[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:01.00,0:00:03.00,Default,,0000,0000,0000,,I want to talk to you today a little bit
Dialogue: 0,0:00:03.00,0:00:06.00,Default,,0000,0000,0000,,about predictable irrationality.
Dialogue: 0,0:00:06.00,0:00:10.00,Default,,0000,0000,0000,,And my interest in irrational behavior
Dialogue: 0,0:00:10.00,0:00:13.00,Default,,0000,0000,0000,,started many years ago in the hospital.
Dialogue: 0,0:00:13.00,0:00:17.00,Default,,0000,0000,0000,,I was burned very badly.
Dialogue: 0,0:00:17.00,0:00:20.00,Default,,0000,0000,0000,,And if you spend a lot of time in hospital,
Dialogue: 0,0:00:20.00,0:00:23.00,Default,,0000,0000,0000,,you'll see a lot of types of irrationalities.
Dialogue: 0,0:00:23.00,0:00:28.00,Default,,0000,0000,0000,,And the one that particularly bothered me in the burn department
Dialogue: 0,0:00:28.00,0:00:32.00,Default,,0000,0000,0000,,was the process by which the nurses took the bandage off me.
Dialogue: 0,0:00:33.00,0:00:35.00,Default,,0000,0000,0000,,Now, you must have all taken a Band-Aid off at some point,
Dialogue: 0,0:00:35.00,0:00:38.00,Default,,0000,0000,0000,,and you must have wondered what's the right approach.
Dialogue: 0,0:00:38.00,0:00:42.00,Default,,0000,0000,0000,,Do you rip it off quickly -- short duration but high intensity --
Dialogue: 0,0:00:42.00,0:00:44.00,Default,,0000,0000,0000,,or do you take your Band-Aid off slowly --
Dialogue: 0,0:00:44.00,0:00:48.00,Default,,0000,0000,0000,,you take a long time, but each second is not as painful --
Dialogue: 0,0:00:48.00,0:00:51.00,Default,,0000,0000,0000,,which one of those is the right approach?
Dialogue: 0,0:00:51.00,0:00:55.00,Default,,0000,0000,0000,,The nurses in my department thought that the right approach
Dialogue: 0,0:00:55.00,0:00:58.00,Default,,0000,0000,0000,,was the ripping one, so they would grab hold and they would rip,
Dialogue: 0,0:00:58.00,0:01:00.00,Default,,0000,0000,0000,,and they would grab hold and they would rip.
Dialogue: 0,0:01:00.00,0:01:04.00,Default,,0000,0000,0000,,And because I had 70 percent of my body burned, it would take about an hour.
Dialogue: 0,0:01:04.00,0:01:07.00,Default,,0000,0000,0000,,And as you can imagine,
Dialogue: 0,0:01:07.00,0:01:11.00,Default,,0000,0000,0000,,I hated that moment of ripping with incredible intensity.
Dialogue: 0,0:01:11.00,0:01:13.00,Default,,0000,0000,0000,,And I would try to reason with them and say,
Dialogue: 0,0:01:13.00,0:01:14.00,Default,,0000,0000,0000,,"Why don't we try something else?
Dialogue: 0,0:01:14.00,0:01:16.00,Default,,0000,0000,0000,,Why don't we take it a little longer --
Dialogue: 0,0:01:16.00,0:01:21.00,Default,,0000,0000,0000,,maybe two hours instead of an hour -- and have less of this intensity?"
Dialogue: 0,0:01:21.00,0:01:23.00,Default,,0000,0000,0000,,And the nurses told me two things.
Dialogue: 0,0:01:23.00,0:01:27.00,Default,,0000,0000,0000,,They told me that they had the right model of the patient --
Dialogue: 0,0:01:27.00,0:01:30.00,Default,,0000,0000,0000,,that they knew what was the right thing to do to minimize my pain --
Dialogue: 0,0:01:30.00,0:01:33.00,Default,,0000,0000,0000,,and they also told me that the word patient doesn't mean
Dialogue: 0,0:01:33.00,0:01:35.00,Default,,0000,0000,0000,,to make suggestions or to interfere or ...
Dialogue: 0,0:01:35.00,0:01:38.00,Default,,0000,0000,0000,,This is not just in Hebrew, by the way.
Dialogue: 0,0:01:38.00,0:01:41.00,Default,,0000,0000,0000,,It's in every language I've had experience with so far.
Dialogue: 0,0:01:41.00,0:01:45.00,Default,,0000,0000,0000,,And, you know, there's not much -- there wasn't much I could do,
Dialogue: 0,0:01:45.00,0:01:48.00,Default,,0000,0000,0000,,and they kept on doing what they were doing.
Dialogue: 0,0:01:48.00,0:01:50.00,Default,,0000,0000,0000,,And about three years later, when I left the hospital,
Dialogue: 0,0:01:50.00,0:01:53.00,Default,,0000,0000,0000,,I started studying at the university.
Dialogue: 0,0:01:53.00,0:01:56.00,Default,,0000,0000,0000,,And one of the most interesting lessons I learned
Dialogue: 0,0:01:56.00,0:01:58.00,Default,,0000,0000,0000,,was that there is an experimental method
Dialogue: 0,0:01:58.00,0:02:02.00,Default,,0000,0000,0000,,that if you have a question you can create a replica of this question
Dialogue: 0,0:02:02.00,0:02:06.00,Default,,0000,0000,0000,,in some abstract way, and you can try to examine this question,
Dialogue: 0,0:02:06.00,0:02:08.00,Default,,0000,0000,0000,,maybe learn something about the world.
Dialogue: 0,0:02:08.00,0:02:10.00,Default,,0000,0000,0000,,So that's what I did.
Dialogue: 0,0:02:10.00,0:02:11.00,Default,,0000,0000,0000,,I was still interested
Dialogue: 0,0:02:11.00,0:02:13.00,Default,,0000,0000,0000,,in this question of how do you take bandages off burn patients.
