An Ex-CIA Officer Explains How to Spot a Lie in Business

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1:16Hello and welcome to another episode of the All Thoughts podcast. I'm Traci Allaway. And I'm Joe Weisenthal. Joe, I'm kind of nervous about this episode. I am too. About 15 minutes ago, the same thought flashed through my mind. I too am a little nervous about this episode. Believe it or not, we do some preparation for our episodes, although maybe it doesn't always show. This particular episode, I haven't done a lot of reading into this topic, and I'm really hoping the guest doesn't notice. But I think my chances are very low because we are literally going to be speaking to someone whose whole career is about basically spotting lies.

1:58I mean, that's essential in the business world. If you really think about it, you know, companies come on their calls. I think they don't typically lie per se. I don't think executives lie that much. But, you know, they shade the truth. They highlight some things. They don't highlight the other things. I feel like it would be a pretty good skill to have in life to just generally, and especially in business, to just generally know whether someone is being honest with you or not. Absolutely. It feels like a sort of module they should have at Wharton if you're doing a business degree, an MBA or something like that.

2:28I've never been in an MBA program. Well, the person we're going to be speaking to actually came to us via Brad Jacobs. You might remember him from the episode in which he was talking about his latest acquisition and the new part of his logistics empire. And he's written a new book and we were reading it. And one of the things that we thought was really interesting was there was a mention that he was working with a man called Dick or Phil Houston, an ex-CIA person who was basically a polygraph examiner for a long time. And Brad and Phil were working together as part of the due diligence process for Brad's many, many, many serial acquisitions.

3:13So the idea was he might go in and buy a company and then Phil would interview some of the senior execs and basically try to see whether or not what they were saying about the company was true. Right. You know, speaking of nice skills to have, there's always that information asymmetry, whether you're just an investor or whether you're buying out a whole company. And, you know, the seller is always going to know more sort of classic problem in economics. But if you knew the result of an answer is going to be 100 percent true, then that would be pretty great. So that would be nice. What's that TV show with the girl who can spot a lie?

3:47Oh, oh, Poker Face. Poker Face. Yes, it's pretty. It's kind of entertaining. It's kind of like it's it's fun. It's a fun. It does seem like a useful skill. Yeah. Yeah. By the way, another reason I'm slightly terrified of this episode is I used to know an ex CIA person who then went into another profession. I don't want to give too much away, but it was finance related. So I used to speak to him about financial things. And I remember I met him once for lunch after a particularly terrible morning where something really, really bad had happened in my professional life. And I sat down and I was like, hi, hey, how are you?

4:23How's it going? I can't wait to have lunch. We're going to talk about capital markets or whatever. And he immediately leaned forward and was like, Tracy, tell me what's wrong. Something bad happened. And I asked him how he knew. And he was like, oh, you got this like little crease in the middle of your forehead. And this wasn't, you know, this was like a casual source meeting. This wasn't someone I knew really, really well. But he knew. He knew that I was upset. Anyway, so on that note, very, very pleased to say that we are going to be speaking to Phil Houston. He is a career CIA officer and also the author of the book Spy the Lie.

5:00Former CIA officers teach you how to detect deception. So we're going to learn how to spot the BS. Phil, thank you so much for joining All Thoughts. Tracy, thanks a ton for having me. So just to begin with, how do you become a lie detection expert? What is this career path? When I joined the agency, fairly early on, I was called over to the head of polygraph in the agency, and they had spotted the fact that I had developed a lot of information doing background investigations, and they thought that I would be a very good candidate for such a position. There's so much to get into. Tracy mentioned that we came across you talking to former guest Brad Jacobs, who you apparently have worked with a lot.

5:49How do you deploy lie detection skills in the corporate context? Well, we use them in every single day. It's not just in a regimen of due diligence protocol. We're looking day in and day out. It's continuous evaluation, especially with new companies that Brad acquires, because we never know if we've missed something in the due diligence process. So we're always paying attention. And Brad has been highly trained now by us and my team in the lie detection model that I developed when I was at the agency. What kind of things are you looking out for specifically? So, you know, if Brad says he wants to buy a company, I'm sure he gets lots of information, like printed information, as part of the due diligence process.

6:43And then he has interviews with senior executives. What type of questions would you be asking them? There are multiple areas of probing that we do. Number one is, first and foremost, is are there any problems or circumstances associated with the acquisition that are not a matter of record, that no one has come forth and said, hey, this is a problem or might be a problem going forward? And so to gather that information, usually the first encounter is with a management meeting where we sit down in front of management and ask them questions. Now, granted, the topics are fairly traditional, but the way that we word questions sometimes are very different.

