Emotional Skills and Lie Detection for Negotiators and Lawyers

Why Standard and Poor Misses Lies

Business “spies” now getting in ratings game, but you can learn to spot lies yourself

It’s no secret many of us lost big bucks on investments that the rating agencies like Standard and Poors gave their top grades. The business “spy” who saved a kidnapped businessman is now joining the ratings game according to a huge story in the New York Times. http://www.nytimes.com/2011/02/27/business/27kroll.html. It’s a fun piece, but it doesn’t tell you what you need to know:  How can you spot lies before you get suckered by the next Bernie Madoff? After all, why trust this new agency?

Or why trust me? I’ve taught the science and art of lie detection, emotional awareness and negotiation to Homeland Security and to business people around the world, like Peter Thiel, the angel investor behind Facebook, and the meeting of federal administrative law judges.  And I’m about to teach JAMS, the world’s top arbitrators.

Let me share the  bad news and good news that I share with all those audiences.  Bad: people on average do no better than chance at catching lies.  But the good news is that research shows that there are scientific ways to catch lies.  In this blog series, I will share some of them with you.

Problem one: You’re listening to the wrong person.  Remember you can’t catch a lie if you’re talking to another victim.  Even Bernie Medoff’s children claim they weren’t in on the game!  A top lawyer I trained in lie detection told me his negotiation secret.  “I never tell the lawyers I send to negotiate for us what the bottom line is I got from the CEO.  And I’m pretty sure the CEO never tells me the truth either.”

Solution one: Get closer to the real decision makers.  It’s never been easier.  Under federal law, you can now access many of the analyst calls when top executives talk to investment analysts.  A Stanford study showed that one could detect the firms that would perform poorly by analysis not of what they said, but how they said it.

Solution two: On the other hand, remember the butler and the nurse know it all.  Rose Mary Woods, Nixon’s secretary, probably lied about the famous 18 minute gap in the White House tapes.  But she was the rare loyalist.  So talk to the people at the very bottom of the totem pole, too.  One investor in a start-up figured it was rigged by asking routine questions of one of the many “busy” people “working” in the office.  The person couldn’t answer basic questions.  It turned out the “worker” was an actor hired to fool investors into thinking there was a lot going on.

That may also explain why one study showed investors who put their money in local businesses outperformed the market as a whole.  If you’re investing locally, you can poke around at both ends.  Try to talk to executives.  Ideally see them in person.  And try to look around the business – or government project – and talk to anyone you can find.

What do you ask? What do you look for?  We’ll cover that in future blogs, but you can rest assured it’s not just their words.

Here’s one preview: there’s no magic bullet.  When people lie, their noses don’t always grow.  And, if someone’s pants are on fire, maybe they dropped a cigarette!  To find the truth, you need to look for clues or what I call soft spots. The soft spots don’t mean someone is lying.  But it means that something is going on, and it’s your challenge to figure out what.

Take eye contact.  A lot of people waste their time thinking that someone is lying if they look up and in one direction.  I was helping at a lie detection training with some spies when a former Canadian border patrol person said this. “Which direction?” I asked.  “It depends,” he said, “on whether you’re right or left handed.”  I said I was right handed.  He didn’t say anything.  “Well, really no one could remember, so we just pulled over anyone who looked up.”  Now at least you know to look ahead when you visit Canada.

Science tells a different story.  Researchers have found there’s no pattern between which way people look up and their truthfulness.  But looking up is a soft spot because it usually means the person is thinking harder.  That’s all.  It doesn’t mean someone is lying. On its own.  But if I ask your birthday and you look up, then that’s a problem – unless you don’t speak English or don’t hear.

Think back to the actor in that start-up.  I wasn’t there.  Here’s my guess.  When the investor asked specific questions about the business, the actor had to look up.  It was a soft spot.  But it would only be a soft spot.  Maybe another person might look up because they were trying to think about how to explain a complex idea to a novice – or how not to give away genuine secrets.  We’ll learn more about that kind of hypothesis testing in future posts.

See for yourself.  Look at this video of Charlie Sheen.

He’s asked when he last used drugs. When do his eyes move? What is he thinking about?  Do you agree with the interviewer that this is his most candid interview ever?

Now try again.  Look at this video of another interviewer asking Sheen if he is using drugs now.

Keep checking the comments on this post for my perspectives.  And stay tuned for more lie detection and negotiation tips in future posts.  What’s left of your 401k will thank you.

Clark Freshman is a tenured professor of law at University of California, Hastings College of Law, and teaches lie detection, emotional awareness, and negotiation around the world.  You can see videos and learn more at clarkfreshman.com.

3 Responses to “Why Standard and Poor Misses Lies”

  1. Mengmeng Zhang says:

    Very helpful advice on the importance of getting closer to the real decision makers as well as to the people at the bottom of the totem pole. Seems like common sense, but I never really thought about it like that until reading this article! Great, practical advice that anyone can use.

  2. Meri Young says:

    Clark, I found this quite interesting! During allergy season, I often look away from the person talking to me as my eyes start to itch or become dry from allergy medicine. Blinking them often wets them and makes them feel better. But I worry that if someone doesn’t know me they will think that I am not telling the truth! I will print this blog out to hand out to educators at my school as many of them think that children and adults are lying when they look away from the person who is talking to them. Thank you!

  3. mindy says:

    Very good illustration of a dilemma: Should you explain to people why you might seem *as if* you were lying? I had this when I met Paul Ekman. I was sweating a ton, and I finally came clean: “I forgot San Francisco has bad underground trains, so I was running late. And I’m not used to the hills. Then when I got in here, I heard you use a Yiddish word, and it reminded me of my father – who was very abusive.” He smiled and said we would talk about that part later. As it turned out, he had a Jewish father, too, and he was abusive. So sometimes it does pay just to explain what’s going on for you.

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