What Investment Professionals Need to Know about Detecting Lies in "a Deception Epidemic"

The first step is to baseline the person you’re interacting with. That’s the B in the BASIC method. When you baseline someone, you’re establishing a reliable reference point for measuring behavioral change. You’re going to interact under very normal circumstances, but you’re paying closer attention to what you observe. You want to ask questions like: “How are you? How was your weekend? What did you do? Did you go shopping?” You’re getting a sense of a person’s norms, so that you know what to observe if their behavior shifts.

For example, if someone is a foot tapper, it’s not significant if they’re always a foot tapper. It’s only meaningful if they’re not tapping their foot and then when you ask them a question they start tapping their foot. You have to understand their normal behavior first or you’ll make mistakes.

You look at eye movement. You look at posture and fidgeting behavior. You look at their hand and leg gestures. You’re going to notice the pitch, the speed, the volume at which they speak. You’re going to get a sense of their laugh pattern—the style, the duration of their laugh—how they hesitate, how they punctuate their sentences. Most importantly, it’s vocal tone and posture that you’re going to observe.

Most people already do this unconsciously. We baseline the people we live with. We know them like a book, we know what their norms are, and we know when they are acting abnormally. But if you’ve just met someone, it’s important to spend time building rapport to get a sense of their normal behavior.

A is for asking open-ended questions. The goal is getting information through expanded verbal replies. If a computer was stolen from an office, you don’t begin with hard questions like, “Did you lock the door?” Instead you might want to ask, “What happened that night?” They’ll tell their story, and then at some point you may ask, “Did you lock the door?”

Think of it as a funnel. You start with a very open-ended question, and then you narrow it down to the more and more specific. You’re asking lots of questions, but you’re also trying to see how someone may be reacting.

You can also propose multiple theories for what you think may have happened. You may empathetically offer a series of possible reasons why the subject may have acted deceptively—then see which ones they respond to. When someone has acted deceptively, they often have a justification for why they did it. Perhaps they were under financial pressure or someone else pressured them or they were covering up for something. If you can touch on that, you may notice—from their body language and vocal tone—which one of those stories they resonate with.

That’s the S in BASIC, studying the clusters of deceptive behavior. You may see someone shift their anchor point—their posture may shift significantly in response to a question. With women, this may be a grooming gesture, perhaps twirling the hair or touching the face below the eye. With men, sometimes you see dusting lint from the shoulders. You might observe a slumped or self-protective posture.

Someone may close their eyes, indicating that they’re using their imagination rather than memory when they’re telling a story. You may notice excessive sweating, finger tapping, or a significant shift in blink rate. You may see what we call post-interview release. If you signal that the interview is over, the person may relax suddenly because they’ve been so tense. Like the exam is over.

A person may also appear to be unconsciously trying to leave the room. They may slump with their posture and point their feet towards the exit or start to lower their voice.

Remember, it’s only the first three seconds after a hard question that’s considered scientifically reliable. If you ask someone a question and they’re dusting lint from their shoulder or touching their face and they are stilldoing this ten seconds later, it doesn’t mean anything. It’s only the spontaneous response that’s considered reliable.

It’s an important question. Often when you see these behaviors, it could simply mean you’re not getting the whole story. It doesn’t necessarily mean they’re lying. It could mean there is a withholding.

There may be information a person hasn’t told you. Or perhaps there has been a related development that someone doesn’t want you to know. When you see these behaviors, you don’t necessarily know what’s being withheld. But it will seem like a red flag or like bad weather.

I teach a very clear method of getting to the truth. It’s really not that valuable just to know if someone is lying. Because if you can’t get to the truth, what’s the point? The last thing you want to do is go around pointing your finger at others saying, “Liar, liar, pants on fire.” That doesn’t do any good.

When you think someone is being deceptive, if you stay curious, you may find they have good reason to be deceptive—there may be something of real interest beneath the lie. So it’s worth keeping a rich, open mind. Keep your curiosity hat on. Don’t accuse people. The first thing to think about when approaching someone is that it’s worth having rapport. It’s worth giving them the benefit of the doubt. Because behind almost every lie is something richer and more meaningful.

A person may use distancing language. Bill Clinton made his famous statement that he “did not have sexual relations with that woman.” People will unconsciously distance themselves from their subject. They use language as their tool for doing that.