Dialogue: 0,0:02:13.00,0:02:16.00,Default,,0000,0000,0000,,So originally I didn't have much money,
Dialogue: 0,0:02:16.00,0:02:20.00,Default,,0000,0000,0000,,so I went to a hardware store and I bought a carpenter's vice.
Dialogue: 0,0:02:20.00,0:02:24.00,Default,,0000,0000,0000,,And I would bring people to the lab and I would put their finger in it,
Dialogue: 0,0:02:24.00,0:02:26.00,Default,,0000,0000,0000,,and I would crunch it a little bit.
Dialogue: 0,0:02:26.00,0:02:28.00,Default,,0000,0000,0000,,(Laughter)
Dialogue: 0,0:02:28.00,0:02:31.00,Default,,0000,0000,0000,,And I would crunch it for long periods and short periods,
Dialogue: 0,0:02:31.00,0:02:33.00,Default,,0000,0000,0000,,and pain that went up and pain that went down,
Dialogue: 0,0:02:33.00,0:02:37.00,Default,,0000,0000,0000,,and with breaks and without breaks -- all kinds of versions of pain.
Dialogue: 0,0:02:37.00,0:02:39.00,Default,,0000,0000,0000,,And when I finished hurting people a little bit, I would ask them,
Dialogue: 0,0:02:39.00,0:02:41.00,Default,,0000,0000,0000,,so, how painful was this? Or, how painful was this?
Dialogue: 0,0:02:41.00,0:02:43.00,Default,,0000,0000,0000,,Or, if you had to choose between the last two,
Dialogue: 0,0:02:43.00,0:02:45.00,Default,,0000,0000,0000,,which one would you choose?
Dialogue: 0,0:02:45.00,0:02:48.00,Default,,0000,0000,0000,,(Laughter)
Dialogue: 0,0:02:48.00,0:02:51.00,Default,,0000,0000,0000,,I kept on doing this for a while.
Dialogue: 0,0:02:51.00,0:02:53.00,Default,,0000,0000,0000,,(Laughter)
Dialogue: 0,0:02:53.00,0:02:57.00,Default,,0000,0000,0000,,And then, like all good academic projects, I got more funding.
Dialogue: 0,0:02:57.00,0:02:59.00,Default,,0000,0000,0000,,I moved to sounds, electrical shocks --
Dialogue: 0,0:02:59.00,0:03:04.00,Default,,0000,0000,0000,,I even had a pain suit that I could get people to feel much more pain.
Dialogue: 0,0:03:04.00,0:03:08.00,Default,,0000,0000,0000,,But at the end of this process,
Dialogue: 0,0:03:08.00,0:03:11.00,Default,,0000,0000,0000,,what I learned was that the nurses were wrong.
Dialogue: 0,0:03:11.00,0:03:14.00,Default,,0000,0000,0000,,Here were wonderful people with good intentions
Dialogue: 0,0:03:14.00,0:03:16.00,Default,,0000,0000,0000,,and plenty of experience, and nevertheless
Dialogue: 0,0:03:16.00,0:03:20.00,Default,,0000,0000,0000,,they were getting things wrong predictably all the time.
Dialogue: 0,0:03:20.00,0:03:23.00,Default,,0000,0000,0000,,It turns out that because we don't encode duration
Dialogue: 0,0:03:23.00,0:03:25.00,Default,,0000,0000,0000,,in the way that we encode intensity,
Dialogue: 0,0:03:25.00,0:03:29.00,Default,,0000,0000,0000,,I would have had less pain if the duration would have been longer
Dialogue: 0,0:03:29.00,0:03:31.00,Default,,0000,0000,0000,,and the intensity was lower.
Dialogue: 0,0:03:31.00,0:03:34.00,Default,,0000,0000,0000,,It turns out it would have been better to start with my face,
Dialogue: 0,0:03:34.00,0:03:36.00,Default,,0000,0000,0000,,which was much more painful, and move toward my legs,
Dialogue: 0,0:03:36.00,0:03:39.00,Default,,0000,0000,0000,,giving me a trend of improvement over time --
Dialogue: 0,0:03:39.00,0:03:40.00,Default,,0000,0000,0000,,that would have been also less painful.
Dialogue: 0,0:03:40.00,0:03:42.00,Default,,0000,0000,0000,,And it also turns out that it would have been good
Dialogue: 0,0:03:42.00,0:03:44.00,Default,,0000,0000,0000,,to give me breaks in the middle to kind of recuperate from the pain.
Dialogue: 0,0:03:44.00,0:03:46.00,Default,,0000,0000,0000,,All of these would have been great things to do,
Dialogue: 0,0:03:46.00,0:03:49.00,Default,,0000,0000,0000,,and my nurses had no idea.
Dialogue: 0,0:03:49.00,0:03:50.00,Default,,0000,0000,0000,,And from that point on I started thinking,
Dialogue: 0,0:03:50.00,0:03:53.00,Default,,0000,0000,0000,,are the nurses the only people in the world who get things wrong
Dialogue: 0,0:03:53.00,0:03:56.00,Default,,0000,0000,0000,,in this particular decision, or is it a more general case?
Dialogue: 0,0:03:56.00,0:03:58.00,Default,,0000,0000,0000,,And it turns out it's a more general case --
Dialogue: 0,0:03:58.00,0:04:01.00,Default,,0000,0000,0000,,there's a lot of mistakes we do.
Dialogue: 0,0:04:01.00,0:04:06.00,Default,,0000,0000,0000,,And I want to give you one example of one of these irrationalities,
Dialogue: 0,0:04:06.00,0:04:09.00,Default,,0000,0000,0000,,and I want to talk to you about cheating.
