Thursday, December 26, 2013

Advice and conflicts of interest

We all take advice of some sort or another, and it’s often critical to our decision making. It’s typically and especially sought out prior to making important decisions, and therefore it’s important to recognize and analyze what might be influencing the advice you’re receiving before you assign a value to it.

Ask yourself, does the person you are obtaining advice from have a conflict of interest of one sort or another? Are they truly unbiased? The most common conflict of interest in financial, so try to figure out the source of the person’s livelihood. In other cases advice is clouded by fear. It’s not uncommon for multiple factors to be at work. 

Let’s say you are considering going to law school, and you estimate that its debt and lost wages will cost you about $200,000. There are other jobs outside of law that you would equally like but at this time you are shopping for opinions to see if law school makes sense from a cost benefit perspective. Let’s say that you are enrolled in an undergraduate business law course. You decide to ask your business law professor’s thoughts on the issue because he is a convenient source. It would not be surprising if the professor said that law school is an excellent idea, and that your job and earning prospects will be great! He may go on to suggest that you go to the university’s affiliated law school. In giving that advice he would obviously not tell you is that the job market for many law graduates is abysmal.

In the above example the professor’s conflict of interest is both financial and fear-based. He may be thinking, “What if I lose my professor job and can’t pay my student loans? How will I support myself?” It’s important to keep in mind that particularly the untenured professor (the majority) is first and foremost looking out for his own career and financial stability. If the word got out that the professor spoke negatively about graduate law education, especially the university’s affiliated school, he may get a warning from the department chair or people within the university’s administration. Advancement and tenure may come in to jeopardy. Department colleagues may ostracize him. Perhaps his department will be downsized if he pushes students away from law, or there may be other negative outcomes which could influence his advice.

As you can see people with conflicts of interest are susceptible to steering you in directions which are against your best interest. Ask yourself the right questions before hand and you’ll be in a better position to weed out and avoid poor advice. 

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