You may hear a lot of qualifying statements, such as “as far as I know” or “to tell you the truth” or “I certainly do not do that.” Someone may question your questions to stall for time. They may repeat your question verbatim to stall for time.

You may observe a non-spontaneous response time or a weak and apologetic tone of voice. You may get an inappropriate amount of detail from someone. In their efforts to convince you that they’re being honest (and teenagers do this all the time), people often will just give you way too much detail. But more often than not, when someone is being deceptive, you’ll just get very short, clipped answers. Because they’re scared to tell you anything.

The person may object to word specifics. “No, no, no. I had the chicken, not the steak, at dinner.” They are trying to appear authentic, so they’ll object to specifics that are irrelevant. They may be uncooperative. “How much longer is this going to take? I really have to go.” There may be a lack of appropriate emotion associated with the story, if they’re telling you something really dramatic. If there’s no emotion associated with the story, that could be a way that they’ve distanced themselves from what they did.

The structure of their story may also be an extended prologue, with all kinds of authentic details, where the main issue is just pushed to the end.

There is an unconscious delight in getting away with a big whopper. It’s so unconscious, it doesn’t even make sense to people that a liar can smile. But it happens all the time, and you’ll start to observe it. And we do see this—we see an unconscious smile at getting away with a whopping lie. This is called “duping delight” and can be associated with deception.

Most emotions come across the face in a very symmetrical way, when they’re real. Often, we’ll see a dissonance between someone’s words and their body language. Or their words and their facial expressions. We call these “hotspots” when we see this conflict. Someone may say, “I’m dying to do that deal,” and then they’ll pull their shoulder up. Or they’ll say, “You’re going to be the best partner ever,” and you’ll see contempt flash on their face.

What you’re looking for in facial expressions is not only the expression itself but how it fits into the whole context of what someone is saying and what their body language is signaling. You’re looking for discordance or asynchrony in a person’s behavior. When a person is truthful, there is synchrony between their words and their body and their face.

A real smile is in the eyes. The crow’s feet around the corners of the eyes is where true joy is expressed. It’s easy to fake a smile of the mouth. If someone is being truly authentic (or they’re happy and they love you or they’re showing joy), you’ll see it in the eyes. I’ve had people say there’s a twinkle in their eye. If you consciously observe their eyes, you’ll see a crease where the crow’s feet are.

My book is a survey of the research out there. However, like many soft sciences, the research is contradictory. In the book, I’ve only included studies where the data could be confirmed by more than one researcher. We threw out lots of studies, including some from major research institutions, because we couldn’t find another study to confirm the same data.

That’s one piece of it, the soft science. The other piece is that lying is actually a gigantic field of practical study. We looked at what we know from police interrogations and what we know from FBI research, as well as how lie detection is taught at the CIA and in the intelligence world. There’s something to be learned from every one of those disciplines.

People lie for very different reasons. We know that extroverts lie more and persist longer in their lies than introverts [do]. Powerful people lie more. Men and woman also lie for very different reasons. Women lie more to protect other people and to avoid conflict, whereas men tell bolstering lies, where they present themselves as more exaggerated versions of themselves.

Lies fall into many different categories. We do know that lies can be either very practical or they can be bolstering. Often the lies that we’re told are to avoid conflict; they’re for practical reasons. You might say, “Oh, you don’t look fat in that.” Or “I’ll call you” when you have no intention of calling. Or “I understand” when you’re actually thinking “Are you kidding me?” Or [you might be told] “It’s not you; it’s me” when someone’s breaking up with you.

There are high-stakes and low-stakes lies. It’s the high-stakes lies that really affect our lives. If you’re researching an investment, considering a deal, trying to decide where to work, or even who to date or to marry, it’s essential that you know the truth.

The next step is to intuit, the I in BASIC. So you want to ask yourself [questions]. Are there intuitive gaps in someone’s story? Is there a gap in their statements between what they claim happened and what the facts indicate? Is there a logic gap?

Are there behavior gaps? Is someone behaving in a way that’s different from their baseline? Are there emotion gaps? Are they talking in an incredibly terse way and flashing contradictory facial expressions? If so, you need to trust your intuition and follow up on it.

If you do sense someone is lying (and this is the final C part of BASIC), you have to confirm. You need to test your hunches and move toward a conclusion. You cannot just accuse someone, perhaps wrongly. You want to use as many third-party facts or as many additional facts as you can. You need to go back to original sources. You can’t just rely simply on your own findings. You need to make sure that you have facts to back it up. I never recommend using a liespotting technique for accusing someone.

