Podcast Transcription

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Welcome to the Scientific American podcast “Science Talk” posted on December 25th, 2012.  I’m Steve Mirsky.  On this episode –

Dan Ariely:            The ability to rationalize our dishonesty away is incredibly human and we need to think about how to fight this.

Steve Mirsky:            That’s Dan, Ariely.  He’s professor of behavioral economics at Duke University.  His most recent book is “The Honest Truth about Dishonesty: How We Lie to Everyone – Especially Ourselves.”  In the last issue of Scientific American Mind Magazines, Staff Editor Ingrid Wickelgren published a Q&A with Ariely called “Unveiling the Real Evil Genius.”  You can find that article online at our website.  It’s excerpted from a long phone interview that Wickelgren did with Ariely.  After listening to the entire interview we decided to share the audio even though we only have the recoding of Ariely’s half of the conversation.  Fortunately Ariely is quite a monologist so it’s still a satisfying listen.  I’ve separated sections of the interview with short musical bridges to let you know when there’s a major shift in the conversation so without any further ado here’s Dan Ariely.

Dan Ariely:            What made me think to start with that creative people might be more dishonest?  So we’ve been doing research on dishonesty for a long time and there are basically two models of dishonest behavior.  The economic model is the model in which people do a cost benefit analysis.  You go by a store and you ask yourself how much money they have, what the chance I’ll be caught and you kind of do cost benefit analysis and you decide whether to rob the store or not and we actually find very little evidence that this is how people think.  Maybe there’s some psychopaths out there but in general we don’t find that this is a good description of human behavior.

What we do find is a good description of the dishonesty that we all engage in is that lots and lots and lots of us are able to cheat a little bit and still think of our self as honest people and this basically suggests that dishonesty is all about rationalization.  It’s all about the small acts we can take and then our self, ‘No.  This is not real cheating” and you can think about range of things, right?  You can think about people who do accounting frauds and when they start they say “The rule of accounting are so unclear.  Is it really so bad or is it kind of almost ok?”  Or maybe people say to themselves, “Oh, I’ll fix it in the next quarter” or if you think about Clinton, right, “I didn’t have sex with that woman” or relations.  I don’t remember what he said exactly.  At the time he probably thought he redefined sex and in his mind he probably didn’t cheat.

So if you think that the main mechanism is rationalization then what you come up with and that’s what we find is that we basically try to balance two things.  We try to balance feeling good about our self.  On one hand we get some pleasure or some satisfaction, some utility from thinking of our self as honest, moral, wonderful people.  On the other hand we try to benefit from cheating.  Now you can say, “How can you do both?”  Well rationalization allows you to do a little bit of cheating and still feel good about yourself so rationalization is what allows you to live with some cheating and not pay a cost in terms of your own view of yourself.

Now if this is a story and the main mechanism that we need to understand is rationalization then what you say is what happens, what kind of people would be able to rationalize better than other people.  Better story-tellers, right?  And what we thought about is creative people because if you’re creative you just find more ways to tell yourself better stories.  You find more ways to cheat and still tell yourself a story about why this is ok.  

So from our perspective we thought that creativity is something that basically contributes to the ability of rationalization and that’s basically what we tried to test.  And we also tested intelligence by the way and we found that intelligence doesn’t change anything.  It’s the addition of creativity beyond intelligence.  Now there’s some correlation between intelligence and creativity so they’re not totally independent but it’s not the smartness part.  It’s the creativity part.  It’s the creativity part that lets you find out all kinds of ways to convince yourself about why what you’re doing is actually ok and we’ve done it in multiple ways, the studies.  

So the first thing we did was we just measured creativity and there’s lots of ways to measure creativity.  We picked a few of them.  We asked people for self descriptions, how much, to what degree words related to creativity describe you.  We also asked people to do things like the brick test.  The brick test is a very standard way to measure creativity where we ask people what kind of things could you do with a brick and you give them 90 seconds and you see how many different usages they come up with and simple things are like “I’ll use this brick to build something” or “I’ll use it as a paper weight” but there’s more creative ways to think about using a brick.  “I’m going to use it as a weight to exercise.”  Or if you say “I’m going to connect it to my shoe to be a little taller.”  I mean you can come up with all kinds of stories about what you’re going to do with the brick.

