MARRIAGE AND ITS DISCONTENTS

Of course, if a happy marriage was easy to achieve, we’d have a much lower divorce rate and far fewer affairs. Unfortunately, it’s much easier to fall in love than it is to stay in love. Just as we can use the body’s own chemistry to chart the effect of infatuation, we can also use it to understand that waning desire is a natural part of any long-term relationship. As Oscar Wilde said, “The essence of romance is uncertainty,” but uncertainty is precisely what you are giving up when you get married. Sadly, finding the right person can never be reduced simply to smelling sweaty T-shirts, appealing though that prospect might be. As studies have shown, this chemical element of romance lessens over time. One researcher has found that the altered brain chemistry of falling in love lasts roughly six to eight months. Others have found that it takes two to three years for the feelings of infatuation to fade to feelings of neutrality—not mild attraction but neutrality!

 

The problem with relying on our passion to guide us is that a marriage has to stand the test of time to be successful. Some people may feel relieved when they get divorced, but I don’t think anyone has ever counted it as a success. To base a long-term relationship on short-term chemistry alone is a little like buying a car based on how it’s going to run for the first one hundred miles.

 

This isn’t a marital problem. It’s a human problem. We all experience this waning of desire in countless ways. The excitement of anticipation gives way to the dullness of routine. If you have ever bought a new car or started a new job, you have experienced this sensation. This isn’t such a big deal when it comes to a car purchase. If you have the money, it’s a relatively simple matter to get a new car. But it is a huge deal when it comes to marriage. The funny thing about the waning of our desires is that even though all of us have gone through this multiple times, studies show that we forget about it each and every time. We also do a terrible job of predicting how we will feel in the future, always expecting that it will be more like that present than it is. You can imagine how potentially destructive these habits of mind are for a couple who marries while still infatuated with each other.

 

If you are one of those people who simply refuse to accept this and want your passion to burn as brightly after forty years as it does after one day, there is one possible solution—more sex. According to several experiments, animals show less habituation to positive feelings when given oxytocin, which is released during sex. It’s not clear how much sexual activity it will take to hold habituation at bay, but I invite any energetic readers to give it their best shot. For the rest of us, it’s time to come to terms once again with the cost of the romantic story line.

LEAVE THEM LAUGHING

 

Humor deserves its own special treatment. As anyone who skims through the personal ads knows, sense of humor is an absolutely essential quality. Everyone wants it in his or her partner, and no one will admit to lacking it. Any time I asked men or women what qualities they looked for, sense of humor was at or near the top of the list. Why should that be the case? Researchers did a very interesting study that helps provide some answers. They asked a group of women to read vignettes about various men. The key variable that changed from story to story was the man’s sense of humor. In some stories, the fictional man had an excellent sense of humor. In others, he had an average one. And in still others, he had a poor sense of humor. The study found that men with an excellent sense of humor were endowed by female readers with all sorts of other good qualities. Women saw them as more sensitive, more adaptable, happier, more intelligent, more masculine, and even taller. All of these additional attributes were not because of anything in the vignette. They were entirely the result of the man’s sense of humor. In other words, women unconsciously use sense of humor as a proxy for many other traits, such as creativity and intelligence. This helps explain why humor is always high on the list of desired qualities. It is not just for that quality in and of itself but because it acts as a signal for so many other sought-after qualities as well.

 

To see how deeply this is woven into our psyches, you only need to look at the results when the researchers took into account a woman’s fertility. When a woman was at her peak fertility and looking for a short-term relationship, her attraction to the man with an excellent sense of humor spiked sharply. Men with average or below-average humor found their ratings unchanged, which confirms that humor acts as a proxy for good genes in general. Humor may even be worth the importance that so many of us place on it. One study revealed that women’s humor rating of their partners significantly predicted their general relationship satisfaction. But there remains a crucial difference between the sexes. Studies show that men tend to be the ones who make the jokes, and women tend to be the ones who laugh at them.

 

Unfortunately, none of this is the holy grail of dating. At best, it gets you only a small way toward figuring out what to look for in a partner. When it comes to personality, science still only has a rudimentary understanding of why one person is attracted to another.