Dialogue: 0,0:04:09.00,0:04:11.00,Default,,0000,0000,0000,,And the reason I picked cheating is because it's interesting,
Dialogue: 0,0:04:11.00,0:04:13.00,Default,,0000,0000,0000,,but also it tells us something, I think,
Dialogue: 0,0:04:13.00,0:04:16.00,Default,,0000,0000,0000,,about the stock market situation we're in.
Dialogue: 0,0:04:16.00,0:04:19.00,Default,,0000,0000,0000,,So, my interest in cheating started
Dialogue: 0,0:04:19.00,0:04:21.00,Default,,0000,0000,0000,,when Enron came on the scene, exploded all of a sudden,
Dialogue: 0,0:04:21.00,0:04:24.00,Default,,0000,0000,0000,,and I started thinking about what is happening here.
Dialogue: 0,0:04:24.00,0:04:25.00,Default,,0000,0000,0000,,Is it the case that there was kind of
Dialogue: 0,0:04:25.00,0:04:28.00,Default,,0000,0000,0000,,a few apples who are capable of doing these things,
Dialogue: 0,0:04:28.00,0:04:30.00,Default,,0000,0000,0000,,or are we talking a more endemic situation,
Dialogue: 0,0:04:30.00,0:04:34.00,Default,,0000,0000,0000,,that many people are actually capable of behaving this way?
Dialogue: 0,0:04:34.00,0:04:38.00,Default,,0000,0000,0000,,So, like we usually do, I decided to do a simple experiment.
Dialogue: 0,0:04:38.00,0:04:39.00,Default,,0000,0000,0000,,And here's how it went.
Dialogue: 0,0:04:39.00,0:04:42.00,Default,,0000,0000,0000,,If you were in the experiment, I would pass you a sheet of paper
Dialogue: 0,0:04:42.00,0:04:46.00,Default,,0000,0000,0000,,with 20 simple math problems that everybody could solve,
Dialogue: 0,0:04:46.00,0:04:48.00,Default,,0000,0000,0000,,but I wouldn't give you enough time.
Dialogue: 0,0:04:48.00,0:04:50.00,Default,,0000,0000,0000,,When the five minutes were over, I would say,
Dialogue: 0,0:04:50.00,0:04:53.00,Default,,0000,0000,0000,,"Pass me the sheets of paper, and I'll pay you a dollar per question."
Dialogue: 0,0:04:53.00,0:04:57.00,Default,,0000,0000,0000,,People did this. I would pay people four dollars for their task --
Dialogue: 0,0:04:57.00,0:04:59.00,Default,,0000,0000,0000,,on average people would solve four problems.
Dialogue: 0,0:04:59.00,0:05:02.00,Default,,0000,0000,0000,,Other people I would tempt to cheat.
Dialogue: 0,0:05:02.00,0:05:03.00,Default,,0000,0000,0000,,I would pass their sheet of paper.
Dialogue: 0,0:05:03.00,0:05:05.00,Default,,0000,0000,0000,,When the five minutes were over, I would say,
Dialogue: 0,0:05:05.00,0:05:06.00,Default,,0000,0000,0000,,"Please shred the piece of paper.
Dialogue: 0,0:05:06.00,0:05:09.00,Default,,0000,0000,0000,,Put the little pieces in your pocket or in your backpack,
Dialogue: 0,0:05:09.00,0:05:12.00,Default,,0000,0000,0000,,and tell me how many questions you got correctly."
Dialogue: 0,0:05:12.00,0:05:15.00,Default,,0000,0000,0000,,People now solved seven questions on average.
Dialogue: 0,0:05:15.00,0:05:20.00,Default,,0000,0000,0000,,Now, it wasn't as if there was a few bad apples --
Dialogue: 0,0:05:20.00,0:05:23.00,Default,,0000,0000,0000,,a few people cheated a lot.
Dialogue: 0,0:05:23.00,0:05:26.00,Default,,0000,0000,0000,,Instead, what we saw is a lot of people who cheat a little bit.
Dialogue: 0,0:05:26.00,0:05:29.00,Default,,0000,0000,0000,,Now, in economic theory,
Dialogue: 0,0:05:29.00,0:05:32.00,Default,,0000,0000,0000,,cheating is a very simple cost-benefit analysis.
Dialogue: 0,0:05:32.00,0:05:34.00,Default,,0000,0000,0000,,You say, what's the probability of being caught?
Dialogue: 0,0:05:34.00,0:05:37.00,Default,,0000,0000,0000,,How much do I stand to gain from cheating?
Dialogue: 0,0:05:37.00,0:05:39.00,Default,,0000,0000,0000,,And how much punishment would I get if I get caught?
Dialogue: 0,0:05:39.00,0:05:41.00,Default,,0000,0000,0000,,And you weigh these options out --
Dialogue: 0,0:05:41.00,0:05:43.00,Default,,0000,0000,0000,,you do the simple cost-benefit analysis,
Dialogue: 0,0:05:43.00,0:05:46.00,Default,,0000,0000,0000,,and you decide whether it's worthwhile to commit the crime or not.
Dialogue: 0,0:05:46.00,0:05:48.00,Default,,0000,0000,0000,,So, we try to test this.
Dialogue: 0,0:05:48.00,0:05:52.00,Default,,0000,0000,0000,,For some people, we varied how much money they could get away with --
Dialogue: 0,0:05:52.00,0:05:53.00,Default,,0000,0000,0000,,how much money they could steal.
Dialogue: 0,0:05:53.00,0:05:56.00,Default,,0000,0000,0000,,We paid them 10 cents per correct question, 50 cents,
Dialogue: 0,0:05:56.00,0:05:59.00,Default,,0000,0000,0000,,a dollar, five dollars, 10 dollars per correct question.
Dialogue: 0,0:05:59.00,0:06:03.00,Default,,0000,0000,0000,,You would expect that as the amount of money on the table increases,
Dialogue: 0,0:06:03.00,0:06:06.00,Default,,0000,0000,0000,,people would cheat more, but in fact it wasn't the case.
