particular, the plant food that women sought did not move, while the animal food that men sought tended to move around a lot. This sexual division of labor caused researchers Irwin Silverman and Marion Eals to predict that woman would be better at remembering the location of objects.11 Plants dont move, so it pays to remember where they are located. This type of memory is not very useful for hunting animals.

Experimentally, Silverman and Eals showed that women are significantly better at what they call object location memory tasks. This difference is so profound that it is easy to replicate even in small groups, and I like to test my students in class. After they have provided their answers, but before revealing their scores, I show my students the data from studies around the world. Out of a perfect score of 20, men average about 12 on this test, and women average about 14.

When running this task in my classes, I always disclose the mens score first. Harvard men are so good that they are even better than the average woman from around the world. So I get average male scores in the range of 16, which leads the Harvard men to think they will defeat the Harvard women. This is just a setup as Harvard women score almost perfect 20s and have always soundly defeated the men in my classes.

If Silverman and Eals are right, as this task suggests, not only are people built to solve ancestral problems, we are even adapted to solve certain types of problems. (A humorous strand of the research related to Silverman and Ealss work looks at differences in the way that men and women give directions. As far as I know, there is no scientific reason for the fact that men never ask for directions.)

So our natural instincts look pretty good in our natural environment. Its almost as though we were designed to be hunters and gatherers. As Richard Lee said of the !Kung San, we are almost uncanny in our abilities. We have brains that worked well to solve ancestral problems. Difficulties arise, however, when we take those ancestral instincts to unnatural environments. And there is no more unnatural environment for a human brain than a financial market.

Dangerous Setting: The Lizard Brain Loses Money on Wall Street

While the !Kung San can find reliable clues to make good decisions, investors face a very different situation. As we have discussed and shown repeatedly throughout this book, we tend to buy when we ought sell, and vice versa. By its very nature, investing requires us to be forward looking to anticipate future events. Our lizard brains, however, are designed to look backwards. Thus, the lizard brain causes us to be optimistic at market peaks (after rises) and to be pessimistic at market bottoms (after falls).

This backward-looking aspect of the lizard brain works well in natural tasks, even those that are very complex. For example, it is better to pick the closer of two identical animals. Thus, a !Kung San hunter should always pick the fresher of two identical trails. Furthermore, such a hunter can learn how to best use even extremely subtle signs that might lead to success.

In hunting, the relationship between information and success tends to be invariant. Precisely that which worked in the past is most likely to work in the future. Accordingly, the lizard brain is built to look for patterns in what worked in the past.

There are no similar rules in investing. Should we, for example, buy the stocks of fast-growing companies? Perhaps, unless too many other investors are also buying the stocks of fast-growing companies. If so, then the stock prices of these companies will be overvalued, and wed be better off selling them.

Investing is fundamentally different from many ancestral tasks. Rather than do what worked best in the past, investing requires staying a step ahead of others. Thus, there can be no stable relationship between information and the correct course of action. This attempt to stay one step ahead of others, who are also trying to be one step ahead of you, leads to some strange statements.

Only in investing can you say, As expected, Microsofts earnings

exceeded expectations by more than expected. In after-hours trading, the stock is falling because the earnings surprise was smaller than was widely anticipated.

For investing, the only rule is to predict what everyone else is doing, and move to profit from their behavior. Investors who do what comes naturally-or who use a fixed rule based on fundamental data-tend to become prey.

Investing is therefore the ultimate cognitive situation where we need precisely to restrain our instincts in order to make money. Unlike neutral games of chance, or ancestral problems like gathering and hunting, financial success means suppressing our gut response.

All of the irrational investing tips in this chapter are methods to prevent our less analytic parts from making our financial decisions. In short, to make money we need to shackle the lizard brain and throw away the key.

Shackle the Lizard Brain Investing Lesson #1: Dont Trade Emotionally, Unless You Are Tom Cruise

In a debriefing of his flying in Top Gun, Maverick (played by Tom Cruise) is criticized for risky flying. Civilian contractor Charlotte Charlie Blackwood (played by Kelly McGillis) says, You perform a split S? Thats the last thing you should do. The bandit is right on your tail- What were you thinking here, Maverick? to which he replies:

You dont have time to think up there. If you think, youre dead.

Maverick is the ultimate instinctual pilot. Because hes got great natural skills he can win even with unconventional tactics. The analysis of Mavericks split S ends with, Maverick makes an aggressive vertical move here, comes over the top and defeats the bandit with a missile shot. The