And what we found to start with is that more creative people were indeed more likely to cheat in our experiments and it’s important to actually make a distinction.  I’m not saying that creative people cheat and non-creative people don’t cheat.  What I’m saying is that all of us cheat a little bit and what happens is creative people are just a little bit better at it.  So it’s not about the fact creativity bad, non-creativity good.  It’s about the fact that we all have this capacity but creativity creates extra benefits for people in terms of their ability to get away with it from their own perspective.

So two things happen.  One is this realization of the importance of rationalization.  We did all kinds of studies about dishonesty that basically got us to the conclusion that it’s all about rationalization.  For example one of the studies that we did basically had the following structure.  Some people get to fill a sheet with 20 simple math problems.  We asked them to solve as many as they can and we promised them in that particular case 50 cents per questions and when they finished we asked them to count how many questions of the 20 they got correctly.  We don’t give them enough time so they can’t do all of them.  We asked them to think about, to count how many questions they got correctly and then we asked them to go to the back of the room and shred that piece of paper and come back to us and tell us how many questions they solved correctly.  And what we find is that people come to us and they report that they solved six questions but we actually play with the shredder so the shredder doesn’t shred all of the page, it only shreds the sides so that we can go back into the shredder and find out how many questions people really solve correctly and what we find is people solve four and report six, so that’s a basic paradigm of how we test cheating.

But one of the most frightening experiments for me was what we call the token experiment.  In the token experiment people did the same thing.  They worked for five minutes, they solve as many problems as they could, they went to the back of the room, they shred the piece of paper, they came to us but now instead of saying “Mr. Experimenter  I solve x problems, give me x dollars” they say “I solved x problems, give me x tokens.”  So when they looked into the experimenter into the eyes and cheated and lied they lied for tokens and basically what we found was that people doubled their cheating.  5 seconds later they walk 12 feet to the side and change it for dollars, so the only difference was that when they look at somebody into the eyes and lie they lied for something that was one step removed from money.

Now this frightened me, worries me to a great degree of course because we move into a society that is going to be cashless.  We’re creating electronic wallet and mortgage backed securities and derivatives and we have stock options.  I mean you can probably make a list of your favorite CEOs who nevertheless have back dated their stock options and you can ask yourself “What would it, I mean back dating stock options is multiple steps removed from money.  It’s not stock.  It’s stock options.  It’s not changing the number.  It’s changing the date.  As we move to become more and more cashless society you can ask yourself whether all of this would help us be more immoral but still think of ourselves as moral people, basically allow more fudge factoring so that for me the most – and then I thought about what’s going on here.

And I remember a little joke and the joke is that Little Johnny comes home from school with a note from the teacher that said Little Johnny stole a pencil from the kid who’s sitting next to him and Johnny’s father is furious and said, “Johnny I can’t believe it.  I’m disappointed.  I’m humiliated.  You never never steal a pencil from the kid who’s sitting next to you and besides Johnny, if you need a pencil you could just say something.  You could just ask, you could mention it and I could bring you dozens of pencils from work.”  And the reason I think it’s kind of a funny joke is because we all recognize that taking ten cents from a petty cash box would feel like stealing but taking a pencil from work would not feel like stealing even by the way if we took ten cents from that petty cash box and went right away and bought a pencil with it.

This I think is the story about being multiple steps removed from money and the story about being able to tell our self stories about why what we’re doing is actually ok so you could say – and with the pencil you could tell lots of stories.  You could say “Everybody’s doing it.”  You can say “The workplace is putting it here for this purpose.”  You could say “Even if I take it home and give it to my kids he’ll leave me alone and I’ll have time to do two more emails.  Clearly it would be beneficial for work.”  All of those stories are really about rationalization so I had both research on cheating and both the realization of how rationalization is the central element here and what allows us in the environment to rationalize more, get us to cheat more and what in the environment allows us to rationalize less, cheat less and then I thought about what about individual characteristics and what individual characteristics were create more or less.

