The Lollapalooza Effect and the Decibel of its Impact

Economics Declassified

By Jillian Tauro | Edited by Aman Kayal

As the season approaches, everything you see on your social media feeds will soon be related to the upcoming music festival our country is to host. The term ‘Lollapalooza’ has an immeasurable significance in the world outside of music.

The term “Lollapalooza effect” was first used in a 1995 Harvard speech by Charlie Munger, an American entrepreneur, investor, and business partner of the renowned Warren Buffett. Munger discussed several reasons why people make mistakes in judgement. Since then, it has evolved into another example of investing speak. A lollapalooza effect is nothing but an extreme outcome. Following his examination of the three primary psychology textbooks, Charlie Munger came up with the term. He observed that the well-known psychological tests, such as Stanley Milgram’s experiment on authority prejudice, neglected to take other biases into account.

Applications of Lollapalooza in the real world

The…

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