Just the Thought of Money Makes Us Unethical, Study Says

Just the thought of money makes us unethical, study says
Harvard / University of UtahThe money (left) and control/neutral (right) pictures used to "prime" participants in one study of how money influences moral outcomes.
The mere thought of money can trigger a subconscious mindset that predisposes people towards unethical actions, according to recent research by professors at Harvard and the University of Utah.

Earlier work suggested that subtle exposure to money can influence behavior and decisions in self-centered ways, making people in studies more likely to choose an individual activity over a group one, for instance. This new research set out to to determine how such exposure might impact "morally relevant outcomes," in light of money's enormous importance to society in general and business organizations in particular.

Participants were exposed to the concept of money -- or not, in the case of control groups -- by unscrambling phrases or viewing images. They then carried out tasks that presented opportunities for dishonesty or other underhanded dealing. In all four studies, people who had been "primed" with the thought of money "were more likely to demonstrate unethical intentions, decisions, and behavior than participants in a control condition," according to Kristin Smith-Crowe, psychologist and associate professor at Utah's David Eccles School of Business.

Smith-Crowe and her coauthors conclude that "money may be a more insidious corruption factor that previously appreciated, going well beyond the often lamented 'love of money' to touch even those not overtly motivated by greed."

Is Money Morality's Kryptonite?

The authors open their discussion with the example of Judas, whose betrayal of Jesus in return for 30 pieces of silver made him "an archetype of immorality." "The repugnance of Judas' behavior," they explain, "is in the severing of social bonds for mere money." (Pretty sure getting the son of Godkilled had something to do with it, too, but this is behavioral psychology, not Biblical studies.) A premise of the paper is that morality is embedded in social relations, and hence encompasses more than the dictum "do no harm": antisocial behaviors can be considered wrong even if they don't hurt someone directly, since they undermine the rules that promote cooperation and trust.

The role of money in this conception of morality is suggested by that old bugbear of capitalism, Karl Marx: "As this perverting power, money then appears as the enemy of man and social bonds that pretend to self-subsistence." But beyond money's obvious effects on society -- turning human faculties into commodities, as Marx suggested, and alienating people from both the products of their labor and human nature itself -- the authors were interested in "the influence that the mere presence of money or a symbolic representation of money may have on us without our awareness."

That influence, they hypothesized, is mediated through a "business decision frame" -- a point of view that objectifies social relationships, making them elements in a cost-benefit calculus driven by self-interest. This is well illustrated by the example of a Ford (F) recall coordinator in the 1970s, who twice voted not to recall the Pinto despite the known danger of gas tank ruptures and explosions in low-impact collisions. "[I]n the context of his job, the moral necessity was not apparent to him. As he later explained, he perceived the decision to recall the Pinto to be a business decision, not a moral one." And to him, "in a business sense the losses were within acceptable parameters."

To test their hypotheses, the researchers primed participants by having them unscramble sentences ("She spends money liberally" vs. "She walks on grass") before testing their moral responses in various ways. In one study, subjects were shown a series of scenarios in which unethical acts were committed and asked how likely they would be to engage in the same behaviors. (The example given in the paper, stealing a ream of copy paper from a university office job, seems quite tame to me, but then I am currently covering the financial industry.)

Another featured a two-player "deception game" in which lying earned more money than telling the truth; there was twice as much deception among the money-primed players. Those who had "seen green" were also more likely to say they would choose to hire a job candidate who promised to share insider information on a competitor, and to characterize this misdeed as a "business decision." Participants in these studies were undergraduates at a U.S. university, receiving course credit in their introductory business course.

What Is To Be Done?

While they obviously don't advocate the abolition of money, the authors do suggest, in light of these results, that organizations be on the lookout for "environmental or contextual cues" that might negatively influence their members' behavior, without even rising to the level of consciousness. Businesses, in other words, should be aware that deep-seated associations activated on the job might predispose employees towards immorality. Given the disastrous consequences of recent scandals emanating from bastions of the business decision frame, as well as the likely effects of ongoing environmental degradation, a societal effort to broaden our "construal of business as an activity narrowly constituted of self-interest and cost-benefit concerns" is urgently needed. In an interview, Smith-Crowe said, "Business ethics has become a lot more prominent in curricula across business schools, but there's definitely this tension to some extent, of what's the point of business? Is it to maximize wealth, or it broader than that?"

These findings would not surprise the man generally considered the founding theorist of capitalism, whose first work was in fact a treatise on moral philosophy. Long ago, in The Theory of Moral Sentiments, Adam Smith wrote of an inverse proportion between regard for wealth and concern for others:

"This disposition to admire, and almost to worship, the rich and powerful, and to despise or, at least, neglect persons of poor and mean conditions, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments."

