What is the ROI for Fraud and Cheating?

Just recently two events regarding ethics got me thinking about this topic and thus here are some thoughts.

The first event talked about one approach of dealing with ethics. It suggested analyzing the consequences, analyzing the action and making a decision.    An example might be someone who presents themselves incorrectly.  The consequence might be qualifying for a job that he/she does not meet. The action could range from dismissal to just looking the other way.  The decision could be could have a long term impact.

The other event was when  as a part time instructor at a university, I caught several graduate students cheating on an exam, part of which covered accounting and finance.   We all know that cheating  is not new and I am not sure how widespread it is or if cheating is increasing, but I starting thinking about  the actual benefit for cheating.

So what follows is my attempt to “measure” the ROI on cheating/fraud.

First, let’s start with the financial version (at least one of them) of an ROI.   Return on Investment can be defined in the following formula; ROI = (gained investment – initial investment) / initial investment.  The higher the return (or higher percent) the better is the investment. Or conversely a zero or negative return indicates a bad investment.

Here is the ROIc for cheating.  ROI = (knowledge gained – initial knowledge)/ initial knowledge.

So if someone studies, does their homework and puts that learning to use, they actually gain knowledge.  Depending on the student, his/her instructor and the environment, this gain can be minimal to unmeasurable.  The ROIc can range from finite to infinite.  And as one extrapolates this over time the percent can approach infinity.

More importantly than the calculated ROIc are the real rewards.  Some of them are great self esteem, contribution to society, success in life, potential role image, knowing a true accomplishment and one can sleep at nights.  By not cheating, who knows who might be the next person to unlock another mystery of the world.

As for cheating the ROI can be extremely short term; i.e.  passing the test. As for the long term the ROI c is no real knowledge gained, no increase in value to oneself, your goals, and your society and eventually as they say, the tapestry will become unraveled.  Thus the ROIc is zero or even worse it goes negative, especially if the cheating becomes the norm versus the unusual.

Just like business people who want the ROIs to be positive, people should want their ROI to be positive especially since its returns are far more valuable than just economic returns.

RHL  3/26/15

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