Abstract. We give the first (ZFC) dividing line in Keisler's order among the unstable theories, specifically among the simple unstable theories. That is, for any infinite cardinal λ for which there is µ < λ ≤ 2 µ , we construct a regular ultrafilter D on λ so that (i) for any model M of a stable theory or of the random graph,The non-saturation result relies on the notion of flexible ultrafilters. To prove the saturation result we develop a property of a class of simple theories, called Qr 1 , generalizing the fact that whenever B is a set of parameters in some sufficiently saturated model of the random graph, |B| = λ and µ < λ ≤ 2 µ , then there is a set A with |A| = µ so that any nonalgebraic p ∈ S(B) is finitely realized in A. In addition to giving information about simple unstable theories, our proof reframes the problem of saturation of ultrapowers in several key ways. We give a new characterization of good filters in terms of "excellence," a measure of the accuracy of the quotient Boolean algebra. We introduce and develop the notion of moral ultrafilters on Boolean algebras. We prove a so-called "separation of variables" result which shows how the problem of constructing ultrafilters to have a precise degree of saturation may be profitably separated into a more set-theoretic stage, building an excellent filter, followed by a more model-theoretic stage: building so-called moral ultrafilters on the quotient Boolean algebra, a process which highlights the complexity of certain patterns, arising from first-order formulas, in certain Boolean algebras.