Scientific Definition
Auditors paid by the firms they audit have predictable blind spots.
Plain-English Definition
Auditors paid by the firms they audit have predictable blind spots.
Feynman Explanation
The check you write is rarely the check that catches you.
Core Principle
Auditors paid by the firms they audit have predictable blind spots.
Mechanisms
Pending editorial review.
Auditors paid by the firms they audit have predictable blind spots.
Pending editorial review.
Pending editorial review.
Assurance services with embedded conflicts.
Pending editorial review.
Pending editorial review.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
The check you write is rarely the check that catches you.
Examples
- Enron / Arthur Andersen and many quieter analogues.
- Assurance services with embedded conflicts.
Pending editorial review.
Famous Experiments
Pending editorial review.
Design Principles
- Rotation requirements. Public-interest funding models.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Rotation requirements. Public-interest funding models.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
Annual bonuses reward annual results — risk that blows up in year four with damage in year seven is rational.
Quarterly bonuses create end-of-quarter behavior changes.
Government rescues of failing institutions privatize gains and socialize losses.
Issuers pay raters who compete for the highest ratings.
Quarterly earnings drive quarterly behavior.
Percentage-of-AUM fees reward gathering assets regardless of net performance.
Originators paid on volume, not on default rates.
Originators paid on volume, not on default rates, fueled the subprime collapse.
EPS-targeted comp incentivizes buybacks even when reinvestment yields more.
Candidates dependent on large donors become structurally responsive to donor priorities over voter priorities.
Discount framing nudges people to buy things they wouldn't otherwise want.
Productivity targets compress visits, raising misdiagnosis and burnout.