Dialogue: 0,0:06:06.00,0:06:09.00,Default,,0000,0000,0000,,We got a lot of people cheating by stealing by a little bit.
Dialogue: 0,0:06:09.00,0:06:12.00,Default,,0000,0000,0000,,What about the probability of being caught?
Dialogue: 0,0:06:12.00,0:06:14.00,Default,,0000,0000,0000,,Some people shredded half the sheet of paper,
Dialogue: 0,0:06:14.00,0:06:15.00,Default,,0000,0000,0000,,so there was some evidence left.
Dialogue: 0,0:06:15.00,0:06:17.00,Default,,0000,0000,0000,,Some people shredded the whole sheet of paper.
Dialogue: 0,0:06:17.00,0:06:20.00,Default,,0000,0000,0000,,Some people shredded everything, went out of the room,
Dialogue: 0,0:06:20.00,0:06:23.00,Default,,0000,0000,0000,,and paid themselves from the bowl of money that had over 100 dollars.
Dialogue: 0,0:06:23.00,0:06:26.00,Default,,0000,0000,0000,,You would expect that as the probability of being caught goes down,
Dialogue: 0,0:06:26.00,0:06:29.00,Default,,0000,0000,0000,,people would cheat more, but again, this was not the case.
Dialogue: 0,0:06:29.00,0:06:32.00,Default,,0000,0000,0000,,Again, a lot of people cheated by just by a little bit,
Dialogue: 0,0:06:32.00,0:06:35.00,Default,,0000,0000,0000,,and they were insensitive to these economic incentives.
Dialogue: 0,0:06:35.00,0:06:36.00,Default,,0000,0000,0000,,So we said, "If people are not sensitive
Dialogue: 0,0:06:36.00,0:06:41.00,Default,,0000,0000,0000,,to the economic rational theory explanations, to these forces,
Dialogue: 0,0:06:41.00,0:06:44.00,Default,,0000,0000,0000,,what could be going on?"
Dialogue: 0,0:06:44.00,0:06:47.00,Default,,0000,0000,0000,,And we thought maybe what is happening is that there are two forces.
Dialogue: 0,0:06:47.00,0:06:49.00,Default,,0000,0000,0000,,At one hand, we all want to look at ourselves in the mirror
Dialogue: 0,0:06:49.00,0:06:52.00,Default,,0000,0000,0000,,and feel good about ourselves, so we don't want to cheat.
Dialogue: 0,0:06:52.00,0:06:54.00,Default,,0000,0000,0000,,On the other hand, we can cheat a little bit,
Dialogue: 0,0:06:54.00,0:06:56.00,Default,,0000,0000,0000,,and still feel good about ourselves.
Dialogue: 0,0:06:56.00,0:06:57.00,Default,,0000,0000,0000,,So, maybe what is happening is that
Dialogue: 0,0:06:57.00,0:06:59.00,Default,,0000,0000,0000,,there's a level of cheating we can't go over,
Dialogue: 0,0:06:59.00,0:07:03.00,Default,,0000,0000,0000,,but we can still benefit from cheating at a low degree,
Dialogue: 0,0:07:03.00,0:07:06.00,Default,,0000,0000,0000,,as long as it doesn't change our impressions about ourselves.
Dialogue: 0,0:07:06.00,0:07:09.00,Default,,0000,0000,0000,,We call this like a personal fudge factor.
Dialogue: 0,0:07:10.00,0:07:14.00,Default,,0000,0000,0000,,Now, how would you test a personal fudge factor?
Dialogue: 0,0:07:14.00,0:07:18.00,Default,,0000,0000,0000,,Initially we said, what can we do to shrink the fudge factor?
Dialogue: 0,0:07:18.00,0:07:20.00,Default,,0000,0000,0000,,So, we got people to the lab, and we said,
Dialogue: 0,0:07:20.00,0:07:22.00,Default,,0000,0000,0000,,"We have two tasks for you today."
Dialogue: 0,0:07:22.00,0:07:23.00,Default,,0000,0000,0000,,First, we asked half the people
Dialogue: 0,0:07:23.00,0:07:25.00,Default,,0000,0000,0000,,to recall either 10 books they read in high school,
Dialogue: 0,0:07:25.00,0:07:28.00,Default,,0000,0000,0000,,or to recall The Ten Commandments,
Dialogue: 0,0:07:28.00,0:07:30.00,Default,,0000,0000,0000,,and then we tempted them with cheating.
Dialogue: 0,0:07:30.00,0:07:33.00,Default,,0000,0000,0000,,Turns out the people who tried to recall The Ten Commandments --
Dialogue: 0,0:07:33.00,0:07:35.00,Default,,0000,0000,0000,,and in our sample nobody could recall all of The Ten Commandments --
Dialogue: 0,0:07:36.00,0:07:40.00,Default,,0000,0000,0000,,but those people who tried to recall The Ten Commandments,
Dialogue: 0,0:07:40.00,0:07:43.00,Default,,0000,0000,0000,,given the opportunity to cheat, did not cheat at all.
Dialogue: 0,0:07:43.00,0:07:45.00,Default,,0000,0000,0000,,It wasn't that the more religious people --
Dialogue: 0,0:07:45.00,0:07:46.00,Default,,0000,0000,0000,,the people who remembered more of the Commandments -- cheated less,
Dialogue: 0,0:07:46.00,0:07:48.00,Default,,0000,0000,0000,,and the less religious people --
Dialogue: 0,0:07:48.00,0:07:49.00,Default,,0000,0000,0000,,the people who couldn't remember almost any Commandments --
Dialogue: 0,0:07:49.00,0:07:51.00,Default,,0000,0000,0000,,cheated more.
Dialogue: 0,0:07:51.00,0:07:55.00,Default,,0000,0000,0000,,The moment people thought about trying to recall The Ten Commandments,
Dialogue: 0,0:07:55.00,0:07:56.00,Default,,0000,0000,0000,,they stopped cheating.
