Some of the headline findings of Duke Professor Dan Ariely’s research into investor–and just plain human–behavior:
Cheating is a lot more prevalent when it’s a step removed from cash. If we’re dealing with a string of electrons instead, it’s much easier to rationalize actions that aren’t totally honest. “When cash is taken away–and that’s what’s happening to our economic system,” Ariely warns, “we will cheat by a factor bigger than we could ever imagine.”
“This is a very hard time to have trust in financial advisors,” Ariely says. After this financial crisis, he feels that the time-consuming process of regaining it has to begin with a high degree of transparency.
In these turbulent times, investing in the stock market is not for the faint of heart. “The real issue for advisors is to protect people against themselves,” Ariely says.
In a purely social environment, people often make generous and altruistic choices. But the moment money is introduced, we lose our altruistic impulses and want to get the best possible deal for ourselves.