RISCARIO INSIDER

August 25, 2012

LANCE ARMSTRONG, INCENTIVES AND BEHAVIOR

Incentives affect behavior.

Lance Armstrong wanted to win but doping got in the way. Jonah Lehrer wanted to rule the book/speaking circuit but plagiarism and lies got in the way. Your advisor has goals too but do you know what gets in the way?

Outsized Rewards

Incentives encourage bad behavior — especially when winners get outsized rewards. Being the fastest cyclist in the Tour de France means something. Number two may try harder but why would we pay them with our ever-so-scarce attention? There’s such pressure to win … at all costs.

Lolo Jones had sponsors like Red Bull and Oakley but didn't win a medal in the 2012 Olympics. Practicing 12 years for a 12 second race and losing? That's not compelling. Sponsors may stick by her until the 2016 games or start looking for more promising prospects.

Cheating doesn't seem as serious a crime as getting caught — especially if competitors might be flexible with the rules. Unfortunately, passing a drug test does not prove innocence.

Smaller Rewards

Advisors at large firms are commissioned employees. They have rules to follow. In exchange, they get the support of a big brand. How is their performance measured? Revenue, rather than service. They have pressure to perform. For them, doping mean selling products which generate higher revenue (e.g., mutual funds instead of ETFs, whole life insurance instead of term life). They might not make you aware of less expensive alternatives, especially if they don't sell them.

The Truth

The truth about what Lance did may never be known. The suspicions will remain and taint the innocent.

While the financial sector ranks at the bottom in trust (Edelman Trust Barometer 2012), there are good advisors and good firms. The onus is on them to show they are exceptions. We can't spot the worthy without transparency. This starts with the advisors.

Penn and Teller reveal the magic behind the magic as only insiders can. Advisors can be transparent too. They can reveal the tricks and show that they don't use them. For instance, by

showing what they are licensed to sell
showing all forms of compensation they receive (including referral incentives)
showing the magnitude of the compensation (e.g., a pie chart showing the percentages from different sources)
showing what others leave out

Actions like these remove doubts about whether an advisor is on your side. The same goes for celebrities, athletes and politicians. As an insider, what did Lance do spotlight and stamp out doping by other cyclists?

The Saddest Part

As spectators, we reward the best. As consumers, we compromise. We'll pick an advisor without knowing their performance. Yet an advisor has a much bigger impact in our lives. We don't need the best in the world, but what's wrong with rewarding advisors who are among the best in serving their clients where you live?

Podcast 183

direct download | Internet Archive page | iTunes

PS Lance could apologize and tell the truth.

August 18, 2012

HOW SORRY IS JONAH LEHRER FOR HIS PLAGIARISM AND LIES?

I'm very disappointed by Jonah Lehrer. He was called the next Malcolm Gladwell (though not by me).

I looked forward to his articles in Wired. I recommended his two latest books: How We Decide (Amazon) and Imagine: How Creativity Works (withdrawn from circulation).

Jonah’s move to sister magazine, The New Yorker, in June was impressive. His plagiarism wasn’t. He resigned (or got fired) on July 30th for lying.

Plagiarism

Jonah is only 31 and had a bright future … until … he was found guilty of self-plagiarism. What's that? Normal plagiarism means passing off someone else's work as your own. That means self-plagiarism is passing off your work as your work.

What's wrong with that?

I'm also guilty of self-plagiarism since my ideas build upon themselves. Creativity is iterative. When I speak, there’s often overlap with content I've used before. Springsteen performs songs over and over but audiences love that.

Professional writing is different. When a publication pays a writer, they expect an original article. That's fair. As an interviewee, you can keep saying the same or similar things. As a paid writer, you can't. Understood.

Even so, there were no sanctions against Jonah. The New Yorker added a disclaimer to the less-than-original articles to say that some content was recycled.

LIES

Jonah concocted Bob Dylan quotes for Imagine. That’s bizarre because Bob isn’t core to the book. That’s also risky because Bob has devoted fans. Michael Moynihan investigated. Jonah finally admitted his lies. Hero to zero.

Sanctions

Jonah’s gone from The New Yorker. Let’s call that his decision. Imagine has been withdrawn and you can return your copy for a refund. Over 200,000 copies were sold. That’s many readers fooled.

However, the Lavin speaker’s bureau hasn’t made any corrections or withdrawn his page. What Jonah did may not matter to them but his speaking engagements are getting cancelled. For example, he won’t be talking to students about ethics at Earlham College next week (Forbes, Aug 1, 2012).

Sincerity

Strangest of all, Jonah makes no apologies on his own website.

Jonah still says he’s a writer for The New Yorker. He’s not.

He still says his book is available for sale. It’s not.

You won’t find any apologies on Twitter either. Why not?

How

Why wasn’t Jonah caught earlier?

He has written for well-known publications with journalists who know how to investigate. He has lots of content that’s available online for easy review.

Maybe there was scrutiny in his early days and less as he established himself. Bad habits can develop …

The Consequence

We trust less when we see mainstream examples of deception. That’s a huge and unwelcome tax.

What will be uncovered next?

As Warren Buffett says (or is said to have said), “There’s never just one cockroach in the kitchen”.

Podcast 182

direct download | Internet Archive page | iTunes

PS There are lots of kitchens to inspect.