For Smith, no person, no matter how selfish, is wholly without sympathy, the ability to imagine oneself in another's position. This innate faculty leads us to make concessions to others, even as we pursue our own self-interest; but a misplaced veneration of the "gaudy and glittering" clouds our perceptions of people, and leads us to take shortcuts in our efforts at self-advancement. This is especially problematic in "the superior stations of life" -- "in the courts of princes, in the drawing-rooms of the great," or in the White House and on Wall Street -- where "the road to virtue and that to fortune" are not necessarily the same, a principle that the business students who participated in the studies seem to have internalized.

On this, Karl Marx and Adam Smith are in agreement: Money is the enemy of people's natural relation to each other. And if Smith-Crowe and her colleagues are correct, it only takes a hint of green to corrupt our moral sentiments.

The studies' results have been published as Kouchaki, M., et al. Kouchaki, M., et al. "Seeing green: Mere exposure to money triggers a business decision frame and unethical outcomes." Organizational Behavior and Human Decision Processes (2013), http://dx.doi.org/10.1016/j.obhdp.2012.12.002.

13 Money Lies You Should Stop Telling Yourself By Age 40
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Just the Thought of Money Makes Us Unethical, Study Says
Think again. Even student loan debt can chase you into retirement.

The Treasury Department has been withholding as much as 15% of Social Security benefits from a rapidly growing number of retirees who have fallen behind on federal student loans -- five times as many as in 2001. Even something as simple as credit card debt can hurt you in retirement, says John Ulzheimer, president of SmartCredit.com.

"When it comes to credit card debt, you absolutely have to get out of it before you hang up your company badge," Ulzheimer says. "It's very likely the most expensive debt you're carrying at 13 percent to 15 percent interest on average, and twice that in some cases. No retirement nest egg can guarantee that kind of growth."

Leaving the workforce might help you cut costs in some areas -- for example, your pricey commute to the office -- but you can never underestimate the cost of aging.

"Many studies show that some retirees even spend more in retirement than they did when they were working," says Susan Garland, editor of Kiplinger's Retirement Report.

 "In the early years, you may be embarking on long-delayed travel and hobbies. And as the years go by, your health care costs are sure to rise. House-related maintenance costs, insurance and property taxes are sure to be on the upswing as well."

A 65-year-old couple retiring in 2012 is estimated to need $240,000 to cover medical expenses throughout retirement.

"More and more Americans say they plan to pay for retirement by working longer, but in reality, many retirees end up quitting sooner than planned," says Greg Burrows, senior vice president for retirement and investor services at The Principal.

One third of American workers said they plan on working past age 65 in a recent survey by the Employee Benefit Research Institute, but more than 70 percent of retirees said they actually quit before that milestone.

Then there's the job market to consider, which doesn't take kindly to workers who are past their prime. In 2011, the median length of unemployment for people 55 and older was 35 weeks, up from 10 weeks before the recession, according to the Government Accountability Office.

Medicare is an excellent resource for retirees needing health care support, but here's a wake up call: It doesn't cover all long-term care.

Medicare coverage excludes extended nursing home stays, custodial care, or an in-home nurse to help out if you're unable to dress, feed or bathe yourself.

"Medicare pays for limited nursing-home and home-health care for short periods to provide continuing care after a hospital stay," Garland says. "For example, skilled care in a facility is limited to 100 days. It may be wise to consider long-term care insurance to cover those costs."

Never underestimate the crippling power inflation has over your retirement savings.

"Too many people have the illusion that money is safe as long as the balance doesn't go down, but the reality is that inflation will eat into your purchasing power unless you learn how to properly manage and invest your wealth," writes David Ning of MoneyNing.com.

"Those who put all their money in a savings account may not experience the volatility that comes with different investments, but they are sure to be able to afford less and less as years go by, which is a real threat too."

Contrary to popular belief, investing savvy isn't something only the rich are born with.

But if you want to invest wisely, do yourself a favor and leave the stock picking and day trading to the professionals.

"Stick to the boring but effective strategy of saving early and often, watch investing fees, and picking an asset allocation plan where you can stay the course when the market inevitably takes a dive," says Ning.

And start as early as possible. According to personal finance expert Kimberly Palmer, someone who begins investing at age 25 will only have to save $4,830 annually to reach $1 million by age 65, accounting for an annual return of 7 percent after fees.

That figure triples to $15,240 if you wait until your 40s.

