Shelby Cortez

BIS 345
Module 1, Paper 1
May 27, 2019

Video: Intro to Behavioral Ethics

1. When asked the vast majority of people will agree with the following two
statements. Would you agree with them also? Explain.
“I have solid, well-considered ethical beliefs that can be altered only by reasoned
arguments or new evidence.”
“I have character and integrity that will carry me though when I face difficult
moral choices.”
I agree with these statements, but not fully. I acknowledge that there are times when I
see somebody else doing something unethical, and I turn my head in a different
direction. I definitely have a selfish mentality of, “it’s not affecting me, so no need to get
involved,” which is not ethical. In regard to myself and how I personally act, I am ethical.
I do have strong character and integrity for myself, but not when it comes to others, I
guess? I do have well-considered ethical beliefs, but they can be altered by more than
just a reasoned argument or new evidence.
2. Probably the strongest finding from the last decade’s research in behavioral
ethics is that people simultaneously think of themselves as good people yet
frequently lie and cheat (typically in a minor way). Is this consistent with your
experience? Do you agree or disagree with the following statements from
researchers in the field? Explain.
“The empirical evidence seems to point to the conclusion that we lie and cheat
much more often than we care to admit. At the same time, we strive to maintain a
positive image of ourselves, and moral values are a central component of our
self-image.” (Francesca Gino)
“Essentially, we cheat up to the level that allows us to retain our self-image as
reasonably honest individuals.” (Dan Ariely)
“Evolution prepared us humans to be devious, self-serving, and only half-honest,
inclined to grab the lion’s share of goodies without being thrown out of the group.
Homo sapiens became wired for truthfulness only to the extent that it suited us,
pleased others, and preserved our reputations. We are willing to break rules to
benefit ourselves, but only within limits we can justify. We are good and fair, most
of the time—at least in our own minds—but that doesn’t exactly make us straight
shooters. …. Our internal cop stops us only when we contemplated big
transgressions.” (Mark Matousek)
This is consistent with my experience of what I see happening in the world. I do often
see people cheating on little things, like getting an extra coupon when they shouldn’t be,
or not scanning all of their items. I do think that people, myself included, lie and cheat
more often than we care to admit, as Gino stated. We do also hold ourselves to a higher
Shelby Cortez
BIS 345
Module 1, Paper 1
May 27, 2019

standard in front of others, but we do tend to do things differently behind closed doors.
And I absolutely agree with Ariely when he states that we cheat up to a limit that allows
us to retain our self-image. This is exactly true. We will do minor things that are just
enough for us to cheat, but not so much that it would hinder our image, or our future.
For example, instead of giving my daughter a full-on bath because she looks raggedy, I
will brush her hair all the way through and style it, clean under her nails, and put her in
fresh clothes with some body spray. It sounds silly, but she appears put together, but I
know that she isn’t, yet the image that I am putting out there is that she is. In regard to
the quote by Matousek, I’m not sure I fully agree with it. It’s a little dark and extreme for
me. I may cheat in little ways, but I don’t think my internal cop only steps in with big
transgressions, because I don’t even think about doing big transgressions. I’m an
honest person for the most part, which he stated, but as far as big transgressions go,
that isn’t me; however, that doesn’t mean that this doesn’t apply to others. I can see this
quote being applied to other people that I know.
3. Do these statements from the experts who research in the field of behavioral
ethics change your mind about your answers to the questions in #1? Explain.
No. They don’t change my mind because I have looked at ethics as something that I am
not fully cooperative of. I am guilty of conformity bias, and a few other biases, and this is
something that I acknowledge now that I am a little older. I am a firm believer that in
order for me to be the best version of me, I have to be honest about myself, and my
realities, even if it’s not aligned with the person that I would like to be on paper.
4. Most empirical research indicates that religiosity is not a significant factor in
ethical behavior. Atheists and religious people tend to say that the same actions
are ethical and unethical. And while religious people tend to give more money
and time to their churches and synagogues, religious and nonreligious people
otherwise have similar profiles in terms of altruism and volunteerism. Does this
surprise you? Explain.
On the one hand, it does surprise me, but on the other hand, it doesn’t. I can see how a
church could influence altruism and volunteerism. I have witnessed this with my friends.
For me personally however, I am not somebody who goes to a church. I am religious,
just without going in to an actual place of worship. With that said, I know people who are
not religious, but this doesn’t make them bad people. They still have their ethics and
standards of what their expectations are of themselves. I think that religious people
probably have more pressure on them to be altruistic and to volunteer, but overall,
regardless of their beliefs, people in general have their own sets of rules that they set
for themselves, and this is usually their guide above all else. Hopefully, anyway.
Video: Lose Aversion
5. Studies show that people hate losses twice as much as they enjoy gains? Is
that consistent with your experience? Explain
Shelby Cortez
BIS 345
Module 1, Paper 1
May 27, 2019

