>>Dan Ariely: So good morning.
So I want to talk a little bit about dishonesty.
I want you to consider something like Enron, the financial crisis, and ask your something,
What do you think this is more a cause of?
A few bad apples?
A few people who decide to cheat and cheat in a big way?
Or is it more of a cause of widespread wishful blindness?
Now, I will try to give you a way we look at this.
I do simple experiments with human beings.
The basic experiment we did to look at this question is the following: Imagine you were
in the experiment.
I would give you a sheet of paper with 20 math problems.
20 math problems that each of you could solve if you had enough time.
I would pass it along.
I would say you have five minutes, solve as many of those as you can.
I will give you $1 per question.
You would go ahead.
You would work as fast as you can.
When the five minutes are over, I would say, Please stop.
Put your pencil down and count how many questions you got correctly.
Now that you know how many questions you got correctly, please go to the back of the room
and shred your piece of paper.
And now come back to the front and tell me how many questions you got correctly.
Most people do this.
They come and they say, We solved six problems.
They get paid $6.
What the people in the experiments usually don't know, actually they never know, is that
the shredder has been fixed.
So the shredder only shreds the sides of the page, but the main body of the page remains
intact.
I can jump inside and I can find out how many questions they really solved correctly.
What do we find?
Vast majority of the people solved four problems and reporting to be solving six.
[ Laughter ] Now, we've run this experiment in about 30,000
people so far.
And from these 30,000 people, we found 12 that were big cheaters.
And we lost about $150 to them.
We found 18,000 people who were little cheaters, and we lost 36,000 to them.
And I think this is actually a good comparison, right?
There are some big cheaters out there but there are incredibly few.
And there is a tremendous amount of little cheaters.
But because there are so many of them and things are so frequent, the financial devastation
of that second activity is much higher.
Now, how do we think about this dishonesty?
There is a lot of factors that get our ability to cheat more and our ability to cheat right
constructed.
I want to tell you two kind of mechanisms that change that.
The first one, I will tell you a little joke.
Johnny comes home from the school with a note from the teacher that said that little Johnny
stole a pencil from the kid sitting next to him.
Johnny's father is furious.
He says, Johnny, I'm embarrassed, humiliated.
You never, never, never steal a pencil from the kid who is sitting next to you.
You are grounded for three weeks and just wait until your mother comes.
And besides, Johnny, if you need a pencil, you know very well you can just say something.
You could just mention it.
You can point it out.
You can ask me, and I can bring you dozens of pencils from work.
[ Laughter ] Now, why this is amusing or a little bit amusing
I think is because we all recognize that taking a pencil from work is something we can easily
justify versus taking 10 cents from petty cash box.
Even if we just took it and went ahead and bought a pencil, it would feel very differently
to us.
So we run our experiment this way.
We run the same experiment with the simple math problems, but we had two conditions.
And one of them you came to the experiment and you said, Mr. Experimenter, I solved X
problems.
Give me X dollars.
In the second one, you would come and say, Mr. Experimenter, I solved X problems.
Give me X tokens and we paid people with pieces of plastic.
People took these pieces of plastic, walked 12 feet to the side and changed them to dollars.
So when somebody was looking into the eyes of the experiment, they were cheating not
for money.
They were cheating for something that was one step removed from money.
What happened in our experiments?
People doubled their cheating.
This, by the way, is one of the most worrisome experiments I think we have ever conducted
because if you think being one step removed from cash relieves people from the moral shackles,
what about stock options?
Mortgage-backed securities?
Think about all kinds of things that has many, many steps in them?
Could it be that in those cases human ability is quite fantastic in both acting dishonestly
but rationalizing things quite quickly to ourselves.
That's the first kind of point I want to point out, is that dishonesty in the way we find
it is a lot about rationalization.
What helps us rationalize something increases dishonesty.
When it is harder to rationalize something, it decreases dishonesty.
Here is another little story.
I will give you the Jewish version.
A guy goes to the rabbi and he says, Rabbi, you won't believe what happened.
Somebody stole my bicycle from synagogue.
The rabbi is appalled.
Somebody is stealing your bike from synagogue?
How could this happen?
He said, come next week to synagogue back and sit in the front row and as we go over
the Ten Commandments, turn around and look at everybody in the eyes.
And when we get to "thou shall not steal" see who can't look you in the eyes, that's
your criminal.
The guy comes back the next week, sits in the front row, and turns around and looks
at everybody else during the Ten Commandments.
Comes back to the rabbi at the end of the services, he says, Rabbi, you won't believe
it.
It worked like a charm.
The moment, the moment we got to "thou shall not commit adultery" I remembered where I
left my bike.
