Take, for example, this video, which my friends at Panda’s Thumb were dissecting a few months ago. The credulous Fox news station reports this “great invention” as a “miracle” that can solve the energy crisis. This “inventor” is proclaiming that he has “discovered” a new form of dihydrogen oxide (they claim it’s HHO, not H2O) by separating hydrogen from the hydroxyl ion by electrolysis. The video then breathlessly describes how hot this gas burns through various objects while allegedly it is not hot to the touch. Then the “inventor” shows off his hybrid car which runs on a mixture of this “miracle gas” plus regular gasoline. The video footage concludes with various people trying to help him get a patent on his “invention” and the possibility of him testifying before Congress about his “miracle discovery.”

I know TV news is famous for not spending any time with fact-checking or asking real experts, especially since they run on a tight deadline and don’t like the facts to get in the way of a good story. But surely they could have consulted with someone who could have told him that this is a famous scam that comes out  every few years (especially when people want stories of easy energy sources). They could have even done a bit of research and Googled “Brown’s gas” to find out the entire history of the scam. Odds are that this con man will get someone to spend money to invest in his “invention” and then the whole thing will quietly disappear before it goes to the Patent Office, where it would be recognized as the age-old con that it is. (If he does get before Congress, someone should inform the Chair of the Committee so they can really grill him, not buy into his fairy tales as they so often do with other garbage told in hearings).

So what’s the story? If you’ve taken any chemistry, you probably did an experiment with hydrolysis, where you separate water into hydrogen and oxygen using electricity. Once the hydrogen has been separated this way, it indeed burns very hot. But it’s not a source of energy, or a “solution to the energy crisis”. The laws of physics have not been violated or circumvented. In order to make the reaction happen, you have to put energy into the system to break up the water molecules. Study after study has shown that energy you get out of burning the resulting hydrogen is less than the energy put into the hydrolysis reaction in the first place, so it’s a losing proposition. You can think of the reaction like a battery—you put energy in to store it and can retrieve some of the energy at the other end, but with some net loss of energy. In other words, it is an energy storage system, not an energy source. As demonstrated by perpetual motion machines, you cannot get perfect efficiency, and there is always some loss of energy somewhere in the system, so the system is not a real solution.

In thermodynamic terms, when we burn a complex hydrocarbon like those in gasoline or other fossils fuels, we break down a long-chain hydrocarbon into small molecules like carbon dioxide and water (if combustion is complete). We get a lot of energy out of this reaction by releasing the energy of those many bonds in the complex hydrocarbon. By contrast, if our “fuel” starts as water, and we break it up, and then it returns to water, there is no difference in energy between the bonds of the starting material and the final product. Thus, there can be no net gain of energy—just temporary storage in another form with more energy consumed to break those bonds than we gain by burning it and re-establishing those bonds.

One of the people who wrote comments on the page where the YouTube video is posted said “remember, you need water & electricity Only!” (sic) and “no crude oil required.” And where does this person think electricity comes from the first place? Most electricity in this country is generated by burning oil, gas, or coal. Only if we generated electricity exclusively by wind, hydroelectric, solar, or nuclear, then there would be no oil, gas, or coal required. Nor it is necessarily cleaner than other forms of combustion. You may not get the fumes of acetylene in the burning process in your welding shop, but somewhere down the line a power plant has generated plenty of pollutants to create electricity to break up the water molecules in the first place.

If you look up “Brown’s gas” on Google, it’s a scam that goes back over a century. In its most recent incarnations, it was called “Brown’s gas” after a Bulgarian con artist named Yull Brown who tried to promote it in Australia in the 1970s and 1980s, and conned a number of gullible investors (see here for details). It is also known as “HHO gas”,  the name given it by fringe physicist Ruggiero Santilli. It has re-emerged many times with slightly different names and guises, but people (and newscasters) get fooled over and over again. Although the video seems impressive, it is full of lies: HHO burns VERY hot, and you cannot put your finger in it unless you want instant third-degree burns. According to my sources at Panda’s Thumb, it burns so hot that the metal quenches in air and hydrogen is introduced to the metal at the cutting point. This makes the metal really brittle and thus is not as good as a cut made with an acetylene torch.