Dialogue: 0,0:07:56.00,0:07:58.00,Default,,0000,0000,0000,,In fact, even when we gave self-declared atheists
Dialogue: 0,0:07:58.00,0:08:02.00,Default,,0000,0000,0000,,the task of swearing on the Bible and we give them a chance to cheat,
Dialogue: 0,0:08:02.00,0:08:04.00,Default,,0000,0000,0000,,they don't cheat at all.
Dialogue: 0,0:08:06.00,0:08:08.00,Default,,0000,0000,0000,,Now, Ten Commandments is something that is hard
Dialogue: 0,0:08:08.00,0:08:10.00,Default,,0000,0000,0000,,to bring into the education system, so we said,
Dialogue: 0,0:08:10.00,0:08:12.00,Default,,0000,0000,0000,,"Why don't we get people to sign the honor code?"
Dialogue: 0,0:08:12.00,0:08:14.00,Default,,0000,0000,0000,,So, we got people to sign,
Dialogue: 0,0:08:14.00,0:08:18.00,Default,,0000,0000,0000,,"I understand that this short survey falls under the MIT Honor Code."
Dialogue: 0,0:08:18.00,0:08:21.00,Default,,0000,0000,0000,,Then they shredded it. No cheating whatsoever.
Dialogue: 0,0:08:21.00,0:08:22.00,Default,,0000,0000,0000,,And this is particularly interesting,
Dialogue: 0,0:08:22.00,0:08:24.00,Default,,0000,0000,0000,,because MIT doesn't have an honor code.
Dialogue: 0,0:08:24.00,0:08:29.00,Default,,0000,0000,0000,,(Laughter)
Dialogue: 0,0:08:29.00,0:08:33.00,Default,,0000,0000,0000,,So, all this was about decreasing the fudge factor.
Dialogue: 0,0:08:33.00,0:08:36.00,Default,,0000,0000,0000,,What about increasing the fudge factor?
Dialogue: 0,0:08:36.00,0:08:38.00,Default,,0000,0000,0000,,The first experiment -- I walked around MIT
Dialogue: 0,0:08:38.00,0:08:41.00,Default,,0000,0000,0000,,and I distributed six-packs of Cokes in the refrigerators --
Dialogue: 0,0:08:41.00,0:08:43.00,Default,,0000,0000,0000,,these were common refrigerators for the undergrads.
Dialogue: 0,0:08:43.00,0:08:46.00,Default,,0000,0000,0000,,And I came back to measure what we technically call
Dialogue: 0,0:08:46.00,0:08:50.00,Default,,0000,0000,0000,,the half-lifetime of Coke -- how long does it last in the refrigerators?
Dialogue: 0,0:08:50.00,0:08:53.00,Default,,0000,0000,0000,,As you can expect it doesn't last very long; people take it.
Dialogue: 0,0:08:53.00,0:08:57.00,Default,,0000,0000,0000,,In contrast, I took a plate with six one-dollar bills,
Dialogue: 0,0:08:57.00,0:09:00.00,Default,,0000,0000,0000,,and I left those plates in the same refrigerators.
Dialogue: 0,0:09:00.00,0:09:01.00,Default,,0000,0000,0000,,No bill ever disappeared.
Dialogue: 0,0:09:01.00,0:09:04.00,Default,,0000,0000,0000,,Now, this is not a good social science experiment,
Dialogue: 0,0:09:04.00,0:09:07.00,Default,,0000,0000,0000,,so to do it better I did the same experiment
Dialogue: 0,0:09:07.00,0:09:09.00,Default,,0000,0000,0000,,as I described to you before.
Dialogue: 0,0:09:09.00,0:09:12.00,Default,,0000,0000,0000,,A third of the people we passed the sheet, they gave it back to us.
Dialogue: 0,0:09:12.00,0:09:15.00,Default,,0000,0000,0000,,A third of the people we passed it to, they shredded it,
Dialogue: 0,0:09:15.00,0:09:16.00,Default,,0000,0000,0000,,they came to us and said,
Dialogue: 0,0:09:16.00,0:09:19.00,Default,,0000,0000,0000,,"Mr. Experimenter, I solved X problems. Give me X dollars."
Dialogue: 0,0:09:19.00,0:09:22.00,Default,,0000,0000,0000,,A third of the people, when they finished shredding the piece of paper,
Dialogue: 0,0:09:22.00,0:09:24.00,Default,,0000,0000,0000,,they came to us and said,
Dialogue: 0,0:09:24.00,0:09:30.00,Default,,0000,0000,0000,,"Mr Experimenter, I solved X problems. Give me X tokens."
Dialogue: 0,0:09:30.00,0:09:33.00,Default,,0000,0000,0000,,We did not pay them with dollars; we paid them with something else.
Dialogue: 0,0:09:33.00,0:09:36.00,Default,,0000,0000,0000,,And then they took the something else, they walked 12 feet to the side,
Dialogue: 0,0:09:36.00,0:09:38.00,Default,,0000,0000,0000,,and exchanged it for dollars.
Dialogue: 0,0:09:38.00,0:09:40.00,Default,,0000,0000,0000,,Think about the following intuition.
Dialogue: 0,0:09:40.00,0:09:43.00,Default,,0000,0000,0000,,How bad would you feel about taking a pencil from work home,
Dialogue: 0,0:09:43.00,0:09:45.00,Default,,0000,0000,0000,,compared to how bad would you feel
Dialogue: 0,0:09:45.00,0:09:47.00,Default,,0000,0000,0000,,about taking 10 cents from a petty cash box?
Dialogue: 0,0:09:47.00,0:09:50.00,Default,,0000,0000,0000,,These things feel very differently.
Dialogue: 0,0:09:50.00,0:09:53.00,Default,,0000,0000,0000,,Would being a step removed from cash for a few seconds
Dialogue: 0,0:09:53.00,0:09:56.00,Default,,0000,0000,0000,,by being paid by token make a difference?
