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 gratificat
ion 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.
Developmental psychologists Bruce Ellis and Jay Belsky have found that two aspects of our childhood environment are critical in determining our life history strategy. First, strategies speed up if people grow up in dangerous environments—places rife with violence or disease. A study of 170 different countries found that local mortality levels (the likelihood of death) were strongly related to the age at which mothers had children, with higher mortality leading to much earlier age at first birth. In Niger, for example, which has the fourteenth-highest death rate in the world, over 50 percent of women have had their first child by age eighteen. In Vietnam, which has a low death rate, 165th in the world, only 3 percent of women give birth by age eighteen. Similarly, in a study of Chicago neighborhoods, the median age of mothers giving birth was 27.3 for the ten neighborhoods with the highest life expectancy but only 22.6 in the ten neighborhoods with the lowest life expectancy. Life history strategies are not merely related to general crime. When we examined records for 373 counties in the United States, we found that earlier age of first birth is specifically related to higher rates of physically dangerous violent crimes (homicide, assault, rape) but not property crime (theft, car theft, burglary). And the patterns persisted even when controlling for income.
The second factor that speeds up life history strategies is being raised in a fluctuating environment. Environmental fluctuations include frequently moving from place to place, having an unpredictable income, or seeing different people move in and out of the house. For example, girls living in a household without a consistently present father figure start puberty earlier—they begin menstruating, on average, nine months before girls who have a consistently present father figure. Earlier onset of menarche is a clear marker of a fast strategy. Similarly, having an insecure and more unpredictable relationship with one’s mother in infancy is also linked to earlier onset of puberty. And just like those of dangerous environments, the effects of fluctuating and unpredictable environments remain strong even when researchers control for socioeconomic status or genetic factors, such as the mother’s own age of menarche.
Just as we saw for tenrecs, it has been evolutionarily adaptive for people in dangerous and unpredictable environments to follow a fast strategy. Such environments are associated not only with a shorter lifespan but also with uncertainty about where resources are going to come from—or if there will be any resources at all. A fast strategy emphasizes getting the rewards and cashing them in immediately. In a dangerous and unpredictable environment, this can be adaptive, since you don’t know whether you’ll be around later to enjoy the benefits of compound interest on long-term investments. For the same reason, investing time and energy in acquiring skills and knowledge (such as getting a college education) makes evolutionary sense only if a person expects to be around for a while. If not, evolutionary success may be better served by foregoing the time, effort, and cost associated with education and instead expending those resources on tasks with more immediate evolutionary payoffs—like reproduction.
Our childhood environments serve as blueprints for what we can expect as adults. When Jeff Simpson, Vlad, and their colleagues examined what kinds of childhood experiences were most associated with a fast strategy in adulthood, they found that the experience of living in a fluctuating environment during the preschool years was the strongest predictor of having more sexual partners, being more aggressive and delinquent, and having a criminal record as an adult. The importance of the first five years suggests that even if our young minds are not consciously ready to analyze what’s happening around us, our brains are nevertheless encoding what’s going on. If you’re being raised in a world where there is little you can do to avoid violence, and it’s impossible to know what tomorrow might bring, you need to make the most of today. And if access to resources is unpredictable, a “get while the getting’s good” attitude may be evolutionarily adaptive.
It’s no coincidence that many people who live fast come from difficult childhoods. MC Hammer, Mike Tyson, and Larry King have all lived fast. They also all grew up in poor and dangerous neighborhoods (in the East Oakland projects and the tough Bedford-Stuyvesant and Bensonhurst neighborhoods of Brooklyn, respectively). Each was raised by a single mother after his father either abandoned the family or died, and each had to find ways to get what he needed (Tyson had already been arrested thirty-eight times by age thirteen).
These kinds of harsh and fluctuating early-life environments calibrate the brain to enact a fast strategy—the kind adaptive for evolutionary success when life is expected to be nasty, brutish, and short. Looking through an evolutionary lens, it becomes clear why these three men started spending their monetary windfalls as soon as the money hit their bank accounts: their brains were calibrated to live fast because they did not know what tomorrow would bring. Not only do the majority of people who win the lottery come from poor and unstable backgrounds, but many lottery winners go on to lose their fortunes within a few years. By contrast, growing up in a safe, stable, and predictable environment calibrates the brain to enact a slow strategy. It pays to go slow and steady when you know what’s coming next and you’re expecting to be around to reap the fruits of your labor.
Let’s reconsider the marshmallow test from earlier, in which kids were given the choice between having one marshmallow now or two marshmallows later. Which choice is smarter? From a life history perspective, the wisdom of waiting depends on the nature of your environment—on whether you live in a predictable or unpredictable world.
Scientists at the University of Rochester recently performed the marshmallow test once again, except they made the child’s environment either predictable or unpredictable. Before giving the kids the test, a researcher first showed them a few crayons and promised that if they waited, they would get to play with a large box of fun art supplies. In one condition, the researcher came back with the art supplies as promised. But in another condition, the researcher came back with nothing, telling the children that he had made a mistake and there were no art supplies. In both conditions, the kids were then offered the standard marshmallow deal. As each child sat alone in the room looking at the treat, the researchers recorded how long each boy or girl waited before eating the marshmallow.
When the kids had experienced a predictable environment with the reliable person, they waited an average of twelve minutes before grabbing the marshmallow. But when they had instead experienced an unpredictable environment with the unreliable person, the children grabbed the marshmallow after just three minutes. Children’s ability to delay gratification is not carved in stone. Their brains adjust their impulsivity depending on their situation, in the same way that our adult life history strategies are adjusted depending on our childhood environments.
WIN, CRASH, OR BURN
So is it always wise to delay gratification and play it slow and steady? Or might it be wiser instead to take large risks in hopes of winning big now? From an evolutionary perspective, the answer depends on whether one is following a slow or a fast life history strategy.
If life were an athletic event, slow and fast strategists would be participating in completely different races. Slow strategists are on a long march. A defining feature of slow strategies is their low variance. This means that few slow strategists will end up as millionaires, but few will end up bankrupt either. Instead,
there is relatively little variability in the slow game—the vast majority of such strategists find themselves somewhere in the middle, with decent, stable jobs, perhaps a white picket fence, and a small nest egg. Slow strategists are the backbone of every community. They include many of our teachers, administrators, nurses, middle managers, and accountants. These are not freewheeling types throwing around money or swimming in massive amounts of debt. They live within their means and expect to be alive to enjoy the fruits of their labor in retirement, when they finally get to cross the finish line of life’s long march.
Fast strategists, on the other hand, are racing in a sprint hurdle. They have to dash rapidly and jump high in hopes of clearing the many impediments that are likely to trip them up. A defining feature of fast strategies is their high variance. Compared to those on the slow path, more fast strategists will come up from the streets to become millionaire movers and shakers. These are the visionary artists, entertainers, and entrepreneurs—of both the legitimate and illegitimate varieties. Through fearless enterprising, maniacal hard work, and a lot of luck, some fast strategists like MC Hammer, Larry King, and Mike Tyson rise to the top. But while a few fast strategists will taste success, even if for a short while, many more will crash and burn. The same riskiness and shortsightedness that lead some to rise to the top lead many more into debt, debilitating addiction, or prison (Mike Tyson, for example, was prosecuted for rape, and Larry King was arrested for grand larceny).
Some fast strategists won’t even live long enough to spend their “easy-come” fortunes or go to prison. That’s because living the fast life is inherently dangerous. The same traits that produce ambitious entrepreneurs, visionary artists, and attention-grabbing entertainers can lead to massive health problems and tragic accidents.
At least fifty-three successful rock stars belong to the infamous “twenty-seven club” of rockers who lived fast, partied hard, and died at the age of twenty-seven. These include raspy-voiced singer-songwriter Janis Joplin (heroin overdose), psychedelic guitar icon Jimi Hendrix (mixing alcohol with barbiturates), generational poet and Doors front man Jim Morrison (heart failure from a drug overdose), original Grateful Dead keyboardist Ron “Pigpen” McKernan (stomach hemorrhage from heavy drinking), eclectic singer Amy Winehouse (alcohol poisoning), and the original Rolling Stones guitarist Brian Jones (found at the bottom of a swimming pool, with the coroner’s report ruling that the cause was “death by misadventure”).
The Rational Animal: How Evolution Made Us Smarter Than We Think Page 16