00:00:13
human beings basically try to do two
00:00:15
things at the same time on one hand we
00:00:17
want to be able to look in the mirror
00:00:18
and feel good about ourselves on the
00:00:21
other hand we want to benefit from being
00:00:22
dishonest now you could say you could do
00:00:24
one or the other you can either look at
00:00:26
yourself as honest or you could benefit
00:00:28
from dis honesty you can't do both Well
00:00:31
turns out that thanks to our flexible
00:00:33
cognitive psychology and thanks to our
00:00:36
ability to rationalize our actions we
00:00:38
could do both and as long as we
00:00:40
rationalize our actions and as long as
00:00:42
we cheat just a little bit we can
00:00:44
benefit from cheating just a little bit
00:00:46
and at the same time we can keep
00:00:48
thinking of ourselves as honest
00:00:50
wonderful people it's all about
00:00:51
rationalization if we can rationalize
00:00:53
things to a higher degree we will be
00:00:55
able to cheat more or be more dishonest
00:00:57
and think of ourselves as good people
00:00:59
and if we can rational less we would be
00:01:01
more honest and by the way it's not as
00:01:04
if we have a lot of big cheaters we have
00:01:06
a lot of little cheaters in this in this
00:01:09
book in this research we've basically
00:01:10
tested about 30,000 people and from
00:01:12
those 30,000 people we found 50 12 big
00:01:16
cheaters and those 12 big cheaters
00:01:18
together stole about $150 for me from
00:01:21
those 30,000 people we also had 18,000
00:01:24
little cheaters and they stole together
00:01:27
$36,000 from me and I would i' like to
00:01:30
argue that this kind of reflects what we
00:01:31
have in society sure there are some big
00:01:33
cheaters out there people who just go
00:01:35
all the way but there are very few of
00:01:37
them and in fact the magnitude of dis
00:01:39
honesty we most likely see in society is
00:01:42
by good people who think they're doing
00:01:44
good work but in fact cheating just a
00:01:46
little bit but because there are so many
00:01:48
of them of us this actually has a
00:01:50
tremendous economic impact there's a
00:01:52
little joke that Johnny comes home from
00:01:56
the from school with the little note
00:01:58
that says that Johnny stole a pencil
00:02:00
from the kidu sitting next to him and
00:02:02
Johnny's father is furious and he said
00:02:05
Johnny you never never never steal a
00:02:08
pencil from the kidu sitting next to you
00:02:10
this is unacceptable I can't believe you
00:02:12
do this you're grounded for two weeks
00:02:14
and besides Johnny you know very well
00:02:16
that if you need a pencil you could just
00:02:18
say something you could just mention it
00:02:20
and I can bring you dozens of pencils
00:02:22
from the
00:02:26
office now why is this slightly amusing
00:02:30
because I think we all recognize that if
00:02:32
we took 10 cents from a petty cash box
00:02:36
we could not help but think of oursel as
00:02:37
thieves but if we took a pencil we would
00:02:40
feel very differently in fact if we took
00:02:42
a 10 cents from a petty cash box and
00:02:43
went to buy a pencil we would still feel
00:02:46
like thieves but taking a pencil is kind
00:02:48
of removed from money because if you
00:02:50
think about it we're becoming a cashless
00:02:52
Society we're becoming a society with a
00:02:54
higher distance between us and the
00:02:56
consequences of our action credit cards
00:02:59
electron elic wallets mortgage back
00:03:01
Securities stock options think about all
00:03:04
of those things that represent
00:03:05
psychological distance between us and
00:03:07
the people us and money could it be that
00:03:09
as the distance increases people can be
00:03:12
dishonest but at the moment don't think
00:03:14
of themselves as doing anything
00:03:16
dishonest and I think the banking
00:03:17
industry is kind of prime to think about
00:03:20
things exactly in that way imagine you
00:03:22
manipulate something like I don't know
00:03:24
interest rates uh there are so many
00:03:27
layers on top of that and you don't see
00:03:29
who exactly you're affecting even though
00:03:31
you might affect the whole global
00:03:33
economy that it might be very easy for
00:03:35
people to take steps in that wrong
00:03:37
direction and still think of themselves
00:03:39
generally as not doing anything Terrible
00:03:41
by the way so so in the last year and a
00:03:43
half as I've been working on the on on
00:03:45
the book every time I go to a restaurant
00:03:48
I ask the waiter if there's a way to eat
00:03:49
in this restaurant and Escape without
