Does Raj Rajaratnam really think, I mean really think, he's not guilty?

The biggest insider trading case in years, overwhelming evidence, wiretaps implicating former Goldman director Gupta, and a guilty verdict on all counts. Yet he still proclaims his innocence. Of course, there are always appeals, and so it's not surprising that all of sudden Raj will say, OK guys, I did it!

But maybe he really believes that he's not guilty. That is more intriguing, isn't it? Lacking my fMRI and a willing subject, I don't know what's really in Raj's head, but I can easily imagine that he genuinely believes he didn't do anything wrong. Why? Because of how our brains process information and make decisions, an evolutionary result millennia in the making. My research into why seemingly sensible people make incredibly bad decisions highlights the role of emotions, and the resulting biases that affect how we think. And we often don't even know we are doing these things.

Self-interest is not an unusual thing in business. People are always trying to get ahead, to protect their turf, to maximize their compensation, and so it is natural to expect self-interest to play a role in decision-making. The problem becomes even worse when we realize that much self-interest operates at a subconscious level such that we are often not fully aware of how we are behaving. Consider the accountants who seem more likely to acquiesce to management when the prospect of future work is dangled as a carrot. Or even the medical researchers who, studies have consistently found, are more likely to report the efficacy of a molecule or drug when their research is supported by pharmaceutical companies. It’s not that they are consciously doing anything unethical, but … self-interest is a powerful thing.

Raj, like many others, might not think they're doing anything wrong because they lack the self-awareness that might point out flaws in their own thinking, and their actions.

Or, maybe it really was all premeditated, and he's just a crook after all, like Skilling, Kozlowski, and Fastow.

For more on my research on red flags in decision-making, read the most recent HBR blog by Amy Gallo.

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