The effect was that Captain Gregory Hanson decided to cut out the center of the cakes he was frying. What was the cause?

It's a surface area maximization strategy. The hole maximizes the surface area, which is important for cooking when the doughnut is fried in oil or baked. The closer to the heat source (the oil) the innermost part of the doughnut is, the faster it will cook, and the less time the outside will overcook while the inside is still under-cooked. So basically the hole is for better cooking, so that the doughnut will taste better and will cook evenly.

Gregory Hanson cut the middle out because it was to soggy. It allowed increased surface area for uniform frying.