00:03:52
payment I said look I'm not going to do
00:03:53
it but just tell me if you were giving
00:03:55
me advice how would you tell me to do it
00:03:58
and aside from one person they always
00:04:00
have great
00:04:01
suggestion and then I say and how often
00:04:03
does it happen and they say almost never
00:04:06
they said from time to time somebody
00:04:07
walks up without paying but they walk
00:04:09
slowly and we we stop them and they just
00:04:11
say they forgot almost never people just
00:04:14
walk without payment contrast that with
00:04:18
illegal downloads my book that came out
00:04:21
about a month ago in the first two days
00:04:23
was download 20,000 times from some
00:04:26
website it's kind of ironic a book on
00:04:28
cheating was
00:04:30
but if you talk to young people
00:04:32
virtually all of them have illegal music
00:04:34
on their computers and nobody feel bad
00:04:35
about it in fact one young guy recently
00:04:38
we talked about it he stood up he said
00:04:40
excuse me I don't think this is wrong he
00:04:42
said musicians want the music to be
00:04:44
heard that's what they wrote it for and
00:04:46
label companies are evil and he said
00:04:48
beside I was not going to buy this music
00:04:50
anyway so I'm not hurting anybody and
00:04:52
everybody is doing it right so this guy
00:04:54
in fact if you listen to him he was not
00:04:56
downloading illegal stuff he was
00:04:58
fighting for freedom
00:05:00
right he was he was promoting the world
00:05:02
making it a better place an amazing
00:05:05
level of russiz that you couldn't do in
00:05:08
a restaurant you can't go and say to
00:05:11
yourself oh you know what chefs really
00:05:12
want their food to be
00:05:13
eaten and it's really on by a
00:05:16
conglomerate that is really not that
00:05:17
good and I mean some things lend
00:05:20
themselves to a much higher degree to
00:05:21
rationalization some things are much
00:05:23
harder so we talked about what gets
00:05:25
people to cheat more what would get
00:05:27
people to cheat less what would get
00:05:28
rationalization to go down to kind of
00:05:31
scrutinize their own actions being
00:05:32
reminded of values yeah we've done we've
00:05:34
done that in a couple of ways and it's
00:05:36
really quite I think optimistic we went
00:05:38
to UCLA Los Angeles and we asked about
00:05:41
500 students to try and recall the Ten
00:05:43
Commandments but after trying to recall
00:05:45
the Ten Commandments when we gave them
00:05:47
the same opportunity to be dishonest
00:05:49
nobody was dishonest in fact even when
00:05:51
we take self declared atheist and we ask
00:05:53
them to swar in the Bible and we give
00:05:55
them a chance to cheat they don't cheat
00:05:57
so this suggest that there's something
00:05:58
about reminder
00:06:00
that the moment we think about morality
00:06:02
even if it's not our own moral code all
00:06:04
of a sudden we are kind of supervising
00:06:06
ourselves to a higher degree we're more
00:06:09
thoughtful about our own actions and as
00:06:11
a consequence we let ourselves get away
00:06:13
with less activities we also looked at
00:06:16
the Catholic confession we went to talk
00:06:18
to Catholic priests and we said from an
00:06:20
economic perspective we don't understand
00:06:22
confession please explain it to us he
00:06:24
said if you can confess and be absolved
00:06:27
shouldn't you cheat more shouldn't you
00:06:29
cheat on the way to
00:06:31
confession the priest said no so here
00:06:33
are three theories how confession might
00:06:34
work one theory is that you think to
00:06:37
yourself I want to Rob this convenience
00:06:40
store but I'll have to confess it will
00:06:42
be unpleasant the priest would think
00:06:44
badly of me and this added cost makes
00:06:47
the whole thing not worthwhile we don't
00:06:49
find any evidence for that another
00:06:51
possibility is like the Ten Commandments
00:06:52
experiment I told you about you come out
00:06:54
of confession and you feel good and
00:06:56
wonderful about yourself and for a
00:06:57
little while longer you want to keep
00:06:59
that feeling of being good we find some
00:07:01
evidence for this but the most
00:07:03
interesting version is the following
00:07:05
when we give people hundreds of
00:07:06
opportunities to steal and to cheat over
00:07:08
time what we find is that people are
00:07:11
slightly dishonest balancing feeling
00:07:13
good about myself cheating a little bit
00:07:15
feeling good cheating and then at some
00:07:17
point many people switch and start
00:07:19
cheating all the time and we call this
