Hollywood is a place where people from Iowa mistake each other for movie stars.

Allen’s joke punctures Hollywood glamour by reframing it as a mirage sustained by outsiders. The “people from Iowa” stand in for ordinary Americans who arrive in the film capital eager to find (or become) celebrity; in that atmosphere, they “mistake each other for movie stars,” suggesting that fame is often a matter of projection, wishful thinking, and mutual hype rather than real distinction. The line also satirizes Hollywood’s self-referential culture: when everyone is chasing stardom, the signs of importance become easy to counterfeit, and recognition turns into a kind of collective misunderstanding. It’s a compact critique of celebrity as social performance.