If companies like Rosland Capital and Lear Capital are so certain that owning precious metals is the key to protecting one’s financial future, why are the companies selling gold and silver – instead of hoarding it? Why isn’t William Devane telling viewers they can turn their old class rings and grandma’s heirloom silverware into cash – by selling those useless trinkets to Rosland?

The answer is simple: because those companies aren’t in the business of selling financial advice; they are in the business of selling precious metals and services related to their ownership, registration and storage.

Incentives are powerful things – perhaps the most powerful influence on human behavior. It is essential to determine the other person’s incentives, whether it is your boss, child, friend – or some C-list actor hawking gold on television.

For instance, the Securities and Exchange Commission just charged a high-profile investment commentator, Andrew Left, with fraud. Left allegedly made recommendations to television viewers and website subscribers, knowing that if enough followers took his advice, he could turn a quick profit by doing the exact opposite of what he was recommending. Viewers assumed (incorrectly, according to the SEC) that Left’s motive was to offer outstanding investment advice.

The power of incentives extends well beyond business.

I chuckle at people’s passive-aggressive political social media posts, feigning a moral superiority as they self-righteously admonish others not to repeat lies about political candidates – only three posts above repeating lies about “the other” political candidate.

Determining the incentive of the moralizing social media meme warrior is tricky. Some people spread misinformation out of ignorance, while others knowingly spread falsehoods, seeing them as noble lies. Understanding a liar’s motive can make the difference between feeling sorry for someone and not trusting them.

The more complex a situation or transaction, the greater the opportunity for someone to mislead you about their incentive. A detailed lie provides multiple avenues for deception. When an investment is structured so that it is needlessly complex, there is usually a reason. As the old poker adage reminds us, if you don’t immediately figure out who the patsy is in a poker game, you are the patsy.

Recognizing your own incentives and motives is equally important. Just as many people go to great lengths to hide the true motives for their actions, we often lie to ourselves about why we do certain things. When I am about to say something harsh, am I trying to make a difference? Or am I trying to make a point? Am I trying to achieve a specific outcome or simply vent?

Whether dealing with financial incentives, social interactions or personal motives, being aware of underlying incentives will lead to better decisions.

David Moon, president of Moon Capital Management, may be reached at [email protected].

This article originally appeared on Knoxville News Sentinel: David Moon: The power of hidden incentives