systematically out of sync. Financial markets are this third and worst of these settings.

Neutral Setting: The Lizard Brain Looks Silly in Las Vegas

In the 1980s, I lived in San Diego and took periodic road trips to Las Vegas with my buddy Jim. During one of those trips, I found him sitting at the roulette table using an interesting betting strategy. When the roulette ball landed on red he would place a bet on black for the next spin. Conversely, whenever the ball landed on black he would place his next bet on red. I asked Jim to explain his strategy, and he said, Dude, isnt it unlikely that the ball will land on the same color twice in a row?

Jims analysis was not correct. As long as the roulette wheel is fair, it doesnt remember the previous spin. Thus, the bet on red has the same chance on every spin, even if, for example, it follows a streak of 10 red in a row.

Jims logic reminds me of the misguided traveler who takes a bomb on a plane, not to blow it up, but rather for protection. When asked how a bomb (that he doesnt plan to explode) provides protection, the traveler responds with, Dude, isnt it unlikely that there will be two bombs on the same plane?

Although Jims logic was not perfect, his betting strategy was fine. In fact, his alternating strategy has exactly the same probability of winning as other strategies, including bet red every time, or bet black every time, or even to bet black on sunny days. Any strategy that wagers on red or black has the same expected payoff.

In Full Metal Jacket, the Marine drill instructor says that he does not look down on anyone in particular. Rather than target some types of recruits for his abuse, he says, Here, you are all equally worthless. Similarly, all betting strategies on the roulette wheel are equally worthless-they all cost the gambler money, and earn profits for the casino.

Recall that our lizard brain is built to find patterns, even when there are none. There is a study showing physiological surprise (as measured by electrical activity) when a pattern is broken. For example, when flipping coins, the more heads that occur the less surprised we are by another occurrence of heads. Even though the prefrontal cortex knows that the chance of heads is 50%, part of the brain uses the past to predict the future.7 So if we sit and watch a roulette wheel long enough, our lizard brain will find a pattern, even if our prefrontal cortex knows that any pattern must be the result of randomness.

Fortunately, the roulette wheel is neutral with regard to the use of any strategy built on faulty pattern seeking. So in one sense our irrational pattern-seeking brain is harmless in memoryless settings like roulette. (Of course, the very fact that people enjoy betting on gambles that lose more often than they win is a costly exploitation of our lizard brains.)

Helpful Setting: The Lizard Brain Finds Food in the Kalahari Desert

Although our instincts seem silly in casinos, in other settings they help people make good decisions. In fact, many aspects of our brains, including the parts that see patterns when there are none, arose to help our ancestors.

Because our modern world is unnatural in so many ways, some of the best examples of instinctual problem solving come from the behavior of people living like our ancestors did, in small groups of foragers. Many of these foraging cultures, where people survive by hunting animals and gathering plants, existed just a few decades ago. Most such societies have disappeared (or been destroyed), but we have anthropological records of their foraging lifestyles.8

Until recently, for example, the !Kung San lived in the Kalahari Desert by gathering plants and hunting animals much as their ancestors had for ten thousand years or more. (The ! is a click used in a few places

around the world including the Khoisan language of these people, and !Kung San means real people. )

In separate anthropological studies, Professor Richard Lee and Professor Irven DeVore lived among The !Kung San of the 1960s. They each report that these people were excellent at living in a very harsh environment.

Professor Lee writes that the !Kung San are such superb trackers and make such accurate deduction from the faintest marks in the sand that at first their skill seems uncanny...Perhaps the most amazing skill is in the hunters ability to figure out the number of minutes or hours elapsed since the animal went through. 9

The ability to find and use patterns was a key survival skill of the !Kung San in the harsh desert. The !Kung San can read something extremely subtle in an animals track, for example, and that allows them to obtain meat. Finding an animal thus relies precisely on the ability to find patterns in an uncertain world.

In natural settings our pattern-seeking brains can work beautifully. Unlike the casino, in the natural world it is usually good to look for patterns.

Until the invention of agriculture about ten thousand years ago, all humans foraged for a living. There is evidence that our brains today still reflect those ancestral foraging problems.10 This suggestion comes from a variety of studies including some showing that men and women have different abilities that may have helped our ancestors find food.

In almost all foraging societies, there is a division of labor where women gather plants and men hunt animals. Without baby formula and plastic bottles, women must travel with infants so they can breast-feed. Thus, even if an ancestral society were equalitarian, it would be harder for women to hunt than for men. Thus, the need for women to feed babies directly through lactation pushed men and women toward different lifestyles, even in societies that were not sexist.

Among our foraging ancestors, men and women had different roles. In