Putting a longer handle on something gives you more leverage to manipulate it, but it also lets another person work with you as a team. The ability to convince others to do or believe things is not of itself immoral, nor is the exercise of that ability. As with so much, it is the context that flavours the morality.
A good pitch to an investor will convince them to invest in a company through many of the same mechanisms that a scam might convince a victim of something. This article points out some of the common features of how scams work, so that you can both avoid falling for them, and ensure your pitch doesn’t sound like one.
Bait, Hook, Push, Pull
First, there is a bait. Something amazing that people want, an aspiration for money, status or something else. It is offered to capture the listener’s emotions, and draw them into desiring the product. Rapport is a large part of this, and scammers will often be unusually friendly or interested in the potential victim early on.
Then a hook is put into the bait. A logical sequence of steps that explains how we will move from the current situation to the desired one. Vague explanations of market movements and other people’s responses, and unverifiable data and assumptions. The only thing that is relatively clear is what you must give up to initiate this logical sequence of events, and what you will get at the end. Concrete contributions from the scammer are less apparent. “Help”, “support”, “introductions” and the like.
The next two steps often work in tandem, alternating between themselves. Pushing involves chastising you for being slow or asking questions- how dare you question the assumptions here, you are so ungrateful! Hurry up or you will miss out!
Pulling is the opposite, rewarding you (and your character) for all the steps you take in line with the scam. Well done, you’re better than the rest!
Finally, the combination of your emotional attachment to the dream (the bait) combined with your human desire to be liked (the pull) and not be disliked (the push), turns you into your own scammer-in-chief, believing and ignoring reality as best fits your desires. At this point the scammer can sit back while you drive the thing forwards, giving up money, shares, time, or whatever it was that the scam wanted from you.
Avoiding Scams
Look out for any behaviour that seems to match the stages above, and ask yourself rational questions about it all.
If someone has a great opportunity for you, why have they given it to you? Think about the bait. Of all the people in the world, why you? Some stock broker can get you returns above the stock index- so why isn’t he managing billions in his own fund somewhere? Someone is willing to help your company out as an advisor for some equity- if they’re so good, why do they even have the free time to deal with you?
The hook is easy to deal with. Google the logic. If the assumptions don’t stand up or the data is from a weird source, leave. Investors think the same way, and that’s why all the business plan goes on and on about supporting your assumptions with data.
The push and pull are harder. You can usually spot the push because it comes as a matter of time- do this now because the opportunity will go soon. Nonsense. Or if people get angry that you reject their offer of help- nonsense. If the emotional aspect is unpleasant to you, then make use of the community- the Clinical Entrepreneur Program or whatever else you are a part of- to give you the support and confidence to walk away.
Have a look at your own pitch. The first thing to check is that you haven’t scammed yourself. Are you now so convinced in the success of your company that you are disengaging from reality? Don’t be your own victim. Look back at the summary page of your business plan, and send it to a friend for their thoughts.
And finally, take an objective ear to your own pitch. Does it sound a bit like any of the above? A wild dream of untold profits, a definite amount of money an investor has to put in while you continue to work a bit as a doctor and just “CEO” things, do you get angry when they ask for data or for references?
“Scam” is perhaps a strong word for most of what you will encounter, especially given that different communities have different cultures of forwardness and pushiness. Business culture is more pushy than many professional practices but that doesn’t make business people more likely to be scammers than anyone else.
Not all good opportunities are scams and not all effort put into convincing people of things is immoral. Throwing someone a surprise party is a verbatim copy of a scam’s recipe. And there are good people who want to help others. This article is intended only to help you identify those who don’t.