Dating and Deception

 

Given this ceaseless battle on both the human and genetic level, relationships are rampant breeding grounds for deception. Part of the problem is that modern society provides far more opportunities to lie. In our ancestral environment, social groups were smaller, and those who lied would gain a reputation for dishonesty. But in today’s environment, especially in cities or other highly populated areas, there is a much smaller chance of being caught. Internet dating has only increased the problem. Not surprisingly, men and women in relationships lie to each other all the time. In a 1990 study of college students, researchers found that 85 percent of the participants had lied to a partner about a past relationship or an indiscretion. Another study revealed that dating couples lied to each other in about one-third of their interactions. The numbers do improve for married couples, who lied in only 10 percent of their conversations, although the survey found that married couples saved their biggest lies for their partners. Your spouse is probably telling the truth about whether or not she likes your new tie but is possibly lying about whether or not she slept with the mailman. While men are more dishonest than women, they are at least more honest about their dishonesty, giving more accurate estimates of how much they lie than women do. And those are just the lies that we openly acknowledge. The most successful lies are those that we do not even know we are telling, and studies have shown that we are quite good at lying to ourselves about many things having to do with mating, such as how committed we think we are to someone when we are trying to get him or her into bed.

 

The deception occurs along predictable lines. Given a culture that frowns on female promiscuity—a man’s greatest fear in any relationship revolves around questions of fidelity and paternity—women quite commonly lie about their sex lives. This helps explain why sexual surveys always show a gross disparity between the number of partners men and women have had (the other cause is that men exaggerate the number of their partners). Researchers found that if they hooked female college students up to a fake lie detector and then asked them about the number of sexual partners they had, women suddenly reported almost twice as many as the women who were not hooked up to the bogus lie detector. For men, there is a quick and easy way to try to get a sense of a woman’s fidelity—if they can get her to divulge her sexual fantasies. One researcher has found that women who have more sexual fantasies about other men are also more likely to be unfaithful. Women also tend to lie about their bodily appearance, although they probably prefer to consider things like padded bras and control-top panty hose enhancements, rather than outright deceptions.

 

Women I interviewed frequently admitted that they did not tell men the truth about their sexual pasts. To give one example, an attractive woman in her late twenties was incredibly self-confident about her sexuality and had no problem sleeping with a man for her own pleasure and then never seeing him again. She had already racked up more than thirty partners, and she used to proclaim that fact proudly to the men she was dating—until she realized that they couldn’t handle the information. Some immediately freaked out. Others went off to sulk. In almost every case, it hurt the relationship and sometimes even ended it. Now when she is asked, she always answers that she has slept with six men, which seems to strike the perfect balance between being a prude and being a slut. Another woman said that men she had dated were often afraid to ask because they didn’t want to break the illusion that she had never been with other men, which was an illusion she was happy to allow them to cling to.

 

While men’s greatest concerns center on a woman’s potential promiscuity, women get more angry when a man has lied about his income or status or when he has exaggerated his feelings in order to have sex, and studies confirm that men lie more about their resources and their level of commitment as well as how kind, sincere, and trustworthy they are. Needless to say, nearly every woman I interviewed had experienced some form of this. One woman later found that her boyfriend had lied to her about virtually every aspect of his life—his age, his family, his previous jobs. The only thing he didn’t lie about was his current job, and that was only because they worked together.

 

What makes deception an even bigger problem is that it turns out that, while seemingly all of us are reasonably adept at lying, we are terrible at telling when other people are lying to us. According to research, people can only distinguish truth from lies 54 percent of the time, which is not much better than random guessing. We’re even worse at picking out lies, which we only manage to achieve 47 percent of the time. Sometimes even the person who is lying isn’t aware that he or she is doing so, which makes detecting the lie nearly impossible.

 

Men are so quick to lie in order to have sex that evolutionary psychologist Glenn Geher advises women that if they can’t judge a man’s intention with at least 90 percent accuracy, they are better off being skeptical all the time. Women should also be more careful prior to entering a relationship. Once they are in a relationship, studies show that they tend to shut off their skepticism and become more vulnerable to deception. If you want to take a more active approach, you can try to train yourself to become better at figuring out when someone is lying, in which case you could turn to Paul Ekman, an expert on facial expressions. He has devoted a substantial part of his professional life to figuring out how to “read” deception in the face of other people and has found that our faces are constantly leaking information about what we are feeling. For example, if your boss makes an annoying request, you might cover up your feeling with a polite smile and a nod of assent, but there was likely a split second (less than a fifth of a second to be more precise) when your face sent a very different message, albeit too fleeting for your boss or even you to notice. Ekman calls these brief moments microexpressions, and with training, you can become better at noticing these facial “leaks.”

 

Deception, genetic warfare, measures, and countermeasures—we are a long way from the romantic story line. Although evolutionary psychology offers a great deal of insight into human mating and dating, it is not a pretty picture. Luckily, that is not the end of the story.

