'People won't become rational just because they get a different title'

Belmont event to host behavioral economist Ariely

The Center for Executive Education at Belmont University will on Wednesday morning host Dan Ariely at its fall leadership breakfast in the Curb Event Center Arena. Ariely is the James B. Duke professor of psychology and behavioral economics at Duke University and the author of bestsellers Predictably Irrational, The Upside of Irrationality and The Honest Truth About Dishonesty. Belmont's event — register here — is being presented in partnership with the Nashville Area Chamber of Commerce and Entrepreneurs’ Organization Nashville.

Ariely took some time early this week to chat with Post Editor Geert De Lombaerde.

NP: On what will your talk focus?

DA: I'll talk about the mistakes people make when they make decisions, about the things that guide us even though we don't realize that they do. If you don't understand what guides you and your decisions, you can create a harmful environment.

So in some ways, my talk will be pessimistic because it address the irrationality in our behavior. But on the other hand, it's optimistic in that we're working to understand that irrationality.

NP: Has our understanding of that dynamic changed as a result of the financial crisis and recession?

DA: It's been tremendously helpful because we've been able to see a greater amount of it. After the crisis, we began to recognize that there were lots of mistakes made and we're now thinking very carefully about those mistakes and our assumptions. So it's been good for this particular field in raising the awareness of our irrationality. There's been some improvement and there is some hope. But the progress is slow.

NP: Does the idea of acting irrationally and not knowing why translate to a corporate level and to executive leadership?

That's hard to say and hard to measure. During the crisis, we definitely saw some cases of willful blindness and faulty risk assessment. But my research is really about decisions being made by people. If people behave irrationally now, they won't necessarily change over time. And they won't change and become rational just because they get a different title.

NP: What is a typical reaction you see from people when they're faced with your research about widespread cheating and dishonesty?

DA: First, they think about other people rather than themselves. It's easy to see dishonesty in other people but a little harder to see it in yourself. And it's really hard to then take action. You have to be aware of your conflicts of interest in areas such as purchases — thinking about the psychology of money — and exercise plans.

NP: A cynic would say it might then be better for us to be blissfully ignorant rather than aware of the factors driving our irrationality.

DA: It's about putting knowledge up against the consequences of our actions, such as saving for retirement. Short-term benefits rule very high for us in many cases. Psychopaths look at the long term but when the rest of us are dishonest, we're not thinking about that. We're looking at the short term.

NP: Are there noticeable variances in that approach in different cultures?

DA: When it comes to cheating, we don't find big differences but that doesn't mean they don't exist. Cultures do changes how we approach our decisions, especially in any one domain. For instance, many young people in the U.S. think illegally downloading music or movies is no problem but that doesn't mean they're going to steal from a shop. They can separate one decision from the other.

Another interesting example is the savings rate in Japan, which is so much higher than in many other countries. Are Japanese people so much more disciplined and rational in other areas? No, they're not. But there is a cultural mechanism, a tradition, that overrides their first impulses when it comes to spending money. In general, we all think about these things inherently in the same way. But there is often another cultural layer that influences us on top of that.

NP: Thanks for your time.