How networks create cheaters
Yenkey’s research suggests that not only can a social network increase a person’s vulnerability to fraud, it also can increase the chance that he or she may perpetrate one.
To arrive at this conclusion, Yenkey and the University of California-Davis’s Donald Palmer studied the world of professional cycling, which represents another kind of social network. Athletes, owners, managers, assistants, and staff form relationships as they work together, and some may depart at the end of the cycling season to join other teams.
This network has had its own battle with fraud, in the form of performance-enhancing drugs. Cyclists have long used these drugs to better compete in races including the Tour de France, a grueling 2,200-mile race that takes riders through the Pyrenees and the Alps and finishes on the Champs-Élysées in Paris. In the 1920s, riders boosted their energy with cocaine. Race organizers banned drug use in 1965, but in the late 1990s through the mid-2000s, there was rampant use of steroids; human growth hormone; a blood-boosting hormone called erythropoietin, or EPO; and amphetamines to improve performance at high altitudes, accelerate recovery, and provide energy.
In the mid-2000s, the International Cycling Union (officially called the Union Cycliste Internationale, or UCI for short) and the police in Europe began cracking down more seriously on cyclists’ drug use, instituting more and better testing and launching investigations into doping operations. The UCI began requiring cyclists to provide blood and urine samples several times throughout the year. A panel of anti-doping experts tracked each rider’s samples over time and assigned him a “suspicion score,” essentially a medical opinion of the likelihood that a cyclist was using performance-enhancing drugs. These scores, typically kept confidential and used only by racing officials, were in 2011 leaked to the press. Scores for all 198 participants in the 2010 Tour de France were leaked to French sports magazine L’Équipe.
Yenkey and Palmer used the leaked report to study links between cycling networks and fraudulent behavior. The data led them to two main observations.
The first is that the role a person has in a network can influence his or her tendency to cheat. People expected to perform complex and difficult tasks at specific points in time are under significant pressure to ensure they can live up to the challenge. This pressure leads them to consider all means available to them, be it legal or illegal. If a person was assigned a critical role on a cycling team, expected to perform a difficult task at a specific time—sprinting, for example—he was almost six times more likely to have a suspicious blood profile than a generalist rider. The cyclists assigned to assist that crucial team member were more than twice as likely than a generalist to have suspicious blood profiles. Those generalist riders, also known as free agents, were no more likely than the average cyclist to be suspected of drug use.
The second observation: people in a network teach others what behavior they can and can’t get away with. Using data from cycling fan websites, the researchers mapped the social networks of 195 of the 2010 Tour de France competitors by tracing the teams they had ridden for throughout their careers. Doing this, the researchers identified the present and past teammates of each rider, as well as what they call “twice-removed teammates,” or the teammates of former teammates (think of these as friends of friends).
The researchers also used data from fan websites that have cataloged more than 1,500 doping incidents that occurred between 1999 and 2010. The incidents included positive drug tests, and evidence of doping from hotel-room raids, phone taps, and vehicle searches. From this data, the researchers reconstructed the cyclists’ full careers, including documented doping incidents and any resulting sanctions.
They find that seeing a fellow rider punished deterred a teammate from committing the same offense. Only 45 percent of prior doping events experienced by people in the riders’ networks led to sanctions, but just over half of the time, those sanctions were major: guilty riders were suspended from competition for more than six months. And the researchers saw that when riders had doped and been sanctioned, their teammates tended to have lower suspicion scores leading up the 2010 Tour de France. The opposite was true for riders whose teammates had doped but had not been sanctioned.
The effect was particularly strong for cyclists whose current teammate had been caught doping. Contemporary teammates were 94 percent less likely to have more-suspicious blood values, while twice-removed teammates were just 8 percent less likely if the prior infraction had been strongly punished. If a cyclist had been caught doping and hadn’t been heavily sanctioned, a contemporary teammate was 27 percent more likely to have a high suspicion score, compared to 3 percent for twice-removed teammates.
The takeaway: people closer to you in your network have more influence on you. You also learn things from people who are more distant in a network, but you do so at a lesser rate.
“If your social network is telling you, ‘Watch out, there are strong consequences for doing this,’ you’re less likely to do it,” Yenkey says. “But if your network contains people who have cheated and basically gotten away with it, it teaches you this is something you can do, and so you do it.”
Drawing lessons about fraud
Frauds are clearly moving through social networks far beyond Kenya and professional cycling. Networks are key to a number of Ponzi schemes, including the Bernard Madoff scandal, where Madoff used social ties to recruit new investors and victims. Before Madoff, Charles Ponzi swindled his Catholic neighbors in Boston, even his own parish priest. The blog ponzitracker.com is updated regularly with news of the latest alleged and confirmed schemes.
The same dynamics that led brokers and cyclists to cheat are at work in networks of all kinds, around the world. According to the 2011 PricewaterhouseCoopers Global Economic Crime Survey, insiders committed 56 percent of all serious corporate frauds reported worldwide.
The research findings, therefore, have broad application. They suggest that to avoid becoming a victim of a fraud, know that while your network can be a great source of information, contacts, and leads, deviants in the network may be looking to take advantage of your trust. Use your network to your advantage, but also with caution.
If you or someone else plays a critical role in an organization—for example as the “rainmaker” responsible for bringing in new business—monitor decisions and actions when the pressure builds. The data suggest that the pressure of meeting expectations can drive people in critical roles to make bad decisions.
And if you find fraud in your network or organization, be vigilant about punishing the wrongdoers. Otherwise, you may encourage more of the same behavior.