Thus, another scam re-emerges. The internet is full of YouTube videos which make the same outlandish claims, some of which are slickly produced commercials for gullible investors (such as this one), and others which are very low-tech. But they all repeat the same lies. The reality: HHO gas is not as good as most other gases for cutting and welding, and HHO gas is not a “new source of energy”. If it looks too good to be true, it probably is. Caveat emptor!

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The Geological Society of America (GSA) is one of the largest organizations of geologists in the world (over 24,000 members). It holds not only an annual meeting every fall in a different city, but also five regional meetings around the U.S. regions (Northeast, Southeast, Midwest, Rocky Mountains, and Cordilleran) throughout the year. Although 97 different countries contribute members, it is composed mostly of U.S., Canadian, and some Central American geologists. The GSA focuses on the cutting-edge and pure research aspects of geology, performed mostly by academics and government geologists. Thus, it is very different from meetings of petroleum geologists or mining geologists or engineering geologists, who tend to be employed in for-profit enterprises and focus on purely practical local problems. The annual GSA meeting routinely draws 6000 or more people for a four-day session, so there are over 2000 talks and posters in at least 30 different sessions with talks every 15 minutes in at least 30 different rooms scattered around some  huge convention center. There SO much to see and hear for a broadly trained and wide-ranging geologist/ paleontologist like myself that I can’t even catch a fraction of what I want to see and hear. For me, it is crucial to make the annual meeting each year to keep up with the latest developments, as well as see old friends that I see only at the meetings, and also to keep up with my geology textbooks and my other books sold in the gigantic exhibits area. I attended my first meeting in 1978 in Toronto, and I have not missed a national GSA since then. I just returned from this fall’s meeting in Minneapolis October 9-12, which was my 33rd in a row.

Most of the time when I attend the meetings, there are plenty of controversial topics and great debates going on within the geological community, so the profession does not suppress unorthodox opinions or play political games. This is the way it should be in any genuine scientific discipline. I’ve seen amazingly confrontational knock-down-drag-out sessions about particularly hotly debated ideas, but always conducted in a spirit of honest scientific exchange and always hewing to rules of science and naturalism. To get on the meeting program, scientists must propose to organize sessions around particular themes, along with field trips to geologically interesting sites within driving distance of the convention city, and the GSA host committee reads and approves these proposals. But every once in a while, I see a poster title and abstract with something suspicious about it. When I check the authors, they turn out to be Young-Earth Creationists (YEC) who claim the earth is only 6000 years old and all of geology can be explained by Noah’s flood. When I visit the poster session, it’s usually mobbed by real geologists giving the YECs a real grilling, even though the poster is ostensibly about some reasonable geologic topic, like polystrate trees in Yellowstone, and there is no overt mention of Noah’s flood in the poster. But the 2010 meeting last year in Denver took the cake: there was a whole field trip run by YECs who did not identify their agenda, and pretended that they were doing conventional geology—until you read between the lines.

I never even spotted them on the field trip on the program. I was teaching a heavy load last fall, and had no spare time for pre- or post-meeting trips (four days away from classes is hard enough to arrange), so I didn’t look the trips over closely. But my colleague Steve Newton did notice the suspicious list of leaders, including Institute of Creation “Research” (ICR) “geologist” Steve Austin, Marcus Ross of Jerry Falwell’s fundamentalist Liberty University, and two others from the ICR and another Christian college. He reported on it here, and according to him, it was an eye-opening experience. Through the entire trip, the leaders never identified themselves as YECs or openly advocated Noah’s flood or a 6000-year-old earth. Instead, the entire trip was filled with stops at outcrops where the leaders emphasized the possible evidence for sudden deposition of the strata at Garden of the Gods near Colorado Springs, without stating explicitly that they believed this sudden deposition was Noah’s flood in action. (There are LOTS of instances of local rapid and sudden deposition of strata in real geology, but they are local and clearly cannot be linked to any global flood). As Newton described it:

Furthermore, the field trip leaders were careful not to make overt creationist references. If the 50 or so field trip participants did not know the subtext and weren’t familiar with the field trip leaders, it’s quite possible that they never realized that the leaders endorsed geologic interpretations completely at odds with the scientific community. Even the GSA Sedimentary Geology Division had initially signed on as a sponsor of the trip (though they backed out once they learned the views of the trip leaders).

