In a nifty piece of forensic analysis, two researchers claim to have figured out how to tell when executives are lying. David Larcker and Anastasia Zakolyukina analyzed 30,000 conference calls between 2003 and 2007 to see if certain “tells” during the call were associated with earnings that were later “materially restated.”"Deceptive bosses, it transpires, tend to make more references to general knowledge (‘as you know…’), and refer less to shareholder value (perhaps to minimize the risk of a lawsuit, the authors hypothesize),” reports The Economist. “They also use fewer ‘non-extreme positive emotion words.’ That is, instead of describing something as ‘good’, they call it ‘fantastic.’?The aim is to ‘sound more persuasive’ while talking horsefeathers.” (Remind anyone of?Realtors perhaps?)??The liars also used the third person (instead of “I”) and used fewer “hesitation words,” perhaps because they had been coached. [%comments]
How to Tell When a CEO Is Lying
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There are quite a few flaws in this study. Check out this article by Joe Navarro, an ex-FBI guy who writes for Psychology Today. Navarro is an expert on non-verbal communication and behavioral analysis, and always an interesting read.
http://www.psychologytoday.com/blog/spycatcher/201008/deciphering-the-ceo-deception-study
Cliff notes of article:
1) they never differentiate what the people are lying about.
2) conference calls are often scripted PR events, with many people putting the script together
3) use of 3rd person and swearing are not necessarily indicative of deception
4) read the article.
How do you get non-verbal cues on a telephone conference call ?
I’ve listened to thousands of these calls over the last five years, and non-verbal doesn’t mean non-vocal. The length of a pause between a question from an astute (or mean) analyst and the answer can tell plenty about the veracity of the answer. Tone of voice is another non-verbal tell, and when a previously expansive good ol’ boy suddenly sounds tight and strained, it’s obvious a nerve has been hit.
I may not have done the original study, but more often than not, I can catch anomalies between The Truth and The Word, particularly when I’ve covered the same company’s calls every quarter for years. I knew that Circuit City was circling the drain a long time before they laid off everyone who knew what they were talking about, because I could “feel” the lies mounting.
i know when someone is lying – it is all about the incentive as the Freakonomics authors so clearly state. And since the freakonomics authors only make money when they can sell books, you know they will lie through their teeth if it helps them. it’s all about the incentive after all.