Home Read Their Lips: Steve Jobs, and Measuring CEO Truthiness

Read Their Lips: Steve Jobs, and Measuring CEO Truthiness

Before today’s Apple press event and all its announcements, Apple CEO Steve Jobs took the opportunity at Apple’s earnings call yesterday to quell rumors that a 7″ iPad was on the way. What Jobs said was true: so why are some people still calling Jobs a liar?

Perhaps it’s the usual mistrust people assign to corporate executives. Yet Jobs is no stranger to controversy around saying one thing – and then announcing another. As it turns out, two Stanford researchers have recently been studying the truthiness of CEOs and devised a formula for red-flagging deceptive CEO statements. Jobs seems to get a mixed score.

We can evaluate online debate about what Jobs says and what he means, and then what Apple does, until we’re weary. Lucky for us, someone else has done this work on a much wider scale. Stanford University researchers Anastasia Zakolyukina and David Larcker set out to find a way to tell when CEO’s are lying, and studied thousands of earnings calls for definitive patterns.

In How Can You Tell When A CEO Is Lying? the researchers present us with a few indicators:

  • Lying executives tend to overuse words like “we” and “our team” when they talk about their company and avoid saying “I”
  • Overuse of words that express positive emotion (‘fantastic,’ ‘superb,’ ‘outstanding,’ ‘excellent’)
  • When the CEO does not answer the question directly; refers to others

This would be like asking a CEO if they plan to put video on the iPod, and getting an answer about what “people” think of watching video on an iPod. As an example of CEO misdirection, NPR has their own to compare with the researchers’ “referral to others” point:

For instance, in 2002 NPR interviewed Computer Associates CEO Sanjay Kumar, who later went to prison for securities fraud, about his company’s auditing practices.

Here’s what he said: “There’s no one out there today in the world of public companies who has the former chief accountant for the SEC running their audit committee. We do. There’s no one out there who has the pre-eminent governance leader, professor [Jay] Lorsch, for example, running their governance committee. We do.”

In other words, Kumar was asked, “Can your books be trusted?” And he replied by saying, “We hire the very best auditors.” Larcker says that can be a big warning sign.

The researchers acknowledge their methodology is not foolproof. But others have applied their own methodology to Apple’s CEO (specifically, his statements) and reached their own conclusions.

Today, cNet reaches back to 2003 to call Jobs an all-out liar:

  • In 2003, in an interview with Walt Mossberg at the All Things D conference, Jobs said Apple wouldn’t do well in the cell phone business. Flash forward a few years.
  • During that same interview, he said Apple was not working on a tablet. “There are no plans to make a tablet,” Jobs said. “It turns out people want keyboards…. We look at the tablet, and we think it is going to fail.” Apparently, Apple filed a patent in 2004 for a tabletlike device. It may have been related to the iPhone, but to completely write off the tablet concept seems a tad suspect (of course, touch-screen technology has changed between 2004 and 2010).

This was along the lines of a February post where Brian Chen detailed Jobs’ skills at verbal misdirection and broke down individual statements:

(…) Not Interested in the Cellphone Business
In that same interview with Mossberg, Jobs said he didn’t feel Apple would fare well in the cellphone business.

“I get a lot of pressure to do a PDA. What people really seem to want to do with these is get the data out. We believe cellphones are going to carry this information. We didn’t think we’d do well in the cellphone business. What we’ve done instead is we’ve written what we think is some of the best software in the world to start syncing information between devices. We believe that mode is what cellphones need to get to. We chose to do the iPod instead of a PDA.”

Of course, in hindsight that quote served as a clue that Apple wasn’t making a traditional cellphone, but rather a brand new device that fused the characteristics of an iPod, a PDA and a cellphone into one. The result was the iPhone. Still, a tricky statement nonetheless. (…)

In the above example, Jobs breaks one of the key indicators of the Stanford researchers’ deception model by using an “I” statement, but then combines it with overuse of team language. This could all be nothing more than a case of seeing what someone says when they don’t really want to answer your question. However, in the ongoing game of rumors and product announcements a company’s relationship with its customers, media, and investors might be seen as an economy of confidence.

Do you think Jobs passes the researchers’ truthiness test? If you’re thinking that the only way we could know for sure is if there were a program to analyze CEO statements, the researchers are already a step ahead. Larcker and Zakolyukina have used their data to create a “speech detector” that issues red flags when signs of deception pop up. But until we get our hands on a CEO Lie Detector, we can read the results of their study in this .PDF.

Image from today’s Live Blog: Apple’s “Back to the Mac” Event (iLife, OS X Lion, New Macbook Air).

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The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

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