negative recency effect was the first experimental demonstration of the gambler’s fallacy in action. Even with strong probability, it overshadows logic. In the decades since Jarvik’s work, it has been demonstrated in situations like actual gamblers’ behavior in casinos, state lottery games, card games, heads-tails guesses, and stock market trading.

  Norfleet had just lost $20,000. But with just one more investment, one more play, he could make it all back, and then some. And so, like all gamblers, even the most rational-seeming ones, he took the plunge.

  A loss, a good confidence artist knows, doesn’t spell the end: that’s why the breakdown sucks the mark in further rather than letting him off the hook. Under the right circumstances, a loss can signal a deepening of commitment. There’s evidence that if we experience a particularly painful situation—the loss of a lot of money, for example—and then successfully overcome it, or think we’ve done so, say, by deciding to give more money, we feel a great sense of accomplishment—and, a bit perversely, a greater sense of loyalty to the cause of our pain. In one early study, Harold Gerard and Grover Mathewson found that people who had to undergo a severe electric shock to be admitted to a group subsequently rated the group as more attractive. We may have lost, but it was all worth it: we become more loyal by virtue of pain, be it physical (shock) or emotional (financial loss).

  Consider how loyal Robert Crichton remained to Demara over the years. He had been fooled by him multiple times, when he vouched for the great impostor’s “genuine reformation,” only to have it blow up in his face. He’d put his reputation on the line for Fred’s new escapades, only to have that reputation tarnished when those escapades went south, as they inevitably did. He invested thousands of dollars in helping Fred “make good,” despite no return on investment—and several lawsuits where Fred claim
ed he’d been “duped” and was owed massive amounts of money. Time and time again, Demara took advantage of Crichton—and time and time again, Crichton remained loyal to him and believed in their friendship. Fred was masterful at playing the breakdown over and over: another loss, but this time, I swear I’ll make it right, if only you stay committed. How could you say no?

  Unfortunately for us, the worse the losses get, the more we are likely to stumble. Positive illusions, psychologist Shelley Taylor notes, are often defensive mechanisms to a threatening circumstance. Even if we don’t realize our worldview is under fire, we already start overcompensating to protect it. We don’t yet understand we’re being conned, but already, we are buying into the game all the more, to try to protect our certainty that everything will turn out for the best.

  * * *

  Not all marks are created equal. Twice suckered was two times too many for Norfleet. He vowed to get revenge. Over four years and thirty thousand miles, crisscrossing the country, traveling into Mexico and Cuba, scouting up into the wilds of Canada, he meticulously tracked down every single member of the vast gang that had conned him out of wealth and reputation. “Go get those miserable crooks,” his wife had told him. “Bring them in alive.” And that’s precisely what he did.

  By the time Norfleet died, in October 1967, he was no longer the Boomerang Sucker. He was the “Little Tiger of Hale County,” the one who single-handedly took down one of the largest organized crime rings in the nation.

  CHAPTER 8

  THE SEND AND THE TOUCH

  Contrary to popular opinion, the hustle is not a new dance step—it is an old business procedure.

  —FRAN LEBOWITZ

  For close to twenty years, the modern art world witnessed an influx of never-before-seen masterpieces from some of the most acclaimed Abstract Expressionist—AbEx—artists of the twentieth century. Jackson Pollock. Mark Rothko. Robert Motherwell. Clyfford Still. Willem de Kooning. Barnett Newman. Franz Kline. Sam Francis. The scope was tremendous, the quality undeniable. The dealer who brought them to the public eye, Glafira Rosales, had exclusive ties to an anonymous collector who had received a large art inheritance from his father; it was from his collection that the paintings now came. And the gallery responsible more than any other for bringing them to the public eye: Knoedler & Company, the oldest art gallery in Manhattan.

  The buyers spanned a who’s who of art collectors, from prominent business moguls to actors to people who simply loved art. The Abstract Expressionist masterpieces made their way around the world. Local exhibitions. The famed Fondation Beyeler. A Guggenheim show.

  Experts rendered their opinions. David Anfam, the historian who had authored the catalogue raisonné—the definitive, official compendium of an artist’s work—for Mark Rothko’s works on canvas declared the Rothkos breathtaking. The National Gallery, then in the process of compiling the catalogue raisonné for Rothko’s works on paper, declared its intention to include a Rothko from the collection in its final pages. “This belongs in the Metropolitan Museum,” one expert wrote about a Pollock. But from whence had this treasure trove come?

  Glafira Rosales was a relatively recent arrival in the United States. Born in Mexico, to a prominent Catholic family, she had grown up surrounded by the crème de la crème of society. Artists, collectors, leaders congregated in the Rosales household, chatting with the little girl, asking her uncle, the bishop, for advice. Among those friends was an older couple, European Jewish émigrés, she recalls. They were avid art collectors, and she listened in rapt fascination as they described the artists they’d met and the paintings they’d bought. This, thought Glafira, was what she wanted to do with her life.

  She grew up. She traveled the world. In Spain, she met a man and promptly fell in love. His name was Jose Carlos Bergantiños Diaz, and he promised he would take care of her always. Together, they decided to try their fortunes in the United States, the land of opportunity for immigrants. They bought a house in the suburbs. They had a daughter. At long last, she opened the art gallery she’d always wanted: King’s Fine Arts. Glafira immersed herself in her art. Jose Carlos took up some philanthropic and humanitarian pursuits. Life was going well. Better than she’d ever hoped. In 1986, she was granted permanent residence.

