Why the consensus breaks so fast
A cascade is thin. People copied the visible choice, not the underlying fact.
Once a few visible actors choose, the next person rationally drops their own signal and follows. The agreement looks like a hundred independent opinions. It is one opinion, copied a hundred times. Which is why it reverses on small new information.
Herd behaviour
Banerjee 1992 Quarterly Journal of Economics
Informational cascades
Bikhchandani Hirshleifer Welch 1992 Journal of Political Economy
Convex flow chasing
Sirri Tufano 1998 Journal of Finance
01
Read the agreement as a clock, not a thermometer. The more universal the consensus, the later the seat. By the time a name is in every group chat, the marginal buyer who pushes price has mostly already bought. Strong agreement is information about how much fuel is left, and the answer is usually not much.
02
Separate the strategy return from the investor return. Time weighted is the factsheet. Money weighted is the bank account. When the two split, the gap is the herd tax, paid by the rupees that arrived late. Ask for the money-weighted number, or check when the assets grew relative to when the return was made.
03
Size for the fragility, not the comfort. A cascade is built on copied conviction, not independent facts, so it unwinds fast when one piece of new information lands. A position you joined because everyone else did is the one you will be slowest to size correctly and quickest to panic out of. Decide the size and the exit before you join, not after the chat agrees.
The line
By the time the group agrees, the trade is finished. The agreement did not make it safe. It used up the fuel. The crowd is not a confirmation of the thesis. It is the last buyer arriving to relieve the first. Independent reasons compound. Copied ones reverse.
The crowd shows up for the screenshot. The return already left.
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