But the leaders’ Young-Earth Creationist views were apparent in rhetorical subtleties. For example, when Austin referred to Cambrian outcrops, he described them as rocks that are “called Cambrian.” It’s an odd phrasing, allowing use of the proper geologic term while subtly denying its implications. In one instance, when Austin was asked by a trip attendee about the age of a rock unit, he responded somewhat cryptically, “Wherever you want to go there.” Such phrasing was telling, if you knew what to listen for.

Subtext about the age of formations was a big part of the Young-Earth Creationist rhetoric on the trip. As we moved on to each field trip stop, a narrative began to emerge: the creationist concept of Noah’s Flood as explanation for the outcrops. Although no one uttered the words “Noachian Flood,” the guides’ descriptions of the geology were revealing and rather coy. For example, at the first stop—a trail off Highway 24 near Manitou Spring—Austin stated that the configuration of the units was “the same over North America,” and had been formed by a massive marine transgression. “Whatever submerged the continent,” Austin went on, it must have been huge in scale.

Apparently, most of the participants on the field trip who weren’t familiar with YEC assumptions and terminology never caught on to the scam that was being perpetrated by the field trip leaders—and none were converted to the YEC viewpoint by a single weird field trip. But conversion and witnessing to unbelievers is not the goal here. The purpose is to get YEC “research” presented at respectable mainstream scientific meetings so they can claim they are doing legitimate “scientific research”—even if they lie about or conceal their motives to do so, and mislead the GSA and the geological community by hiding their real agenda. During the poster sessions at that same meeting, there were no less than four posters by students from fundamentalist Cedarville University challenging the idea that the classic Permian sand dune deposits of the Coconino Sandstone below the rim of the Grand Canyon were laid down in in the wind and not water—because that’s a major dilemma for the YEC in trying to shoehorn the entire Grand Canyon into “flood geology” (see my book Evolution: What the Fossils Say and Why it Matters, Chapter 3, for a detailed critique of the idiocy of “flood geology”).

Even more bizarre was one of the presentations given by Marcus Ross of Liberty University, who did conventional research on Cretaceous mosasaurs (huge marine monitor lizards) and ammonites for his legitimate Ph.D. at the University of Rhode Island. As Newton described it:

“Millions of years” was a phrase that also appeared in Ross’ talk on Late Cretaceous marine stratigraphy; many of his slides used normal geologic time, with millions of years clearly labeled on axes. Nothing in his 15-minute talk hinted at nonstandard geologic thinking. Because most of the audience probably did not know Ross’ background, it must have been puzzling to them when the first question following Ross’ talk challenged him on how he could “harmonize this work with [his] belief in a 6,000-year-old Earth.” (This question came from University of Florida geology professor Joe Meert, who blogged about the exchange.)

Ross answered the question by saying that for a scientific meeting such as GSA, he thought in a “framework” of standard science; but for a creationist audience, he said, he used a creationist framework. Judging from the reaction of the audience, this answer caused more confusion than enlightenment. Ross pointed out that nothing in his presentation involved Young-Earth Creationism. But he then volunteered that he was indeed a Young-Earth Creationist.

It was a strange moment for the audience. It was the last talk of the session, and as everyone migrated into the hallway, several people asked me what had just happened, as if they had misheard the exchange.

What to do about this situation? Steven Newton argues (rightly in my opinion) that at professional meetings YEC should be allowed to give presentations as long as they are clearly following the rules of science (at least in their abstracts). They deserve to be debated and confronted but we don’t want to get in the game of censoring or rejecting them as non-scientists as long as their abstracts approach their topics in a scientific and professional manner. If we reject them beforehand,  they can legitimately claim that they are being victimized and unfairly censored by conventional scientists who won’t give them a fair hearing. However, in a peer-reviewed paper, the reviewers should take them to task if they are using non-scientific methods or assumptions. I know of only a few YEC papers in conventional journals that survived peer-review—and only by doing completely conventional research and making no mention of their YEC assumptions or goals.

