the human ancestral environment and the current world in which we live. Just as zoo chimpanzees do crazy things, so do zoo humans.

This idea of a mismatch between human nature and industrialized living conditions has been explored quite thoroughly in nonfinancial areas.1 Perhaps the problem shared by most people is that we enjoy the taste of foods that are bad for us. Why dont we derive pleasure from healthful foods? The answer, according to some theorists, is that our ancestors lived in a world where both calories and dietary fat were scarce.

For our ancestors, this theory suggests, the more calories they ate, and particularly the more dietary fat they consumed, the better. Ancestral humans who ate more of what we would term junk food were better able to survive and reproduce than their competitors.

Thus, our ancestors were built to love food, and to especially enjoy fatty foods. The world has changed, and saturated fats, for example, now cause heart disease. Nevertheless we are still built to feel joy at eating the foods that helped our ancestors, not the foods that would help us today. Professor William Irons of Northwestern University summarizes this hypothesis as follows in an important scientific paper:

in ancestral environments, these preferences [towards different foods] motivated people to come as close as their circumstances allowed to optimal diets. However, in modern environments, the abundance of different types of foods is vastly different, and these preferences often motivate people to choose diets that are much less healthy than are possible in their [current] circumstances.2

Because we live in a different world from our ancestors, our very human nature pushes us toward food that is bad for us. In a famous scientific article, The Past Explains the Present: Emotional Adaptations and the Structure of Ancestral Environments, Professors John Tooby and Leda Cosmides make the same argument about human logical abilities.3 What was good for our ancestors can be bad for us living in a modern world. Professors Cosmides and Tooby reason that it is simplistic-or

downright wrong-to say people are irrational. Rather, our behavior depends on the context. In settings that were relevant to our ancestors, we are able to perform brilliantly. In novel settings, however, even with our big prefrontal cortexes, we look silly because we are fish out of water.

Using this logic, Professor Gerd Gigerenzer and colleagues are able to rephrase the Linda-the-bank-teller question that tripped us up at the beginning of this book in such a way that people behave rationally. Recall from Chapter 2 on individual irrationality that most people commit the conjunction fallacy by choosing answer (2) in the following problem instead of the correct answer (1).

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations.

Which of the following two alternatives is more probable?

1. Linda is a bank teller.

2. Linda is a bank teller and is active in the feminist movement.

Professor Gigerenzer changes the problem slightly to:

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations. (This part is identical to the other wording.)

There are 100 people who fit the description above. How many of them are: Bank tellers?

Bank tellers and active in the feminist movement?

In this second version, the conjunction fallacy disappears as most people get the question right.4 In a series of related experiments, Professor

Gigerenzer has shown that human brains work better when problems are described in frequencies (e.g., how many out of 100?) as opposed to probabilities (e.g., which is more probable?). Professor Gigerenzer argues that human brains are built to deal with frequencies.5

Why are humans better at frequencies than probabilities? No one knows for sure, but I always imagine humans in the ancestral environment thinking about outcomes in terms of frequencies. Something like, Remember when it last rained like this, we caught those tasty antelopes on the west side of camp. I never picture them saying, The probability of successful hunting increases by 7% during rains.

The conclusion of the work by Professors Cosmides, Tooby, Gigeren-zer, and others is to reconsider how we should interpret human acts that appear to be irrational. This more nuanced perspective suggests that humans are not designed to be crazy, but rather that we can be pushed to crazy actions by certain situations.

There is an active debate within academia on the value of this ancestral perspective. Interestingly, many of the leading behavioral economists, including Professor Richard Thaler, see little value in considering how human nature was shaped in ancestral environments.6 Others (including me) see the ancestral perspective as a primary organizing principle underlying all study of human nature, including its irrational aspects.

This idea that human problems stem from living in an unnatural environment helps to understand the deep cause of human irrationality, and it provides the basis for the practical advice in the rest of this book. The key hypothesis is that many of our financial difficulties stem from the fact that, like captive chimpanzees, humans are built for one world yet live in another. So humans are not built to make good financial decisions.

The lizard brain helped our ancestors achieve their goals, but in situations that were never experienced by our ancestors it often pushes us toward self-destructive or seemingly irrational acts. When it comes to financial decisions, the situation is far worse than a lack of natural talent. There are three sorts of decisions that we face. For some decisions the lizard brains effects are neutral, for others the lizard brain guides us toward the correct solution, and for the third category the lizard brain is