Dialogue: 0,0:09:56.00,0:09:58.00,Default,,0000,0000,0000,,Our subjects doubled their cheating.
Dialogue: 0,0:09:58.00,0:10:00.00,Default,,0000,0000,0000,,I'll tell you what I think
Dialogue: 0,0:10:00.00,0:10:02.00,Default,,0000,0000,0000,,about this and the stock market in a minute.
Dialogue: 0,0:10:03.00,0:10:07.00,Default,,0000,0000,0000,,But this did not solve the big problem I had with Enron yet,
Dialogue: 0,0:10:07.00,0:10:10.00,Default,,0000,0000,0000,,because in Enron, there's also a social element.
Dialogue: 0,0:10:10.00,0:10:11.00,Default,,0000,0000,0000,,People see each other behaving.
Dialogue: 0,0:10:11.00,0:10:13.00,Default,,0000,0000,0000,,In fact, every day when we open the news
Dialogue: 0,0:10:13.00,0:10:15.00,Default,,0000,0000,0000,,we see examples of people cheating.
Dialogue: 0,0:10:15.00,0:10:18.00,Default,,0000,0000,0000,,What does this cause us?
Dialogue: 0,0:10:18.00,0:10:19.00,Default,,0000,0000,0000,,So, we did another experiment.
Dialogue: 0,0:10:19.00,0:10:22.00,Default,,0000,0000,0000,,We got a big group of students to be in the experiment,
Dialogue: 0,0:10:22.00,0:10:23.00,Default,,0000,0000,0000,,and we prepaid them.
Dialogue: 0,0:10:23.00,0:10:26.00,Default,,0000,0000,0000,,So everybody got an envelope with all the money for the experiment,
Dialogue: 0,0:10:26.00,0:10:28.00,Default,,0000,0000,0000,,and we told them that at the end, we asked them
Dialogue: 0,0:10:28.00,0:10:32.00,Default,,0000,0000,0000,,to pay us back the money they didn't make. OK?
Dialogue: 0,0:10:32.00,0:10:33.00,Default,,0000,0000,0000,,The same thing happens.
Dialogue: 0,0:10:33.00,0:10:35.00,Default,,0000,0000,0000,,When we give people the opportunity to cheat, they cheat.
Dialogue: 0,0:10:35.00,0:10:38.00,Default,,0000,0000,0000,,They cheat just by a little bit, all the same.
Dialogue: 0,0:10:38.00,0:10:41.00,Default,,0000,0000,0000,,But in this experiment we also hired an acting student.
Dialogue: 0,0:10:41.00,0:10:45.00,Default,,0000,0000,0000,,This acting student stood up after 30 seconds, and said,
Dialogue: 0,0:10:45.00,0:10:48.00,Default,,0000,0000,0000,,"I solved everything. What do I do now?"
Dialogue: 0,0:10:48.00,0:10:52.00,Default,,0000,0000,0000,,And the experimenter said, "If you've finished everything, go home.
Dialogue: 0,0:10:52.00,0:10:53.00,Default,,0000,0000,0000,,That's it. The task is finished."
Dialogue: 0,0:10:53.00,0:10:57.00,Default,,0000,0000,0000,,So, now we had a student -- an acting student --
Dialogue: 0,0:10:57.00,0:10:59.00,Default,,0000,0000,0000,,that was a part of the group.
Dialogue: 0,0:10:59.00,0:11:01.00,Default,,0000,0000,0000,,Nobody knew it was an actor.
Dialogue: 0,0:11:01.00,0:11:05.00,Default,,0000,0000,0000,,And they clearly cheated in a very, very serious way.
Dialogue: 0,0:11:05.00,0:11:08.00,Default,,0000,0000,0000,,What would happen to the other people in the group?
Dialogue: 0,0:11:08.00,0:11:11.00,Default,,0000,0000,0000,,Will they cheat more, or will they cheat less?
Dialogue: 0,0:11:11.00,0:11:13.00,Default,,0000,0000,0000,,Here is what happens.
Dialogue: 0,0:11:13.00,0:11:17.00,Default,,0000,0000,0000,,It turns out it depends on what kind of sweatshirt they're wearing.
Dialogue: 0,0:11:17.00,0:11:19.00,Default,,0000,0000,0000,,Here is the thing.
Dialogue: 0,0:11:19.00,0:11:22.00,Default,,0000,0000,0000,,We ran this at Carnegie Mellon and Pittsburgh.
Dialogue: 0,0:11:22.00,0:11:24.00,Default,,0000,0000,0000,,And at Pittsburgh there are two big universities,
Dialogue: 0,0:11:24.00,0:11:27.00,Default,,0000,0000,0000,,Carnegie Mellon and University of Pittsburgh.
Dialogue: 0,0:11:27.00,0:11:29.00,Default,,0000,0000,0000,,All of the subjects sitting in the experiment
Dialogue: 0,0:11:29.00,0:11:31.00,Default,,0000,0000,0000,,were Carnegie Mellon students.
Dialogue: 0,0:11:31.00,0:11:35.00,Default,,0000,0000,0000,,When the actor who was getting up was a Carnegie Mellon student --
Dialogue: 0,0:11:35.00,0:11:37.00,Default,,0000,0000,0000,,he was actually a Carnegie Mellon student --
Dialogue: 0,0:11:37.00,0:11:41.00,Default,,0000,0000,0000,,but he was a part of their group, cheating went up.
Dialogue: 0,0:11:41.00,0:11:45.00,Default,,0000,0000,0000,,But when he actually had a University of Pittsburgh sweatshirt,
Dialogue: 0,0:11:45.00,0:11:47.00,Default,,0000,0000,0000,,cheating went down.
