Our buggy moral code Dan Ariely
[Music]
I want to talk to you today a little bit
about the predictable irrationality and
my interest in irrational behavior is
started many years ago in hospital and I
was burned very badly and if you spend a
lot of time in hospital you’ll see a lot
of types of irrationalities and the one
that particularly bothered me in the
burned apartment was the process by
which the nurses took the bandage off me
now you must have all taken a band-aid
off at some point and you must have
wondered what’s the right approach do
you rip it off quickly short duration
but high intensity or do you take your
bandage off slowly you take a long time
but each second is not as painful which
one of those is the right approach the
nurses in my department thought that the
right approach was the ripping one so
they would grab hold and they would rip
and they would grab hold and they would
rip because I had 70% of my body burned
it would take about an hour and as you
can imagine I hated that moment of
ripping with incredible intensity and I
would try to reason with them and say
why don’t we try something else why
don’t we take it a little longer maybe
two hours instead of an hour and have
less of this intensity and the nurse
just told me two things and they told me
that they had the right model of the
patient that they knew what was the
right thing to do to minimize my pain
and they also told me that the word
patient doesn’t mean to make suggestions
or interfere or this is not just in
Hebrew by the ways in every language
I’ve had experience with so far and you
know there’s not much there wasn’t much
I could do and they kept on doing what
what they were doing and about three
years later when I left the hospital I
started studying at the University and
once the most interesting lessons I
learned lessons it was that there is an
experimental method that if you have a
question you cannot get create a replica
of this question in some abstract way
and you can try to examine this question
maybe learn something about the world so
that’s what I
I was still interested this question of
how do you take bandages of burn patient
so originally I didn’t have much money
so I went to a hardware store and I
bought a carpenter’s vise and I would
bring people to the lab and I would put
their finger in it and I would crunch it
a little bit and I would crunch it for
long periods and short periods that
painted went up and when it went down
and with breaks and without breaks all
kinds of versions of pain and when I
finished hurting people a little bit I
would ask them so how painful was this
oh how painful was this so if you had to
choose between the last two which one
would you choose I kept on doing this
for a while and then like all good
academic projects I got more funding I
moved to sounds electrical shocks
I even had a pain suit that I could get
people to feel much more pain but at the
end of this process what I learned was
that the nurses were wrong here were
wonderful people with good intentions
and plenty of experience and
nevertheless they were getting things
wrong predictably all the time it turns
out that because we don’t encode
duration in the way that we encode
intensity I would have had less pain if
the duration would have been longer and
the intensity was lower it turns out it
would have been better to start with my
face which was much more painful and
moved toward my legs giving me a trend
of improvement over time that would have
been also less painful it also turns out
would have been good to give me breaks
in the middle to kind of recuperate from
the pain all of these would have been
great things to do and my nurses had no
idea and from that point on I started
thinking are the nurses the only people
in the world who get things wrong in
this particular decision or is it more
general case and it turns out it’s a
more general case there’s a lot of
mistakes we do and I want to give you
one example of one of these
irrationalities and I want to talk to
you about cheating and the reason I
picked cheating is because it’s
interesting but also it tells us
something I think about the stock market
situation we’re in so my interest in
cheating started when Enron came on the
scene exploded all of a sudden
started thinking about what is happening
here is it the case that there is got a
few apples who are capable of doing
these things or are we talking about
endemic situation that many people are
actually capable of behaving this way so
like we usually do I decide to do a
simple experiment and here’s how it went
if you were in the experiment I would
pass you a sheet of paper with twenty
simple math problems that everybody
could solve but I wouldn’t give you
enough time when the five minutes were
over I would say pass me the sheets of
paper and I’ll pay you $1 per question
people did this I would pay people four
dollars for their task on average people
would solve four problems other people I
would tempt to cheat I would pass the
sheet of paper when the five minutes are
over I would say please shred the piece
of paper put the little pieces in your
pocket or in your backpack and tell me
how many questions you got correctly
people now solve seven questions on
average now it wasn’t as if there’s a
few bad apples a few people who did a
lot instead what we saw is a lot of
people who cheat a little bit now in the
economic theory cheating is a very
simple cost-benefit analysis you say
