Gambling Tricks use the expectation of randomness and the false appearance of insight to separate people from their money.
The Baltimore Stockbroker scam is a famous example of this.
From Wikipedia:
The Baltimore stockbroker scam relies on mass-mailing or emailing. The scammer begins with a large pool of marks, numbering ideally a power of two such as 1024 (2^10). The scammer divides the pool into two halves, and sends all the members of each half a prediction about the future outcome of an event with a binary outcome (such as a stock price rising or falling, or the win/loss outcome of a sporting event). One half receives a prediction that the stock price will rise (or a team will win, etc.), and the other half receives the opposite prediction. After the event occurs, the scammer repeats the process with the group that received a correct prediction, again dividing the group in half and sending each half new predictions. After several iterations, the "surviving" group of marks has received a remarkable sequence of correct predictions, whereupon the scammer then offers these marks another prediction, this time for a fee. The next prediction is, of course, no better than a random guess, but the previous record of success makes it seem to the mark to be a prediction worth great value.
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Several authors mention the scam: Daniel C. Dennett in Elbow Room (where he calls it the touting pyramid); David Hand in The Improbability Principle; and Jordan Ellenberg in How Not to Be Wrong.
Ellenberg reports often hearing of the scam told as an illustrative parable, but he could not find a real-world example of anyone carrying it out as an actual scam. The closest he found was when illusionist Derren Brown presented it in his television special The System in 2008. Brown's intent was merely to convince his mark that he had a foolproof horse race betting system rather than to scam the mark out of money. However, Ellenberg goes on to describe how investment firms do something similar by starting many in-house investment funds, and closing the funds that show the lowest returns before offering the surviving funds (with their record of high returns) for sale to the public. The selection bias inherent in the surviving funds makes them unlikely to sustain their previous high returns.
The Baltimore Stockbroker scam relies on selection bias and survivorship bias to ensure that the final targets entirely misunderstand the system under which they are operating. To them and them alone it appears as if they have been given access to information that cuts through the apparent randomness of the market. They are kept carefully ignorant of all results that would falsify this misunderstanding.
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