Sadly, the real problem here is that YEC “geologists” come back from this meeting falsely braggingthat their “research” was enthusiastically received, and that they “converted” a lot of people to their unscientific views. As Newton pointed out, they will crow in their publicity that they are attending regular professional meetings and presenting their research successfully. For those who don’t know any better, it sounds to the YEC audience like they are conventional geologists doing real research and that they deserve to be taken seriously as geologists—even though every aspect of their geology is patently false (see Chapter 3 in my 2007 Evolution book). And so, once more the dishonesty of the YEC takes advantage of the openness and freedom of the scientific community to exploit it to their own ends, and abuse the privilege of open communication to push anti-scientific nonsense on the general population that doesn’t know the difference.

P.Z. Myers said it best on his recent blog“The Fundamental Cowardice of Creationists”:

I’m sure that the creationists will cry that he had to do this, because science defends a dogmatic orthodoxy and won’t let them speak otherwise. This is totally false. If someone wants to defend heterodox ideas, they should state them openly, not hide them and present theories they do not believe so they can acquire false authority in a field, as Ross tries to do, or so that they can lie and pretend that they had convinced an audience, as Austin did.

And that’s all Marcus Ross is trying to do. He’s trying to build up credibility by presenting all of the data and interpreting it in a rational framework (he learned something at URI!) at scientific meetings, only so he can turn around and spend that reputation to endorse laughable absurdities at creationist meetings. It is contemptible.

Addendum: I checked the program of our October meeting just held in Minneapolis, and they were not on the field trip schedule (whew!).

Why should this be expected to have any kind of therapeutic value? It’s quite simple. Here is the explanation on the Earthing Institute’s home page:

In an age of rampant chronic disease, reconnecting with the Earth’s energy beneath our very feet provides a way back to better health. We are bioelectrical beings living on an electrical planet.

I hope that clears it up.

There seems to be a fundamental disconnect within the Earthing community. Half of the descriptions of Earthing say that it’s about transferring the Earth’s “energy” to your body; while the other half say the exact opposite, that it’s about electrically grounding yourself. Oh well, perhaps the research is still in its nascent stages.

So what’s the angle? Well, obviously, the sale of goofy products and services. They sell bedsheets costing hundreds of dollars, bands and straps to connect to your body, pads and mats to sit on or lay on, travel kits, and my favorite, a pad to lay on your car seat that you sit on (it “neutralizes micro-electrical charges on the body”). And don’t forget your pets: They also sell pet beds, in case Rover is not feeling quite in touch with the Earth’s “energy field”. If you’d like to get in on this action yourself, here is a nifty service offered by the Earthing Institute:

The Earthing Institute is pioneering the research and application of safe and effective biological grounding systems. The institute has unique expertise to test the validity of products designed for consumer or specialized usage. Products submitted to us will undergo detailed testing procedures. Upon approval they will be certified by the institute and manufacturers be authorized to use our “Bio logo” on their products. Costs vary depending upon the level of expertise required and the time needed to test individual products.

But of course, one shouldn’t simply assert that a new idea is goofy based on its face-value silliness. One should look at the research. A cursory search of PubMed did, indeed, turn up an impressive sounding study (“The biologic effects of grounding the human body during sleep as measured by cortisol levels and subjective reporting of sleep, pain, and stress”) with the following abstract:

OBJECTIVES: Diurnal cortisol secretion levels were measured and circadian cortisol profiles were evaluated in a pilot study conducted to test the hypothesis that grounding the human body to earth during sleep will result in quantifiable changes in cortisol. It was also hypothesized that grounding the human body would result in changes in sleep, pain, and stress (anxiety, depression, irritability), as measured by subjective reporting. SUBJECTS AND INTERVENTIONS: Twelve (12) subjects with complaints of sleep dysfunction, pain, and stress were grounded to earth during sleep for 8 weeks in their own beds using a conductive mattress pad. Saliva tests were administered to establish pregrounding baseline cortisol levels. Levels were obtained at 4-hour intervals for a 24-hour period to determine the circadian cortisol profile. Cortisol testing was repeated at week 6. Subjective symptoms of sleep dysfunction, pain, and stress were reported daily throughout the 8-week test period. RESULTS: Measurable improvements in diurnal cortisol profiles were observed, with cortisol levels significantly reduced during night-time sleep. Subjects’ 24-hour circadian cortisol profiles showed a trend toward normalization. Subjectively reported symptoms, including sleep dysfunction, pain, and stress, were reduced or eliminated in nearly all subjects. CONCLUSIONS: Results indicate that grounding the human body to earth (“earthing”) during sleep reduces night-time levels of cortisol and resynchronizes cortisol hormone secretion more in alignment with the natural 24-hour circadian rhythm profile. Changes were most apparent in females. Furthermore, subjective reporting indicates that grounding the human body to earth during sleep improves sleep and reduces pain and stress.

