ANALYSIS
ANALYSIS
Thinking in Layers
To end where we began, another thought experiment. Imagine a room of one hundred people, each asked to think of a number between 0 and 100, and then to write down the number they believe will be half of the group’ s average.
At first call, many write down 50. Half of 100 feels sensible- rational, even. But if everyone else reasons the same way, the average will cluster near 50, so the rational response should be half of what everyone else is thinking. And half of 50 is 25.
At second call, the crowd anticipates that shift.“ If everyone is already thinking of 25,” they reason,“ then the winning number must be half of half of 50, or 12,5.”
By the final call, it becomes clear that the exercise isn’ t about numbers at all. It’ s about expectations of expectations. And the winner in this process? The one who best reads not the room, but the reasoning in the room.
That, in the end, is Keynes’ enduring insight- whether in a beauty contest, an art auction, or a trading floor. What matters most is not the bid but understanding the beliefs and psychology behind the bid.
42 REI MAGAZINE NOVEMBER 2025