How We Decide by Jonah Lehrer

undergraduates. Unlike the rat, the students, with their elaborate networks of dopamine neurons, stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict; the apparent randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced that they were making progress toward identifying the underlying algorithm, they were, in actuality, outsmarted by a rat.
    The danger of random processes—things like slot machines and basketball shots—i's that they take advantage of a defect built into the emotional brain. Dopamine neurons get such a visceral thrill from watching a hot player sink another jumper or from winning a little change from a one-armed bandit or from correctly guessing the placement of a food morsel that our brains completely misinterpret what's actually going on. We trust our feelings and perceive patterns, but the patterns don't actually exist.
    Of course, it can be extremely hard to reconcile perceptions of streaks and runs with the statistical realities of an unruly world. When Apple first introduced the shuffle feature on its iPods, the shuffle was truly random; each song was equally as likely to get picked as any other. However, the randomness didn't
appear
random, since some songs were occasionally repeated, and customers concluded that the feature contained some secret patterns and preferences. As a result, Apple was forced to revise the algorithm. "We made it less random to make it feel more random," said Steve Jobs, the CEO of Apple. * Or consider Red Auerbach, the legendary Celtics coach. After being told about Tversky's statistical analysis of the hot hand, he reportedly responded with a blunt dismissal. "So he makes a study," Auerbach said. "I couldn't care less." † The coach refused to consider the possibility that the shooting streaks of the players might be a fanciful invention of his brain.
    But Auerbach was wrong to disregard the study; the belief in illusory patterns seriously affects the flow of basketball games. If a team member had made several shots in a row, he was more likely to get the ball passed to him. The head coach would call a new set of plays. Most important, a player who thinks he has a hot hand has a distorted sense of his own talent, which leads him to take riskier shots, since he assumes his streak will save him. (It's the old bane of overconfidence.) Of course, the player is also more likely to miss these riskier shots. According to Tversky and Gilovich, the best shooters always think they're cold. When their feelings tell them to take the shots because they've got the hot hands, they don't listen.
    THIS DEFECT IN the emotional brain has important consequences. Think about the stock market, which is a classic example of a random system. This means that the past movement of any particular stock cannot be used to predict its future movement. The inherent randomness of the market was first proposed by the economist Eugene Fama in the early 1960s. Fama looked at decades of stock-market data in order to prove that no amount of knowledge or rational analysis could help anyone figure out what would happen next. All of the esoteric tools used by investors to make sense of the market were pure nonsense. Wall Street was like a slot machine.
    The danger of the stock market, however, is that sometimes its erratic fluctuations can actually look predictable, at least in the short term. Dopamine neurons are determined to solve the flux, but most of the time there is nothing to solve. And so brain cells flail against the stochasticity, searching for lucrative patterns. Instead of seeing the randomness, we come up with imagined systems and see meaningful trends where there are only meaningless streaks. "People enjoy