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Rabbi Seidel Drash | How We Tend to Act Just Like Wall Street

 

Rabbi Seidel Drash – Kol Nidre - 5773 (2012)
How we tend to act just like Wall Street did before the crash of 2008

 

I spent some time this year thinking and reading about the Wall Street failures of 2008.  Part of my interest in the 2008 financial meltdown was due to conversations with congregants who have been active, either personally, or professionally, in researching just what went wrong.  Perhaps a number of you have also spent time learning about all this: the subject is, after all, fascinating, complex, and of some import.

However, after reading articles, and talking with experts, I came to question my motives for being so interested in the banks and their vicissitudes.  I came to realize that the primary reason for my interest in Wall Street's troubles was not as much intellectual as it was emotional.  What I really wanted to do was indulge in righteous anger.  Who were the bastards who did so much to harm to our economy, who put so many out of work??  And how exactly had they done it?  Was it a clever conspiracy?  Was it stupidity?  I wanted to know who was most at fault, and what they had done, and if they hadn't been punished, why the hell not?

I found that I was disappointed by what I learned about the crash. Sure there were miscreants, bad actors deserving of prison sentences.  However, to my dismay, I found that a lot of folks were just playing by the rules.  Sure, the rules themselves weren't good, the Glass-Steagall law should never have been repealed - banks should never have been allowed to resume risky financial dealings.  But as far as sending folks to jail - it was all much more complicated than I had thought.  Sure, people were acting selfishly, even dishonestly, but there wasn't near as much rampant illegality as I had hoped.

There's a nice little article in my packet - thanks to Ray Natter for the reference - that describes how a financial bubble expands.  It turns out, that while, to an outside observer, these financial bubbles seem to have been the result of temporary mass insanity, the people on the inside of the bubbles were actually acting quite rationally.  Whether we're talking about the price of tulips in the 17th century, or the value of mortgage backed securities in this most recent crisis, many of the actual investors were playing smart, even as they realized that there was a bubble, and that prices would come crashing down at some point. 

Part of the key to understanding this, is remembering that it makes perfect sense to keep trading as close to the inevitable crash as possible, if you have a reasonable expectation that when the bubble bursts, the government will bail you out, and your fall off of the cliff will be cushioned.  This promise of government help in the event of a crash may even have been the cause of the tulip mania in the 1600's.  Certainly, implied government guarantees had a major part to play this time around as well.

I'm not saying that this is fair - just that it's rational.  It's certainly unfair that no-one in the financial world seems to have a problem with big government when it comes to the bailout.  The big brokerage houses are happy to borrow government money to get back on their feet.  The problem with big government, says Wall Street, is too much government regulation.  We can supervise ourselves, thank you very much.  We need no outside supervision.

This all came to a deliciously ironic head just this past May, when JP Morgan lost 5.8 billion dollars in a trading debacle.  It was ironic because JP Morgan, which had weathered the crisis of 2008 relatively unscathed, had been lobbying intensely, and successfully, to weaken and delay new government regulations in the aftermath of 2008.  Had JP Morgan not weakened and delayed those regulations, it probably would not have lost the billions it did.  To quote from an article from the NY Times in my packet:

...the fact that large institutions arguing against transparency in derivatives trading won't acknowledge that such rules could also save them from themselves is quite the paradox.

          [the article goes on to quote Michael Greenberger, a law professor at the U. of MD] "These regulations are not just protecting the United States taxpayer,"  "They protect the banks themselves. The best friend of these banks would be laws that prevent them from shooting themselves in the foot. The fact is, they can't do it themselves."

Which brings me to my question for you this evening.  Can we supervise ourselves?  Whether we're an enormous bank, or we're just your average Jew trying to be a better person - are we self-sufficient, or are we prone to fooling ourselves?  Ok, the answer to that is an obvious yes, even though we're all at times loathe to admit it.  But why exactly, do we need supervision - what is it about human nature, that we sometimes fool ourselves?  And why, given we need this supervision, why do we have such a hard time accepting it?  And finally, given we need supervision to help us do teshuvah, how might we find such help?

So, back to the first question - what is it about human nature, that we're so good at fooling ourselves?  I got some fresh ideas about this from a book I just read, called The (Honest) Truth About Dishonesty, by Dan Ariely, just published by HarperCollins.  The book is about why people cheat, and when we're more likely to cheat, and how we fool ourselves into thinking we haven't really cheated at all.

So why are we so good at fooling ourselves? Building on what Ariely says, it's because we all want two contradictory things.

