On Thanksgiving evening, I started reading Greg Smith's book, Why I left Goldman Sachs late in the afternoon. I finished it around midnight. It's a relatively easy read with a relatively straightforward message: That Wall Street, as exemplified by Goldman Sachs' evolution, has increasingly become a place where we send many of our brightest students to outwit the people who manage our pensions and retirement accounts.
Greg Smith is famous for resigning from Goldman Sachs via an op-ed published in the New York Times, accusing Goldman of evolving from a firm that serves its customers to one that often profits by taking advantage of them. Nothing illegal is documented in the book, but it does show how employees are encouraged to sell ever more complex products to customers in the hope of generating more fees, without consideration of whether these products make their customers' lives better. Who are these customers? They are the people who manage the money in our retirement accounts, pension funds, and the wealth of philanthropic organizations. Like many Americans, they look to investment bankers like Goldman Sachs for advice on how to help their money grow.
There is little dispute about this, but not everyone believes it is morally wrong. The CEO of Goldman Sachs asserts that they have no obligation to tell customers when they sell them something that they believe will lose money. The Wall St. Journal's review of the book essentially says that he should have known that Goldman Sachs was not built on selflessness, but rather on "tawdry commerce" and the "sometimes morally ambiguous business of sales". Bloomberg News seems more interested in tearing him down personally than examining the morality of what he says in the book, asking "Hasn't it always been about making money and isn't it okay to be a bank that makes money?"
At the heart of this, is the question that recent financial reforms were designed to change. Specifically, should investment professionals have a fiduciary responsibility to their clients? More simply, should they be required to put their clients' interests over their own, when making recommendations? I can't say objectively whether it is morally wrong to take advantage of clients lack of knowledge, but I can examine our data from YourMorals.org to see which individuals believe that it is ok to conduct a "negotiation where not everyone completely understands the process" involved (e.g. opaque fees hidden in the fine print of investment products). The below table shows correlations of Schwartz Values Scale scores and demographics with belief that negotiations with information assymetries are wrong, with positive correlations first.
Clearly, people disagree about how wrong it is to conduct a negotiation without complete understanding by all parties. People who hold self-transcendent values such as benevolence and universalism are the most likely to believe that such conduct is wrong. People who hold traditional values are also likely to believe that this is wrong. In contrast, younger, educated, more conservative males who tend to value power, of the type that populate most investment banks, are less likely to feel that such information asymmetry is wrong. As such, it is perhaps not surprising that the reaction of many in the business world to Smith's book is a collective "so what?"
Those of us who are mere consumers of financial services, via our 401ks, pensions, and college funds, would do well to understand what is behind this collective yawn. What some in the finance world are telling us is that the primary goal of these financial companies is to make themselves money, not serve clients, and given that the average money manager fails to beat the market, we would all probably be better off simply buying broad, transparent index funds, rather than taking their sales calls. We should urge our city officials, counties, and pension managers to stop trying to beat the market with the advice of ostensibly wise finance professionals, who don't really have their clients interests at heart, lest they suffer the fate of the city of Oakland or Jefferson County, Alabama who both ended up on the wrong side of deals with Goldman Sachs. And if there ends up being less demand for their products, perhaps we can move some of the genius that creates arcane financial products into creating things that people actually need.
- Ravi Iyer
Almost all social psychologists are smart, but few are wise. I would argue that you can't advance our collective understanding of the human condition by being smart, without also adding some wisdom to give context to what you study.
For example, the most essential paradigm in social psychology is the experiment and the more controlled the experiment is, with fewer extraneous variables, generally the more prestigious the article. However, as these experiments become more and more specific, isolating psychological mechanisms and ruling out alternative hypotheses, they also largely become more divorced from reality. After all, reality is usually uncontrolled and contains more, not fewer variables. Further, most experimenters have an initial hypothesis and will keep working to create the conditions that show their hypothesis to be true. As such, if I show that X causes Y in a lab, it doesn't necessarily follow that X causes Y in society. Often, another researcher will confirm that X does not cause Y using a different paradigm. Since you get to construct the paradigm to show what you want to show in an experiment on humans, what does such a study actually prove? Perhaps a better characterization of the findings of such research is that X can cause Y, rather than the more simplistic X causes Y.
There is something very valuable in showing that X can cause Y. Good social science research performs the same function as a good parable or a good memoir, often illustrating a truth that we know deep down, but often forget. Thinking fast can make you take unwise risks. Being grateful can make you happier. Crying wolf can make people ignore real requests for help. Whether through story or statistics, these examples examples of what can happen are often helpful in considering our daily life.
However, the average person often knows many of these truths already and it takes wisdom to move these examples beyond the realm of the self-evident and into the realm of useful knowledge. This recent New York Times op-ed, by Barry Schwartz, illustrates how one can take parables generated by research (e.g. on how too much of something can be bad) and create something wise. In it he argues that efficiency can make us better off, yet can cause hardship too. I excerpt a bit of it below, but it doesn't do the original article justice, so I hope you read it.
So whereas some efficiency is good, more efficiency may not be better. The psychologist Adam Grant and I published an article last year suggesting that the “too much of a good thing” phenomenon may be more general than commonly thought. Some choice is liberating; too much choice is paralyzing. Some motivation produces excellent performance; too much motivation leads to folding under pressure.