And moreover, a paper on an alternative health web site briefly described several such studies. Wow! Pretty impressive, isn’t it?

Well, not so much. First, the above study was published in none other than the Journal of Alternative and Complementary Medicine, which means that it was either not submitted to, or was rejected by, journals that have any sort of legitimate reputation. I didn’t purchase the article, but going by the abstract and by the descriptions of other studies in that PDF, all of these studies suffer from the same fatal flaws: No blinding at all, and no control groups at all. This means that the test subjects might as well have been wearing paper hats, and if told it would reduce their stress, it probably would have had the same effect. The small size of the study, 12 people, renders any result statistically useless; and my experience in such matters suggests there’s a good chance that these 12 people were very possibly employees and friends of the company selling the products.

Is it true that grounding yourself to absorb the Earth’s peaceful energy will cure all your ills? Maybe, but we wouldn’t know from these studies. Maybe we should all buy the products to find out.

Techno Scams

One flavor of scam is to overwhelm a potential customer with technical information that sounds superficially impressive but which the customer is sure not to understand. There may be a kernel of truth to the science, but it just takes one technical fatal flaw to doom an otherwise plausible scheme. Examples include special audio cables that cost thousands of dollars, but do not produce any audible difference in sound quality.

A subset of these scams is to take a technology that actually has some advantage in specific industrial applications and then adapt them for residential or personal use, where they have not benefit. An examples of this is filling tires with pure nitrogen – this has a small but real benefit for trucks and large vehicles, but not for your family car.

Sometimes part of the scam is to come into the home with some gizmo and then give an impressive-looking demonstration. Home water filter salesmen are known for this.

Protect Yourself

There are some very useful rules of thumb to follow when someone is trying to sell you such a  device. Do not purchase of device if you do not understand the science behind it. Do not let a slick salesmen dazzle you with technobabble. If you don’t understand the claims well enough to judge them for yourself, then consult an expert before making a purchase.

Listen to your common sense. If a claim sounds too good to be true, that’s because it probably is. Adding a magnet to your fuel line is not going to increase the fuel efficiency of your car by 30%. You have to ask yourself – if such a claim were true, why isn’t everyone using such a device. Why isn’t the government mandating that such devices are added to all cars. Imagine if we could reduce the fuel use of our automobile fleet by 30%.

Don’t believe testimonials. Testimonials are worthless, they can be invented, they can be given by people who have a stake in the company or the sale, or they could just be cherry picked and misleading. Testimonials are used because people emotionally find them compelling, but they are worthless as evidence. If a company has a link to testimonials, but not a link to published peer-reviewed scientific evidence, or to official government or industry information – then be wary.

But also – be wary of links to official government or industry information. This may be legitimate, but ask yourself if the links actually support the claim or are just provided to give the impression of legitimacy. One trick, for example, is for medical device marketers to claim that their device is listed with the FDA. This makes consumers think that the claims made for the device are FDA approved, but this is not true. Again – if you have dificulty sorting this out, consult an expert or a more knowledgable friend.

And of course – generic advice – don’t let yourself get pressured into a quick sale. Take the time to investigate. Anyone who wants you to make a decision right then is scamming you.

Power Factor Optimization

Now back to power factor optimization – what is it? This falls under the category of something that is useful for industry, but not for residential use. Companies selling this for the home, will typically impress their customers with a long, and generally accurate, description of the physics. But they leave out the little detail that dooms their claims.

