The Rational Animal: How Evolution Made Us Smarter Than We Think (21 page)

Imagine that a man must share $40 with you, so he makes you an offer.
If you accept the offer, each of you gets to take home the agreed-on amount.
But if you reject the offer, neither of you gets anything.
If the man offered you only $5 out of $40, would you take it?

When researchers examined this exact question, they found that men’s responses depended on their testosterone level.
For men with below-average testosterone, 93 percent accepted the offer, happily taking $5 for themselves while letting the other man have $35.
But of the men with above-average testosterone, almost half—45 percent—rejected the offer, choosing to take $0 rather than lose face by accepting a raw deal.
And of the men in the study with the highest level of testosterone, fully 71 percent outright rejected the low offer.

Because the young are more restless and prone to risk taking, they are more willing to test their luck in risky professions such as fishing in the unforgiving, icy waters of Alaska, logging giant trees with chain-saws, or starting their own business.
But while younger individuals are more likely to test their luck, does this always make them better entrepreneurs?
The answer appears to be no.
Because young adults are more likely to be blinded by myopic optimism and naïve enough to bet everything on one hand, a few will succeed.
But many more will fail.
A study of 549 successful entrepreneurs found that those who succeeded in their ventures were, on average, older and more experienced when they started the company that ultimately went on to be successful.
Of course, successes are often preceded by many failures from risky ventures undertaken when people were younger.
While older individuals might be wiser when they do take risks, they are less likely to enter into risky ventures in the first place.

FAST VERSUS SLOW STRATEGIES

Imagine you’re one of the five-year-old children who showed up for a now classic study at Stanford University.
As you wait by yourself in a room free of distractions, you are offered a tasty marshmallow, planted temptingly on the table right in front of you.
You are told it’s alright to munch the tasty treat if you really want to, but if you can wait for a little while without giving in to temptation, you will be rewarded with two marshmallows.
What would you do?

After the researcher left the room in the study, each child was observed through a one-way mirror.
Whereas some of the kids gobbled the marshmallow right away, others tried to resist.
The scientists observed that some of the latter kids would “cover their eyes with their hands or turn around so that they [couldn’t] see the tray.”
A few began kicking the desk or tugging on their pigtails.
And one even started to “stroke the marshmallow as if it were a tiny stuffed animal.”

The marshmallow study tested people’s ability to delay gratification.
A decade later, when the children from the study had grown into adolescents, those who had resisted eating the marshmallow as five-year-olds were more competent teenagers as judged by their parents
and teachers.
And a few years later, those same individuals scored higher on their SAT exams.
The message is simple: impulsiveness bad; delayed gratification good.

But is delaying gratification always a good thing?
And might acting impulsively sometimes be smarter?
Life history theory suggests that there is more to the marshmallow test than meets the eye.
So far we have talked about how people’s general priorities change across the lifespan.
But life history theory emphasizes that there are important differences among people who are pursuing different strategies.
Although just about everyone goes through the mating stage, for example, some people in this phase have an eye on tomorrow, while others seek to live for today.
And as we’ll discover, it turns out that impulsivity is sometimes the best strategy.

HIGH RISK, NO REWARD

Ray Otero works as a building superintendent at 106 East Eighty-fifth Street in New York City.
A former car mechanic with a happy-go-lucky disposition, Otero has an unusual investment strategy.
He “invests” $500 to $700 every week in the lottery.
He plays the game in shifts, placing one bet in the morning at eleven o’clock and another in the midafternoon.
His bets range from $10 to $20 on a scratch-off game or on the daily numbers, and he picks his digits from the license plates of parked or passing cars.

