Wall Street to Lance Armstrong: We Get It!

As human beings we try to do two things at the same time. On one hand, we want to look in the mirror and feel good about ourselves … and on the other hand, we want to benefit from dishonesty. 


Dan Ariely, Ph.D. Professor of Psychology  

and Behavioral Economics, Duke University


Before you complain about all the dishonest cheaters in Washington or on Wall Street, I have to ask … how do you personally define “cheating the system”? You may be surprised to find where you really stand on this issue.

Duke University’s Dan Ariely is one of the nation’s leading thinkers on motivation and its economic impacts. And with our economy at its precipice after years of people cheating the system, today I’d like to take a look at why cheaters do what they do … and how, in the right context, we might be able to understand and even identify with their actions.

Dr. Ariely begins with the notion that humans have two conflicting motivations:

  • We want to feel good about ourselves, and yet …
  • We want to benefit from dishonesty.

He goes on to say it’s actually possible to do both. And this ability stems from flexible cognitive psychology and powerful rationalizations.

In essence, the more we are removed from the direct consequences of our actions — by time or position — the easier it is to feel OK about “cheating a little bit.”

Look at it this way.

How This Simple Dime Test Can Define Us

It’s unlikely that we would actually take 10 cents out of the petty-cash box at work. Why? Because we would feel like thieves. But if we took a pencil — costing 10 cents — we would likely feel very differently.

If we took 10 cents and went out and bought a pencil, we would still feel like a thief. This is because taking the pencil itself is removed from the money. In other words, the distance between the pencil and the money is much farther psychologically than if you took the money directly from petty cash.

Dr. Ariely goes on to say that, as an increasingly cashless society, we are creating a greater distance between ourselves and the consequences of our actions. Think about this psychological distance in the context of credit cards, e-wallets, mortgage-backed securities, stock options, and so on.

The question now becomes, with a greater psychological distance — between us and people or us and money …

Is it Just Easier to be a Cheater?

In the financial sector, take the recent LIBOR price-rigging scandal and the manipulation of interest rates. There are so many layers here that the distance between the banker manipulating the rate and the ultimate effect on the global economy is enormous.

Because of this gulf … does it make it easier for the actor to move in the wrong direction and cheat the system? It would seem so.

The bankers are in a position where their rationalizations actually shape their reality until they think of themselves as doing nothing wrong. This is until the full consequences of their actions come to light … and the cheaters are “caught,” so to speak.

But if the potential future consequents are far enough away … it is easier for the cheater to move down the wrong path.

Can Livestrong Live on?

What about what’s happened recently to the former seven-time Tour-de-France-winning Lance Armstrong? As sad as it is to watch his fall from grace, it’s interesting to look at the motivations for cheating the system — for such a long time.

I am not going to say I know all of his motives for cheating. But it would seem likely that one rationalization might stem from his high-profile advocacy for cancer survivors — raising hundreds of millions for cancer research through his Livestrong Foundation.

Granted, we can expect that most who cheat really don’t have extenuating-enough circumstances to make the act the “right” thing to do, especially for the victims. (Consider the $1.6 billion in customer funds lost in the MF Global collapse, for which Jon Corzine is widely believed to be at fault despite denying any wrongdoing.)

Might the ends have helped to justify the means, however, when the outcome was ultimately – partially — a noble one?

Motives Matter … Maybe

Armstrong’s need to win and stay on top was undoubtedly fueled in part by the belief he had to fill a role in saving the lives of cancer sufferers everywhere. In essence, “I have to do whatever it takes to win … so I can keep up my crusade against this ruthless killer … I’m saving lives.”

Of course it’s easy to look at the big cheaters — the politicians, lobbyists and Bernie Madoffs of the world — and think … “Wow, how could they do that?”

But what’s interesting in Dr. Ariely’s research is that the “big cheaters” are less the norm. The real problem lies in the fact that there are vast amounts of “little cheaters” … like you and me.

Yes, you AND me. Have you driven over the speed limit in the last week? OK, moving on ….

‘Little Cheaters,’ HUGE Losses

One study of 30,000 people uncovered 12 “big cheaters” who stole about $150 from Dr. Ariely during the study. But what is truly surprising is that it also uncovered 18,000 “little cheaters” who stole about $36,000 in the same experiment.

This study reflects the broader society as a whole. Sure there are big cheaters out there … the Madoffs, Enrons, Wall Street bankers, etc … but there are far more little cheaters.

And the magnitude of dishonesty in society seems to stem more from good people who think they are doing good … but in fact are cheating “just a little bit.”

With this in mind, all of “us” may be more of the economic problem than we are willing to accept.

And by taking personal responsibility—which I touched on in my article Why a Sound U.S. Dollar Truly Can’t Happen Without You—we can likely get our economy back on track faster than just pointing fingers at the those really bad, BIG CHEATERS!

As Dr. Ariely points out, we falsely believe that as long as we kick the bad people out and keep the good ones in … everything should work out fine.

That’s because we tend to think of people as good or bad. But the reality is, we all have the capacity to behave in a dishonest way — given the right circumstances.

Just think about it. If you were paid $5 million a year to review mortgage-backed securities, wouldn’t you find it easier to shade your view just enough to see them as a “decent” or even “good” product?

I mean they are rated. And of course there are all these complex calculations from really smart people that back up the financial projections and the value.

Can you See the Distance Building?

The problem is not one “BIG CHEATER” pushing the limits … it’s more like a bunch of “little cheaters” in a position where they are blinded by their circumstances.

But we still expect THEM to overcome their blindness … because we aren’t actually part of the problem. We would never buy a second home on cheap credit or a car we can’t really afford.

And we certainly would never take a pencil … right?

Where Do We Go from Here?

In the sport of cycling, should there be an amnesty program for drug cheats? On Wall Street … and in Washington … is there room for confession and redemption?


Dr. Ariely has some pretty interesting empirical research on confession as well. So take a few minutes and check out this animated video of Dr. Ariely’s recent talk on “The Truth About Dishonesty” and let me know what you think.

Maybe we’re all just bad … or, at least, not as good as we think.




(x/post from my article at The Campaign for a Sound Dollar)

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