Psychology Of Fraud: Why Good People Do Bad Things

Psychology Of Fraud: Why Good People Do Bad Things

NPR’s Chana Joffe-Walt and Alix Spiegel have put together a fascinating podcast that examines the psychology of fraud. It often isn’t as easily explained as bad people doing bad things. Ethicists and psychologists have documented an unusually high number of people who start out, in their minds, doing the right thing.

The story follows the case of Toby Groves. He was a man who almost everyone who knew admired for his integrity. In fact, his company’s culture was defined, according to many former employees, by its high integrity. But It began to go wrong, when Toby saw his company needed some help. So he decided to take out a personal loan on his house. But in order to do it? . . . He needed to lie about the income he was currently making so he could get the loan. The loan he intended to take on personally to help save the company. Then it got worse.

And in the end, it turned into a multi-million dollar fraud that put a company out of business and cost 100 people their jobs.

 

Fraud Often Starts With Good Intentions

“80%-90% of people say ‘I’m never capable of doing something like be involved in business fraud,” says one psychologist. “And the evidence indicates many of them, quite possibly the vast majority of them, are wrong.” Most people, say these analysts, aren’t intending to do bad. In fact, it often begins as unintentional. There are cognitive blind spots we can’t see. And often our minds can’t fully process the choices we are confronted with.

Often, say the NPR psychologists, human beings commit fraud not because they’re greedy, but because human beings like each other and want to help each other. One example: A finding that a number of state emissions inspectors, who make a modest wage themselves, may be inclined to help people with old, broken-down cars pass emissions tests—even if their cars don’t quite fit all the specs they should. NPR documents the steps its analysts found a fraud story often follows:

1. The Promise
2. The First Lie
3. Why We Don’t See the Big Ethical Picture
4. Fraud Spreads
5. We Lie Because We Care
6. Searching for Resolution

 

Listen to the whole piece.