BEWARE EXPECTATIONS

Our experience is not only hostage to our slippery memory—it’s also powerfully shaped by the expectations we bring with us. Even something as fundamental as how we taste food is remarkably susceptible to manipulation based on our expectations. You only need to look at Brian Wansink’s brilliant work as the director of the Cornell University Food and Brand Lab. He has done a number of clever studies at the Spice Box, a laboratory that masquerades as a restaurant. In one experiment, he offered diners a free glass of Cabernet Sauvignon—but with one devious alteration. Although all the diners were given a glass of a wine known as Two-Buck Chuck (the nickname tells you the price), half of them were told that they were being served wine from a new California label, while the other half were told that they were getting a glass of North Dakota’s finest. Even though they drank the same wine, their expectations radically shaped their experience. Not only did those diners who thought they were drinking North Dakotan wine rate their wine as tasting bad, they also rated their food as worse than the other group. In fact, it altered their entire meal. They ended up eating less and leaving the restaurant sooner.

 

The power of expectations is so great that it has an almost preternatural ability to become a self-fulfilling prophecy. In one study, after a test was given to all the students in an elementary school, a few students were randomly selected, and the teachers were told that these students had scored so highly on the test that they were sure to excel in the coming year. The parents and the students weren’t told about this so that the only difference was in the minds of the teachers. But just that small intervention led to a major difference. By the end of the year, the falsely anointed “exceptional” students showed significantly higher gains in their IQ scores than the other students. In other words, simply leading the teachers to believe that these students were special led those teachers to treat them in a way that ended up making them special.

 

Experiments have demonstrated the same power of expectations for attraction. In one study, men and women were asked to talk on the phone and get acquainted with an unknown member of the opposite sex. Before the conversation, each man was given a photograph of his supposed partner. The actual photograph was randomly selected from a group that was either attractive or unattractive. The women were not given photographs. Then, the couples spoke on the phone for roughly ten minutes about anything they wanted. Men who had received photos of beautiful women spoke to the women in a way that caused the women to be friendlier and more flirtatious—acting for all intents and purposes as beautiful women, regardless of their actual appearance.

 

In The Psychology of Human Conflict, Edwin Guthrie tells a remarkable story of how one college woman was transformed in real life by a similar experiment. A group of college men chose a shy, socially inept student and decided to treat her as if she were one of the most popular girls at the school. They made sure she was invited to the right parties and always had men asking her to dance and generally acted as if they were lucky to be in her company. Before the school year had ended, her behavior had completely changed. She was more confident and came to believe that she was indeed popular. Even after the men ended their experiment (although without telling her anything about it), she continued to behave with self-assurance. But here is the really amazing part—even the men who “conducted” the experiment came to see her in the same way, so fully had her demeanor been transformed. If only someone would secretly hire the people around us to treat us not as we are but as we wish to be, we might all become the people we aspire to be.

 

HOW THINKING TOO MUCH IS BAD FOR YOUR DATING

 

Before you go off, confident that you will avoid falling into the traps of priming or framing by bringing ruthless rationality to all of your decisions, I have to warn you against turning to an overly cerebral approach to dating: consciously thinking about your decision making is perhaps even more dangerous than not thinking at all. There are probably some among us—I admit to being one—who, when faced with a tough decision, decide to sit down and write out a list of all the pros and cons so that we can make an informed choice. Well, I’m here to tell you that this is a disastrously bad idea and likely to lead to worse decisions, especially if the subject we are examining is difficult to articulate. Or, as I like to think of this section, the unexamined life is worth living!

 

Imagine that you are given a choice of five different posters to decorate your room. One of them is a van Gogh, another is a Monet. The other three are captioned cartoons or photos of animals. Which do you choose? Researchers ran precisely this study with college students, and, as you might expect, most people preferred the posters by van Gogh and Monet. No great surprise there. We probably didn’t need a study to find that the average college student prefers van Gogh to a kitten playing with a ball of yarn. But that was not the purpose of the study. Researchers were interested in how thinking about that decision might alter it, so they asked half of the people involved to write a short essay explaining what they liked or disliked about the five posters. Afterward, all of the students were allowed to choose one of the posters and then take it home.

Self-Fulfilling Beliefs and Data Mining

Taken to extremes, these cognitive illusions may give rise to closed systems of thought that are immune, at least for a while, to revision and refutation. (Austrian writer and satirist Karl Kraus once remarked, “Psychoanalysis is that mental illness for which it regards itself as therapy.”) This is especially true for the market, since investors’ beliefs about stocks or a method of picking them can become a self-fulfilling prophecy. The market sometimes acts like a strange beast with a will, if not a mind, of its own. Studying it is not like studying science and mathematics, whose postulates and laws are (in quite different senses) independent of us. If enough people suddenly wake up believing in a stock, it will, for that reason alone, go up in price and justify their beliefs.

