Last year, a person asked me if I knew about KAPA Ministry. Honestly, I don’t know anything about it so I did my quick google search and told the person, that its probably a scam. The other person replied, “but I am receiving payouts from my investments monthly and the founder is a man of faith.” Then, recently there has been a crackdown of investment scams such as KAPA and Organico and others.
Investment scams has been with us since men knew how to lie. So people will fall for it, each and everytime something new comes up. The primordial emotion of Greed is with us. Come to think of it, if you could make a lot of money without working, would you take the chance? Of course you would.
So why am I posting Organico? Well, you see, my in-laws (even my wife) invested in Organico. Since I just got married to their daughter, the topic of investing in Organico at the dinner table, has been one of those topics that I am very wary of saying my opinion on. Don’t want to piss off in-laws immediately. But here’s what I think about the matter… I didn’t knew about the Organico investment by my wife until the crackdown and she made the investment herself before we got married.
This time of investment scam crackdown has been one of the most productive learning experience I have when it comes to human psychology (aka Behavioral Finance). I used to just read it in the books. But now, there are people close to me that are affected by what you call “biases”. And these biases, for us investors, are hidden enemies. They prevent us from making rational decisions because it is invisible to us. You don’t know you are affected by it until later.
Take for example, people who joined or invested in KAPA and Organico will defend their company as legitimate even if all the evidence points otherwise. Now, why is that? Why do people deny? Are they lying? No my friend. They are not lying. They are affected by different kinds of biases that prevent them from thinking rationally.
Take that into an investing point of view, don’t we still like to hold on to losers hoping it will comes back after ignoring all the evidence that points to the truth? Its very hard to accept that we are wrong. People don’t want to think that they look like an idiot for making a mistake. Add to that herd mentality, if other people invested with you, you already think that you and the group are correct. There are lots of people who thinks KAPA and Organico are still legit, just because other people think it is legit. People invested in KAPA and Organico even with outrageous investment yields because “other people made money with it.”
As for my in-laws, they still think Organico is legitimate even if the company has been hiding and evading authorities. Why is that? Because each member of the family thinks Organico is legitimate. As I listen to them discuss their Organico investment and how the government has been wrong to run after these investment scams, I find myself being affected by these thoughts that “maybe Organico IS legitimate.” It was enlightening to see how I can feel that I am being affected by herd mentality. It makes sense now.
The reason why Warren Buffett chose Omaha Nebraska, a farming town, to be his headquarters was to be away from crowds (from Wall Street). The reason why he always work alone, was to be away from crowds. Even the smartest people on the planet is NOT IMMUNE to this bias. The only thing you can do was to get away. As far away as possible. It all makes sense that the best investors in the world works alone in a far away place, away from all the gossip and rumors.
Is the Government Right in Raiding these Operations Though?
I am honestly not sure. Usually, you get a complain and you get a raid. But it seems like the government did raids first without any formal complain. Such is the nature of scams. They have stages. Only when investors are not getting payouts will they complain to the government and the government can take action. But it seems that its too early and people thinks its the governments fault for stopping their party. They haven’t been in pain yet to blame the actual perpetrators of the scams. They are still in the party mode and blaming the government for pooping on their party.
Its probably best if the government did preemptively raided these scam operations like they did. But its going to be hard to explain to the victims that they have been saved, since they have biases now and still in euphoria. They will only look at the government as the enemy and not their saviour.
Its like saving someone before a crash. But the victim is angry at you because the future has not happened yet and they can not see that it can happen. Even if the future is pretty certain at this point.
Now before I end this post, let me just explain why I think KAPA and Organico is a scam. It may help you decide later on, should you encounter another KAPA or Organico and avoid yourself some financial pain.
First, outrageous investment returns.
KAPA boasts 30% return on investment, per month, for life. That equates to 360% annually, for life. You’ll be the richest man in the world in no time with that kind of return.
Organico boasts 66% in 3 months. That’s 22% monthly return in a commodity business (farming).
You actually don’t need to look deeper once you got those returns. Just keeping things into perspective, Warren Buffett returned 30% annually (or 2.5% monthly during his early years). KAPA and Organico are beating Warren Buffett big time. They should be made the greatest investors or businessmen of all time and not Buffett.
Second, just because you are receiving payouts doesn’t mean its gonna keep going.
Such is the nature of Ponzi schemes. You will receive payouts only in so far as there are new members. Once the new members dried up, so are the payouts.
Third, keep your greed in check.
A little bit of greed is ok. But too much of it will only lead to disaster. People earning high returns on investments, in the stock market or otherwise, is not a reason for you to join the bandwagon. It should be a reason for alarm. You should be fearful when others are getting greedy.
Finally, avoid crowds
Avoid crowds. Avoid groups. Think for yourself. We can not prevent herd mentality from affecting us, or any kind of biases until only later. We can only avoid them by not joining them. Once you have done that, your own thinking is your only guiding light. A group of smart and objective thinkers are also good to keep everyone in check of biases.
And with that, I’ll leave you a quote by a famous person who has a lot of experience when it comes to investment scams and investment fails:
“What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so.”Mark Twain