The favourite con trick of Daniel Finkelstein
I am going to tell you about my favourite con trick.
It’s really clever, this one. The con artist sends out 10,000 letters selling his services as an investment adviser. He tells the recipients that he is very good at stock picking, but that he doesn’t expect them simply to take his word for it. He is going to show his predictive power over the coming four weeks.
In this first letter he predicts the direction in which the price of a particular stock will travel in the next seven days. Now here’s the clever bit - he has split the recipients in two. He tells 5,000 of them that the stock will go up, while 5,000 are told it will go down.
Now, let’s say the stock goes up. The con artists ditches the 5,000 people he misinformed and concentrates on the 5,000 who thinks he got it right. Again he sends 2,500 letters saying that a particular stock will go up and 2,500 saying that it will go down. He continues until he has 625 recipients hugely, but incorrectly, impressed at his predictive ability. He asks them to give him their life savings to invest. Dastardly but brilliant.
Better services without reform? It’s just a con | Daniel Finkelstein - Times Online