  • 1) On the one hand we have normal, selfish desires that lead us to cross the line, if ever so slightly, and cheat: we want money, or fame, or a better job. Or maybe we stretch the truth just to keep the job we have.
  • 2) However, on the other hand, we also want to be able to see ourselves as good people. We want to be able to look ourselves in the mirror, and not flinch.

 It's because we want to see ourselves as honest people, that we hide our bad actions from ourselves.  We find some way to rationalize our bad behavior, so we can get both things we want - money, fame, a job, whatever, and at the same time, keep our self-image as a good person.  And it's because of this need to hide bad actions from ourselves, that we tend to fool ourselves.

So far, I haven't said anything all that surprising.  Troubling, perhaps, but we all know that we humans have a tendency towards rationalizing our bad behavior - that's part of why we're here today.  However, Ariely, in his research adds some important findings that I found as helpful as they were troubling.

Ariely has a simple way of measuring cheating.  He gives volunteers a mildly challenging arithmetic test, and sees how they do on it, giving them a little money for each correct answer.  That group, the control group, hands in their tests, and collects their money. To a second set of volunteers he gives the same test, this time with an answer key at the bottom, so they can "grade their own test".  And that second group that grades its own test is allowed to shred their exams, and just tell the proctor how many answers they got right.  Turns out, not surprisingly, that those with the answer key tend to do better.  But interestingly, not all that much better.  The cheaters want more money, but they don't want to think of themselves as cheaters, so they don't cheat much.  Maybe their eyes happened to glance down at the bottom at the answer key once or twice - that's not really cheating is it?  The cheaters tend to cheat by only about 15% on these tests (p. 50-51), because they want to be able to look themselves in the mirror.

So far, not so surprising.  But Ariely did another experiment that was a bit more unsettling (p. 147-149).  He wanted to see if those who cheated on the test came to believe that they deserved the higher marks.  So he gave all his volunteer test-takers a chance to take a second, similar test.  On this longer test, he made it clear that there were not going to be any answer keys on the bottom.  Now I quote directly from the book:

...[I offered] them up to $20 if they could correctly predict their performance on the second test.  Even with a financial incentive to be accurate, they [i.e. the cheaters] still tended to take full credit for their scores [on the first test] and overestimate their abilities.  Despite having a strong motivation to be accurate, self-deception ruled the day.

          Wow.  Disturbing, how we can fool ourselves so completely, even to our own detriment.  But maybe you're saying to yourselves what I think about myself, that I would never look down at the answer key and cheat like that.  And if I did look down at the answer key, I would at least realize that I had fudged the truth, and I wouldn't overestimate my ability on a test without the answer key.

So let's hope that last example has no relation to us here today, and move to a more subtle form of self-deception, another way we tend to believe the best about ourselves.  Here's a situation I confront every now and again:

A congregant has just done something for the shul.  It could be anything - leading a committee, leading services, reading Torah, giving a drash - anything that requires a bit of skill, and energy, and preparation. But alas, this thing which the congregant did was not done well.  And it was not a little thing, but of enough concern that I feel, as the Rabbi, I need to say something.  I hate this part of my job.  Anyway, I try to be nice, and if at all possible I try to say something like: "I think we could work together and really improve the kind of job you do for the congregation."  And that almost always works just fine - we work together to fix the problem.

But sometimes I'll get the response: "But Rabbi, people complemented me on the job I did!?  And not a single person said anything negative to me at all!?" Indeed.  And who can blame a person, who only hears praise, to begin to have an inflated view of their work?  Just as the person who cheats a little on a test comes to believe the lie, so too the person who hears only praise begins to imagine that their work deserves it.  So too the Rabbi who only hears praise for his sermons, but never any constructive feedback.

The fact is, in whatever job you hold, it's easy to believe all the complements you hear, and come to have an inflated impression of how you're doing.  It is especially easy to fool yourself if you lack good supervision, as many of us do.

Here's a story from my first years at this congregation.  This was 20 years ago, in 1992.  It was a different world back then.  Synagogues were, for the first time, beginning to set up Rabbinical oversight committees.  For us Rabbis, who had never been subject to such a challenge to our authority - that was how we thought of these committees, as a challenge our authority - these oversight committees were an idea to be fought tooth and nail.  If memory serves, I personally did not fight the establishment of such a committee at TI - but I do remember feeling in my heart that it was a bad idea.

