Using a locust analogy, Jake Taylor posits that investors join crowded trades due to repetitive, low-information 'contact' with a theme—like seeing a stock rise daily. This constant stimulus triggers a behavioral change akin to a chemical reaction, not a rational update of beliefs.

AQR's Cliff Asnes argues that markets are becoming less efficient due to social media. It destroys the independence required for the 'wisdom of crowds' to function, creating feedback loops that amplify biases and lead to bouts of irrationality, similar to how it has made politics more extreme.

The "wisdom of crowds," where average guesses are accurate, breaks down in financial markets. Unlike guessing an ox's weight, investors become emotionally attached to powerful narratives (e.g., crypto, AI), causing them to make correlated, systematic errors that lead to bubbles.

Unlike physical sciences where observation doesn't change the subject, the stock market's behavior is influenced by participants watching it. A market can rise simply because it has been rising, creating momentum loops. This "self-awareness" means price and value are not independent variables, a key distinction from more rigid scientific models.

The maxim "buy low, sell high" is psychologically hard because it forces you to act against the crowd's emotional consensus. It's like flying by instruments when everyone else is calm and looking out the window. This act of trusting abstract data over social proof feels deeply unnatural for humans.

Investors try to apply lessons from past market cycles, but this collective awareness changes their behavior. This creates a self-reinforcing loop that alters timelines and dynamics, ensuring history only rhymes, not repeats.

Keynes compared professional investing to a newspaper beauty contest where the goal isn't to pick the prettiest face, but the one the average competitor will choose. This highlights how short-term markets are driven by guessing others' opinions, not by fundamental analysis—a game very few can win consistently.

Media outlets are incentivized to generate clicks through hype and fear. This creates a distorted view of the market, causing retail investors to panic-sell during downturns and FOMO-buy during bubbles. The reality is usually somewhere in the less-exciting middle.

An asset's price is ultimately determined by what someone is willing to pay, making the market a game of predicting collective human emotion, much like trading baseball cards. Even fundamentally sound assets can crash if sentiment turns negative, meaning investors are gambling on the emotional state of others.