A recent series of experiments conducted by Chen-Bo Zhong of the University of Toronto suggests that people with an option to treat someone fairly or to lie to a person and gain at that person’s expense choose to be more honest when instructed to trust their gut feelings instead of thinking the situation through rationally.

The results of the experiment have definite implications for the business world. One needs to look no further then the recent economic slow down we are facing due to risky financial behavior. Bankers were issuing hundred-thousand dollar mortgage loans to individuals who did not have the assets or income to be able to afford such a loan. Even though bankers understood the problem with their actions, they were able to rationalize their actions by the profit that they were making. Such a system also encouraged loan applicants to apply as they understood and saw from the people around them that their loan application would not be turned down. And they were able to rationalize this through the larger house or apartment that they could acquire.

If these individuals, would have listened to their instincts telling them that something feels wrong about the whole process, we may have had a much more stable mortgage lending system.

This lesson has special applications for individuals working at and founding new companies. Trusting your instincts may be a better decision then you think.

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Business · Economy · Financial services · Loan · Mortgage · Mortgage loan · United States · University of Toronto

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