00:07:21
switching point the what the hell effect
00:07:22
it turns out we don't have to be 100%
00:07:24
good to think of ourself as good but if
00:07:27
at some point you don't think of
00:07:28
yourself as good you might as well enjoy
00:07:31
it and many people by the way report
00:07:32
this same thing with diets you start a
00:07:35
strict diet and then you violate your
00:07:36
diet and you say ah today I'm not
00:07:38
dieting I might as well have a burger
00:07:40
and some fries I'll start tomorrow next
00:07:42
Monday or next month now if people cheat
00:07:44
a lot all the time why would they ever
00:07:46
stop why would you ever stop if you
00:07:47
think you're going to hell in the in the
00:07:48
Catholic version why would you ever stop
00:07:51
the Catholic confession might have
00:07:52
actually stumbled on this which this is
00:07:54
might be a really good idea that if you
00:07:56
are cheating a lot maybe you need to be
00:07:58
able to open a new page so we did these
00:08:00
experiments we do a non-catholic kind of
00:08:02
confession people cheat a little bit
00:08:04
they cheat a lot we give them a chance
00:08:05
to say what they have done badly we give
00:08:07
them a chance to ask for forgiveness
00:08:09
from whatever Spirits they're beli in
00:08:12
what happens after those two actions
00:08:13
together cheating goes down opening a
00:08:16
new page does seem to be very successful
00:08:19
this by the way I think is something
00:08:20
that religion figured out and the
00:08:22
question is how do we put it into Civic
00:08:24
Society should we create opportunities
00:08:26
for Bankers for example H to ask for
00:08:28
forgiveness from time to time and start
00:08:31
and start a new page people would
00:08:33
transgress there's nothing that we can
00:08:35
do about it how do we get people to feel
00:08:37
clean again and able to act on their
00:08:39
goodness let me let me just summarize
00:08:42
with the following if you think about it
00:08:45
this is really the whole thing is a
00:08:47
question of conflicts of interest and
00:08:50
conflicts of interest mean that we have
00:08:51
a pool to see reality in a certain way
00:08:54
and we could justify our view imagine
00:08:57
that you like a particular football
00:08:59
soccer team and you go to a game and the
00:09:02
referee calls a call against your team
00:09:04
is there any way but for you to think
00:09:06
the referee is evil vicious stupid blind
00:09:08
something like that of course not you
00:09:11
can't help but having your motivation
00:09:14
influence how you see reality now
00:09:16
replace your team with $5 million or
00:09:19
with something else and you could see
00:09:21
how the same forces would get you to see
00:09:22
reality in a biased way so imagine you
00:09:25
were a banker and imagine that I paid
00:09:28
you $5 million a year to view mortgage
00:09:30
back security as a good product could
00:09:32
you help but seeing them as better than
00:09:34
they are now I'm not saying that you
00:09:36
will shift your opinion from thinking
00:09:38
that are terrible to thinking that are
00:09:39
wonderful but you will probably shift
00:09:41
your understanding of them and what if
00:09:44
everybody around around you thought that
00:09:46
they were great as well and what if they
00:09:48
were difficult to compute and you were
00:09:50
sitting there with a big spreadsheet and
00:09:52
you would different calculations and
00:09:54
parameters and estimators and in the
00:09:56
bottom you would see their final value
00:09:58
but it would also reflect on your end of
00:09:59
year bonus wouldn't you shade your
00:10:02
evaluation even further and this is
00:10:04
actually quite important because if you
00:10:06
think about the whole financial crisis
00:10:08
we've taken people and we put them in
00:10:10
situations which basically are
00:10:12
guaranteed to blind or at least to
00:10:14
distort their vision and we expect
00:10:17
people to overcome that you know we all
00:10:19
have a tendency to think of people as
00:10:21
good or bad and we say as long as we
00:10:23
kick the bad people everything would be
00:10:25
fine but the reality is that we all have
00:10:28
the capacity to be quite bad under the
00:10:31
right circumstances and I think in
00:10:33
banking we've created the right
00:10:35
circumstances for everybody to misbehave
00:10:38
and because of that it's not such a
00:10:41
matter of kicking some people and
00:10:42
getting new people in it's about
00:10:44
changing the incentive structure that
00:10:46
because unless we change that we're not
00:10:48
going to get
00:10:58
forward e
