The Chess Mess

For those interested in Behavioural Economics, the hit Netflix documentary ‘Tinder Swindler’, provides an interesting insight into bad decision-making, in particular, truly terrible decisions that are driven by the so-called ‘sunk cost fallacy’.

The ‘sunk cost fallacy’ relate to people when “they continue a behaviour or endeavour as a result of previously invested resources (time, money or effort)”.

In other words, when people feel that have invested so much in an effort close to their hearts, they have no alternative to keep going in the hope they can turn a bad situation around.?It is a refusal to face up to facts, because there may be some censure, and is often accompanied by exhortations, such as ‘keep the faith’, ‘just one final push’ and ‘we have no other option but to continue’.

The Tinder Swindler

The Tinder Swindler scam is a fairly old con where a plausible person, usually a man, gains the trust ?of another person, most often a woman, and after a time begins to ask for money, often portrayed as loans, to complete a project involving both, such as the purchasing a joint holiday home. The requests usually start off small but build up to large amounts sometimes ending up claiming all of the victim’s wealth.

In the Tinder Swindler documentary, an international jet setting ‘businessman’ hooks up with young women via the eponymous Tinder App and gives them an insight into a ‘dream’, a life where a private jet will fly the couple to a European city for dinner or a Rolls Royce will take the couple to a top-class restaurant.?The businessman has all of the outward trappings of a very wealthy international financier, so what could go wrong?

After a time, the businessman, who is away on business a lot, contacts the woman claiming he has been attacked or robbed and his credit card has been stolen and it will take a week or so to get a new one. ?Could she please pay for some airline tickets or hotel accommodation and he will pay back the money as soon as the new card arrives??But the new card is delayed and he asks for more ‘loans’ starting at hundreds and increasing to tens of thousands to finish the project close to the woman’s heart. Running out of cash, the woman begins to borrow to fulfill the increasingly panicky requests, until ?the man agrees to repay.

But you guessed it – the cheque bounces, ?and the Tinder Swindler disappears.

The genius of the Netflix documentary is that it shows the Swindler, using one of his many aliases, running what was called a ‘Ponzi Con’, using the money conned from one woman to build the ’dream’ for another, at the same time.

Looking back on the swindles, the women involved were aghast and ashamed at how easily they kept giving money away even though they had qualms about doing so at the time.

But that is hindsight!

At the time, the pressure was on to ‘save the dream’, and the women had a deep emotional investment which overrode practical economic considerations until the rug was pulled out from under them. ?They invested in ‘sunk costs’ and kept investing until they were completely under water.

The Chess Mess

The ASX Chess Replacement project is NOT a scam, but is definitely ?a ‘dream’, turning into a nightmare. There was no idle ‘swipe right’ that forced the ASX to connect to a ?Blockchain ‘solution’ to replace its ageing equities settlement system CHESS but an enthusiastic embrace of a dream of exciting new technology.

The honeymoon period was intoxicating.

Praise from politicians and the press for leading an ‘Innovation Nation’.?Praise from the industry for promising massive savings. Praise from the media for embracing ‘world leading’ technology. Jetting around the world discussing multi-million-dollar investments. Puff pieces in weekly magazines.

Just give us a few years, they said, and everything will turn out to be magic.

But life is not all Instagram snapshots nor media puff pieces. ?Someone actually has to do the work.

And it turns out there was a lot of work to do ?as the technology originally purchased was not as advanced as it appeared. And it also turns out that the project would cost a LOT more than originally claimed (it would be wild overstatement to say the expense was ‘budgeted’ for).

But we have no option, they said - we just have to pay whatever it takes to be in the game!

This week, having lost[1] a Chairman, a Deputy CEO, and various other managers over the past 18 months, the ASX also ‘lost’ its CEO.

And it appears that expenses are climbing, rapidly. What to do?

Of course, Keep Going – there is no Plan B. We have to spend what it takes to get us off the ground and off the hook.

The ASX have been well and truly sucked/suckered into the ‘sunk cost’ dilemma.?And it is not an easy place to be since, as each day goes by, more costs are being sunk.

Meanwhile the ‘dream’ has turned into a nightmare. The Chess Replacement project is years late, many tens of millions of dollars over budget and nowhere near completion[2].

What to do??Stop Digging, too much has been sunk already!

[1] ‘Lost’ being a metaphor for ‘retiring’ or at least leaving.

[2] In the author’s opinion, the madcap decision to implement an enormous, highly critical, industry-wide system on one day as a ‘big bang’ is just too risky to contemplate but neither the ASX nor the industry have come to terms with this reality yet because no proper risk analysis has ever been done.