A contrived but interesting illustration of a self-fulfilling belief involves a tiny investment club with only two investors and ten possible stocks to choose from each week. Let’s assume that each week chance smiles at random on one of the ten stocks the investment club is considering and it rises precipitously, while the week’s other nine stocks oscillate within a fairly narrow band.

George, who believes (correctly in this case) that the movements of stock prices are largely random, selects one of the ten stocks by rolling a die (say an icosahedron—a twenty-sided solid—with two sides for each number). Martha, let’s assume, fervently believes in some wacky theory, Q analysis. Her choices are therefore dictated by a weekly Q analysis newsletter that selects one stock of the ten as most likely to break out. Although George and Martha are equally likely to pick the lucky stock each week, the newsletter-selected stock will result in big investor gains more frequently than will any other stock.

The reason is simple but easy to miss. Two conditions must be met for a stock to result in big gains for an investor: It must be smiled upon by chance that week and it must be chosen by one of the two investors. Since Martha always picks the newsletter-selected stock, the second condition in her case is always met, so whenever chance happens to favor it, it results in big gains for her. This is not the case with the other stocks. Nine-tenths of the time, chance will smile on one of the stocks that is not newsletter-selected, but chances are George will not have picked that particular one, and so it will seldom result in big gains for him. One must be careful in interpreting this, however. George and Martha have equal chances of pulling down big gains (10 percent), and each stock of the ten has an equal chance of being smiled upon by chance (10 percent), but the newsletter-selected stock will achieve big gains much more often than the randomly selected ones.

Reiterated more numerically, the claim is that 10 percent of the time the newsletter-selected stock will achieve big gains for Martha, whereas each of the ten stocks has only a 1 percent chance of both achieving big gains and being chosen by George. Note again that two things must occur for the newsletter-selected stock to achieve big gains: Martha must choose it, which happens with probability 1, and it must be the stock that chance selects, which happens with probability 1/10th. Since one multiplies probabilities to determine the likelihood that several independent events occur, the probability of both these events occurring is 1 × 1/10, or 10 percent. Likewise, two things must occur for any particular stock to achieve big gains via George: George must choose it, which occurs with probability 1/10th, and it must be the stock that chance selects, which happens with probability 1/10th. The product of these two probabilities is 1/100th or 1 percent.

Nothing in this thought experiment depends on there being only two investors. If there were one hundred investors, fifty of whom slavishly followed the advice of the newsletter and fifty of whom chose stocks at random, then the newsletter-selected stocks would achieve big gains for their investors eleven times as frequently as any particular stock did for its investors. When the newsletter-selected stock is chosen by chance and happens to achieve big gains, there are fifty-five winners, the fifty believers in the newsletter and five who picked the same stock at random. When any of the other nine stocks happens to achieve big gains, there are, on average, only five winners.

In this way a trading strategy, if looked at in a small population of investors and stocks, can give the strong illusion that it is effective when only chance is at work.

“Data mining,” the scouring of databases of investments, stock prices, and economic data for evidence of the effectiveness of this or that strategy, is another example of how an inquiry of limited scope can generate deceptive results. The problem is that if you look hard enough, you will always find some seemingly effective rule that resulted in large gains over a certain time span or within a certain sector. (In fact, inspired by the British economist Frank Ramsey, mathematicians over the last half century have proved a variety of theorems on the inevitability of some kind of order in large sets.) The promulgators of such rules are not unlike the believers in bible codes. There, too, people searched for coded messages that seemed to be meaningful, not realizing that it’s nearly impossible for there not to be some such “messages.” (This is trivially so if you search in a book that has a chapter 11, conveniently foretelling many companies’ bankruptcies.)

People commonly pore over price and trade data attempting to discover investment schemes that have worked in the past. In a reductio ad absurdum of such unfocused fishing for associations, David Leinweber in the mid-90s exhaustively searched the economic data on a United Nations CD-ROM and found that the best predictor of the value of the S&P 500 stock index was—a drum roll here—butter production in Bangladesh. Needless to say, butter production in Bangladesh has probably not remained the best predictor of the S&P 500. Whatever rules and regularities are discovered within a sample must be applied to new data if they’re to be accorded any limited credibility. You can always arbitrarily define a class of stocks that in retrospect does extraordinarily well, but will it continue to do so?

