Beware of the Invisible Gorilla

When it comes to fraud you need to be aware of the unexpected. Watch this famous Harvard cognitive test below before reading on:


So how did you do? Did you notice the gorilla?

A remarkable percentage of people drop their jaw and ask “are you crazy? There was no gorilla. Listen, if there was a gorilla in the middle of a basketball court in the middle of a game I’d have noticed, how could anyone have missed it!”

How indeed. But of course most people do miss it. When they are shown the video clip again they simply can’t believe they hadn’t seen the gorilla. They saw it plain as day after they knew to look for it.

When this test was first released, there were some people who were so certain that there was no gorilla that they accused the scientists of switching the original gorilla-free film clip for one that actually had a gorilla in it! Many may say that these types of personalities work on Wall Street managing hedge funds!

The same cognitive failings are at work when police gather confident eye witness testimonies that turn out to be so often wrong. Indeed a notable percentage of death row convictions that have been reversed because of new DNA evidence originally rested on the confident testimony of eyewitnesses who were absolutely certain that they had seen what happened and who has unwittingly incriminated an innocent man.

The above test as well as the famous Madoff case¹ is a searing reminder that all of us have the capacity to miss what is right under our noses. If we’re not expecting it, if we’re focused intently on something else or if we have allowed our vision to be clouded by some trust in some dazzling deeds or by our faith and our own judgment about who is trustworthy and who isn’t.

Unfortunately this suggests that the only sure vaccine against Ponzi schemes² would be clinical paranoia because Ponzi schemes are absolutely impossible in a world where nobody trusts anybody. However, nobody wants to live in the world like that and modern commerce is impossible in a world like that. Who wants to work in an organization or live in a world where everyone is under suspicion all of the time. We can’t simply decree that people should stop trusting each other unless we want to bring human Commerce and all human society to a halt.

What we can learn and what we must learn is some old-fashioned humility. We must realize that our own natural inclination to trust others, especially others who look a lot like us, sound a lot like us, seem to believe in the same things we like to believe in. That natural inclination to trust and our ill-placed faith in our own gut instincts can combine to create blind spots big enough to hide gorillas and a fraud the size of Bernie Madoff and by definition we never see our own blind spots until it’s too late.

This is the challenge anti-fraud professionals must face. When it comes to preventing and detecting Ponzi schemes we don’t need systems that will protect us from all the suspicious characters out there, we need systems that will protect us from the people we trust the most because they are the ones, they are the only ones who can lure us into a Ponzi scheme and that’s a very tall order.

Just remember. Beware of invisible gorillas!



Key Terms:

Madoff = Relating to the famous Bernie Madoff investment scandal fraud case based on a Ponzi scheme

Ponzi scheme = A fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources.


Notes:This essay is excerpted from ACFE website.
ACFECHINABeware of the Invisible Gorilla