In short, these devices reduce reactive force – technically volt-ampere reactive power, or var. There are two kinds of loads in an electric circuit: resistance and reactive. Resistance is what does useful work – turning a motor or lighting a lightbulg. Reactive load results from differences in the current and the voltage and essentially is wasted as heat.

Var devices claim that they balance the current and voltage (using capacitors and other methods) and therefore reduces reactive load, decreasing the amount of electricity that is wasted as heat, and thereby increasing efficiency. This, therefore, will reduce your electric bills by reducing waste electricity.

But here’s the kicker – electric companies measure and charge for only the resistance load, electricity that does work. They do not care about the reactive load for residential homes because it is generally minimal.

They do measure the reactive load for industrial use, where certain pieces of equipment may have significant reactive load. They charge a “penalty” for high reactive loads for industrial use – but not to residential customers.

Therefore the savings for a residential user should be minimal to nothing.

Some companies, like KVAR energy controller, appear to make devices that actually work, in that they may reduce reactive load. They have to be installed by an electrician at the circuit breaker box – the point at which electricity enters the house. The problem appears only to be the application to the home and the claims for electric bill savings, with only testimonials to support these claims.

Even the modest 10% savings they are claiming would be huge if employed nationwide. If it really worked I would think it would either be mandated, or supported by a tax refund or other incentive.

There may also be outright fraudulent products out there also. I recently received this e-mail from an SGU listener:

Last year I was visiting my mom and she had an appointment with some people to come over and check her house because they could “save her money” on her electrical bill.  Of couse when they showed up I was immediatly asking for specifics about what they did.  They had all kinds of fancy words and equipment, but here is the jist.  The lady pluged a device with a small LCD screen into the wall sockett and said, “Ooohhh…” then told me that the current in the line was jumping up and down really bad.  She also threw in some “wave” and Diffrental” words   She then pluged a capacitor into another plug on the same circuit and showed me her little LCD readout witch had droped to neer zero.  She told me that the capacitor would store all that wasted energy “noise” and smooth out the flow in the lines, then release it later.  Thus saving up to 30% on your energy bill.  I was astounded, mostly that my mother and stepdad would let these people within 100 yards of their front door.

A device plugged into an outlet would not plausibly achieve power factor optimization,  so this is a scam of a scam. But we see here the typical ploy of doing the in-home demonstration combined with some technobabble and some impressive claims – 30%, wow.

Conclusion

I had to spend some time investigating this one. The basic concept of installing a device at the junction box to reduce wasted electricity sounds superficially reasonable. There are advancements in effiiciency all the time as the technology evolves. Home appliances and electrical circuits today are generally more effiicient than they were 50 years ago. Just like cars today are much more fuel efficient than those of the past (although in the US they are also bigger on average, offsetting some of the advantage in fuel efficiency).

Also – the back story of reactive vs resistive loads is all correct. But still, the extraordinary claims and the marketing style set off my skeptical alarm bells. The devil is in the details, and in this case power factor optimization seems to be useless for residential use, although legitimate for certain industrial applications.

I also acknowledge that I am not an electrical engineer, and some of the technical websites I consulted exceeded  my basic knowledge in this area. So if there are any electrical engineers out there – please add any needed detail or corrections to my summary.

But I followed my own advice – I consulted the experts, and my summary above is what they had to say.

Here’s a supreme irony for you. About six months ago a colleague of mine named Stephen Greenspan, a psychiatry professor at the University of Colorado, sent me a book manuscript to review and blurb for him (a blurb is one of those back jacket endorsements from someone who hopefully knows something about the subject of the book). Greenspan’s book is called Annals of Gullibility (Praeger, 2009, due out in January), and it includes chapters on gullibility in literature and folktales (Pinocchio, Gulliver), in religion (end-of-the-world predictions), in war and politics (the Trojan Horse), in criminal justice (child witnesses), in science (cold fusion), and in finance (Ponzi schemes). It’s a great read and an excellent reference source that, as I wrote in my blurb, “belongs on the bookshelves of skeptics and scientists, not to mention politicians and policy analysts, especially before they go to war.”