7:35For example, on the really key issues, we rarely will ask a did you or do you. So, for example, we won't say, do you have any concerns in this area? We use what we call presumptive questions. And a presumptive question might sound simply like, what concerns do you have in this area? It presumes that there's potential for a concern. The beauty of that type of a question is that if a person is telling the truth, it's still a very easy and fair question to answer. However, if a person is concealing something and we ask it presumptively, it generally and often plants what we call a mind virus. The mind virus is that thing that we've all been victims of.

8:28It's when somebody walks in the door in the morning and their coworker comes running up and says, Joe, the boss wants to see you. And you say, well, what's that about? And they say, I don't know, but right away. And as Joe's walking down there, is he likely thinking more, geez, it's going to be a great day. I'm going to get a bonus. I'm going to get a promotion. Or does he immediately start thinking what's wrong? Or is there a problem? And if it is, then he's inventorying mentally what the problems might be and how he's going to deal with that. That mind virus triggers, if someone's lying, it often triggers the exhibition of deceptive behaviors, both verbal and nonverbal behaviors.

9:16I already love this conversation so much, but let's continue to pursue. I imagine that when you're doing due diligence on a company, it's the unknown unknowns. It's the things that aren't written down, but you don't even know the right question to ask because it's not written down. But as you say, the presumptive approach. Talk to us about like, okay, take the example further with a question like that. What are the types of responses that would say trigger warning lights of either it's verbally or physically, this looks like a lie. Like what might be gleaned in the response to such a question?

9:51Sure. In working with Brad, we've had all kinds of, when people are lying, all kinds of crazy responses. We've had responses where we've said or made just simply the statement, listen, in describing our diligence, we are also going to come in and take a look at your accounting. And the person immediately says, oh, there's no need to do that. And you'd think that they would realize how obvious that dodge is to spot. But at the moment, they're on the spot and they need it out. And so they're not realizing the kinds of responses they give. They'll also say, well, why do you need to go there? Or why are you asking that?

10:31Or how much do you need to know? Or here's what I can tell you. And that's an interesting statement we hear and we listen for. because if you think of the literal interpretation of that statement, here's what I can tell you, it immediately in our world conjures up, what can't you tell us? Do people try to deflect? Having interviewed many people on this podcast, the most problematic response that we tend to get, hopefully not outright lies, at least not often, but you ask a question and someone will say, oh, that's very, very interesting. Now let me talk about this entirely different point that has nothing to do with what you just asked.

11:11That could be a product of their media training, but it also could be if it's accompanied by other deceptive behaviors. And if we talk a little bit later about the model for detecting deception, clusters are an important component of that model. So more than just one deceptive behavior in response to a stimulus, meaning a question or a statement. That's what gets our attention. And so when they start that deflection, deceptive people know that they can't just sit there like the proverbial bump on a log and say nothing. They have to say something. And so what they often do is will try to lead us astray by talking about something they can comfortably talk about that might be interested to you and perhaps even assuage what concerns they think you might have.

12:06Are lies in the business world different or do they exhibit different qualities to lies outside of the business world? So I guess in criminal activity or maybe in intelligence gathering going back to your career at the CIA, are there differences in the way those lies The primary differences, Tracy, are the topics. But in reality, the lying, the behaviors remain the same. They're intrinsic to human nature. And we have a very specific list of behaviors that we are looking for. The biggest problem in spotting lies if people are not trained is when they see something odd that happens or something different or uncomfortable, their instincts may kick in, but they might not recognize what's going on.

13:03And they're only guessing at that point as to whether they've just heard a lie or not.

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14:43It's built to grow with your business, whether you are just starting out or already scaling up. Plus, it's easy to use, customizable, and designed to streamline every process, so you can focus on what really matters, running your business. Thousands of businesses have made the switch, so why not you? Try Odoo for free at odoo.com. That's O-D-O-O dot com. Why don't we back up and talk about the framework or the model that you first developed at the CIA? And I imagine that over the years, it's been refined, you have more examples, and you get better and better at applying it. Why don't you just sort of just bring us back to, like, what are the core, like, underpinnings of your approach?