So usually when we do the kind of experiments I do we think about environmental interventions.  We think about how the environment would facilitate more good behavior or bad behavior but then I was thinking about what about personality traits would facilitate that and that’s basically where I got to creativity, better stories.  So first of all I think that dishonesty is partially a function of the individual and partially a function of the environment.  It’s very easy to think it’s just a function of the individual, right, and we say “If we only hire honest people everything would be ok” but the reality is that the environment plays a big role in this.

Let’s say both you and I think of ourselves as wonderfully honest people but imagine that we were in Wall Street in 2007 and imagine that we could get five – ten millions dollar a year bonus if we could only see mortgages or mortgage backed securities as a good product, right?  Ask yourself if you wouldn’t be able to tell yourself a story about why those are fantastic products.  Now I don’t mean that you would lie, that you would say “Oh my goodness.  These are terrible products but let me pretend that they’re good.”  With $10 million on the line you would probably be able to convince yourself that these are actually quite good or at least better than they are.

So I think that most of dishonesty is actually not about individual characteristics.  Most of it comes from the environment.  Now I’m not talking about psychopaths.  That’s a different story but the cheating all of us can do, a little bit for taxes, driving over the speed limit, adding a few things to insurance claims, adding a little bit to our expense reports, all of those things are something everybody can do and the question is how flexible are the rules and what we deem acceptable and unacceptable not from the perspective of being caught but from the perspective for our internal moral compass.  

If you put an incredibly creative person in something like the military academy where they basically have no flexibility in any decision that they make they’re going to behave perfectly honest.  On the other hand you can take someone who we think of as an incredibly honest person and put them as a Wall Street executive and make all their friends be Wall Street executives and I think very quickly they will not deserve sainthood so I think the way to think about it is the environment plays a large role and then creativity adds to that but if you have an environment that is not allowing for dishonesty that would not be such a big deal.  And what’s interesting though is how those two things interact and whether people who are more creative also have a tendency to go to places that also have more flexibility inherently.

So I have a friend here in Duke in the history department who basically is arguing that many new technologies, their first usage has been for dishonest purposes.  When the mail started for example one of the first things that came with it was mail fraud when they would promise you to sell you all kinds of things that they never did and then of course the US government created the regulations and made federal offense and so on and that basically created the mail to be a very safe place to do business.  In radio he said it is the same thing.  The first thing they were selling in radio was all kind of terrible, dishonest things, selling things that don’t really exist and his kind of analysis is that new frontiers call for particular kind of people who basically test the boundaries and push them until we kind of figure out what’s acceptable and not acceptable and what we want to regulate and not regulate so it could be that creative people are being – they feel kind of gravitational pull toward things that the boundaries are less clear.

So I think you want two things.  I think you want situations where the rules are not very clear, that we have flexibility and where people have conflicts of interest or a reason to have a biased perception of reality.  Think about conflicts of interest, right, so if I’m your financial advisor and I get paid if you do Action A but not Action B, now I have motivational reason to see Action A as being better for you.  If I’m far away from it, I’m distant from it and I have nothing to gain then there’s no motivational force that is going to push me but if I have a motivational force that pushes me to see things one way or another and then on top of that the rules are not perfectly clear now my motivational power has a way to influence my judgment or my decisions and now if you’re creative you could do more of it.

And the sad thing is that we seem to value flexibility so if you think about accounting, we do create all kinds of flexible accounting policies and rules and regulations because we understand that accounting, the profession can benefit from being more flexible so somebody promised to pay you but they haven’t paid you yet.  We say “Well they promised.  Why don’t we think about counting that already?” and maybe discounting by some percentage probability that they wouldn’t pay but now you create a very subjective rule.  What does a promise really mean and how much will they really pay and what is the discount rate we’re going to apply to it and we see the benefit in this flexibility and we don’t see the costs.

So if you think about stuff like Enron for example, the government basically allowed them to participate in an accounting system that had lots of very unclear rules about what counts and what not counts and if you have a very strict rule that says “The moment a dollar is deposited in your account you can count it and before you can’t” now stealing is very different than saying, “The moment somebody makes you a promise to pay you can start counting it in some discounted way.”  