This is consistent with my experience. When I was younger, I moved out of my mom’s
house and got my own place. When I left, I was told that I would never make it on my
own and that I would come back. I let that phrase dictate my life for years, constantly
struggling, just so I wouldn’t “lose” and go back to my mom’s house. To this day, 12
years later, I never moved back to my mom’s house, but it wasn’t easy. Looking back, I
should have asked for help. It would have saved me so much money, in addition to all
the headaches that I had from struggling for so long. I didn’t want to lose, even though I
was, so I went out of my way to try to make something work, that just wasn’t working. It
was a bad decision, and it continued to get worse, all because I didn’t want to have a
loss.
6. Nick Leeson famously almost sank Baring’ s Bank when he lost a big chunk of
money, but was too embarrassed to admit it and then doubled down trying to
make the money back before the loss was discovered. The losses grew and grew
(to more than $2b) as he took increasingly risky bets. Indeed, this is a famous
pattern in financial frauds including those involving Jerome Kerviel (lost $6.3b
trading for France’ s Societe Generale) and John Rusnak (lost $691m trading for
Allfirst Bank). Does it seem to you that loss aversion plays a role in this
dynamic? Explain.
Loss aversion does seem to play a role in these big losses. These people seem to
make a mistake, and rather than being transparent and bringing it to the attention of
people that should know about it, they try to correct it, only to get themselves into a
bigger issue. When somebody feels that they are stuck between a rock and a hard
place, it’s clear that they will go to great lengths to prevent a loss from happening, or
from people realizing that a loss happened. This is a very scary thought.
7. A recent study found that when people were under time pressure, they were
more willing to cheat to avoid losses (“ losing the sale” ) than to accrue gains
(“ getting the sale” ). Do you think that is how you would react? Explain.
This isn’t surprising to me, but I don’t think I would be the type to cheat. Not now
anyway. I have really grown up over the last few years, and something that I value
deeply is transparency in all settings of my life. I’ve learned the value of being
transparent and honest, and it can go a long way. Even in the event where you make a
mistake, if you’re being honest and address it head on, then the consequences will
likely be less than if you went out of your way to try to cover it up.
Case Study: The Collapse of Barings Bank
8. Judith Rawnsley, who worked for Barings Bank and later wrote a book about
the Leeson case, proffered three explanations for Leeson’s behavior once the
losses had started to pile up: 1) Leeson’s loss aversion stemmed from his fear of
failure and humiliation; 2) his ego and greed were exacerbated by the macho
trading environment in which he operated; 3) he suffered from common
distortions in thinking patterns that often result from high levels of stress,
Shelby Cortez
BIS 345
Module 1, Paper 1
May 27, 2019

including overconfidence and denial. Which of these explanations (or all) do you
think played a role in this case? Why?
I think that option two, his ego and greed were exacerbated by the macho trading
environment in which he operated, is the most fitting. I like to think of this scenario as
the “good ‘ol boy system” which is where old school politics play a bigger role in the
work environment than they should. I think that Leeson had a reputation to uphold, and
these losses played right into his insecurities, which would make any person crack
under this pressure. Aside from not wanting to lose his job, I believe Leeson didn’t want
to face his peers and admit the mistake he and his team made, so instead he went into
a loss aversion mode, and made even bigger mistakes. Ego and greed are dangerous
things in delicate situations such as this.
9. If you were in Leeson’s position after the initial loss made by the employee,
what would you have done? Why?
I would have handled it in a transparent way, and addressed it head on. When you look
at the initial loss that Leeson dealt with, even though it was a loss, it was likely
significantly less than what he ended up losing the company. If he would have
addressed the loss in the proper way by reporting it correctly, and being as transparent
as possible, then the actions that he took after this loss would have been drastically
different, and the circumstances that the bank faced, never would have occurred. He
got himself into an even bigger hole because he was trying to cover up for something
minor, which is so silly.
10. Do you have trouble owning up to mistakes that you have made? Do others
whom you know? Explain with examples.
In the past I have had trouble owning up to mistakes that I have made, but recently I
have been going out of my way to put my own ego to the side and admit when I am
wrong. The other day I got mad at my husband for something, and I didn’t realize he
wasn’t feeling well. I snapped at him and said a snarky comment, to which he got mad
at. He told me that he was feeling nauseous and that I just assumed he wasn’t paying
attention to my daughter acting wild at the restaurant. At first, I was defensive because
that’s how I normally am, but then after a couple of minutes I admitted that he was right
and that I did assume that he just on his phone not paying attention. I apologized
genuinely, and we moved on. It may seem trivial, but it was a huge step for me to not
only recognize the reality of the situation, but to then say it out loud and admit my
wrongs, was big.
My sister is somebody who has a hard time owning up to her mistakes, because her
ego really gets the best of her. She is all about her image, and she really goes to great
lengths to protect it. A few years ago she got accepted into an MBA program, and it
meant that she would be working full-time, while attending the program part-time. A few
days before she officially accepted the admission, she found out she was pregnant with
her first child, and she had just closed on her first home. Her home was over an hour
Shelby Cortez
BIS 345
Module 1, Paper 1
May 27, 2019

away from her job, and over three hours away from her school, which she would be
attending for the next three years. I tried to warn her that it wasn’t a good idea, but she
felt pressured from her job to go into the program, so she did. She is currently six
months out from graduating with her MBA now, and she just recently told our mom that
if she had known the struggles and hardships that were awaiting her, she never
would’ve signed up for the program. She tends to have a fixed mindset with things, and
this is a prime example of her thinking that she knew what she was getting into, only to
find out later that it was so different than she had expected. Unfortunately, she’s gotten
herself into similar situations all throughout her life, and she is the type that will
experience loss aversion just to not let her ego get bruised, and so she won’t feel like
she lost. Her image is everything to her, and it really plays a huge role in how she
handles a lot of situations in her life.