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TED: Dan Ariely on Why We Cheat

Dan Ariely is a people hacker. A professor of behavioral economics at Duke University and MIT as well as director of MIT’s Center for Advanced Hindsight, Ariely deconstructs human behavior to find the hidden ways we deceive ourselves about the things we do and to construct better ways of resolving some of life’s issues. Ariely, […]

Dan_ariely

Dan Ariely is a people hacker. A professor of behavioral economics at Duke University and MIT as well as director of MIT's Center for Advanced Hindsight, Ariely deconstructs human behavior to find the hidden ways we deceive ourselves about the things we do and to construct better ways of resolving some of life's issues.

Ariely, who was born in the U.S. and raised in Israel, wrote a book called Predictably Irrational, which showed how people are irrational in calculable and dependable ways. He's also conducted tests on cheating that produced some interesting results.

In his research, Ariely gave test subjects 20 math problems to solve and told them they'd be paid cash for each correct answer. The subjects were given only five minutes to do the exam, ensuring that no one would complete it. When the time was up, the control subjects were told to count their correct answers and collect their pay.

The test group, however, was told to shred their exams before reporting their totals, to see if they'd fudge the number if no one could confirm their claim. Not surprisingly, many people in the latter group cheated. But they cheated by only a small amount. And the amount by which they cheated didn't change when they were offered more money per question. It also didn't change when they were told to pay themselves from a bowl of money.

Conventional wisdom assumes people cheat based on whether they think they'll get caught and the level of punishment they’ll receive. But Ariely says other factors come into play.

He'll be speaking about some of his findings at the Technology Entertainment and Design conference on Saturday. Wired spoke with him about his research and what it might tell us about the Bernard Madoffs and Rod Blagojevich's of the world.

Wired: What did your tests tell you about the ways people cheat and why they do it?

Dan Ariely: We came up with this idea of a fudge factor, which means that people have two goals: We have a goal to look at ourselves in the mirror and feel good about ourselves, and we have a goal to cheat and benefit from cheating. And we find that there's a balance between these two goals. That is, we cheat up to the level that we would find it comfortable [to still feel good about ourselves].

Now if we have this fudge factor, we thought that we should be able to increase it or shrink it [to affect the amount of cheating someone does]. So we tried to shrink it by getting people to recite the Ten Commandments before they took the test. And it turns out that it shrinks the fudge factor completely. It eliminates it. And it's not as if the people who are more religious or who remember more commandments cheat less. In fact even when we get atheists to swear on the Bible, they don't cheat afterwards. So it's not about fear of God; it's about reminding people of their own moral standards.

That was the first thing we discovered. Then we said let's try to increase the fudge factor [to make people cheat more]. So I distributed Cokes in refrigerators in the dorm, and I found out that people very quickly took these Cokes that did not belong to them. But when I distributed plates with $1 bills on them, nobody ever took the money.

Wired: Why would someone take a Coke but not money?

DA: When you take money, you can't help but think you're stealing. When you take a pencil, for example from work, there's all kinds of stories you can tell yourself. You can say this is something everybody does. Or, if I take a pencil home, it's actually good for work because I can work more. It's the same thing with the Coke. You can say to yourself, Maybe somebody left it on purpose, or somebody took mine once so it's okay for me to take this.

We did the [math problem] experiment with tokens instead of money to see if it would change the cheating and it did. The idea was we get people one step away from money, [and they cheat more].

As we deal with things that are more distant [from] money, the easier it is to cheat and not to think of yourself as a bad person. I think we're moving to a society where things are getting more and more removed from cash. Executives backdating stock options [can think] it's not cash, it's stock options.

Wired: What are the implications of these findings?

DA: The idea is, what are the points at which we're tempted, and can we reduce the issues at the point of temptation? When we got people to contemplate on their morality, they reduced their cheating. So the issue is, how in society we can get people to contemplate morality more when it matters.

I really think that people have good moral standards, but it's just the case that you don't go around all day asking yourself am I moral. And when you don't ask yourself am I moral, you can do all kinds of little things that don't seem to be engaging your moral compass.

Wired: So it's a matter of putting a mirror in front of people. Posting rules above the copier machine, things like that.

DA: That's right. It's basically about the mirror that reminds us who we are at the point where it matters.

Now I don't want to say this is the only factor that's going on. Take what happened in Enron. There was partly a social norm that was emerging there. Somebody started cheating a little bit, and then it became more and more a part of the social norm. You see somebody behaving in a bit more extreme way, and you adopt that way. If you stopped and thought about [what you were doing] it would be clear it was crazy, but at the moment you just accept that social standard.

The second thing that happened at Enron is that it wasn't clear what was the right social norm to apply to this particular emerging energy market. They could basically define it anyway they wanted. And, finally, they were dealing with stuff that was really very removed from money, which allowed them to [cheat].

Wired: What's the difference between the person who goes along with the standard and the whistleblower who says enough?

DA: It's a very good question, but I haven't done stuff with whistleblowers and I don't really know what makes them decide to stand up. My guess is that at some point they get sufficiently exposed to other forces from outside of the organization and that gets them to think differently but I don't really know.

Think about this CEO of Merrill Lynch who just apologized for refurbishing his bathroom for $1.2 million. I think that when he was in the midst of those things, if he thought about it, he would realize it is crazy. But he wasn't thinking about it, and nobody around him was thinking about it either. They wanted to see the world in a certain way and wanted to get these incredible bonuses. So the moment you're surrounded by all these people who think the same way, it's very hard to think differently.

Wired: What are you hoping to convey to the TED audience?

DA: That people don't predict correctly what will drive our behavior and, as a consequence, we need to be more careful. What happens is you have intuitions and axioms about the world, and you assume they are perfectly correct. I think we should just start doubting our assumptions more regularly and submitting them to empirical tests.

We understand cheating is bad, but we don't really understand where it's really coming from and how we can reduce it. The common theory says that all we need to do is to make sure we don't have bad apples and that the punishment is sufficiently severe. I think that's not the right approach. I think we need to realize that most people are not bad apples – we find very, very few people who really cheat in a big way – but a lot of people are cheating just by a little bit. [Bernard] Madoff's . . . cheating is substantially lower than everything else that was happening in the market.

The market for cheating is unbelievably big. It's estimated to by some people to be about $600 billion a year – just internal fraud and theft within companies. The market for blue-collar criminals is tiny in comparison.

Wired.com reports from TED 2009: