Cheaters Never Prosper?

People cheat.

Photo: Gerd Altman. Source: Pixabay

That’s the not-so-surprising conclusion from the VW’s “Dieselgate.” But before VW installed adaptive software to sense when their cars were being tested, there was a scam involving heavy trucks. 15 years ago Navistar, Renault, and Volvo paid over $1 billion in fines for installing devices to defeat exhaust tests on their vehicles. Last year Hyundai paid $300 million for overstating mileage claims on its cars. In 1996 GM recalled half a million Cadillacs that had a chip to shut off emissions controls when the air conditioner was on.

Lest you think it’s just auto makers who cheat, check out Google and YouTube. It’s easy to learn how to remove or punch holes in a car’s catalytic converter—improving mileage and power in a lot of cars. Then type “auto inspection cheats” to see how to fool the inspector. All the outrage about VW’s scandal reminds me of the scene from Casablanca, where Inspector Renault says he is shocked, shocked to find gambling going on in Rick’s café—just before an assistant hands him his winnings.

As long as there are audits and inspections, people will try to cheat and manipulate the score–whether it’s emissions testing or high school grades or football or investment management. This has been the case ever since Adam and Eve hacked their supervisor’s ethics-evaluation system–“knowing good and evil.” We’re born to trouble as the sparks fly upward.

For VW, it will take a while to reestablish trust after a scandal like this. But people need cars and companies to build them. The struggle between mileage and performance and emissions and costs will continue. Hopefully, we’ll just keep stumbling forward.

Douglas R. Tengdin, CFA

Chief Investment Officer

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