Rich and Co.

Dan Ariely – Disclosure? It’s Not Good Enough

In the debate about fiduciary responsibility, full disclosure is one of the cornerstones.  However, like so much in investing (and most decision-making) now, our rapidly growing knowledge of how our brains work – or “don’t” – makes simple solutions ineffective.  Our minds are not well equipped to process disclosures it appears. Unintended consequences are also rife. from MIT blog –

“…disclosure doesn’t seem to help. Several studies have shown that when professionals disclose their conflicts of interest, this only makes the problem worse. This is because two things happen after disclosure: first, those hearing the disclosure don’t entirely know what to make of it — we’re not good at weighing the various factors in any given situation — and second, the discloser feels morally liberated to act even more in his self-interest and to disregard what’s in the public good. …It’s hard to figure out from a statement of disclosure just how much influence the conflict of interest had on the discloser, and to what degree we should be wary of them as a result. The real issue here is that people don’t understand how profound this problem of conflicts of interest really is, and how easy it is to buy people. … it’s very hard for us not to be swayed by money. Even minor amounts of it.  Or gifts.  Studies have found that doctors who receive free lunches or samples from pharmaceutical reps end up prescribing more of the company’s drugs afterwords. It’s just a fact of human life: we have an ingrained need to reciprocate favors, and an ingrained inability to disregard what’s in our financial interest.


Written by Rich and Co.

April 7, 2010 at 10:39 am

Posted in Uncategorized

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