The excerpt below got me thinking about how and why people lie. Falsehoods can come in many forms: There are lies of omission, lies that protect, efficient lies, and, of course, bald-faced lies.
Why do we believe such lies? One reason is their scale. Think about the falsified returns that Bernie Madoff reported for many years—they were good enough to make investing with him look like a sweet deal, but not so good as to be unbelievable. We also tend to believe liars who reveal their incentive to lie up front. My colleague at the Yale School of Management, Daylian Cain, discovered that when a seller reveals a conflict of interest, the buyer trusts the seller more for the disclosure. So far, so good. But now the seller feels much freer to take advantage of the buyer. In other words, people start trusting just when they shouldn’t!