[ Laughter ] [ Applause ]
How do we translate this into an experiment?
We went to UCLA and we asked about 500 students to try and recall the Ten Commandments.
By the way, none of them could.
This was interesting by itself.
They made up all kind of new commandments.
[ Laughter ] But after just trying to remember the Ten
Commandments, we gave them the same task in which they could cheat.
What happened?
Nobody cheated.
Now, it wasn't as if the people who remembered many commandments didn't cheat and the people
who remembered a few commandments cheated.
Nobody cheated.
That basically suggested once you get people to consider their own moral code, we basically
kind of reduce the flexibility by which we could justify all kinds of moral behavior.
We ran a similar experiment, by the way, with a big insurance company.
The only thing we did was we changed the line on the signature.
You know, usually on an insurance form, you fill out the insurance form and you sign at
the bottom.
By the time the people sign at the bottom, they finished cheating.
It is over.
We changed the line and we got people to sign up front.
Turns out people cheat much less when they first sign.
Now, if you think about this type of cheating, the small cheating that happens very frequently
and you think about rationalization and morality, I think the big issue is to think about those
things as conflicts of interest.
We all know conflicts of interest.
If you like any particular sport -- there was some soccer can game I understand from
the discussions this morning.
Imagine that you are a fan of some team and the referee calls a call against your team.
You think the referee is evil, vicious, blind, something, right?
There is no way not to see things from the perspective of your team.
Well, you know, maybe in sports, conflicts of interest are not bad.
Maybe it is even good.
Maybe it makes life more fun.
But banking?
Medicine?
How much do we really want conflicts of interest in those industries?
Not so much.
I think one lesson is to try to think about how do we decrease conflicts of interest.
It is not something that we necessarily see in ourselves or in others.
I want to give you one last story.
If you think about cheating and people start cheating a lot, there is a question of why
people would stop and how would it work.
So we've done lots of experiments in which we gave people hundreds of opportunities to
cheat over time.
And what we see is people cheat a little bit, cheat a little bit, cheat a little bit and
at some point, many people switch and start cheating all the time.
And we call this the "what the hell" effect.
[ Laughter ] If you start cheating all the time, why would
you stop?
To look at this, we decide to think of something like the Catholic confession.
Anybody here Catholic?
A few?
A few lower, a few higher.
[ Laughter ] So no offense to anybody in the audience,
but we decided to go and talk to real Catholics.
We went to Italy.
We went to talk to Catholic priests and we said, Please explain to us how confession
works.
From an economic's perspective, if you can ask for forgiveness and be absolved, wouldn't
you just cheat more?
In fact, wouldn't you cheat just on the way to confession?
That's kind of the optimal approach?
[ Laughter ] Another theory we say, maybe confession is
like part of the cost-benefit analysis.
Not only would I steal and I might go to prison, but I also have to talk to somebody.
That would increase the cost of cheating.
Turns out that doesn't work empirically.
We said maybe cheating is -- maybe confession is like the Ten Commandments.
When you think morality, you think honestly, it turns out it is part of the reason.
When people go to confession, they feel good about themselves.
They don't -- they speak nice on their walk home and so on, be nice to their kids and
family a few days afterwards.
But the thing that interests us the most was this idea that confession can open a new page
for people.
And we've done these experiments so we get people to cheat a little bit, they cheat a
lot.
After a while we ask them to confess, not a religious confession.
We as them, Please write for us some bad things you have done recently.
And they write something, and they shred it for real.
Then we ask them to ask for forgiveness from whatever deity they believe in, and they do
that as well.
What happened?
People start cheating a little bit.
They start cheating a lot.
And after confession happened, people reset their moral compass and they start clean.
Now, later on, they go up again.
But at least for a while, it's working.
Now, I think there is a couple of lessons here.
One is, you know, we might think about confession.
It's a mechanism that religion has adopted, but maybe we should adopt it more generally.
Maybe there should be an opportunity for our politicians, our bankers to ask for forgiveness
from time to time and open a blank slate.
I just wanted to leave you with two thoughts.
One is, you know, when you go home tonight and you go to your room tonight, ask for forgiveness
before you start the next day.
I think it would be a better day tomorrow.
The second thing is that our understanding of dishonesty, I think, has largely been skewed
to think about big cheaters who cheat in a cost-benefit analysis.
And, of course, those exist.
But I think we must understand human folds, right?
What is the chance that we would have a banking system that has tremendous conflicts of interest
and we will just put new people in and they will not misbehave?
Incredibly low.
We really have to understand how people interact with systems, what is the weak point of the
system that don't fit with our human psychology and our ability?
And to think about how we design those systems so we don't have these tragedies repeating
over and over.
Thank you very much.