At some time (and for a lot of you, many times), life eventually will get in the way and you'll find yourself on the wrong side of your bank or, worse, a debt collector.

Stand your ground and watch them like a hawk. That means reading the fine print before signing up for a high-interest, high-fee credit card and taking a proactive approach to lower your interest rates on credit and mortgage loans. Sometimes, all it takes is a phone call and a little math work to figure out you could be getting a better deal elsewhere.

When in doubt, think about Kenny Golde, a 40-something producer we spoke with last year. He managed to negotiate $220,000 worth of debt down to $70,000 on his own.
It turns out one in four workers resorts to taking out 401(k) loans each year, to the tune of $70 billion, nationally.

"You might be cheating your future self," says Catherine Golladay, VP of 401(k) Participant Services at Charles Schwab. "While paying back a 401(k) loan, many people stop saving in their 401(k) plan, which can really derail retirement savings."

And don't forget about the fees. Workers under age 59 1/2 who dip into retirement funds must generally pay back their loan quickly, between 30 to 90 days in most cases. Otherwise, you could wind up paying income taxes on whatever you've taken out, along with a 10 percent early withdrawal penalty. And you still have to pay back the loan with interest -- and with after-tax money, which then gets taxed again when you withdraw it in retirement.

We'll never tire of the Roth vs. Traditional 401(k) debate. With a Roth 401(k) or Roth IRA, all of your contributions are taxed immediately according to whatever tax bracket you fall into today. Traditional IRAs are tax-deferred until retirement.

The general consensus is that it's better to convert to or start a Roth now, since it's likely that you will wind up retiring in a higher tax bracket than you occupy now, in which case you'll pay significantly more in taxes later than you would today.

But investors who've already built a substantial IRA or 401(k) often can't stomach the thought of paying taxes on everything at once if they make the switch.

"Sometimes it just takes a lot of handholding because investors don't like to write that check," says Janet Briaud, chief investment officer of Briaud Financial Advisors. "There is sticker shock, but in the long-term, our clients really get it. They're really happy."

Ultimately, that money will be taxed one way or the other, either starting at age 70 1/2 when required minimum distributions take effect, or during the life expectancy of the beneficiaries, she argues. And if you leave a Roth IRA to your loved ones, you'll have the peace of mind of knowing they won't have to pay taxes on the money they withdraw.

To help ease the blow, speak with your advisor and try a partial conversion by moving just part of your savings to a Roth each year.

Many advisors base their calculations of your future needs on your current income. Nickel, the anonymous blogger behind Five Cent Nickel, takes a slightly different approach:

"Start by estimating your post-retirement expenses. Average it out across a year. From there, estimate what sort of investment returns you'll be able to generate -- yes, you'll need a crystal ball for this.

"From there, divide that rate (as a decimal) into one to find your multiplier. So, for example, if you think you can generate 4% real returns (i.e., 4% returns after accounts for inflation, so more like 7% nominal returns) then you'll need 25x your annual expenses (1 / 0.04 = 25). If you think you'll only be able to generate 3% real returns, then you'll need 33x your expenses. And so on."

The benefit of saving for your children's college education early (ideally via a 529 plan) is that you limit your saving burden by spreading it out over time.

But even if you come up short of tuition costs, don't immediately dip into you retirement savings to make up the difference.

"You can always fall back on financial aid. Grants, scholarships and student loans can help pay your child's way," writes Learnvest's Laura Shin. "When it comes to your retirement, however, there are no loans."
Of course, few people have the benefit of unlimited cash flow without putting in a little leg work first. But there are higher priorities in life than working overtime and depriving yourself of a few pleasures today just to save a buck or two.

"People spend most of their time planning their finances for old age, but not their fulfillment" along the way, says Ken Budd, executive editor of AARP The Magazine.

"We once profiled a man who decided that for the first year of retirement he would do whatever he wanted. So he went for long walks, he skimmed the newspaper online, he sat in Starbucks and read Grisham novels. But after that, he [felt so bored] he decided to become a chaplain."

In a 2011 study by RocketLaywer.com, more than half of Americans admitted they hadn't written a will yet -- including 44 percent of those aged 45-64.

Without a plan in place, you could leave your estate's future in the hands of squabbling family members or your state, which would appoint an administrator to handle everything.

"[A will] enables you to start thinking about issues like whether you have the right insurance coverage, life insurance, and ways of replacing your lost income," RocketLawyer founder Charley Moore says.

This is doubly important for gay spouses, as states that don't recognize gay marriages would pass over same-sex spouses in favor of next of kin.


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