Over the years, however, I've come to feel differently.  I've come to realize that we all need people, whether paid or unpaid, who are empowered to criticize us.  Nobody likes criticism, as Bill Galston pointed out in a recent Shabbat afternoon talk at TI.  Not even those of us who publically proclaim how important it is to be criticized, like criticism, especially, as Bill pointed out, when that criticism has some truth to it.  But a person cannot do much of a job repenting without such critiques.  Without a committee, or, say a group of friends you trust to offer you the harsh truth when you need to hear it, you're going to fool yourself, whether you are JP Morgan Chase, or just some stam Yid davenning on Yom Kippur.

But to return to the original situation - why is it that most people you know will only say nice things, as they evaluate your performance?  Because they're part of your community.  Take TI.  We care about each other, and we don't like to cause one another pain.  And we know that we may need each other in the future.  So, if we like what a fellow congregant did for the community, we'll say something, and if we don't, well, it makes communal sense for several reasons to keep quiet.  But you would be fooling yourself, if you thought all of that praise an honest sampling of public opinion.

Which brings me to the more general issue of favors.  As social animals, we don't just need each other, we like to do favors for each other.  And when someone does a favor for us, we have a deep need, (it is really part of our nature) to want to reciprocate.  We all know this - the lobbying industry in this town is built on people's inborn need to return favors.  We know how Congress has been swayed by lobbyists - that's what enabled JP Morgan to mess with the Dodd-Frank legislation the way it did.  But we like to pretend that other professions, and certainly ourselves, are above such tawdry influences.  And it is because we have this tendency to fool ourselves into thinking that we are not influenced by favors granted, that we ourselves need oversight.  In fact, Ariely has shown that the people who are most self-confident about their objectivity are precisely those who are least able to accurately gauge their own honesty (p. 151).  In other words, the less you think you need oversight, the more likely it is that you're fooling yourself.

There is no person, and no profession without these issues. With regard to the issue of returning favors, and the more general issue of conflict of interest, every one of us is affected.  Think of doctors wrestling with the issue of how the favors they receive from drug companies affect their prescribing practices.  And think of us Rabbis, writing High Holiday sermons, wrestling with the issue of saying anything negative about the medical profession, given the doctors we know and respect in the congregation.  Come to think of it, Rabbis are a little like auditors, hired by, and thus dependent on the very people we are paid to critique.  Or kashrut supervisors, paid by the very organizations they supervise.  The list of conflicts of interest is endless. Don't think that you are immune to a nice thing that done for you, be it as small as some kind words spoken to you, or be it your continued employment.  Don't think that you can remain above the fray, objective, uninfluenced in your judgments by favors, or salary received.

And it is not just through returning favors that we fool ourselves.  Another confounding influence on our behavior is exhaustion.  And by exhaustion, I don't just mean major sleep-deprivation, though that is a significant, and increasing problem.  It turns out, even small things can tire us, and influence our choices.  A study was done in Israel about when judges are most likely to grant parole.  Here I quote from Ariely's book (p. 102):

...Investigating a large set of parole rulings in Israel ... researchers found that parole boards were more likely to grant parole during their first cases of the day and just after their lunch breaks.  Why?  The default decision of parole boards is not to grant parole.  But it seems that when the judges felt rejuvenated, which was first thing in the morning or after just having eaten and taken a break, they had an increased ability to override their standard decision, make a more effortful decision, and grant parole more frequently...

I feel the same about Talmud study, which I always try to do first thing in the morning, for this very reason.  It is so tempting, when reading a difficult passage to fool myself and think: "I pretty much get what they're trying to say".  When I'm tired, actually at any time of the day except right after a meal or a nap, I never have the energy to really wrestle with the text.  And if I don't bring energy to the text, I generally get little out of the studying, and as a result I have little to share with you.  With the Talmud as with life, exhaustion, even just a little tiredness, can make us think we understand, when in fact, we do not.

I'd now like to put forth a few suggestions about how to limit this fooling of ourselves, this year, so we can live a better life. 

First, another example from Ariely's book.  It turns out, that on one of his little tests with the answer key "helpfully" at the bottom of the page, he has ways to stop people from cheating (p. 39ff).  Let's say, for instance, before handing out the test, he asks people to see how many of the 10 commandments they can remember.  In such a case, when people have just been thinking about the 10 commandments, no one cheats, even though the answers are right there at the bottom of the page.  No one cheats.  Or if he has them sign an honor code pledge right before the test (p. 42), "I understand that this experiment falls under the guidelines of the MIT honor code."  Again, no-one cheated under those conditions, even though MIT did not in fact have an honor code.