Perhaps we can use the criticism of Bain Capital as an opportunity to bring a little friction [the opposite of efficiency] back into our lives. One way to do this is to use regulation to rekindle certain social norms that serve to slow us down. For example, if people thought about their homes less as investments and more as places to live, full of the friction of kids, dogs, friends, neighbors and community organizations attached, there might be less speculation with an eye toward house-flipping. And if companies thought of themselves, at least partly, as caretakers of their communities, they might look differently at streamlining their operations.
We’d all like a car that gets 100 miles to the gallon. The forces of friction that slow us down are an expensive annoyance. But when we’re driving a car, we know where we’re going and we’re in control. Fast is good, though even here, a little bit of friction can forestall disaster when you encounter an icy road.
Some social scientists think studying human behavior and thought is like physics. If intelligent people spend enough time on it and collect enough data, we experts can figure out all the rules. But research on human beings is inherently messy, especially for those of us who believe in free will. Just imagine how much trouble physicists would have if atoms could decide whether or not to split.
Another view of social science is that it is but one form of evidence, in a conversation about the human condition that has gone on for millions of years and a marketplace of ideas that is far broader than our parochial disciplines and methods. Social scientists provide a unique and important way of thinking about the world, and I'm hopeful the gap between data and knowledge will decrease as data on human behavior is increasingly collected and shared by all sorts of organizations and the wisdom of crowds replaces the intelligence of a very smart few.
- Ravi Iyer
ps. This is part of a series of posts I'm writing to help crystallize my thoughts for a presentation I'm doing at South by Southwest on how moral psychology and big data are converging. Comments that help sharpen my thinking are welcome and please attend my presentation if you will be at SXSW. I'll certainly upload slides/video afterwards.
A colleague of mine forwarded me this article in the New York Times, which compared the presidential candidates' usages of various terms. Some words require more context, but what struck him (and me, after I saw it) in this graph is the fact that Ron Paul doesn't use the words America or American very much, even as he talks a lot about war (usually in negative terms), the constitution, and liberty.
A simple possible convergent explanation comes from this graph of questions concerning how much how much a person identifies (e.g. feel's close to, has things in common with, uses the word "we") with people in their community, in their country, and around the world. Ron Paul and libertarians like him, may think of themselves as individuals, moreseo than the typical liberal or conservative, and less as members of a community, a country, or the world.
From a psychological perspective, this is a further illustration of the idea that moral reasoning is intimately inter-twined with social functioning in that people tend to have a moral profile that correlates well with the types of social functioning they desire.
I would argue that a healthy society needs all types of social concerns. Cohesive working units such as armies, companies, and to a lesser extent countries, are necessary for efficiently performing tasks and competing with/defending against other groups. At the same time, it would seem callous to be an extraordinarily efficient society that doesn't care about the plight of others who are not in our group. Finally, any society needs people who are less constrained by group concerns who can push society forward. We should be thankful for the diverse ideological perspectives in our country and rather than seeing politics as war, we could see it as an exercise in finding balance between worthy concerns.
- Ravi Iyer
Over the past couple years, Jon Haidt has had press articles from various liberal leaning press organizations, including these articles from ThinkProgress, Alternet, Daily Kos, and the New York Times.
One of the great things about doing internet research is that web servers automatically collect information that makes it very easy to do cross-sample validation. This information can also be used to compare the people who visited us from these articles. Which group is the most liberal and how do they compare on their moral foundations scores?
First, I thought do a simple comparison of these groups.
There are fewer people from the Daily Kos to be able to be sure about conclusions (hence the larger error bars), but it looks like (unsurprisingly) all of these groups are liberal, compared to people who find us via search engines, who tend to be only slightly liberal. Their moral foundations scores show a similarly more liberal pattern with higher Harm/Fairness scores and lower Ingroup/Authority/Purity scores. Daily Kos readers are the most liberal followed by ThinkProgress & Alternet and then NY Times readers and finally people who found yourmorals.org via a search engine.
To me, the most interesting results are where groups appear to be equally liberal (ThinkProgress & Alternet), but have differences. ThinkProgress visitors appear esepcially low on Purity scores, while Alternet visitors appear significantly higher on Harm/Fairness scores.
An even stronger test of the kinds people who use these websites is to control for how liberal (slight, moderate, or extreme) individuals at these sites report themselves to be and examine individuals within each group of liberals. Those results are below.
This is the graph for people who said they were "very liberal".
These are the results for people who said they were "liberal".
These are the results for people who said they were "slightly liberal". Interestingly, there weren't enough slight liberals in the Daily Kos sample to include them in this graph.
The pattern seems fairly robust in that ThinkProgress visitors care less about Purity. Perhaps they are less religious? Alternet visitors seem to care more about Harm/Fairness. Perhaps they are more empathically motivated and ThinkProgress visitors are more rationally oriented. I don’t know enough about the liberal blogosphere to theorize well about why these differences exist, but I’m hopeful that by sharing these differences, others will be able to enlighten me. At the very least, I hope readers of these sites will find it interesting.
Would you be interested in seeing how your group compares to others on the moral foundations questionnaire? Or visitors to your website? You may have noticed a small "create a group" link on our explore page of yourmorals.org which lets you create a custom URL, whereby each visitor's graphs will not only let them compare their individual scores to other liberals/conservatives, but also to members of their group, and to compare their group scores to the average liberal/conservative. Once you create those URLs, you can put them into blog posts, articles, or emails targeting your group. We are still beta testing the feature, but would welcome anyone who wants to try it out and who perhaps has feedback on how we can improve it.
- Ravi Iyer