You can ask what are called confirming questions. So you might ask the same question in different ways. Or you may ask, “What should happen if the person who did this is found guilty?” Often a guilty person will respond, “I don’t know.” They may recommend a lenient punishment, while a truthful person is going to recommend an appropriate punishment, such as removing a person from their position or from the company. You can ask, “Who do you think did it?” The guilty person may not answer the question, while the truthful person is going to cooperate and brainstorm with you.

If someone is being deceptive, they may become passive-aggressive at this point or refuse to talk further with you. They may not completely trust you because you’ve cut a little too close to the truth. At this point, you need to significantly develop rapport again with the person before you take the conversation further. You really need to have a green light.

You might ask, “How can I be helpful to you? Is there anything else you want to tell me? Do you have any advice for me? What’s the pettiest thing that’s bothering you about our conversation? What’s the pettiest thing that’s bothering you about what happened?” You’re signaling that you’re not going to judge them.

You’re saying, “Whatever happened is not morally repugnant to me. I’m not going to be condescending in any way. I’m on your side.” When you are really in a place where you have a green light from someone and you sense that kind of rapport, you can then start to ask some of the more difficult questions again, to move toward the truth.

I do. I go out of my way to really think through—from the other person’s standpoint—how they may be feeling. I want to be curious, especially to who they are as a person. I want to remember that usually someone’s life is much richer and much more complex than the one event you may be discussing with them.

This is important, because we’re trained by TV culture to accuse and convict. But real life isn’t really like that. It’s more nuanced.

I think that’s really important, particularly because we’re in the midst of, essentially, a deception epidemic. The first thing is to understand ourselves better and make sure we are not self-deceptive. It begins with getting your ego out of the way and knowing where you may be overreacting. There’s a lot of personal work to do before we go out in the world and start accusing everyone else of lying. You have to make sure you’re not lying to yourself first.

From a management perspective, transparency is key. You want to commit to openly communicating your goals, your concerns, your disappointments, and your expectations with people. You need to have these difficult conversations and not just hand someone an employee handbook or code of conduct (although it helps to have these). You have to demonstrate you’re committed. Transparency doesn’t mean that you share everything. It means you’re transparent about what you are sharing and what you are not sharing.

It helps to be explicit about our moral code. We can signal to everyone around us that our interaction is going to be honest. There’s usually room to be much more explicit about this. It does make a difference.

This means building a habit of honest communication during uncomfortable moments. Many of us sabotage open communication by going behind someone’s back, by acting passive-aggressively toward deceitful people via email, or by avoiding conflict all together. That doesn’t help. We really need to have these uncomfortable conversations. It’s a necessary social skill that mature leaders need to develop now. When they do, this infuses an entire organization with trust.

The technology around lie detection is changing significantly. It used to revolve—particularly in the federal government—solely around the polygraph. The polygraph has been the DNA of the intelligence world, and now that is shifting dramatically. I’m on the advisory board of a company called Converus. They have a biometric system that takes several measurements of the eye and tells us, with as much accuracy as a polygraph, whether or not someone is being deceptive.

The system takes ocular measurements, among them pupil dilation and autonomic nervous system responses that cannot be controlled. We know that pupil dilation shifts when someone is being deceptive. So this particular technology measures ocular shifts several times a second.

When you’re attempting to deceive, to act composed and appear spontaneous, what happens is the cognitive load is so significant on your system that you actually leak indicators of deceit. When the cognitive load is high on the system, it can be seen in the eyes. The brain is essentially overloaded when someone has to think to lie. That’s what’s being detected.

There’s a lot of research being done on inside threats. Someone may want to exfiltrate your data, sell it to the competition, and harm your assets. A large percentage of cyber hacks have been accomplished with the help of an insider in the company. This is a very interesting new field, and we’re starting to see a lot of new science around this type of deception.

Carnegie Mellon University has published a number of case studies. So has the Association of Certified Fraud Examiners. They’re finding that insiders are often disgruntled at how a conflict has been resolved or are under certain kinds of financial stress. They may have control issues. The indicators for a possible disgruntled insider are different than the indicators for someone who might engage in pure deception.

The sub-science of inside-threat actors is really interesting. Most companies are very far behind in figuring out that piece and therefore very vulnerable to inside-threat actors harming them in some way.