Jefferson Randolph Smith earned his nickname in Denver in the 1880s from a routine he ran on street corners.
He would set up a tripod and display a stack of ordinary soap cakes. He would wrap some of them in paper, and while doing so — visibly, in front of the crowd — wrap banknotes in with several of them, including at least one hundred-dollar bill. He would then mix them all together and sell them for a dollar or five apiece.
Almost immediately, a man in the crowd would open his soap and find a large bill, and hold it up.
The winner was a shill. So, usually, was the second one. The soaps containing money were palmed out during the mixing, and the remaining stack was worthless.
What makes this the founding demonstration of a mechanism rather than a simple swindle is what happens in the audience's mind. Kahneman and Tversky's availability heuristic describes it: probability judgments are made from how easily an instance comes to mind, and an instance you have just watched with your own eyes dominates any abstract base rate. The buyer is not estimating the proportion of winning bars. They are recalling a man holding up a hundred dollars, thirty seconds ago, four feet away.
Smith scaled this. In Denver and then in Creede, Colorado, he built gambling operations and a network of associates, and finally in Skagway, Alaska, at the height of the Klondike gold rush in 1897, he established what amounted to a parallel civic infrastructure.
He ran a fake telegraph office. Prospectors arriving from the south, desperate to reach home, paid five dollars to send a message; there was no telegraph line to Skagway at all, and replies would arrive shortly afterwards, often requesting money. He ran an information bureau, a freight company, and gambling halls, all rigged, and his men worked the docks identifying arrivals with money.
And he bought the community's tolerance with the reciprocity of chapter 1. He gave to churches, funded a widows' and orphans' fund, adopted stray dogs, organized the town's Fourth of July parade in 1898 and rode at the head of it, and was photographed with the territorial governor. Charity purchased delay: for months, enough people in Skagway had reason to be grateful that collective action against him could not form.
The gold rush supplied the last ingredient, which is the one every con in this part depends on. Time pressure. Men who had a season to reach the Klondike before the passes closed were making decisions under a deadline, and deliberative checking is the first thing to go.
It ended on 8 July 1898 on the Juneau Wharf, at a meeting of a vigilance committee Smith had come to disrupt. He and the committee's guard, Frank Reid, shot each other. Smith died at the scene. Reid died twelve days later.