what’s the probability of being caught
how much do I stand to gain from
cheating and how much punishment would I
get if I get caught and you weigh these
options are to do the simple
cost-benefit analysis then you decide
whether it’s worthwhile to commit the
crime or not so we try to test this for
some people we varied how much money
they could get away with how much money
they could steal we paid them ten cents
per correct question 50 Cent’s $1 $5 $10
per correct question you would expect it
as the amount of money on the on the
table increases people would cheat more
but in fact it wasn’t the case we got a
lot of people cheating by still by a
little bit what about the probability of
being caught some people shredded half
the sheet of paper so there was some
evidence left some people shredded the
whole sheet of paper
some people shredded everything went out
of the room and paid themselves on the
ball of money that had over a hundred
dollars you would expect it as the
probability of being caught goes down
people would cheat more but again this
was not the case again a lot of people
cheated by just by a little bit and they
were uncensored to these economic
consent
so we said if people are not sensitive
to the economic rationale theory
explanations to these forces what could
be going on and we thought maybe what is
happening is that there are two forces
at one hand we all want to look at
yourself in the mirror and feel good
about ourselves so we don’t want to
cheat and the other hand we could cheat
a little bit and still feel good about
ourselves so maybe what is happening is
that there’s a level of cheating we
can’t go over but we can still benefit
from cheating at a low degree as long as
it doesn’t change our impressions about
ourselves we call this like a personal
fudge factor now how would you test a
personal fudge factor initially we said
what can we do to shrink the fudge
factor so we got people to the lab and
we said we have two tasks for you today
first we asked half the people to recall
other ten books to read in high school
or to recall the Ten Commandments and
then we tempted them with cheating turns
out the people who try to recall the Ten
Commandments and in our sample nobody
could recall the Ten Commandment but
those people who tried to recall the Ten
Commandments given the opportunity to
cheat did not cheat at all it wasn’t
that the more religious people the
people who remembered more of the
commandment cheated less and the less
religious people the people who could
remember almost any commandment you did
more the moment people thought about
trying to recall the Ten Commandments
they stopped cheating in fact even when
we give self-declared atheists the task
of swearing on the Bible and we give
them a chance to cheat they don’t cheat
at all now Ten Commandments is something
that is hard to bring into the education
system so we said why don’t we get
people to sign the honor code so we got
people to sign I understand that this
short survey falls under the MIT honor
code then this shredded it no cheating
whatsoever and this is particularly
interesting because MIT doesn’t have an
honor code
so all this was about decreasing the
fudge factor what about increasing the
fudge factor the first experiment I
walked around MIT and I distributed six
packs of cokes in their refrigerators
these were common refrigerators for the
undergrads and I came back to measure
what we technically called the half
lifetime of coke how long does it last
in the refrigerators and you can expect
it doesn’t last very long people take it
in contrast I took a plate with six $1
bills and I left those plates in the
same refrigerators no bill was ever
disappeared now this is not a good
social science experiment so to do it
better I did the same experiment as I
described to you before a third of the
people we pass the sheet they gave it
back to us a third of the people we
passed it they shredded it they came to
us and said mr. experimenter I solved X
problems give me X dollars a third of
the people when they finish reading the
piece of paper they came to us and said
mr. experimenter I solved X problems
give me X tokens we did not pay them
with dollars we pay them with something
else and then they took this something
else they walked 12 feet to the side and
exchanged it for dollars think about the
following intuition how bad would you
feel about taking a pencil from work
home compared to how bad would you feel
about taking ten cents from a petty cash
box these things feel very differently
with being a step removed from cash for
a few seconds by being paid by token
make a difference our subjects double
their cheating
I’ll tell you what I think about this in
stock market in a minute but this did
not solve the big problem I had with
anyone yet because in any one is also a
social element people see each other
behaving in fact every day when we open
the news we see examples of people
cheating what does this causes us so we
did another experiment we got the big
group of students to be in the
experiment and we prepaid them so
everybody got an envelope with all the
money for the experiment and we told
them at the end we asked them to pay us
back the money they didn’t make okay the
same thing happens when we give people
the opportunity to cheat they cheat that
you just buy a little bit all the same
but in this experiment we also higher
than acting’s to
this acting student stood up after 30
seconds and said I solved everything
