Wednesday, August 25, 2010

How to Tell When A CEO is Lying

The Farnam Street Blog has an excellent piece on how to determine when CEO's are lying on conference calls. 

Deceptive bosses, it transpires, tend to make more references to general knowledge ("as you know…"), and refer less to shareholder value (perhaps to minimise the risk of a lawsuit, the authors hypothesise). 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.

When they are lying, bosses avoid the word "I", opting instead for the third person. They use fewer "hesitation words", such as "um" and "er", suggesting that they may have been coached in their deception. As with Mr Skilling's "asshole", more frequent use of swear words indicates deception. These results were significant, and arguably would have been even stronger had the authors been able to distinguish between executives who knowingly misled and those who did so unwittingly. They had to assume that every restatement was the result of deliberate deception; but the psychological traits they tested for would only appear in a person who knew he was lying.

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