Otero is fully committed to his investment strategy—so much so that he spends a whopping $30,000 a year on the lottery!
In 2008, Otero’s buddy Richie Randazzo, the doorman for the building across the street, won $5 million in the Set for Life scratch-off game.
The forty-four-year-old Randazzo, now set for life, immediately started dating a leggy, twenty-three-year-old Swedish model (who was later charged with promoting prostitution at Big Daddy Lou’s Hot Lap Dance Club).
But Otero himself has thus far failed to recoup his staggering investment.
He has won only three times, earning $1,000 on a scratch-and-win and pulling in $2,000 on the Pick Five twice.
But all of it was reinvested.
“No matter how much I get,” he says, “I always spend it back.”

Why doesn’t Otero just save his money instead of essentially gambling it away?
It turns out that Otero is not alone in his enthusiasm for the lottery.
John Charlson, a spokesman for the New York State Lottery, points out that 75 percent of all New Yorkers have, at one time or another, put money on the games, with an average New York lottery player spending about $350 a year.
But even more intriguing is that the lottery has attracted more “investors” in the last decade.
While consumer spending generally decreased right after the 2001 tragedy of September 11, spending on the New York State Lottery has increased every year after 2001.
Are millions of people foolish and irrational, or might Otero’s behavior reflect some kind of deeper logic?

At the heart of this puzzle is the question of the best strategy for investing money.
While the specifics of financial investing entail limitless small print and shady complexity, there are really just two types of broad investment strategies.
One option is the high-risk, high-reward route.
You can, for instance, buy shares in a new start-up company, play amateur venture capitalist by funding your college buddy’s zany business idea, or perhaps invest your money in excavating a new diamond mine in a faraway country.
If just one of these ventures succeeds, you’re going to be rich—possibly rich enough to put gold hubcaps on your Cadillac and maybe even to buy a luxury yacht and retire.

Ray Otero clearly favors the high-reward strategy.
This is because spending money on the lottery is not all that different from buying risky stocks.
If you pick a winner, like the $5 million doorman Richie Randazzo did, you’ll be set for life.
A key part of the high-reward strategy is that it promises the possibility of not only large but also immediate payoffs.
You don’t have to wait to enjoy that twenty-three-foot sailboat with your AARP buddies—you might be able to cruise around in your own luxury yacht right now!

But there’s a reason the “go for it” strategy is called high risk.
There’s a good chance you won’t make any money—and you’ll likely lose everything.
The new start-up you invested in may well go belly-up when the next bubble pops, your college buddy’s scheme may well turn out to be as harebrained as you’d suspected, and the guaranteed largest-ever diamond mine in a faraway country is more likely to yield
a record-size pile of rocks and dirt.
Ray Otero’s desire for big and fast rewards has not yielded much on his $30,000 yearly investment, most of which has been an unintended gift to the New York State Department of Taxation and Finance.

If you’re not too comfortable with the possibility of losing your savings, there is an alternative investment strategy: the safe and boring route.
This strategy entails doing things like putting money in a savings account or buying some bonds.
While this isn’t too exciting, you will earn some interest each year.
Let’s say that you earned 4 percent a year.
While 4 percent isn’t a huge return, it’s far more than the 80 percent loss you can expect every time you buy a lottery ticket.
The safe route will also enable you to take advantage of the extraordinary power of compound interest.
If Ray Otero put $30,000 a year into a savings account with 4 percent interest, in ten years he’d have $419,000—and in twenty years this would grow to a cool million.
Of course, Otero would have to wait two decades to get his hands on that kind of cash.

So which strategy is better: takings large risks in hopes of winning big now or playing it slow and steady to reap rewards later?

To all you college-educated types who read books about rational animals, it may certainly seem like it’s smarter to resist the temptation of an easy but highly unlikely big score, and instead control your impulses and delay gratification.
After all, slow and steady wins the race, doesn’t it?
This is why our parents want us to get an education in a practical field like accountancy and find secure employment rather than dropping out of school to start a risky new business or become a rock musician.

