On Coke, the Fudge Factor, and Money

This week’s book learning is the first of a 8 part series from The Honest Truth About Dishonesty by Dan Ariely. (Part 1)

Can increasing the psychological distance between a thing and money increase the “fudge factor”, meaning people cheat more?

Dan Ariely tested this in the communal refrigerators in MIT dorms. In half the dorms, his team placed 6 cans of Coca Cola and in the other half, a plate with six 1 dollar bills. The Cokes disappeared within 72 hours while no one touched the money. They could easily have taken the $1 bill, walked over to the vending machine, and bought a coke. But, they didn’t!

To test this further, Dan and team revisited the matrix experiment with a new “token” condition. When students finished solving the matrices, they now received a token/plastic chip stating the number of problems they had solved. Once they received the token, they walked 12 feet to another table and exchanged it for cold hard cash. The difference from the normal condition was that collection of money was one step removed from telling the volunteer how many problems they solved.

Cheating increased to twice the normal amount.


Sketch by EB

These experiments explain the shrinkage problem in companies – employees are more likely to take expensive stationary home than money lying around in the office. Our moral compass slips when the “fudge factor” increases. Would the famous credit default swaps have been used to disastrous ends by banks if they looked like dollar bills?

It brings up the next interesting question. How does the cheating process work in our heads? Next week, same time, same channel..