what do I do now and the experimenter
said if you finished everything go home
that’s it the task is finished so now we
had a student an acting student that was
a part of the group nobody knew there
was though it was an actor and they
clearly cheated in a very very serious
way what would happen to the other
people in the group will they cheat more
or will they cheat less here is what
happens it turns out it depends on what
kind of sweatshirts they are wearing
here is the thing we ran this at a
Carnegie Mellon in Pittsburgh and the
Carnegie at Pittsburgh that two big
universities Carnegie Mellon University
of Pittsburgh all of the subjects
sitting in the experiment were Carnegie
Mellon students when the actor was
getting up was the Carnegie Mellon
student pretty it was actually a con
email student but he was a part of their
group cheating went up but when he
actually had the University of
Pittsburgh sweatshirt cheating went down
now this is important because remember
when the moment the student stood up it
made it clear to everybody that they
could get away with cheating because the
experimenter said you finished
everything go home and they worked with
the money so it wasn’t so much about the
probability of being caught again it was
about the norms for cheating somebody
from our in-group cheats and we see them
cheating we feel it’s more appropriate
as a group to behave this way but if
it’s somebody from another group these
terrible people I mean not terrible in
this but somebody we don’t want to
associate ourselves with from another
university another group office and
people awareness of honesty goes up a
little bit like the Ten Commandment
experiment and people cheat even even
less so what what have we learned from
this about cheating we’ve learned that a
lot of people can cheat they cheat just
by a little bit when we remind people
about the morality they cheat less when
we get bigger distance from cheating
from the object of money for example
people cheat more and when
we see things of cheating around us
particularly if it’s a part of our
in-group cheating goes up now if we
think about this in terms of the stock
market think about what happens what
happens in a situation when you create
something where you pay people a lot of
money to see reality in a slightly
distorted way would they not be able to
see it this way of course they would
what happens when you do other things
like you remove things from money
you call them stock or stock option
derivatives mortgage-backed securities
could it be that with those more distant
things it’s not a token for one second
it’s something that these many steps
removes for money for much longer time
could it be but people would cheat even
more and what happened to the social
environment when people see other people
behave around them I think all of those
forces worked in a very bad way in the
stock market
more generally I want to tell you
something about behavioral economics we
have many intuitions in our life and the
point is that many of these intuitions
are wrong the question is are we going
to test those intuitions we can think
about how we’re going to test this
intuition in our private life in our
business life and most particularly when
it goes to policy when we think about
things like No Child Left Behind when
you create new stock markets when you
create other policies taxation health
care and so on and the difficulty of
testing on intuition was was the big
lesson I learned when I went back to the
nurses to talk to them so I went back to
talk to them and tell them what I found
out about removing bandages and I
learned two interesting things one was
that my favorite nurse Ettie told me
that I did not take her pain into
consideration she said of course you
know it was very painful for you but
think about me as a nurse taking
removing the bandages of somebody I
liked and had to do it repeatedly over a
long period of time creating so much
torture was not something that was good
for me - and she said maybe part of the
reason what it was it was difficult for
her which was actually more interesting
than that because she said I did not
think that your intuition was right I
thought my intuition was correct so if
you think about all of your intuitions
think about it’s very hard to believe
that your intuition is wrong
she said given the fact that I thought
my intuition was right she thought her
intuition was right it was very
difficult for her to accept doing a
difficult experiment to try and check
whether she was wrong but the fact this
is the situation we’re all brawling all
the time we have very strong intuitions
about all kinds of things our own
ability how the economy work how we
should pay schoolteachers but unless we
start testing those intuitions we’re not
going to do better and just think about
how better my life would have been if
these nurses would have been willing to
check their intuition and how everything
would have been better we would just
start doing more systematic
experimentation of our intuitions thank
you very much
[Applause]
what does a machine know about itself
can it know when it needs to be repaired
and when it doesn’t in industries like
manufacturing and energy they’re using
predictive analytics to detect signs of
trouble helping some companies save
millions on maintenance because machines
seek help before they’re broken and
don’t when they’re not that’s what I’m
working on I’m an IBM er let’s build a
smarter planet