Dialogue: 0,0:11:47.00,0:11:50.00,Default,,0000,0000,0000,,(Laughter)
Dialogue: 0,0:11:50.00,0:11:53.00,Default,,0000,0000,0000,,Now, this is important, because remember,
Dialogue: 0,0:11:53.00,0:11:55.00,Default,,0000,0000,0000,,when the moment the student stood up,
Dialogue: 0,0:11:55.00,0:11:58.00,Default,,0000,0000,0000,,it made it clear to everybody that they could get away with cheating,
Dialogue: 0,0:11:58.00,0:12:00.00,Default,,0000,0000,0000,,because the experimenter said,
Dialogue: 0,0:12:00.00,0:12:02.00,Default,,0000,0000,0000,,"You've finished everything. Go home," and they went with the money.
Dialogue: 0,0:12:02.00,0:12:05.00,Default,,0000,0000,0000,,So it wasn't so much about the probability of being caught again.
Dialogue: 0,0:12:05.00,0:12:08.00,Default,,0000,0000,0000,,It was about the norms for cheating.
Dialogue: 0,0:12:08.00,0:12:11.00,Default,,0000,0000,0000,,If somebody from our in-group cheats and we see them cheating,
Dialogue: 0,0:12:11.00,0:12:15.00,Default,,0000,0000,0000,,we feel it's more appropriate, as a group, to behave this way.
Dialogue: 0,0:12:15.00,0:12:17.00,Default,,0000,0000,0000,,But if it's somebody from another group, these terrible people --
Dialogue: 0,0:12:17.00,0:12:19.00,Default,,0000,0000,0000,,I mean, not terrible in this --
Dialogue: 0,0:12:19.00,0:12:21.00,Default,,0000,0000,0000,,but somebody we don't want to associate ourselves with,
Dialogue: 0,0:12:21.00,0:12:23.00,Default,,0000,0000,0000,,from another university, another group,
Dialogue: 0,0:12:23.00,0:12:26.00,Default,,0000,0000,0000,,all of a sudden people's awareness of honesty goes up --
Dialogue: 0,0:12:26.00,0:12:28.00,Default,,0000,0000,0000,,a little bit like The Ten Commandments experiment --
Dialogue: 0,0:12:28.00,0:12:32.00,Default,,0000,0000,0000,,and people cheat even less.
Dialogue: 0,0:12:32.00,0:12:36.00,Default,,0000,0000,0000,,So, what have we learned from this about cheating?
Dialogue: 0,0:12:36.00,0:12:39.00,Default,,0000,0000,0000,,We've learned that a lot of people can cheat.
Dialogue: 0,0:12:39.00,0:12:42.00,Default,,0000,0000,0000,,They cheat just by a little bit.
Dialogue: 0,0:12:42.00,0:12:46.00,Default,,0000,0000,0000,,When we remind people about their morality, they cheat less.
Dialogue: 0,0:12:46.00,0:12:49.00,Default,,0000,0000,0000,,When we get bigger distance from cheating,
Dialogue: 0,0:12:49.00,0:12:53.00,Default,,0000,0000,0000,,from the object of money, for example, people cheat more.
Dialogue: 0,0:12:53.00,0:12:55.00,Default,,0000,0000,0000,,And when we see cheating around us,
Dialogue: 0,0:12:55.00,0:12:59.00,Default,,0000,0000,0000,,particularly if it's a part of our in-group, cheating goes up.
Dialogue: 0,0:12:59.00,0:13:02.00,Default,,0000,0000,0000,,Now, if we think about this in terms of the stock market,
Dialogue: 0,0:13:02.00,0:13:03.00,Default,,0000,0000,0000,,think about what happens.
Dialogue: 0,0:13:03.00,0:13:06.00,Default,,0000,0000,0000,,What happens in a situation when you create something
Dialogue: 0,0:13:06.00,0:13:08.00,Default,,0000,0000,0000,,where you pay people a lot of money
Dialogue: 0,0:13:08.00,0:13:11.00,Default,,0000,0000,0000,,to see reality in a slightly distorted way?
Dialogue: 0,0:13:11.00,0:13:14.00,Default,,0000,0000,0000,,Would they not be able to see it this way?
Dialogue: 0,0:13:14.00,0:13:15.00,Default,,0000,0000,0000,,Of course they would.
Dialogue: 0,0:13:15.00,0:13:16.00,Default,,0000,0000,0000,,What happens when you do other things,
Dialogue: 0,0:13:16.00,0:13:18.00,Default,,0000,0000,0000,,like you remove things from money?
Dialogue: 0,0:13:18.00,0:13:21.00,Default,,0000,0000,0000,,You call them stock, or stock options, derivatives,
Dialogue: 0,0:13:21.00,0:13:22.00,Default,,0000,0000,0000,,mortgage-backed securities.
Dialogue: 0,0:13:22.00,0:13:25.00,Default,,0000,0000,0000,,Could it be that with those more distant things,
Dialogue: 0,0:13:25.00,0:13:27.00,Default,,0000,0000,0000,,it's not a token for one second,
Dialogue: 0,0:13:27.00,0:13:29.00,Default,,0000,0000,0000,,it's something that is many steps removed from money
Dialogue: 0,0:13:29.00,0:13:33.00,Default,,0000,0000,0000,,for a much longer time -- could it be that people will cheat even more?
Dialogue: 0,0:13:33.00,0:13:35.00,Default,,0000,0000,0000,,And what happens to the social environment
Dialogue: 0,0:13:35.00,0:13:38.00,Default,,0000,0000,0000,,when people see other people behave around them?
Dialogue: 0,0:13:38.00,0:13:42.00,Default,,0000,0000,0000,,I think all of those forces worked in a very bad way
Dialogue: 0,0:13:42.00,0:13:44.00,Default,,0000,0000,0000,,in the stock market.
Dialogue: 0,0:13:44.00,0:13:47.00,Default,,0000,0000,0000,,More generally, I want to tell you something
Dialogue: 0,0:13:47.00,0:13:50.00,Default,,0000,0000,0000,,about behavioral economics.
