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No general method to detect fraud
- chrisweekly 5y agoMods: Please consider changing the title. It makes it seem like this awesome, grounded, helpful, 100% licit advisory outlining clever examples of hard-to-detect fraud is instead some kind of NSFW nonsense. So glad I RTFA; hope others will too.
- anyfoo 5y agoI agree, this was a fantastic read.
- buffet_overflow 5y agoIf it weren't for this comment, I would have missed this one. Thanks for the flag, and a +1 to this being worthwhile.
- yjftsjthsd-h 5y agoAnd here I was hoping for a tutorial on unusual sexual maneuvers. So yes, it should be fixed so nobody else is disappointed. (I'm actually semi serious, if you're wondering)
- calpaterson 5y agoThanks: glad you liked it. he original title is my fault as author because I picked it and it took me a while to realise that it was so terrible. Sorry about that.
- grzm 5y agoThe title is editorialized (and I'd say egregiously so): the title of the article is "No general method to detect fraud"
- 22c 5y agoSeems like the author of TFA submitted it to HN, so they editorialised their own title.
- dang 5y agoWe cut authors some slack about that, but not when the submitted title is clickbait. We've changed it now. (Submitted title was "Slick Tricks for Tricky Dicks". That's one hell of a stretch.) "Please use the original title, unless it is misleading or linkbait; don't editorialize." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html The article itself looks good though!
- calpaterson 5y agoSorry about that, I changed the title after posting it here, when I realised how terrible it was. It wasn't really intended as clickbait though and in fact it actually functioned as anti-clickbait. As a few people have said, it looked like a "risky click". :| Glad you liked it though.
- dang 5y ago> I changed the title after posting it here Ah, like the New York Times. No worries :)
- deleted 5y ago[deleted]
- calpaterson 5y agoI'm very sorry about that. The submitted title was the one I originally had but it took me a while to realise that it wasn't very good. I changed my mind about it but you can't edit titles on HN submissions after publishing.
- etempleton 5y agoMy approach to detecting fraud is to always assume the worst possible reason why someone did something or why something happened. Always be looking for the angle. You will detect fraud and manipulations and also a bunch of manipulations that aren’t there at all. In psychological circles this is called catastrophic thinking. It is a hell of a way to live.
- fanzhang 5y agoGood point. To add an exception to the original article then, perhaps the only general method to detect fraud is the trivial method: assume everything is fraud. In practice though for most goals it's probably better to trade off Type 1 vs Type 2 error.
- fho 5y agoI mean ... at some level everything today is some kind of "fraud" ... everything that is sold to you is not sold to you out of altruism, but because somebody else is living of that trade. That person in turn has to maximize the profits, which is why you never buy something at value.
- numpad0 5y agoSomeone said: “people immune to cultist recruitments don’t have friends”
- hutzlibu 5y agoI get the point, though in reality, the people without any real friends, are the most vulnerable to be dragged into a cult and once they are in - cannot go, because they would then be truly alone again.
- swagasaurus-rex 5y agoWhat about just applying that reason only when people want something from you. Most people don't want anything from you. Some people like just chatting. Salesmen will feel smothering and uncomfortable because they want something from you. Advertisements trigger me because it's so obvious (in my mind) they want something from you. News feels this way too. How can I tell? The same cues that fool people who focus on the surface-level: flashiness, bravado, loudness, taking the subject matter to things I do not care about. Trying to make me feel emotions (fomo, FUD, even excitement). You could use it as dating advice: people are turned off when you want something from them too much. Not all that glitters is gold.
- umvi 5y agoAs long as trust exists, fraud will exist. The only way to eliminate fraud is to eliminate trust, and trustless societies are pretty dystopian.
- f3rnando 5y ago¬¬
- scotty79 5y agoI'm not sure. Reducing necessity for trust is a worthwhile goal. It's wonderful to not have to trust too much. Instead to rely on evidence and have a contingency if things go horribly south.
- lbriner 5y agoIs that possible? Every system we use has to be trusted at some point. I don't trust the internet so I use https but that is only really saying that I trust the IETF or my certificate provider and I (personally) have no realistic way of knowing whether either is trustworthy. Did the IETF miss a vulnerability when they inveted the protocol? Was there someone on the team planted by the NSA? Do the cert authorities provide the means to hack my data in some way? I don't think they do but that is because I trust them that I don't think it would be in their interest to do this and I think that if the IETF messed with the protocol, someone would have noticed but we have seen OpenSSL bugs that have sat there for years because it was too complex for most people to understand. It just sounds like turtles all the way down because ultimately you have to trust someone or something even if it is just time and experience.
- musicale 5y ago> A surprising number of employees get duped into accepting part of their pay packet as options in their employers' private (and highly illiquid) stock I'd not heard this stated so clearly before.
- ludamad 5y agoCan I get a second opinion on this (from someone here who feels they know, that is)? Say the stock option is at a call at a high valuation, but you know all exits would be higher, is the underlying stock that much more valuable?
