Some people are better at spotting deception, but assuming the truth is important for society to function.
Perhaps society would be better off if we were better at spotting fraud and deception. In the early twenty-first century, a New York financier named Bernie Madoff defrauded thousands of investors of over $60 billion dollars, while claiming to be earning them stellar profits. And for a time, he got away with it. As one investor later commented, if Madoff had simply been making things up, surely someone would have noticed. Everyone assumed that someone else had their eye on the ball.
Everyone, that is, but Harry Markopolos. An independent fraud investigator, Markopolos wasn’t fooled by Madoff’s deception. He saw right through it because he doesn’t assume that everyone tells the truth. Growing up, he saw his parents’ restaurant business impacted by small-scale fraud and theft, and the experience affected him.
When he analyzed Madoff’s models, Markopolos immediately saw that the profit was impossible. He even called up all the Wall Street traders dealing in derivatives, which Madoff claimed to be trading, and asked them if they were doing business with Madoff. None were. Markopolos warned the financial regulatory body, The Securities and Exchange Commission, about Madoff as early as 2000. He warned them again in 2001, in 2005, 2007 and 2008. Each time, he got nowhere.
Here’s the thing, though. It’s great that there are some people out there like Markopolos, assuming the truth serves the majority of us well. As psychologist Tim Levine notes, lies are relatively rare in real life. Most interactions do not involve people like Bernie Madoff or Ana Montes. Most interactions are fundamentally honest. And to treat them as if they aren’t is disruptive. Sure, when the barista at your coffee shop tells you that your muffin and latte comes to $5.74 with tax, you could whip out your smartphone and check the calculation. But you’d be holding up the line, and most likely wasting your and everyone else’s time.
We can celebrate Harry Markopolos’s perceptive skepticism, but for most of us, it doesn’t really matter that we can’t spot lies. Defaulting to truth makes sense, and Bernie Madoff and Ana Montes are outliers.