Having already written a piece on the similarities between how contestants in the TV game show The Traitors behave and our futile attempts to time financial markets, I thought I was finished with the subject. After indulging in the fourth UK series of the show, however, I realised there are so many excellent examples of human folly and perplexing decision-making that it felt worthy of a sequel.

For those uninitiated, there is a recap of how the game works in my previous post on this subject.

Here are some traitorous observations on investor behaviour:

We like being part of the herd. In the first banishment round of the latest UK series, 16 of the 21 contestants voted to remove the same person from the game. This broad consensus was reached despite there being no meaningful evidence to speak of. Of course, despite the agreement, they were entirely wrong.

We don’t like outsiders. After the first failed banishment, one of the 16 people who voted to remove a Faithful suggested turning their attention to a contestant who had voted differently, on the basis that this made them a potential Traitor. This was despite the majority having been incorrect in their prior accusation. It does not matter whether a group is right or wrong; it is safer to be in it.

We have a narrow circle of competence. A consistent feature of the game is that people in certain professions, such as lawyers and police detectives, believe they will be good at it and are reassuringly terrible. Part of me worries that people whose jobs involve making decisions under uncertainty do not seem to spend much time thinking about how to make good decisions. Another part simply concludes that our circle of competence is far narrower than we like to admit.

We are wildly overconfident. Along similar lines, a highlight of the most recent series is a retired police detective who plays the game with great confidence while aggressively and incorrectly accusing the wrong people of being Traitors. They also decided to keep their previous career a secret from the group, until revealing it to one other contestant who was, with wonderful inevitability, a Traitor. We are not as good as we think we are.

We are in thrall to expertise. Even though participants with so-called decision-making backgrounds are wrong at least as often as everyone else, other contestants remain in awe of their supposed expertise, no matter how often it proves unreliable. This is reminiscent of investors patiently waiting for the next insight from a market strategist who is right about as often as a coin flip.

We are attracted to new things. In the game, a banishment occurs every episode or day, and there is a strange behaviour whereby one day an individual may attract a great deal of suspicion and votes, but if they survive, they are barely mentioned the following day. We are drawn to shiny new things even when the evidence has not changed at all, much like investors latching on to the topic of the month and forgetting what they were previously obsessed with.

We are terribly calibrated. One of the most enjoyable and bewildering facets of the game is how often contestants say things like, “I am 100 percent sure X is a Faithful.” This is typically based on no evidence whatsoever and would be absurd even in situations where we have good reason to be confident. Here, participants have almost nothing to go on. We are very poor judges of how confident we should be about uncertain outcomes.

We need to survive: Although the game is focused on identifying Traitors in the group this isn’t really very important until we get near to its end because banished Traitors are replaced anyway. Participants shouldn’t care that much whether they banish a Faithful or a Traitor – they just need to make sure it is not them. Survival is the most vital and underappreciated thing in both the game and investing.

We cannot read people. Whether it is identifying a Traitor or judging a fund manager, we are awful at reading people yet remain convinced we are good at assessing both honesty and intentions. In a previous season, there was a contestant who was a professional magician whose job involved reading people. He was predictably hopeless at the game.

We ignore the most important things. Given how little useful evidence there is for identifying Traitors, particularly early in the game, the most sensible approach outside of choosing someone at random would be to ask: if I were a producer of this show, who would I select as a Traitor? Either contestants do not think this way, or, if they do, it is not shown on television because it would spoil the magic. My guess is the former.

We use salience as evidence. Judgements about who is a Traitor, especially early on, seem to be driven by what or who is salient, noticeable, or different. We mistake what captures our attention for what is meaningful. The current UK series has seen players frequently banished after making themselves the centre of attention – which is baffling behaviour.

While The Traitors is a light-hearted and convoluted game, it does a great job of revealing some of our most ingrained and peculiar behaviours. When we watch it and feel frustrated by the decisions being made, it is worth remembering that the contestants are simply being human. We do many of the same things in life and certainly when investing.

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My first book has been published. The Intelligent Fund Investor explores the beliefs and behaviours that lead investors astray, and shows how we can make better decisions. You can get a copy here (UK) or here (US).

All opinions are my own, not that of my employer or anybody else. I am often wrong, and my future self will disagree with my present self at some point. Not investment advice.