- 22c 5y ago>By switching, you have a 2/3 chance. I guess I need to read up on the Monty Hall problem again, because I always thought it was 1/2 chance if you switch (vs 1/3 chance if you don't).
- albedoa 5y agoThat would mean you have a 5/6 chance of finding the car if you were allowed to pick both doors. You can see the problem with that. In reality, it's 2/3 and 1/3 respectively.
- 22c 5y agoIf you started with 4 doors, where 3 of them had goats, wouldn't you have a 1/4 chance of picking the car the first time and a 1/3 chance of picking the car the second time?
- lmm 5y ago1/4 chance if you keep your original door, 3/4 chance if you switch (assuming the host opens two doors to show goats). If the host opened one door (so you have your original door and two other doors to pick from) then it's a 3/8 chance if you switch, if that's what you're asking.
- 22c 5y agoYes, I was asking about the latter, thanks!
- anyfoo 5y agoIt's been a while since I actively thought about the Monty Hall problem, I thought I understood it intuitively back then. I thought it became one of those "oh yeah, that's unintuitive, but once it clicks it's fine" things for me. I thought through it again, and I'm angry now. At least I'm not alone (got this link from the article): https://web.archive.org/web/20140413131827/http://www.decisionsciences.org/DecisionLine/Vol30/30_1/vazs30_1.pdf https://web.archive.org/web/20140413131827/http://www.decisi...
- modeless 5y ago> The best defence against frauds and scams seems to be a kind of "intellectual vaccination" via repeated exposure to benign, non-functional specimens. Similarly, ransomware is doing us all a favor. Every ransomware hack exposes and closes a vulnerability that could do much more damage in the hands of a truly malicious actor such as an enemy in wartime.
- calpaterson 5y agoRansomware isn't a "benign, non-functional specimen" :). It has real harms and they can be quite serious. I suppose that - always dangerous to extend an analogy - ransomware is more like "intellectual variolation" than vaccination. I wonder what would happen in wartime though.
- modeless 5y agoRandom, sparse ransomware attacks are absolutely benign compared to what a wartime enemy would do. If you don't think so, you haven't properly imagined the serious, extensive, real world damage that could be done by coordinated simultaneous attacks. Look at Stuxnet's destruction of machinery and then imagine that applied to a wide swath of the economy, including basic infrastructure like water and power, all at once.
- MattGaiser 5y agoI have read and own the recommended book at the end, Financial Shenanigans. Anyone who has ever had to measure up to some imperfect KPI will find it relatable. My way of personally looking for fraud is to look at incentives. What might this person stand to gain if I take this chosen action and do my incentives align in any way with his?
- jimnotgym 5y agoIs there any KPI that is perfect? I think you could find a valid criticism of any KPI. The incentive view is a good one, and one often followed by auditors, starting with the pay of company accountants!
- motohagiography 5y agoMakes you wonder if having a lottery system for firing people in a company at random would perform better than KPIs, or at least provide a baseline for KPIs to be measured against. 8-12 months severence / perf bonus, glowing reference for taking one for the team, and placement services. It's just like normal attrition, but makes planning a scam and consolidating a lot of anti-patterns way less viable. It seems psychotic, but compared to the incidence of mendacity, it's a pretty good deal for everyone.
- thatfunkymunki 5y agoagreed. Who wants to have unlucky employees? Get rid of them by using the RNG!
- lbriner 5y agoThis doesn't work in some fraud cases. If Madoff is selling you an investment, it is obvious what you think he gets out of it, he invests your money and keeps a proportion and that is normal business right? As the article says, his clever angle was not to over-inflate the ROI of the investments which might well make them look implausible. What is harder to spot is whether an investment is actually taking place.
- jimnotgym 5y agoIf you create the right atmosphere, you will find your junior employees will become very adept at keeping a suspicious mind. This is endemic in most accounts staff, but only if you encourage it.
- pjc50 5y ago> I think confirmation bias afflicts aficionados most of all. Interesting to link this to https://news.ycombinator.com/item?id=27467999 https://news.ycombinator.com/item?id=27467999 (hedgehogs/foxes and "one big idea"); the people with one big idea, who are aficionados of that idea, are easier to exploit because they're using the idea to avoid being contingent: that is, they're not looking at what's actually happening, merely whether they can fit the idea to it. Following this, a lot of modern social media culture war consists of (a) selling you a universal idea that explains everything you see in the media and then (b) recruiting you into a cult which uses your support (money, votes) for their own gain. The ur-example is of course Nazism selling the idea that Jews were the problem to which they had the "solution", but you can see analogies to this all over the political spectrum.
- user-the-name 5y ago> you can see analogies to this all over the political spectrum. No, you can see analogies of this specifically on the right, which is just doing the same thing still.
- pnutjam 5y agohttps://en.wikipedia.org/wiki/Benford%27s_law https://en.wikipedia.org/wiki/Benford%27s_law This is a good way to detect fraud. Basically, any number set will tend to have more 1,2,3's vs 7,8,9. Fraudsters will use random data that doesn't follow this.