  It was sometime in the early 1990s that the news reached her from Mexico: her old family friend, the art collector, had died. And unlike him, his children had no interest in painting; they wanted nothing more than to get rid of the things. They were only taking up space in storage. To them, they were worth far more sold. They’d heard that Glafira was now in the art world herself. Would she help find the canvases a good home? The price was unimportant—she could determine the market value herself. That’s what they were hiring her for. That, and her discretion. Since she was a family friend, they knew they could count on her silence.

  It was of paramount importance, the son stressed, that the paintings’ origin not become known. It wasn’t much of a secret that their father had been a closet homosexual—and the paintings, well, they had been acquired under the radar, with the help of a certain like-minded special friend of his, who worked closely with the artists and was able to move unmolested from one studio to the next, picking up pieces that wouldn’t be inventoried, wouldn’t be officially catalogued, and so wouldn’t be subject to those pesky tax regulations. For family pride—they didn’t want to officiate that he was gay—as well as family decency—they couldn’t be seen as tax evaders—it was crucial, he couldn’t repeat enough, to maintain complete anonymity.

  Glafira was only too happy to oblige. But one question remained: how would she sell the paintings? Her own gallery was far too small and unimportant for such a large trove of masterpieces. Besides, AbEx art wasn’t her specialty. She didn’t rightly know what the works were worth or who the key collectors would be. For that, she needed a specialist.

  Since the mid-1980s, Rosales had been making her way around the New York art scene. She attended auctions, socialized at openings, could be seen smiling, a glass of champagne in hand, at events and parties throughout the city. It was on one of these evenings that she’d met Jaime—Jimmy—Andrade. They’d hit it off at once. Like her, he spoke Spanish. He was older, elegant, a gentleman of the classic school. His partner, too, she liked immensely—Richard Brown Baker, a contemporary art collector famed for his eye and his largesse. Whenever she and Andrade saw each other, they met like old friends. Air kisses, fond words, endless smiles all around. And Andrade, she knew, had for decades worked at the Knoedler Gallery—just the kind of place, with just the kind of reputation, that she now needed for her newly discovered collection.

  Glafira called Jimmy. He’d already arranged to have her come to the Knoedler once before, when Glafira had come into possession of some sketches by Richard Diebenkorn, but this time she had something far more substantial, she told him. Would he arrange an introduction to Ann Freedman, the gallery’s director? There was a painting she would want to see.

  Ann Freedman doesn’t recall the first time she met Glafira Rosales. It hadn’t seemed important—some friend of Jimmy’s bringing in some Diebenkorns that, in the grand scheme of things, weren’t worth all that much. Back in 1991, 1992, maybe even 1993? She couldn’t rightly be sure. Someone had brought the prints. She’d sold them. That was that.

  But this meeting—this meeting she recalls well. It wasn’t Glafira Rosales who made an impression. It was the painting she held out in her arms. A pale pink-peach background. Two clouds of color. “Breathtaking. It was a beautiful Rothko,” she tells me, closing her eyes. Freedman is tall and thin, a mass of short gray curls lining an angular face, rimless glasses, a penchant for sneakers over heels that does nothing to mar the elegance of her outfits. It’s a painful subject for Freedman to revisit. That meeting, after all, led to what some might call her downfall: being dismissed from Knoedler, accused of fraud, watching her beloved gallery shut its doors. (Rosales did not implicate her in her confession; legally, Freedman is innocent, a
s of this writing.) Losing friends. Losing clients. Losing the faith of the people who had once held her in high regard. She could not have predicted it, not for a moment. The art was just so compelling. How could it have been fake, or “wrong,” in the preferred language of the art world?

  Freedman asked Rosales where the painting had come from. It was beautiful, true, but it needed a provenance. Paintings don’t just appear out of nowhere. A private collector, Rosales explained. Somebody who wished to remain anonymous—she had promised the family. It had been purchased under private circumstances, never recorded, and had been in storage for decades. For half a century or more, the art had been languishing away. All Rosales was willing to say for certain was that a certain Mr. X had, back in the heyday of Abstract Expressionism, grown chummy with some artists destined for future greatness. He dealt in cash, off the record, directly from the artist to his home. No official paper trail existed because no official paper trail had ever been made. Any receipts that did pass from hand to hand, Rosales said, would likely have been thrown out by Mr. X’s daughter after his death. His son was the one who was now parting ways with the art.

  And what did Rosales reveal about the son? He was of Eastern European descent, with residences in Switzerland and Mexico. Around 2001, after years of working with Freedman, who relentlessly badgered her for more information, Rosales would finally provide Knoedler with a family name. It was the same as the name of a Mexican painter of European ancestry who had lived in Switzerland and died in Mexico. His sons had managed his art collection since his death. None of the artists Rosales had dealt in, they later claimed, had ever passed through their father’s collection. That, however, came much later.

  For now, all Glafira was willing to say was that Mr. X had children, and those children did not like art. Freedman told her she’d need more information before she could proceed, and asked her to leave the painting with her for evaluation. Rosales left.