I think it’s an important thing to distinguish between how acts of dishonesty start and how acts of dishonesty end and I’ve recently been interviewing all kinds of cheaters, people who’ve been MCI, people who’ve been involved in insider trading, all kind of white collar crimes.  I don’t know if you remember Crazy Eddie, the electronic stores in New York.  I interviewed people from that family.  And mostly, almost exclusively I would say, when people start taking the first act it is something that they can rationalize but what happens later on is it’s a slippery slope that takes them down the line and they end up doing things that they can’t find a way back and I think when you think about evil genius, I think we need to find out what’s the beginning and where’s the end and I think the beginning action is probably rationalization is a big element of it but once they’ve taken the first act the question is is this something that has a slippery slope.  It means that people just go down and down and down and there’s no way back.

Even Madoff I suspect – I tried to talk to Madoff.  He’s refusing to talk to me but I’ve talked to people who know him and who’ve dealt with him and invested money with him.  Look.  The guy seemed like an incredibly smart guy.  He took lots of money from people and didn’t seem to think about the end game.  If you and I were going to steal like $20 billion wouldn’t we find like a nice island somewhere with no extradition rules and figure out how to get there when the time comes?  It’s just hard to imagine that somebody who is thinking about crime in a cold calculated place is not thinking about what to do. 

But if you think about Madoff, and I can’t verify it, but I would speculate that when he started this was not the game that he wanted to play.  He did not think that this is how it would end up.  The fact that I think his son committed suicide, that also suggest to you that there was something incredibly wrong there, that this was not really the plan.  I suspect that based on other people on the first quarter he did that he said “I’ll just do it for one quarter” because things were kind of not well and he kind of had a story about what happened.  “Next quarter I’ll make it up” and then another quarter happened and slowly, slowly, slowly he became more and more behind.  Otherwise we have this dilemma to say how come this crook has been able to do it for such a long time but hasn’t thought about this in a better way.  

I think that evil genius probably start like all of us.  Maybe they’re a bit more creative so maybe their acts are more frequent or maybe they’re a bit more extreme and I think later on the vast majority probably get involved in a slippery slope that at some point there’s kind of no way back and when you get into a situation about no way back it’s very tough.  Think about embezzlement.  Many people take money from their company because they’ve fallen on hard time or have some medical expenses and they hope to give it back at some point.  Things just escalate and they can’t do it.

[Music plays]

So we’ve done a few things.  The first thing we did was we just took students and we measured how creative they were in multiple methods and we showed that no matter what method of creativity measurement you take, the more creative people cheat more in our experiment I described to you with the math problems.  So that was the first thing.  The second thing we did was we tried to say whether we can increase people’s creative mindset for a little bit of time, they cheat to a higher degree.  They did not solve any more but they reported to solve more.  So they were not better but they reported a higher number.  

Then the other thing we did was we did something to do with priming.  Priming is basically the word psychologists use to say we’re going to change your mind set for a little bit of time to be more x and more y and we tried to prime people with creativity so we basically got people to think, to become a bit more creative and there’s all kinds of evidence that this works and there’s been all kinds of wonderful experiments on creativity and priming including one experiment I particularly like that shows when you expose people to an apple computer logo compared to an IBM logo people become a bit more creative in things like the brick test we talked about earlier. It doesn’t last very long.

So the first thing was just kind of correlation between people creativity and cheating.  The second one we tried to increase creativity in some people and not in others and what we showed is that when we increased creativity in some and not the others, the people we increased their creativity cheated a bit more so as we increased creativity we also increased cheating so that’s more causal.  We can’t increase creativity a lot with this priming but the fact is you increase it a little bit and cheating increase a little bit is kind of supporting the idea that creativity is the mechanism.

And finally we tried it in a more market set up.  We went to a big advertising company.  We asked people – we did not use the math problem task.  We asked people to report – we had a set of questions that asked people about their moral flexibility let’s call it.  You were on a business trip, you got back home but on the way to the office you stopped at a restaurant and had dinner and a glass of beer, would you still report this as an expense report even though it’s after you got home?  You got home but then you went out.  Does it still count?  All kinds of questions like this that are kind of basically exploring the moral flexibility in personal relationship, in taxes, in relationship with companies, with our friends, all kinds of things like that.

 We gave those to people across the company and we also asked them for what their job title was and which department they worked at and then we asked the CEO of the company to tell us which jobs required more or less creativity and this was no big surprise, right, it was an advertising company so the people in accounting need less creativity.  The people who have creative in the title needs more creativity and so on and what we basically showed is the people, as the role of creativity is larger in their job descriptions so is the amount that they cheated, that they declared more flexibility in our survey.