15:21The core is that we have codified the behaviors, so meaning that we've picked the behaviors that we know through research and anecdotal evidence are the most reliable indicators. What we learned in the early days is that many of the traditional behaviors that we thought were good were not. And for example, take eye contact, for example. Eye contact is not nearly as reliable as people would think it to be. Yeah, both me and Tracy, a big relief on that. Yeah. Eye contact can be very different, especially in different cultures, in different regions. I'm here in New York City. If I were to walk down the street and smiling and saying hi to people and so forth, that wouldn't look very good, right?

16:17Or it probably wouldn't go over very well. But in the little town where I live in, the reverse would be true. If I didn't smile or if I didn't nod or even verbally greet someone, they'll walk away with a different opinion. And so the eye contact piece is just simply not as reliable as we need it to be. The anecdotal evidence in our world supports that as well as some major research studies, two in particular, one in the U.S. and one in London. strongly suggests that the deceptive person often has better eye contact than the truthful person does, highly likely because they're forcing it. You know, earlier I was using the term BS and lie sort of interchangeably, but they're not exactly the same thing.

17:06And in the business world, one thing that tends to happen is you have people telling a good story about their business. And the story, you know, it might even be true. That might be the way particularly ambitious executives sees things unfolding. I guess what I'm getting at is how do you tell the difference between an outright lie saying something fraudulent about their business versus someone who's like trying to sell the optimistic best case scenario story? Okay. First of all, let me go back to the model itself, in the model, we're monitoring both their verbal behavior or what's commonly been referred to as body language.

17:50And we're also monitoring their nonverbal behavior. What I said earlier, we're monitoring their verbal behaviors, what they say, the nonverbal is obviously what they don't say. And those both happen, you know, often simultaneously or in conjunction with a single response to a particular stimulus. And we're picking up on both of those. Now, what are we picking up? All of the behaviors that we use fit into five psychological buckets. The first bucket is the evasion bucket. Okay. These are behaviors such as, you know, failing to answer the question or qualifying the question. They're not giving you some or all of what you want from them.

18:39The second one is this persuasion bucket. And this is kind of, Tracy, where you were leading to, if I heard you correctly, where someone's trying to tell you something positive or good because they can't tell you the truth because the truth has consequences to it. So they start using convincing statements. Oh, we would never do that. We're a great company. We've been around forever. We've got the best team in the industry. And they're trying to convince you that you don't have to worry about, you know, whatever it is or whatever topic that you surface to them. The third behavior is aggression behavior, sometimes referred to as attack behavior.

19:24Sometimes it's very visibly or visible. Other times it's more nuanced. So, for example, you ask someone a question and they say, why are you asking that? And or sometimes they say, why are you asking me that? You guys always ask these things. I've gone to five different banks today and it seems like every single person has this, has fixated on this issue and so forth. They're trying to get you to back off. The fourth behavior is what we call manipulation. This is where they're manipulating the circumstances of the interaction to their favor. A good example of that is when you ask them a question and they repeat your question.

20:09Now, you might say, well, geez, what value does that bring to them? Well, the value is that we think about 10 times faster than we talk. So in that second or two to repeat the question could equate to 20 seconds of material to say or strategy to pursue. And that's how they stay up with this. That was good media training, right? If you need to buy yourself a little bit of time to like formulate the thoughts in your head, you repeat the question or you say something nondescript. What a great question, Tracy. Great point, Joe. Thank you so much for bringing that up. A non-answer statement is another one in the manipulation bucket.

20:49And for the same purposes, it's buying time. The fifth and final bucket is the reaction bucket. And this is, again, the body language. When people respond either as a result of the fight, flight, or freeze response, or there are a couple of other things that aren't caused necessarily by that response. For example, something we call a verbal-nonverbal disconnect, where you ask someone a question and they're saying, no, I wouldn't do that. And at the same time, they're nodding their head yes in response to the question. You see that kind of thing. But the other big one, two big ones in the reaction bucket are when people have anchor point movements in response to something you ask them or see them.

21:38I remember in the early days when I first started working in the investment world at a hedge fund, and I was sitting there with the hedge fund manager interviewing a management team. And I remember he asked someone a very direct question about what the street was saying was a problem. And the moment he started answering the question, he reached across the table and started making huge sweeping gestures on the table. And we call those grooming gestures or anchor point movements. And it can be as simple as a swivel in the chair, a leaning forward after answering or in the midst or in preparation for answering your question, leaning backwards.