I’m reminded of a well-known paradox devised (for a different purpose) by the philosopher Nelson Goodman. He selected an arbitrary future date, say January 1, 2020, and defined an object to be “grue” if it is green and the time is before January 1, 2020, or if it is blue and the time is after January 1, 2020. Something is “bleen,” on the other hand, if it is blue and the time is before that date or if it is green and the time is after that date. Now consider the color of emeralds. All emeralds examined up to now (2002) have been green. We therefore feel confident that all emeralds are green. But all emeralds so far examined are also grue. It seems that we should be just as confident that all emeralds are grue (and hence blue beginning in 2020). Are we?

A natural objection is that these color words grue and bleen are very odd, being defined in terms of the year 2020. But were there aliens who speak the grue-bleen language, they could make the same charge against us. “Green,” they might argue, is an arbitrary color word, being defined as grue before 2020 and bleen afterward. “Blue” is just as odd, being bleen before 2020 and grue from then on. Philosophers have not convincingly shown what exactly is wrong with the terms grue and bleen, but they demonstrate that even the abrupt failure of a regularity to hold can be accommodated by the introduction of new weasel words and ad hoc qualifications.

In their headlong efforts to discover associations, data miners are sometimes fooled by “survivorship bias.” In market usage this is the tendency for mutual funds that go out of business to be dropped from the average of all mutual funds. The average return of the surviving funds is higher than it would be if all funds were included. Some badly performing funds become defunct, while others are merged with better-performing cousins. In either case, this practice skews past returns upward and induces greater investor optimism about future returns. (Survivorship bias also applies to stocks, which come and go over time, only the surviving ones making the statistics on performance. WCOM, for example, was unceremoniously replaced on the S&P 500 after its steep decline in early 2002.)

The situation is rather like that of schools that allow students to drop courses they’re failing. The grade point averages of schools with such a policy are, on average, higher than those of schools that do not allow such withdrawals. But these inflated GPAs are no longer a reliable guide to students’ performance.

Finally, taking the meaning of the term literally, survivorship bias makes us all a bit more optimistic about facing crises. We tend to see only those people who survived similar crises. Those who haven’t are gone and therefore much less visible.

The Fundamentalists’ Creed: You Get What You Pay For

 

The notion of present value is crucial to understanding the fundamentalists’ approach to stock valuation. It should also be important to lottery players, mortgagors, and advertisers. That the present value of money in the future is less than its nominal value explains why a nominal $1,000,000 award for winning a lottery—say $50,000 per year at the end of each of the next twenty years—is worth considerably less than $1,000,000. If the interest rate is 10 percent annually, for example, the $1,000,000 has a present value of only about $426,000. You can obtain this value from tables, from financial calculators, or directly from the formulas above (supplemented by a formula for the sum of a so-called geometric series).

 

The process of determining the present value of future money is often referred to as “discounting.” Discounting is important because, once you assume an interest rate, it allows you to compare amounts of money received at different times. You can also use it to evaluate the present or future value of an income stream—different amounts of money coming into or going out of a bank or investment account on different dates. You simply “slide” the amounts forward or backward in time by multiplying or dividing by the appropriate power of (1 + r). This is done, for example, when you need to figure out a payment sufficient to pay off a mortgage in a specified amount of time or want to know how much to save each month to have sufficient funds for a child’s college education when he or she turns eighteen.

 

Discounting is also essential to defining what is often called a stock’s fundamental value. The stock’s price, say investing fundamentalists (fortunately not the sort who wish to impose their moral certitudes on others), should be roughly equal to the discounted stream of dividends you can expect to receive from holding onto it indefinitely. If the stock does not pay dividends or if you plan on selling it and thereby realizing capital gains, its price should be roughly equal to the discounted value of the price you can reasonably expect to receive when you sell the stock plus the discounted value of any dividends. It’s probably safe to say that most stock prices are higher than this. During the 1990 boom years, investors were much more concerned with capital gains than they were with dividends. To reverse this trend, finance professor Jeremy Siegel, author of Stocks for the Long Run, and two of his colleagues recently proposed eliminating the corporate dividend tax and making dividends deductible.

 

The bottom line of bottom-line investing is that you should pay for a stock an amount equal to (or no more than) the present value of all future gains from it. Although this sounds very hard-headed and far removed from psychological considerations, it is not. The discounting of future dividends and the future stock price is dependent on your estimate of future interest rates, dividend policies, and a host of other uncertain quantities, and calling them fundamentals does not make them immune to emotional and cognitive distortion. The tango of exuberance and despair can and does affect estimates of stock’s fundamental value. As the economist Robert Shiller has long argued quite persuasively, however, the fundamentals of a stock don’t change nearly as much or as rapidly as its price.