But the answer to the question of which investment strategy is better is neither that simple nor that obvious.
In fact, it relates directly to the life history strategies we discussed earlier.
Asking about how best to invest your money is very much like asking whether it’s better to follow a fast or a slow life history strategy.
As we discuss below, the answer is, “It depends.”
And when it comes to people, an evolutionary perspective suggests that some may be better off running at full speed rather than trudging along slowly and steadily.

FAST AND SLOW PEOPLE

Recall that some animals, like tenrecs, follow a fast life history strategy (investing very little in somatic effort and instead focusing on mating), while other animals, like elephants, follow a slow strategy (investing heavily in somatic effort and delaying reproduction).
Life history theory emphasizes that neither strategy is inherently better.
Instead, each is evolutionarily suited to different environments.

Fast strategies are adaptive in environments that are dangerous and unpredictable, like that of tenrecs, whose life is treacherous and uncertain.
Not only must tenrecs endlessly scour for dinner in a desiccated Madagascar desert, but predators lurk behind every bush, on the lookout for a delicious tenrec dinner themselves.
For critters living in a dangerous and unpredictable world, following a fast strategy is a necessity.
If they delay investing in reproductive effort, they risk not reproducing at all.
Tenrecs simply can’t afford to build a larger bank account, because they might not be around later to spend their savings.

Slow strategies, on the other hand, are adaptive in safer and more predictable environments.
Unlike tenrecs, elephants feed on a predictable diet of regional vegetation, and their massive size and power protects them from most predators.
The adaptive strategy for elephants is to take their time, grow, and learn more about their world.
With the luxury of being able to pad their somatic bank account, elephants invest more in somatic effort, thereby making themselves more competitive as mates in the future and, ultimately, better parents.

But here is where things get even more interesting.
Differences in life history strategies don’t just apply across different species.
Individual animals within a given species also differ in their life history strategies.
Some elephants and tenrecs reproduce earlier, while other elephants and tenrecs reproduce later.
The same is true for humans.
Although humans are relatively slow compared to other species, some people start families earlier, and others start them later.
In the United States, for example, although the average age of first-time mothers is twenty-five, more than one in five first births occur to women under age twenty, while one in ten occur to women over the age of thirty-five.
Some people are faster than average; others are slower.
And on closer
examination, these differences are not just random variations in whether or not a woman happens to become pregnant.
Instead, fast and slow strategies are associated with vastly different psychologies and vastly different orientations toward everything from family to sex to money.

Slow strategists tend to be late bloomers.
They actually grow up less rapidly, start puberty at later ages, and age biologically at a slower rate.
They start having sex later in life and have fewer sexual partners, preferring monogamous relationships.
People on the slow path also tend to have fewer children, to have them later in life, and to be married when they do so.

In sharp contrast, people on the fast track grow up more rapidly, start puberty at earlier ages, and age biologically at a faster rate (if you’ve ever been to a high school reunion, take a look at how some people look a lot older than others, even though everyone is the same age).
Fast strategists are sexually precocious, having their first sex at an earlier age and having more sexual partners both earlier and later in life.
Lots of sex often results in their having children earlier in life and in having more of them.
People on the fast path are also more likely to be single parents, either because they never settled down or because they have divorced—an outcome made more likely by the fact that fast strategists are attracted to other fast strategists, who are quicker to move on to new mating opportunities.

Fast and slow people also have different personality traits.
Whereas slow strategists are long-term planners, delaying immediate gratification to increase future payoffs, fast strategists are short-term opportunists, taking immediate benefits with little regard for long-term consequences.
The cautious and calculated trudge along in the slow lane, while the reckless, the horny, and the shortsighted zoom by in the fast lane.
As the noted lyrical philosopher MC Hammer said during his rapid rise to fame and fortune, “U Can’t Touch This”!

RAISED TO RUN

Why do some people follow a fast strategy while others follow a slow one?
Part of it has to do with the genes inherited from our parents.
But another part has to do with our environments.
In particular, our life history strategies hinge on the environment we encountered early in childhood.