Thaler and others speculate that these logical lacunae are the product of a brain wired for survival on the savanna, not for hyperrational calculation. Machines do deductive and inductive calculations well. People excel at "abduction," which is less like reason than inspired guesswork. (Deduction: All taxis are yellow; this is a taxi; therefore it is yellow. Induction: These are all taxis; these are all yellow; therefore, all taxis are probably yellow. Abduction: All taxis are yellow; this vehicle is yellow; therefore this is probably a taxi.) Abduction leaps to conclusions by connecting a known pattern (taxis are yellow) to a specific situation (this yellow vehicle must be a taxi). Compared with computers, people are lousy number crunchers but superb pattern makers -- even without being aware of it. Indeed, much of what we call instinct, psychologists say, is simply pattern recognition taking place at a subconscious level.

Some tantalizing evidence in this regard comes from experiments by Antonio Damasio, head of neurology at the University of Iowa Carver College of Medicine. In one experiment, Damasio gave subjects four decks of cards. They were asked to flip the cards, picking from any deck. Two decks were rigged to produce an overall loss (in play money), and two to produce a gain. At intervals, the participants were asked what they thought was going on in the game. And they were hooked up to sensors to measure skin conductance responses, or SCRs (which are also measured by lie-detector machines).

By the time they'd turned about 10 cards, subjects began showing SCRs when they reached for a losing deck -- that is, they showed a physical reaction. But not until they had turned, on average, 50 cards could they verbalize their "hunch" that two decks were riskier. It took 30 more cards before they could explain why their hunch was right. Three players were never able to put their hunches into words -- yet they, too, showed elevated SCRs and they, too, picked the right decks. Even if they couldn't explain it, their bodies knew what was going on.

Damasio was already aware of the astounding fact that people who suffer damage to parts of their brains where emotions are processed have difficulty making decisions. When such patients participated in Damasio's card experiment, they never expressed hunches. Remarkably, even if they figured out the game intellectually, they continued to pick from losing decks. In other words, they knew their behavior was a mistake but they couldn't make the decision to change it. Emotions, Damasio theorizes, get decision-making started, presenting the conscious, logical mind with a short list of possibilities. Without at least a little intuition, then, the decision process never leaves the gate.

None of us have the advantage of a handy SCR detector to know when we're getting a hunch. But gut knowledge has other ways of making its presence felt, and it's often physical. Howard Schultz shook when he had his caffe epiphany. George Soros, the international financier who made billions in currency speculation, feels opportunity in his back, according to his son Robert. "The reason he changes his position on the market or whatever is because his back starts killing him," Robert said in a book about his father. "It has nothing to do with reason. He literally goes into a spasm, and it's his early warning sign."

What exactly is Soros's back reacting to? That question bedeviled Flavia Cymbalista, an economist who specializes in uncertainty in financial markets. Soros invests only when he has a hypothesis -- a story that explains a trend in the market. But as Soros himself has theorized, markets don't yield to analysis, because they are continuously changing -- and this is one reason Soros has learned to trust his back. "There are things you can know, but only experientially and bodily," Cymbalista says.