Lessons in DishonestyHow we cheat ourselves into

making decisions

Warning: None of these ideas are mine!

All based on Dan Ariely’s 2012 book:“The (Honest) Truth about Dishonesty”

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Inspired by Enron consultants

Dan met someone he respected, who somehow never saw the problems in Enron while consulting there

• “wishful blindness”

• “Is dishonesty limited to a few bad apples, or is it a widespread problem”?

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Rational economics model of dishonesty

“Simple Model of Rational Crime”

• Economist Gary Becker risked a parking fine, weighed pros and cons, wrote a paper

• Led to economic theory of rational cost/benefit for making decisions

• A theory which is being disproved more and more…

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An example

Retiree volunteer tellers at charity gift stores• Of $400k of sales, $150k was disappearing• Set up a sting, caught one guy… but it kept

happening – was lots of people stealing just a little amount each

• Got everyone to write down every sale in a ledger, thievery stopped

• “We are going to take things from each other if we have a chance… many people need controls around them for them to do the right thing.”

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The matrix task

Participants were asked to solve a series of simple problems (find numbers that add up to 10)

• They were paid $2 for each correct answer

• Some were checked and counted by administrators

• But some were asked to shred the answer sheet and report verbally how many they got right

• How much did people overestimate?

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The matrix task (2)

• Checked: 4/20

• Self-reported: 6/20

• Doesn’t sound like much, but it’s a 50% increase…

• Next they tried more money: $10 per correct answer!

• How many this time?

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The matrix task (3)

• Money made no difference

• Participants added two correct answers each time, regardless of money

• In fact, people cheated slightly less for more money

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The matrix task (4)

• How about the probability of getting caught?– They put a blind person in charge of the money, but

had a hidden camera – no difference!

• Probability of standing out?– Told half that 4 was average rate, other half that 8 was

average rate – no difference!

• “Essentially we cheat up to the level that allows us to retain our own self-image as reasonably honest individuals”

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“Fudge factor theory”

• Jerome K Jerome:– “When I have caught forty fish,” said he, “then I

will tell people that I have caught fifty, and so on. But I will not lie any more than that, because it is sinful to lie.”

• More likely to “steal” tokens rather than money– People took coke cans left in dorm fridges, but not

cash

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Examples

• Billable hours

– Consultancies over-estimating hours

– The one person who was totally honest had low utilisation, and was the first to go in downsizing

• Other examples?

– Estimating assumptions when writing business plans

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How to “remind” people to be honest?

• Thinking about moral codes

– “try to write down the ten commandments”

• No one cheated!

• Signing a “promise not to cheat”

– Signing at the beginning is better than at the end

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Conflict of interest

• Dentist upselling new tools• Consultants using new techniques and

frameworks• Test: advisors paid more for bigger estimates of a

marble guessing game– Stuck to the “fudge factor” of 25%

• “Conflict-of-interest plus disclosure”– INCREASED estimates by ANOTHER 25%!– Listeners discounted their estimates, but only by 25%

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Decision fatigue, cognitive load

• We make worse decisions when we are tired

• Stanford experiment:

– A group remembered a 2-digit number

– B group remembered a 7-digit number

– On the way was a plate of fruit and a plate of cake…

– You can guess what happened!

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Ego depletion

• Judges make harsher decisions when they’re hungry

– Denying parole is the default decision – takes less thought

– Granting parole takes more deliberation, only done when judge has more energy

• So you should bring food to your next tough stakeholder meeting!

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Fakes vs luxury goods

• Having a fake handbag makes you more likely to cheat!– (30% vs 74% cheated on the matrix task)

• Having a real handbag changes your own views: “self-signaling”

• Giving money (or food) to beggars makes people feel more altruistic– “fake it till you make it” really can work

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Self-deception

• “I knew it all along” effect

– Get people to write down their predictions first

• Exaggeration

– Brian Williams

– Bill O’Reilly

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Creativity and dishonesty

• Correlation between creativity and selfishness

– “the link between creativity and dishonesty seems related to the ability to tell ourselves stories about how we are doing the right thing, even when we are not”

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Conflict of in

• Thinking about moral codes

– “try to write down the ten commandments”

• No one cheated!

• Signing a “promise not to cheat”

– Signing at the beginning is better than at the end

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