The human mind is limited, we all like to think it's this infinitely expanding universe that can hold as much information as possible but in truth it can't.
You know research shows that the average human can only truly remember 300 people at any one time? Yet even with this limit we can still seemingly know anyone, thousands of people, even 300 people seems to be a lot. How do we do this? Labels.
Humans have properties, and when we associate only one property per human we get into trouble, the amount of space required to remember each property for each individual human is large, it's inefficient to have only one human for one property. Instead, we can extend the property to be more, we may have one property that a hundred humans share, when we do this we only have to remember what property a human belonged to, we don't need to rethink or remember the exact qualities of the human, we can just specify that the human is part of the set of humans that share this property, that is a label.
The reason we have labels is it's generally more efficient to store information that way, and it allows us to seemingly remember hundreds of things about people, while only keeping a small amount of information. It creates bias though, and sometimes creates inaccuracies, but that's generally the reason.
