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.

Phenomena like bank runs or speculative bubbles are often rational responses to perceived common knowledge. People act not on an asset's fundamental value, but on their prediction of how others will act, who are in turn predicting others' actions. This creates self-fulfilling prophecies.

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.

Contrary to popular belief, the most dangerous speculative bubbles aren't con jobs. They are built on universally recognized, transformative ideas like railroads, the internet, or AI. Widespread belief in their world-changing potential is precisely what fuels the speculative mania and subsequent crash, as everyone wants a piece of the future.

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.

In situations like investing, where stakes are high but control is limited, humans invent compelling narratives they want to believe. Morgan Housel calls these "appealing fictions," which can lead investors to ignore reality and make poor decisions based on comforting stories.

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.

The expectation that universal, instant access to information would lead to more efficient markets has been proven wrong. Instead, it has amplified sentiment-driven volatility. Stock prices have become less tethered to fundamentals as information is interpreted through the lens of crowd psychology, not rational analysis.