The (Honest) Truth About Dishonesty: How We Lie to Everyone – Especially Ourselves

As scientists, we took great care to carefully document, measure, and examine the influence of being one step removed from money. But I suspect that some companies intuitively understand this principle and use it to their advantage. Consider, for example, this letter that I received from a young consultant:

Dear Dr. Ariely,

I graduated a few years ago with a BA degree in Economics from a prestigious college and have been working at an economic consulting firm, which provides services to law firms.

The reason I decided to contact you is that I have been observing and participating in a very well documented phenomenon of overstating billable hours by economic consultants. To avoid sugar coating it, let’s call it cheating. From the most senior people all the way to the lowest analyst, the incentive structure for consultants encourages cheating: no one checks to see how much we bill for a given task; there are no clear guidelines as to what is acceptable; and if we have the lowest billability among fellow analysts, we are the most likely to get axed. These factors create the perfect environment for rampant cheating.

The lawyers themselves get a hefty cut of every hour we bill, so they don’t mind if we take longer to finish a project. While lawyers do have some incentive to keep costs down to avoid enraging clients, many of the analyses we perform are very difficult to evaluate. Lawyers know this and seem to use it to their advantage. In effect, we are cheating on their behalf; we get to keep our jobs and they get to keep an additional profit.

Here are some specific examples of how cheating is carried out in my company:

• A deadline was fast approaching and we were working extremely long hours. Budget didn’t seem to be an issue and when I asked how much of my day I should bill, my boss (a midlevel project manager) told me to take the total amount of time I was in the office and subtract two hours, one for lunch and one for dinner. I said that I had taken a number of other breaks while the server was running my programs and she said I could count that as a mental health break that would promote higher productivity later.

• A good friend of mine in the office adamantly refused to overbill and consequently had an overall billing rate that was about 20 percent lower than the average. I admire his honesty, but when it was time to lay people off, he was the first to go. What kind of message does that send to the rest of us?

• One person bills every hour he is monitoring his email for a project, whether or not he receives any work to do. He is “on-call,” he says.

• Another guy often works from home and seems to bill a lot, but when he is in the office he never seems to have any work to do.

These kinds of examples go on and on. There is no doubt that I am complicit in this behavior, but seeing it more clearly makes me want to fix the problems. Do you have any advice? What would you do in my situation?

Sincerely yours,

Jonah

Unfortunately, the problems Jonah noted are commonplace, and they are a direct outcome of the way we think about our own morality. Here is another way to think about this issue: One morning I discovered that someone had broken the window of my car and stolen my portable GPS system. Certainly, I was very annoyed, but in terms of its economic impact on my financial future, this crime had a very small effect. On the other hand, think about how much my lawyers, stockbrokers, mutual fund managers, insurance agents, and others probably take from me (and all of us) over the years by slightly overcharging, adding hidden fees, and so on. Each of these actions by itself is probably not very financially significant, but together they add up to much more than a few navigation devices. At the same time, I suspect that unlike the person who took my GPS, those white-collar transgressors think of themselves as highly moral people because their actions are relatively small and, most important, several steps removed from my pocket.

The good news is that once we understand how our dishonesty increases when we are one or more steps removed from money, we can try to clarify and emphasize the links between our actions and the people they can affect. At the same time, we can try to shorten the distance between our actions and the money in question. By taking such steps, we can become more cognizant of the consequences of our actions and, with that awareness, increase our honesty.

LESSONS FROM LOCKSMITHS

Not too long ago, one of my students named Peter told me a story that captures our misguided efforts to decrease dishonesty rather nicely.

One day, Peter locked himself out of his house, so he called around to find a locksmith. It took him a while to find one who was certified by the city to unlock doors. The locksmith finally pulled up in his truck and picked the lock in about a minute.

“I was amazed at how quickly and easily this guy was able to open the door,” Peter told me. Then he passed on a little lesson in morality he learned from the locksmith that day.

In response to Peter’s amazement, the locksmith told Peter that locks are on doors only to keep honest people honest. “One percent of people will always be honest and never steal,” the locksmith said. “Another one percent will always be dishonest and always try to pick your lock and steal your television. And the rest will be honest as long as the conditions are right—but if they are tempted enough, they’ll be dishonest too. Locks won’t protect you from the thieves, who can get in your house if they really want to. They will only protect you from the mostly honest people who might be tempted to try your door if it had no lock.”

After reflecting on these observations, I came away thinking that the locksmith was probably right. It’s not that 98 percent of people are immoral or will cheat anytime the opportunity arises; it’s more likely that most of us need little reminders to keep ourselves on the right path.

How to Get People to Cheat Less

Now that we had figured out how the fudge factor works and how to expand it, as our next step we wanted to figure out whether we could decrease the fudge factor and get people to cheat less. This idea, too, was spawned by a little joke:

A visibly upset man goes to see his rabbi one day and says, “Rabbi, you won’t believe what happened to me! Last week, someone stole my bicycle from synagogue!”

The rabbi is deeply upset by this, but after thinking for a moment, he offers a solution: “Next week come to services, sit in the front row, and when we recite the Ten Commandments, turn around and look at the people behind you. And when we get to ‘Thou shalt not steal,’ see who can’t look you in the eyes and that’s your guy.” The rabbi is very pleased with his suggestion, and so is the man.

At the next service, the rabbi is very curious to learn whether his advice panned out. He waits for the man by the doors of the synagogue, and asks him, “So, did it work?”

“Like a charm,” the man answers. “The moment we got to ‘Thou shalt not commit adultery,’ I remembered