Dialogue: 0,0:13:50.00,0:13:54.00,Default,,0000,0000,0000,,We have many intuitions in our life,
Dialogue: 0,0:13:54.00,0:13:57.00,Default,,0000,0000,0000,,and the point is that many of these intuitions are wrong.
Dialogue: 0,0:13:57.00,0:14:00.00,Default,,0000,0000,0000,,The question is, are we going to test those intuitions?
Dialogue: 0,0:14:00.00,0:14:02.00,Default,,0000,0000,0000,,We can think about how we're going to test this intuition
Dialogue: 0,0:14:02.00,0:14:04.00,Default,,0000,0000,0000,,in our private life, in our business life,
Dialogue: 0,0:14:04.00,0:14:07.00,Default,,0000,0000,0000,,and most particularly when it goes to policy,
Dialogue: 0,0:14:07.00,0:14:10.00,Default,,0000,0000,0000,,when we think about things like No Child Left Behind,
Dialogue: 0,0:14:10.00,0:14:13.00,Default,,0000,0000,0000,,when you create new stock markets, when you create other policies --
Dialogue: 0,0:14:13.00,0:14:16.00,Default,,0000,0000,0000,,taxation, health care and so on.
Dialogue: 0,0:14:16.00,0:14:18.00,Default,,0000,0000,0000,,And the difficulty of testing our intuition
Dialogue: 0,0:14:18.00,0:14:20.00,Default,,0000,0000,0000,,was the big lesson I learned
Dialogue: 0,0:14:20.00,0:14:22.00,Default,,0000,0000,0000,,when I went back to the nurses to talk to them.
Dialogue: 0,0:14:22.00,0:14:24.00,Default,,0000,0000,0000,,So I went back to talk to them
Dialogue: 0,0:14:24.00,0:14:27.00,Default,,0000,0000,0000,,and tell them what I found out about removing bandages.
Dialogue: 0,0:14:27.00,0:14:29.00,Default,,0000,0000,0000,,And I learned two interesting things.
Dialogue: 0,0:14:29.00,0:14:31.00,Default,,0000,0000,0000,,One was that my favorite nurse, Ettie,
Dialogue: 0,0:14:31.00,0:14:35.00,Default,,0000,0000,0000,,told me that I did not take her pain into consideration.
Dialogue: 0,0:14:35.00,0:14:37.00,Default,,0000,0000,0000,,She said, "Of course, you know, it was very painful for you.
Dialogue: 0,0:14:37.00,0:14:39.00,Default,,0000,0000,0000,,But think about me as a nurse,
Dialogue: 0,0:14:39.00,0:14:41.00,Default,,0000,0000,0000,,taking, removing the bandages of somebody I liked,
Dialogue: 0,0:14:41.00,0:14:44.00,Default,,0000,0000,0000,,and had to do it repeatedly over a long period of time.
Dialogue: 0,0:14:44.00,0:14:47.00,Default,,0000,0000,0000,,Creating so much torture was not something that was good for me, too."
Dialogue: 0,0:14:47.00,0:14:52.00,Default,,0000,0000,0000,,And she said maybe part of the reason was it was difficult for her.
Dialogue: 0,0:14:52.00,0:14:55.00,Default,,0000,0000,0000,,But it was actually more interesting than that, because she said,
Dialogue: 0,0:14:55.00,0:15:00.00,Default,,0000,0000,0000,,"I did not think that your intuition was right.
Dialogue: 0,0:15:00.00,0:15:01.00,Default,,0000,0000,0000,,I felt my intuition was correct."
Dialogue: 0,0:15:01.00,0:15:03.00,Default,,0000,0000,0000,,So, if you think about all of your intuitions,
Dialogue: 0,0:15:03.00,0:15:07.00,Default,,0000,0000,0000,,it's very hard to believe that your intuition is wrong.
Dialogue: 0,0:15:07.00,0:15:10.00,Default,,0000,0000,0000,,And she said, "Given the fact that I thought my intuition was right ..." --
Dialogue: 0,0:15:10.00,0:15:12.00,Default,,0000,0000,0000,,she thought her intuition was right --
Dialogue: 0,0:15:12.00,0:15:17.00,Default,,0000,0000,0000,,it was very difficult for her to accept doing a difficult experiment
Dialogue: 0,0:15:17.00,0:15:19.00,Default,,0000,0000,0000,,to try and check whether she was wrong.
Dialogue: 0,0:15:19.00,0:15:23.00,Default,,0000,0000,0000,,But in fact, this is the situation we're all in all the time.
Dialogue: 0,0:15:23.00,0:15:26.00,Default,,0000,0000,0000,,We have very strong intuitions about all kinds of things --
Dialogue: 0,0:15:26.00,0:15:29.00,Default,,0000,0000,0000,,our own ability, how the economy works,
Dialogue: 0,0:15:29.00,0:15:31.00,Default,,0000,0000,0000,,how we should pay school teachers.
Dialogue: 0,0:15:31.00,0:15:34.00,Default,,0000,0000,0000,,But unless we start testing those intuitions,
Dialogue: 0,0:15:34.00,0:15:36.00,Default,,0000,0000,0000,,we're not going to do better.
Dialogue: 0,0:15:36.00,0:15:38.00,Default,,0000,0000,0000,,And just think about how better my life would have been
Dialogue: 0,0:15:38.00,0:15:40.00,Default,,0000,0000,0000,,if these nurses would have been willing to check their intuition,
Dialogue: 0,0:15:40.00,0:15:41.00,Default,,0000,0000,0000,,and how everything would have been better
Dialogue: 0,0:15:41.00,0:15:46.00,Default,,0000,0000,0000,,if we just start doing more systematic experimentation of our intuitions.
Dialogue: 0,0:15:46.00,0:15:48.00,Default,,0000,0000,0000,,Thank you very much.