Dishonesty, Choices and Investing
by Charles Rotblut, CFA and Dan Ariely
Dan Ariely is a professor of psychology and behavioral economics at Duke University. I spoke with him recently about how advisers and investors rationalize actions that are not in the investors’ best interests.
—Charles Rotblut
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Charles Rotblut (CR): In your new book, “The (Honest) Truth About Dishonesty” (Harper Collins, 2012) you seem to imply that people rationalize their dishonesty and that people only cheat up to a certain point. Could you elaborate?
Dan Ariely (DA): The standard view is that people who cheat do a cost/benefit analysis. They weigh the cost, the benefit, what they stand to gain, what they stand to lose. And they work within that framework.
First of all, we don’t find evidence of that. But also, if you think about it, even if you look at the cheating you see around you, you will probably come to the conclusion that you have lots of opportunities to cheat every day that you don’t take. And it is the same for everybody. It turns out that there’s this construct that we call morality, which keeps us more honest than we would be if we were perfect cost/benefit analysts.
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Dan Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University and a founding member of the Center for Advanced Hindsight. His new book is called “The (Honest) Truth About Dishonesty”.
Discussion
Really like Dr. Ariely's work and this article.
Figure 1 says that the amount of money to be gained has no effect on dishonesty. Perhaps it is a matter of definition. What happened to the idea that every man had his price?
Or this old story:
Would you do it for a million dollars?
Well, yes.
Would you do it for $50?
What do you think I am?
We've established what you are, now we're haggling over price!
posted 11 months ago by W Hawkins from Minnesota
The conflicts of interest over the compensation of CFAs can be avoided by working with a NAPFA-registered CFA. All of its members are fee-only, and they act as a fiduciary to their clients. That's about the best you can hope to avoid the conflicts mentioned in this article.
posted 10 months ago by Paul from New York
Just a question to clarify my understanding of CFA vs. CFP. I've looked up requirements for these certifications and there seems to be significant overlap. Are there any true differences that would lead an investor to choose a CFP over a CFA or vice-versa?
posted about 1 month ago by Ted Nicholas from California
