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Free Beer

On May 12, 2011, I wrote an essay as part of my application for the Sofaer International MBA at the Recanati School of Business at Tel Aviv University that I am two weeks away from completing. The focus of the essay was on the combination of psychology and business, and I researched inspiring individuals including Sendhil Mullainathan, a leading behavioral economist, and Muhammad Yunus, from Bangladesh, who won the 2006 Nobel Peace Prize for the Grameen Bank. He gives microcredit to people in poor countries; 94% of recipients are female. Additionally, I spoke with Professor Richard Thaler. His focus is on Behavioral Economy and Behavioral Finance, which links economy and psychology. Specifically, he focuses on public as well as private decision-making, which he calls Choice Architecture. Professor Thaler encouraged me to read his books, which I very much enjoyed. Thaler wants to make the world a better place by giving people tools to make better decisions regarding health, wealth and happiness.

Thaler gives much of his credit to Daniel Kahneman (who I later became very disappointed with after hearing him speak at the Presidential Conference) who with Amos Tversky, developed a cognitive basis for common human mistakes, based on biases and heuristics. He won the Nobel Prize in Economics in 2002 because of his Prospect Theory, which is all about judgment and decision-making. The findings of Professor Dan Ariely in his book Predictably Irrational, which was recommended to me by the administrative staff at Tel Aviv University, are directly related to this approach. Ariely credits much of his work to the findings of Thaler and Kahneman.

Yesterday, I had the great pleasure of hearing Dan Ariely’s lecture at the Crowne Plaza Hotel in Tel Aviv. The week before the lecture, we emailed back and forth, and I told him about Jewlicious. Before the lecture began, I introduced myself to him, and when he was done speaking, we took a picture together.

Someone asked me, who can take him seriously when he is dressed so casually? I said, even if he dressed in a bikini, everyone would take him seriously. In fact, he probably would look great in a nice polka-dot two piece.

Although I didn’t get to personally interview him (he is extremely popular…even more than I!) I took detailed notes on his lecture, which I would like to share with you.

The name of the lecture, “Free Beer,” is an honestly dishonest title for such an event. We did not get drunk off free beer, there were no bottles of delicious Scotch whiskey, there wasn’t a bar with free wine like the one at the Presidential Conference; but there was coffee, cake, and lunch. I would have much preferred to waste calories on alcohol, but the food was great and I even ran into a friend in town from NYC (when I stayed with him there, I saw a copy of Ariely’s book in his bathroom and he and I have been friends ever since).

Ariely began his lecture by asking the audience how we perceive ourselves. As it turns out, the group (myself included) was unique in that, unlike the rest of the human race, we are wonderfully honest people who never lie. Truth be told, we all lie, we know we do, and yet we still think of ourselves as perfectly honest people. How can this be? Through his research, Ariely has discovered multiple reasons explaining this fact of life.

As it turns out, we do something called “partitioning of morality,” meaning that our morality actually varies depending on different aspects of different situations. One of his favorite examples: “Modern accounting is kind of like magic with its rules on what you can and cannot do” and as we discover time after time, people often cheat in the “most rational way” for them. The field of economics views honesty as a cost benefit analysis, but its principles are based on the assumption that people are rational and do what is best for them, which is as far from accurate as possible. For example, did you know that there is no evidence that crime rates are reduces as a result of the death penalty? People simply do not think about the future or consequences, so threats like the death penalty become abstract, not concrete. It is human nature to try and balance how we feel about ourselves as honest individuals, and the benefits gained from being dishonest under certain circumstances. We still think of ourselves as honest, even when we aren’t, by using rationalization as a mechanism to decide.

“Little cheaters,” or those who take a little bit from various places, actually have a far more financially detrimental effect, but get little or no attention in society. On the other hand, the few “big cheaters” get all the attention, but actual damage done is far less devastating. People cheat for many reasons: perhaps they justify it if someone with authority or a role model says it’s okay, or if they realize that there is no downside, or if they follow others’ examples (we are especially willing to cheat if we see people cheating in our social groups and circles). What about the effect of punishment, you ask? This experiment is yet to be conducted, but Ariely suspects that there will be short-term effects, but in the long-run, punishment won’t be effective.

Ariely mentioned Rabbi Jonathan Sacks from England, who reinforces the idea that “Judaism says peace is more important than honesty,” but Brian of London who accompanied me begs to differ. Read his article, Who Will Rid Me Of This Turbulent Rabbi? for more information. One benefit of religion that even the most secular person can’t deny: if a rule is not clear and well-defined, it is easier to mess with, and religion sets clear and well-defined rules.

Moving along, we learned about the “What the Hell?” effect. In Hebrew, I think that translates to something like Im cvar, az cvar. This means that while most people can continue cheating a little all their lives, some of them take a sudden leap and become “big cheaters” because they have already been going down that slippery slope for so long. Ariely does not suggest that it is easy to stop this pattern, but he does believe that “there is something incredibly important in opening a new page” and I must agree.

Sometimes, people want to balance their good and bad doings, so they do something good only to compensate for the bad (or do something bad because they deserve it for being so good). Being honest vs. dishonest is not always about convenience and feasibility (for example, very few people leave restaurants without paying), rather it has much to do with how you view yourself and what you label as acceptable or not. Also, if you physically see the person you are offending, it is often more difficult to complete the task.

The main concern is that society is becoming more and more distant from physical cash, and as that distance grows larger, people are more and more okay with cheating. This is not always the case (take the “name your own price” model, for example), but we know that it is easier to steal, lie and cheat by use of something other than physical cash (read his books for more on this). Therefore, if it is easy to justify, people just might do the wrong thing. For example, if you lie for someone else, you suddenly think of it as a “good cause”.

People need moral reminders, as silly as it sounds. In court, first you swear to tell the truth, and then you speak. On the other hand, when signing a contract, first you go over the terms and conditions and then sign at the end. What if we signed first and then acted? Ariely’s research suggests that people will lie, steal and cheat less.

How do you stop the deterioration of honesty? Can we establish boundaries and rules of action? Ariely asked the audience, mostly Israelis, if they thought his research results showed that people lie and cheat more in Israel or in the US. Much of the audience said they were sure that Israelis cheat more, but this is not the case (I was slightly annoyed by their perceptions, I must say, but realize that every culture has this strange view of themselves as shown in the link below). In fact, across cultures, different views of honesty are acceptable, but the level/amount remains the same. Across the globe, Ariely conducts research at universities, where recipients earn cash, and bars where they earn free beer (hence the name of the lecture). The next location is Portugal, where the government is giving a grant to Ariely to test cheating (a project I am ready, willing and able to work on as soon as Dan asks it of me!).

So what is the solution to this problem of cheaters, liars and thieves? Punishment proves ineffective, so how about starting with education and media? As much as I love listening to and dancing to fun music, for years I have been repulsed by the encouragement and praising of cheating in relationships. We have gone too far, friends.

Meanwhile, let’s reflect on these findings and try to seriously think about what this means for us, our families, communities and societies.

That’s all for now, so take care and be well!

Dr. Mishmish

MBA, MA. Have more fun. Worry less. Laugh more. Be good to yourselves & others. Grow, learn, and develop.

The greatest risk in life is not taking one.

1 Comment

  1. Pingback: After Over Taxed Beer, Free Beer | Israellycool

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