that is so Zen. With universal praise and love, the stock had nowhere to go but down, and down it went from over $100 a share to below $4.

The story of precious metals in the 1970s, and EMC more recently, form a universal pattern. Both Wall Street and Main Street have an amazing ability to be wrong about investments. At about the same time that Andrew Tobias was selling silver at ridiculously high prices, unloved stocks were being sold for rock-bottom prices.

Job Listing: Street Sweeper to Pick Up Surplus $100 Bills Left Lying in the Street

This is one of the job descriptions that you will never see posted. For obvious reasons, $100 bills cannot remain visible for long. Because $100 bills tend to get picked up, believers in efficient markets assume that they cant exist. An alternative, however, is that there are opportunities to make profits, but they persist only in what can be thought of as the lizard brains financial blind spots.

Market opportunities will be difficult to find. There are no easy roads to making money. In The Godfather: Part II, a young Vito Corleone does the favor of hiding some guns for his neighbor Clemenza (Vito goes on to become the Don and Clemenza one of his trusted lieutenants). After the guns are returned, Clemenza says, A friend of mine has a nice rug.

Maybe your wife would like it....It would be a present. I know how to

return a favor.

As the two men go to pick up the rug from the friends house, it becomes clear that they are actually stealing. In the process, a policeman comes to the door and Clemenza prepares to shoot the officer. Fortunately, the scene resolves itself without any violence, but the quest for possessions, whether by legal or illegal means, isnt an easy one.

While the $100 bills we seek are not easy to find, interestingly sometimes the hardest things to spot are those hiding in plain sight. For example, with modern electronic-search capabilities, the FBI can track most

people down very easily. Special agents enter some information about the suspect into the computer, click a few keys, and voila, the suspect is found. Among the hardest to find, however, are people with common names like John Smith. So one of the few ways left to hide from the FBI is to hide in plain view, by being part of a crowd. This problem has complicated U.S. efforts to prevent bombers from boarding planes. There are a large number of people, for example, with the name Mohammad. Thus, many international flights have been cancelled because of mistaken identity.

In the case of markets, the opportunities exist, but the lizard brain is built not to be able to see them. During the dot-com bubble, the unprofitable Internet retailer Etoys was worth more than the profitable, and much larger, Toys R Us. Recognizing that Etoys was irrationally priced (and in fact soon went out of business) didnt require any fancy math.

While profitable investing doesnt require mathematical prowess, it does require a willingness to learn about the irrationality in oneself, in others, and in markets. Becoming a successful investor requires a keen understanding of human frailty, including ones own limitations.

Weve encountered many of those limitations in Chapter 2. Two additional aspects of the lizard brain are harmful to investing success. The first is our desire to conform, and the second is the fact that our emotions really do seem to be out of sync with financial markets-both of which tend to lose us money.

The Loneliest Man in San Diego

One of our human limitations is the desire to conform to the majority. This seems to be something built into us and it works against us since popular investments tend to be unprofitable.

I learned something about this a few years ago at a football game between my Detroit Lions and the San Diego Chargers. My Lions lost the game, which was not surprising, as theyve had a long tradition of mediocrity. What was surprising was the level of pain that I felt. The game was

played in San Diego, and I was almost the only Detroit fan in a sea of Charger fans. The pain of losing in this setting was far greater than any I had experienced in home losses.

The human desire to conform to those around us extends beyond sports stadiums. A line of psychological research performed by Professor Solomon Asch and others demonstrates the pressure to conform.22 In one setting for this research, six people enter a room and are asked to answer a question for which there is a clear answer. For example, here is a reference line:

X -

Which of the following lines matches the length of the reference line?

A -

B -

C -

Of the six people answering the questions, five are confederates of the experimenter, which means they give false answers designed to manipulate the behavior of others. In this case, the experimenter first asks the confederates to rate the lines, and they all give the same wrong answer. In this case they might say, Line C matches line X.

After the five confederates have made these obviously false statements, the sixth person (who is not in on the experiment) is asked the same question. Now this person faces a bit of a quandary. Should he or she pick the obviously correct answer (A) or pick the same answer as everyone else (C)? In the original experiments, 75% of subjects sometimes conformed to what is labeled the false consensus by picking the obviously false answer (C).

More recently some of these original results have been challenged, but the basic finding seems intact. We seem built to want to be part of the crowd, even when doing so contradicts our direct observation.