The (Honest) Truth about Dishonesty

TheHonestTruthAboutDishonesty

Behavioral economist Dan Ariely, who teaches at Duke University, is known as one of the most original designers of experiments in social science. Not surprisingly, the best-selling author’s creativity is evident throughout his latest book, The (Honest) Truth About Dishonesty. A lively tour through the impulses that cause many of us to cheat, the book offers especially keen insights into the ways in which we cut corners while still thinking of ourselves as moral people. (Gary Belsky, Via business.time.com)

This is the 3rd of Ariely’s books that I’ve read, and possibly the most relevant to readers interested in exploring evidence-based research into dishonesty. Ariely illuminates the “rationalization” corner of the fraud triangle with concrete research that can be applied by individuals, investigators, ethics educators, and corporations worried – or who should be worried – about compliance.

1. Most of us are 98-percenters.

Ariely says, “In our research over many years, we’ve found that everybody has the capacity to be dishonest and almost everybody is at some point or another.” Via business.time.com

This research brings reality to the exploration of fraud and corruption. It’s time for corporations, governments, and anyone worried about dishonesty to look at the dynamics. Implementing the findings of Behavioral Economics can make penetrate the brain’s rationalization of crossing that ethical line, using the brain to trigger a bias to ethical behavior.

2. We’ll happily cheat … until it hurts.

“The Simple Model of Rational Crime suggests that the greater the reward, the greater the likelihood that people will cheat. But we’ve found that for most of us, the biggest driver of dishonesty is the ability to rationalize our actions … Most people are able to cheat a little because they can maintain the sense of themselves as basically honest people. They won’t commit major fraud on their tax returns or insurance claims or expense reports, but they’ll cut corners or exaggerate here or there because they don’t feel that bad about it.”  Via business.time.com

Do humans do a cost-benefit analysis before committing crime? Ariely’s experiments with the Simple Model of Rational Crime (SMORE) reveal that SMORE may be an economic and criminological myth. And really, look around at interviews by ethics violators that destroyed their lives and by crossing that ethical line to the slippery slope into fraud and corruption. Rational choice? Really? Finally science says otherwise.

3. It’s no wonder people steal from work.

“In one matrix experiment, we added a condition where some participants were paid in tokens, which they knew they could quickly exchange for real money. But just having that one step of separation resulted in a significant increase in cheating … Our willingness to cheat increases as we gain psychological distance from the action.” Via business.time.com

Ariely experiments with the forces that make cheating more – and less – likely, with fascinating results. The effect of psychological distance from money increasing willingness to cheat is something professionals and regulators in the financial industry need to take a hard look at.

4. Beware the altruistic crook.

“People are able to cheat more when they cheat for other people. In some experiments, people cheated the most when they didn’t benefit at all. This makes sense if our ability to be dishonest is increased by the ability to rationalize our behavior.”   Via business.time.com

Like all of Ariely’s findings, this one struck me as being obvious – in hindsight. I’ve read several fraud cases where the fraudster got entangled in committing crime – not directly for her or his own benefit, but for “a greater cause”.  Satisfying someone else’s need doesn’t make crime and corruption “right”, but the lizard in the human hindbrain says differently.

5. One (dishonest) thing leads to another.

“Small dishonesties matter because they can lead to larger ones … while 30% of the group wearing real designer sunglasses cheated, and slightly more … more than 70% of the group wearing the fakes exaggerated the number of matrices they solved. One moral violation leads to further immorality.” Via business.time.com

Reading court sentencing reports, case legal summaries, and particularly the convicted person’s own allocutions, in retrospect so many frauds committed by people who didn’t set out to do fraud begin with a small step across the ethical line, and an everyday rationalization. The trouble is, brain scans actually reveal that the brain becomes more comfortable with dishonesty with each repetition.

6. Better to encourage honesty than discourage cheating.

“How can we help people stay honest? When we had an insurance company move the signature on a mileage reporting form from the bottom of the document to the top — so people were attesting that the information they were reporting was true before they filled out the form, rather than after — the amount of cheating went down by about 15%. Via business.time.com

Tweaks like this seem almost magical. The real magic is that they can be done using an evidence-based approach in any organization. Look at what seems to work in the experiments, design a “nudge” such as the above movement of the signature, and try it out in a test. Keep or expand the changes that work, and continue experimenting with small ways to make a big difference.

7. Honesty is a state of mind.

“In one of our experiments, we split participants into two groups. We asked one group to try to recall the 10 Commandments, the other 10 books they read in high school. Then we had everyone do some matrices. What we found was that the people in the group who recalled books engaged in the same level of cheating as most people. But the participants in the group that tried to remember the 10 Commandments didn’t cheat at all. Small reminders of ethical standards can be very powerful.”

Dan Ariely’s “The (Honest) Truth about Dishonesty is well worth reading, and check out the feature length documentry that grew out of behavioral economics research at The Dishonesty Project. This fascinating research is exciting food for the brain and very entertaining while educating. At $14.99 it’s a bargain!

(Dis)Honesty: The Truth About Lies
Feature film available online.

 

Author: V. G. Oltmann

V. G. Oltmann, MBA, CPA, CGA, CFI - Professor, Vancouver Island University 2002 - 2013 - Board Member, Association of Certified Forensic Investigators of Canada (ACFI): 2010-2013 - LinkedIn Profile: http://ca.linkedin.com/in/vgoltmann/

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