In 1940 Action Comics introduced a brilliant supervillain named Lex Luthor who tries to kill Superman to advance his plot to rule the world. These days news articles often portray Bernard Madoff as an “evil genius” because of his creative Ponzi scheme that siphoned some $20 billion from investors.
We think of an evil genius as someone who devises a clever plan for wrongdoing on a large scale. According to behavioral economist Dan Ariely of Duke University, however, the genius of the perpetrators often manifests itself not in elaborate planning of misdeeds but in almost the exact opposite: an unplanned escalation of a minor wrong they imaginatively have justified to themselves. I spoke with Ariely, author of The (Honest) Truth about Dishonesty (HarperCollins, 2012), about the true origins of evil genius.
ARIELY: There are two models of dishonest behavior. The economic model is one in which people do a cost-benefit analysis. You go by a store and ask yourself, “How much money do they have in the store, and what are the chances I'd be caught?” You then decide whether to rob the store or not. We found very little evidence that this is how people think.
What we do find is that lots of us are able to cheat a little bit and still think of ourselves as honest people. This suggests that dishonesty is all about rationalization. It's all about the small acts we can take and then think to ourselves, “No, this is not real cheating.” Think about people who do accounting fraud. When they start, they say to themselves, “The rules of accounting are so unclear, is it really so bad?” Or they say, “I'll fix it in the next quarter.” Or think about when Clinton said, “I did not have sexual relations with that woman, Miss Lewinsky.” At the time, he likely redefined sexual relations, and in his mind he really didn't cheat.
So I wondered: What kind of people would be able to rationalize better than others? Creative people will be able to tell themselves better stories. Intelligence doesn't change anything, we found. It's not the smartness part. The creativity part lets you find all kinds of ways to convince yourself that what you're doing is actually okay.
It's very easy to think that dishonesty is only a function of the individual, but the reality is that the environment plays a big role. You cheat when the rules are flexible or not very clear and when you have a conflict of interest or a reason to have a biased perception of reality. Let's say you and I think of ourselves as honest people. But imagine we were on Wall Street in 2007, and we could get a $10-million bonus if only we could see mortgage-backed securities as a good product. With $10 million on the line, you could probably convince yourself these securities are quite good—or at least better than they are. But if the environment doesn't allow for dishonesty, creativity won't be such a big deal. If you put a creative person in a military academy, where he has no flexibility in his decisions, he will be perfectly honest.
It's important to distinguish between how acts of dishonesty start and how they end. I've been interviewing cheaters, people who are involved in all kinds of white-collar crime. I've tried to talk to Madoff—he refuses to talk to anybody—but I've talked to people who know him. He seemed like an incredibly smart guy. He took lots of money from people and yet didn't seem to think about the endgame. If you or I were going to steal $20 billion, wouldn't we find a nice island somewhere with no extradition rules and figure out how to get there when the time comes? I would speculate that when he started, he did not have a long-term plan. I suspect that in the first quarter, he said, “I'll just do this for one quarter, and then next quarter I'll make it up….” But then he fell more and more behind. I think evil geniuses start like all of us—they are maybe a little more creative, so maybe their acts are more frequent or extreme—but the vast majority get on a slippery slope, and at some point there's no way back.