Well, last week Stephen emailed me a query letter about writing an article for Skeptic on Ponzi schemes, based on the chapter in his book, and — here’s the irony — it would recount how he lost a huge chunk of his retirement investments (to the tune of hundreds of thousands of dollars) not to the market collapse (like the rest of us) but by investing in none other than Bernard Madoff’s now-infamous Ponzi scheme. Yup, a psychiatrist who wrote the book on gullibility got taken.

What I am skeptical about here, however, is not Madoff and his scam, but the media’s portrayal of his investors as suckers for falling for it. My question is this: how was anyone outside of the Security and Exchange Commission (SEC) to know? What signs and signals were there for the average investor to see? Madoff was head of NASDAQ for three years and his investment company apparently consistently returned annual dividends to his investors in the range of 8% to 14% — healthy but not outrageous (apparently his golf scores were similarly rigged to make him appear good but not great, shooting 80–89 every round). One could make the case that the SEC should have known (indeed, they were warned in 2005 that Madoff was running a Ponzi scheme), or that investment experts who monitor the business should have been suspicious (and some of them were but their voices went unheard). But how would a college professor in Colorado, or Joe the Plumber in Puckerbrush, Pennsylvania, or you and me as Joe Sixpack investors know that Bernie Madoff was a latter-day Charles Ponzi?

Madoff’s deal was especially effective because it was what is called an affinity scam, where you appeal to those in your social group, in this case Jewish investors. It makes you feel like you’re an insider, a member of an exclusive club, and as such you would surely not be scammed by one of your own. If, say, you were working in the entertainment industry and Stephen Spielberg or Jeffery Katzenberg (both clients of Madoff) phoned to tell you about this sound investment opportunity that was by invitation only and that they could get you in for a minimum of $100,000, and that they had been invested for years in this program and had reliably received annual dividend checks ranging from 8% to 14% on their money, what would you do? You’d most likely jump at the opportunity. In fact, in his article in the forthcoming issue of Skeptic (and in this week’s eSkeptic), Stephen Greenspan recalls that he felt like he would have been a fool not to capitalize on this opportunity. Was he a fool for so doing? Only in hindsight. But what foresight was there?

By way of analogy, in 2000 I co-hosted a television series for the Fox Family Channel called Exploring the Unknown, in which we produced a segment on cons and scams, one of which was the infamous three-card monte. We employed the help of a professional magician named Dan Harlan who set up a cardboard box at a street mall in Santa Monica to show us how easy it is to sucker people into giving him their money (watch the segment on YouTube). It’s a relatively simple game. There are three cards on top of the box. One of them is, say, the Queen of Spades (the money card), while the other two are numbered cards. Your task is to follow the Queen as the magician/conman rapidly moves the cards around the boxtop. When he is finished with half a dozen moves, you place your bill ($5, $10, or $20) in front of the card that you think is the Queen. If you are right he matches your bill. If you are wrong he takes your bill. Unless you are a shill working for the magician/conman (who is signaled through an agree-upon sign where the Queen is located so that he can occasionally win), you will always lose. Why? Because the three-card monte involves one sleight-of-hand move whereby when he is rapidly moving the cards about and occasionally showing you the Queen on the bottom of two cards in his hand, he moves his ring (or pinky) finger down a card from holding the top card to holding the Queen, so that when he appears to be tossing the bottom card (Queen) onto the box top, he is actually tossing down the top card and thereby moving the queen to a different spot. You can’t see it. For the show we had to ask Dan to make the move in slow motion for us, and even then we had to slow down the tape in order to see the move.

Would you be fool enough to fall for the three-card monte? Most of us would say no, because we have heard that it’s a con, or we’ve seen shows like the one I produced, or we’ve read about it in a magazine or a book. But if you had never heard of the game and saw one being played, by the information of your senses you would see some people winning (you wouldn’t know that these are shills) and you would not see the sleight-of-hand move. So it would not be unreasonable to believe that you stand a reasonable chance of winning. In other words, what signs would there be that a con was underway?

The analogy holds for Madoff-level investment scams. Short of just being skeptical of all investment technologies (which, obviously, most of us are not and that’s what helps fuel the modern economy), how are any of us to know which investment companies are legit and which are not? The SEC? We’ve seen how well that works, so what’s an investor to do?

My answer is … diversify. What’s your answer?