Using Forensic Economics to Uncover Cheating in Sports and Business
Who doesn’t love a good cheating scandal? Whether it’s the fallout from Lance Armstrong’s doping confession or Martha Stewart’s insider trading, the public is ever eager to consume the twists and turns of adored public figures paying the price for bad decisions, especially when they are caught cheating.
However, for every cheating scandal in the media headlines, there are thousands of cheating incidents lurking in dark corners. So what is to be done? Enter forensic economics and the use of simple statistical techniques to uncover patterns of cheating. The availability of data in recent decades has given journalists, researchers, and everyday people a flashlight for detecting fraud and corruption.
Consider Derek Murphy, a family man and financial analyst from Ohio, whose passion for running and know-how with spreadsheets has resulted in a new identity as the marathon investigator. Murphy spots irregularities in race time data for Boston Marathon runners. When he finds strong evidence, he confronts suspected cheaters. Murphy’s detective work underscores how anyone armed with good data and basic data handling skills can discover outliers, and potentially cheaters.
Don’t worry if math is not your superpower. This book is full of entertaining stories from sports and business. From NBA match fixing to corrupt judging in winter sports and collusion in the stock market to accounting manipulation, villains, and sometimes heroes, emerge. Weaving together narratives, charts, and illustrations, this book shows how cheating takes place, and more importantly, how it can be detected. For example, readers will certainly recognize the name Bernie Madoff, but they might be surprised by the early detection (and reporting to the SEC) of his pyramid scheme by a portfolio manager at another firm based on available data.
Segments of this book unfold like a game of cat and mouse between government authorities and shady investment fund managers, and even a few lottery swindlers. Other examples include the absurd subscriber and streaming figures from JayZ’s TIDAL, the student standardized test “erasure scandal” connected to celebrated education reformer Michelle Rhee, and the questionable performance reports of Elizabeth Holmes’ bogus blood testing device company, Theranos.
Data, combined with a free press and an active research community, provides an important tool for holding cheaters accountable.
Sample chapters available upon request.