Imagine you’re attending a gathering with 100 people.
After lunch, the host announces a quick game.
The rules are simple:
- Everyone contributes $10.
- Each person secretly writes down a number between 1 and 100.
- The host collects all the numbers and calculates the average.
- The average is divided by 2.
- Let’s call that result X.
- Whoever picked the number closest to X wins the entire pot.
What number would you choose?
What Most People Choose
For someone seeing this game for the first time, the reasoning usually goes like this:
“Since the numbers range from 1 to 100, the average should be around 50.”
If that’s true, then:
50 ÷ 2 = 25
So many people naturally choose a number close to 25.
This is a perfectly logical answer. In fact, if you asked a large group of random people, you would likely find many guesses clustered around 20 to 30.
But that’s only the first level of thinking.
How Investors Think Differently
People with investing experience often see the problem differently.
Instead of asking:
“What is the answer?”
they ask:
“What will everyone else think the answer is?”
An experienced investor might reason:
“Most people will arrive at 25.”
If many participants choose around 25, then the average will no longer be close to 50.
It may become closer to 25.
If so:
25 ÷ 2 = 12.5
Now a guess near 12 becomes more attractive.
Going One Step Deeper
But what if other smart participants think the same way?
They might also choose 12.
Then the average falls again.
12 ÷ 2 = 6
Suddenly, 6 becomes a strong candidate.
The chain of reasoning continues:
- First-level thinking → 25
- Second-level thinking → 12
- Third-level thinking → 6
- Fourth-level thinking → 3
- Fifth-level thinking → 1
The more you think about how others think, the lower the number tends to go.
Why This Looks a Lot Like the Stock Market
Many people believe investing is simply about analyzing companies.
In reality, investing is often about analyzing other investors.
Suppose an AI semiconductor company reports excellent earnings.
A beginner may think:
“Great earnings means the stock should go up.”
An experienced investor asks a different question:
“If everyone already knows the earnings are great, isn’t that already reflected in the stock price?”
Then they go one step further:
“What does the market expect everyone else to do next?”
The stock market is not merely a contest of valuation.
It is a contest of expectations.
Success often comes not from knowing the facts first, but from understanding how other participants will react to those facts.
What Numbers Would Different Groups Choose?
Of course, there is no universal answer.
The result depends on who is playing.
But in a first-time game, the pattern often looks something like this:
| Participant Type | Likely Guess |
|---|---|
| General public | 20 – 30 |
| Experienced investors | 6 – 12 |
| People trained in game theory | 1 – 6 |
The exact numbers matter less than the underlying mindset.
Most people try to solve the problem.
Investors try to solve the people who are solving the problem.
The Real Question
When you first read the game, what number came to mind?
If your answer was near 25, you’re in good company. Most people start there.
If your instinct was somewhere between 6 and 12, you may already be thinking one or two layers deeper than the average participant.
That doesn’t automatically make you a successful investor.
But it does suggest you naturally think about expectations, incentives, and crowd behavior, which are essential skills in the stock market.
Because investing is not simply about predicting a company’s future.
It’s about predicting what everyone else thinks that future will be.
And sometimes, a simple number game can reveal more about your investing mindset than years of reading financial statements.
So what number did you choose: 25 or 6? The answer may tell you something interesting about the way you see markets.