The lesson for us.  The rituals might be a help for us human beings, with our tendency to fool ourselves.  The regular reminders that have been handed down to us - daily davenning, saying blessings before eating, regular Torah study - these might well keep us on track.  Ariely calls all this: "recalling moral standards at the time of temptation".

Another strategy, in the face of human frailty: cultivating good friends, friends whose loyalty you trust enough to hear their criticism.  It's not easy nurturing a friendship to that degree of trust - it takes a lot of time together.  And it's not enough just to have such close friends.  You also have to ask for the critique.  Not from a spouse, of course - the critique comes naturally in that sort of a relationship.  But in other relationships, we tend to avoid conflict, given the present norms of the culture we live in.  If you want constructive criticism, you have to ask.

This can be true professionally as well.  Bosses sometimes avoid giving bad evaluations, perhaps due to the societal expectation for "niceness" we all labor under.  If you think you could be doing a better job in whatever it is you do, but you aren't getting any feedback, you may have to ask.  I hear this regularly from teachers - from grade school on up.  It's hard to get an honest, helpful evaluation.  Those who should be doing the evaluating - prinicipals, heads of departments, deans - they often feel too busy to actually sit in on classes and watch a teacher teach.  They may not even see it as part of their job description.  Increasingly, students' input in anonymous on-line surveys seems to take the place of evaluation by peers.

There's another way to go, sometimes, for outside help.  Videotaping yourself, depending on the profession, of course.  Therapists, with the permission of clients, of course, sometimes use this technique effectively, poring over the tape with their own adviser.  But it can be really painful to watch yourself.  In essence, you are your own outside commentator, watching.  And nobody looks as good on tape as they think they do.  But if no one else can evaluate you, you might have to be brave, and tape yourself.

And professionals have their own problems getting evaluated by peers.  Often there is enormous, if unacknowledged competitiveness among professionals, making frank critiques unreliable at best, and dangerous at worst.  And what's more, often professional organizations are set up not to helpfully critique members, but rather to protect their parochial interests.  The most you can hope for is an occasional recertifying test - but a thoughtful, personal, loving critique can be hard to come by.

Along these lines, there was a great article in the New Yorker of October 3rd last year, an article by the surgeon, Atul Gawande (pron.: atool ga-wan-day).  No doubt many of you have read his brilliant articles about health care.  In this article, Dr. Gawande talks about how coaching helped him improve his surgical outcomes.  Dr. Gawande had improved his outcomes for many years, but had reached a plateau.  He felt he could do better, but didn't know what else he could do differently.   So he just up and hired his old professor from his medical training to watch him do surgery, and make suggestions.  It was a bold move, asking for criticism.  It took immense self-confidence, on the one hand, but also the realization that he didn't know how to improve any further on his own.  

Maybe that's the definition of genuine self-confidence - realizing that there are things you don't know, and not being ashamed of it.  Or in the context of this sermon, knowing how you could be influenced by forces you don't recognize, and not being ashamed of it. Maybe there is someone in your field, or in a related field, that you trust enough to help you?

Another way to get a little outside of yourself, is by journaling.  This year, as I have been doing the last few years, I read my journal entries from 30, 20 and 10 years ago.  I read all I wrote from 1982, just after Rachel and I were married, and I was deciding my career path.  I read all of 1992, when I was deciding if I should accept the offer of a job from this congregation, and I read 2002, the year I began writing plays.

Now you might think that reading an old journal that I had written myself could not possibly qualify as outside supervision, but you'd be wrong.  I was inspired by the scribblings of my idealistic 24-year-old self, a young man determined to change unpleasant personality habits he was ashamed of.  And I was hit hard when I came to realize that not only does the 54-year-old me still have some of those bad habits, I've stopped even worrying about them.  I've lost the idealism.  I've come to think: these habits are just who I am.  I started to feel, as I was reading my journal from 1982, that I had not kept faith with that 24-year-old's optimism.  It felt like that 24-year-old me was present in the room, giving me some necessary, stinging supervision.

Listen, outside help can come from any number of places.  Evaluating your actions is hard, whomever you ask.  Don't be like Wall Street, pretending you don't need regulating, as you sink in a mess of your own making.  Listen to your friends, find colleagues, find other ways of seeing yourself as others see you.  Put some effort into admitting, and then correcting for, your own misjudgments.  Don't fool yourself.  You could make this your best year yet.