Wason Effect and Due Diligence
"Persuading someone that his judgment turns on a misperception that he cannot see, and that neutral third parties cannot see, will be vastly more difficult than pointing out a logical slip which becomes undeniable once it is pointed out."
For example, it is very typical of investors in what the FTC calls business opportunities frauds to have performed the following "due diligence": check with the local BBB, and possibly order a Dun and Bradstreet Report. The first step is always commented on with pride by the disappointed investor. "How could I have possibly known more than the BBB?"
What has happened in these cases is that the investor has fallen afoul of a complex Wason effect. A bad BBB report does mean that the company in question has reputational problems; but a silent BBB report is not a recommendation of the company. Interestingly, my clients refuse to accept at face value what the BBB websites all state: "We don't recommend companies": The FTC disclosure package for franchises says a similar thing about franchises. Both are routinely ignored.
How the potential investor dilute the Wason Effect and avoid being a litigation client?
Well, in the abstract how could the abstract example be changed to select for the correct behavior?
Here is a variation on the Wason selection task that I would like to see tested: after instructing the individual to turn over cards to test the inference, point out that there is a $1.50 penalty for being wrong and conduct 20 or so tests with the same individual to see how quickly they learn the correct inference. My guess is that it will only take 2 or 3 trials before the penalty kicks in and people select the correct pair of cards. I believe this because the Wason selection tasks that people do well on also have a premium or penalty for getting the selection task right.
The potential purchaser should focus on how much of premium he would pay now to avoid the total loss of his investment by reflecting on what he would have paid, after he discovered the fraud or scam, to avoid losing his total investment. If you could lose $30,000, even if you think that it is very unlikely that you will, what would you pay after you found out that you had lost the entire amount to have avoided the loss?
