Signaling Misbehavior

Reading Time: 2 minutes

One of my girls came down into my office today wearing my clothes from head to toe, including my sandals, over-sized polo shirt and my watch. She couldn’t stop giggling as she thought it was funny. My other daughter came down dressed like my wife, including three pumps of perfume, lipstick and high heels. We all had a good laugh as they trudged around in our adult-sized shoes and clothes.

While we all had a good laugh, I couldn’t help but think how we often try and mimic those around us–often subconsciously–known as the chameleon effect. Sometimes we mimic good behavior, and sometimes we reflect poor traits and characteristics. Often we will see a child and think that he is the spittin’ image of his dad. “Like father, like son…” we often hear.

Yawning

When I type the word, “yawn,” do you suddenly feel the urge to….well, yawn? Yawning is a perfect example of an action we can’t resist mimicking. Some scientists point out that only sociopaths are immune to contagious yawning. So, let’s be honest, have you yawned yet?

Have you ever tried to keep up with the Joneses? (no offense if your last name is Jones) I recently read a whitepaper that described how neighbors of lottery winners had more bankruptcy and debt as they tried to keep up with their lottery neighbor’s win. We want to show other people that we are smart, wealthy, and sophisticated. As a result, we try and mimic those we think have it all together to prove how sophisticated we are. One of the ways we mimic those “sophisticated” investors is to try and invest in the same types of assets, such as private equity. This can be a costly mistake if you aren’t careful.

In this podcast, I will discuss this signaling misbehavior with Dr. Brad Case, CFA. This podcast is a part of a multi-part series on real estate and investor misbehavior, so be sure to check back or subscribe to our podcasts.