22:24In the case of the sweeping of the table with the hands, what is the respondent doing there implicitly or what makes that a tell or a takeaway? From a psychological standpoint, what he's doing is cleaning up the surroundings. He, in his mind, is making life better at that moment because right now life's terrible because he doesn't have a great answer to the question. And that example, by the way, the company went under a few weeks later for the exact issue that he was doing that sweeping. Now, we don't rely on any one of these behaviors in response to the question. we're looking for a cluster, two or more deceptive indicators will tell us immediately that we have more work to do.

23:11More work simply means not that we're leaping to judgment, but that we're going to ask more questions, we're going to follow up, or we're going to talk to somebody else once they leave, whatever, or do research, whatever more work means. But the beauty of it is, is that we don't get snookered, so to speak. How often do you get false positives where you're interviewing someone and you think, oh, this person is lying or there are some red flags here to suggest that maybe he's not being 100 % truthful. And then you go out, you do additional info gathering, as you were just describing, and you find out actually, maybe he's just a weird guy or socially awkward or something like that.

23:54Sure, sure. He just likes to straighten up the table. Yeah. Very meticulous individual. More often than not, we're not likely to see, but if we're going to see one, it's likely going to be in a situation where we're dealing with multiple issues. So, for example, for Brad, for years, we've done a ton of employment, pre-employment screening, especially for the senior executives. And there may be more than one lie or more than one problem that they're worried about. But because of something called psychological set, it means that they have a fixation or fear on one particular area of deception. And they're not nearly as worried as much about the other areas.

24:39And so most of their behavior comes out on that particular issue that they're worried about. And as a result, we may miss, you know, which would be a false negative. But if our bias has the pitchfork effect, in other words, we're thinking, oh, this guy's not telling the truth about anything, then we're starting to see false positives. And it happens. I mean, I know you mentioned that eye contact is not as robust as maybe people imagine popular belief. But I'm curious, like in a world where more and more is done Zoom digitally, etc. Have you had to update your tactics at all or approach? Can you talk a little bit about lie detection in the pre and post Zoom era?

25:24Sure. We always, if we can, want to be doing the interaction in person. And in particular, when we're there, whether we can do it overtly or even covertly, we want a head-to-toe observance of them as we're talking to them, because the behavior can leak out anywhere. For example, we know that the feet are always an anchor point. And if the fight-or-flight response kicks in, It will often go to the feet first because that's our primary anchor point in life. And that's what gets us out of trouble. That's the escape mode and so forth. So we want to be able to see those. In the Zoom, we lose a lot.

26:09We lose at least 50 % of the reaction bucket. And so we rely very heavily then or more heavily even on the other four buckets because those are all almost completely related to the verbal activity. What about eye contact in Zoom? Because I will admit I have a hard time focusing my eyes on Zoom calls, partially because I don't want to look at the screen and see myself when I'm talking. It's just very awkward. So I sort of look off in the distance. Does that mean anything? No, Tracy. There are people that will tell you the opposite, but our research and, again, the anecdotal evidence and a lot of your taxpayer's money has gone to, you know, to invalidate some of that.

26:53When you're on Zoom, one of the biggest problems you have, both as the interviewer, if you're the person asking the questions, or, you know, if it's just a conversation, one or the other is likely to experience what we call mental drift, where when you're sitting there, you have all kinds of distractors that are drawing your attention, whether it's an email that pops up or a dialogue box that pops up, whatever the case may be, or someone sticks their head in the door or a sound outside or whatever, it's so easy to become distracted. And it happens a lot. And so we have to be very careful with using eye contact as a lie behavior, so to speak.

27:38So in the CIA context, obviously, a lot of people engaged in intelligence gathering. It's good to know if someone is being honest or not. But I also have to imagine that in the CAA context, there are a handful of people for whom the ability to lie is actually a valuable skill, including, say, people who are going undercover in some situation, in which case deception is actually part of the job. Can we learn to be better liars? Can we learn to identify our own leaks and tells and behaviors and sweeps and anchors and pivots so that we come off more trustworthy than we should be in some situations?

28:12Most of the time when people try to avoid lie detection, they're doing two things. Number one is they try not to do things that everyone believes is obviously a deceptive behavior. The second is they try to do things and focus on things that mask or carve out the other behaviors that sound better, so to speak. And we know that because once we develop this methodology in the CI, I was the principal developer of both the model and the training. We started training federal law enforcement, and they love the training. We, in fact, did years ago before Homeland Security with the U.S. Customs down at the Southern California border.