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What can we do about it?  So this is a tricky situation about what can we do about it because creativity is very helpful for lots of things so I don’t think we want to just hire non-creative people and I don’t think we want to stamp creativity out although sometimes I feel my kids’ school is trying to do that but I think what we need to understand is that it’s not just creativity.  It’s creativity, biased incentives and flexibility.  It’s the intersection of all of those things.  That if you take creative people and you put them in a situation where they have a conflict of interest and you put them in a situation where the rules are flexible this is going to be a bad recipe.  

I would say that whenever rationalization is involved, not just about creative people or not creative people, wherever rationalization is easy I would worry a lot about the rules and the regulations, about code of conduct, about standard of behavior and then I would try to eradicate both those and conflicts of interest.  So for example if you take a very creative person and you pay them like we pay judges.  So judges don’t get percentage of the verdict so they have no conflict of interest in that regard.  Somebody in finance they could make lots of money if they could see reality in one way versus the other so I think we need to think about biased incentives, conflict of interest, flexible rules and creativity and rationalization and we need to basically think about how dangerous is the concoction we’ve created of all of those ingredients.

So for example because artists never make any money anyway almost I wouldn’t worry about them, right.  What kind of bias incentives can they have?  But if you have a situation like medicine where physicians can prescribe tests and then get paid for the patients doing those tests or not just tests, procedures, now we’re dealing with a dangerous situation and now we need to worry about how flexible are the rules and what the bias incentives are and now is the place where creativity can start playing a big dangerous role.

[Music playing]

I think we can increase creativity.  I mean we can increase lots of personality traits, right?  We view ourselves often as a stable person with stable personality traits.  Lots of those can get increased or decreased depending on where we are.  And again creativity has benefits.  It’s wonderful to get more creative from time to time.  I for example would worry about increasing creativity just before people are doing their taxes or just before people start playing golf.  I mean there are cases where you can think about creativity exercises not being beneficial.

[Music playing]

So I think there is a danger of saying creative people are cheaters and non-creative people are not.  We need to remember that the truth is we all have some creativity to some degree and that creativity is something connected to rationalization and it’s not about creative people doing it and non-creative people not doing it.  It’s about all of us have the capacity to do it and the question is when do we do it more and when do we do it less and who’s doing it more and who is doing it less but the real lesson here I think for me is the fact that the ability to rationalize our dishonesty away is incredibly human and we need to think about how to fight this generally.  There’s a risk that when we think about creative people we think about Albert Einstein and then we say “Oh there’s not that many of them anyway so why worry about it.”  It turns out it’s not about Albert Einstein, it’s about rationalization and rationalization is something we can all do.  Some people slightly better.  Some people slightly worse.

And we need to figure out how we combat dishonesty because we all think about the standard model of dishonesty, the cost benefit model and our legal system and our police system and our enforcement system is basically designed to combat that one, right.  It’s all about frightening people with prison sentences and having police force.  It’s all directing our effort into the people who consider the cost and benefits.  We’re almost not directing any effort toward the cheating that is about rationalization and I think economically the second one is much more dangerous than the first one.  If you look at all of blue collar criminal in the US for a year and then you look at the financial crisis you can’t compare the two.  Actually if you probably look at all of blue collar crime from the dawn of history and you look at the financial crisis you probably can’t compare either.

[Music playing]

Steve Mirsky:            Dan Ariely’s book again is called “The Honest Truth about Dishonesty: How We Lie to Everyone – Especially Ourselves.”  You can get it as your free audio book by taking advantage of the offer at www.audible.com/sciam.  That’s it for this episode.  Get your science news at our website, www.scienceitific amaercian.com where you can check out the Scientific American staff picks, ten apps for your smart phone or tablet.  For example there’s the ISS detector which lets you know when the international space station is visible at night but where you live so you can look up and see it and follow us on Twitter where you’ll get a Tweet whenever a new article hits the website.  Our Twitter name is @sciam for Scientific American Science Talk I’m Steve Mirsky.  Thanks for clicking on us.

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