"Suppose we look closely at the behavior of investment crowds. They share one important characteristic: The members of every investment crowd are certain that the crowd’s size is evidence of the correctness of the crowd’s beliefs. So many people can’t be wrong! An investor outside the crowd is impressed not just by the crowd’s investment success but by the unanimity of its beliefs and expectations. Experience reinforced by an instinctive belief in collective wisdom then causes him to put aside his skepticism. He believes the crowd’s members must collectively know more than he does. In this way the crowd gains one more member."
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