The (Honest) Truth About Dishonesty

One straightforward recommendation is to try to eradicate conflicts of interest altogether, which of course is easier said than done. In the medical domain, that would mean, for example, that we would not allow doctors to treat or test their own patients using equipment that they own. Instead, we’d have to require that an independent entity, with no ties to the doctors or equipment companies, conduct the treatments and tests. We would also prohibit doctors from consulting for drug companies or investing in pharmaceutical stocks. After all, if we don’t want doctors to have conflicts of interest, we need to make sure that their income doesn’t depend on the number and types of procedures or prescriptions they recommend. Similarly, if we want to eliminate conflicts of interest for financial advisers, we should not allow them to have incentives that are not aligned with their clients’ best interests—no fees for services, no kickbacks, and no differential pay for success and failure.

Though it is clearly important to try to reduce conflicts of interest, it is not easy to do so. Take contractors, lawyers, and car mechanics, for example. The way these professionals are paid puts them into terrible conflicts of interest because they both make the recommendation and benefit from the service, while the client has no expertise or leverage. But stop for a few minutes and try to think about a compensation model that would not involve any conflicts of interest. If you are taking the time to try to come up with such an approach, you most likely agree that it is very hard—if not impossible—to pull off. It is also important to realize that although conflicts of interest cause problems, they sometimes happen for good reason. Take the case of physicians (and dentists) ordering treatments that use equipment they own. Although this is a potentially dangerous practice from the perspective of conflicts of interest, it also has some built-in advantages: professionals are more likely to purchase equipment that they believe in; they are likely to become experts in using it; it can be much more convenient for the patient; and the doctors might even conduct some research that could help improve the equipment or the ways in which it is used.

The bottom line is that it is no easy task to come up with compensation systems that don’t inherently involve—and sometimes rely on—conflicts of interest. Even if we could eliminate all conflicts of interest, the cost of doing so in terms of decreased flexibility and increased bureaucracy and oversight might not be worth it—which is why we should not overzealously advocate draconian rules and restrictions (say, that physicians can never talk to pharma reps or own medical equipment). At the same time, I do think it’s important for us to realize the extent to which we can all be blinded by our financial motivations. We need to acknowledge that situations involving conflicts of interest have substantial disadvantages and attempt to thoughtfully reduce them when their costs are likely to outweigh their benefits.

As you might expect, there are many straightforward instances where conflicts of interest should simply be eliminated. For example, the conflicts for financial advisers who receive side payments, auditors who serve as consultants to the same firms, financial professionals who are paid handsome bonuses when their clients make money but lose nothing when their clients lose their shirts, rating agencies that are paid by the companies they rate, and politicians who accept money and favors from corporations and lobbyists in exchange for their votes; in all of these cases it seems to me that we must do our best to eradicate as many conflicts of interest as possible—most likely by regulation.

You’re probably skeptical that regulation of this sort could ever happen. When regulation by the government or by professional organizations does not materialize, we as consumers should recognize the danger that conflicts of interest bring with them and do our best to seek service providers who have fewer conflicts of interest (or, if possible, none). Through the power of our wallets we can push service providers to meet a demand for reduced conflicts of interest.

Finally, when we face serious decisions in which we realize that the person giving us advice may be biased—such as when a physician offers to tattoo our faces—we should spend just a little extra time and energy to seek a second opinion from a party that has no financial stake in the decision at hand.

CHAPTER 4

Why We Blow It When We’re Tired

Imagine yourself at the end of a really long, hard day. Let’s say it’s the most exhausting of days: moving day. You’re completely exhausted. Even your hair feels tired. Cooking is certainly out of the question. You don’t even have the energy to locate a pan, plate, and fork, much less put them to use. Clearly it’s going to be a take-out night.