You've hit the nail on the head. This is what's called the measurement problem in quantum mechanics and it's arguably the biggest open question in foundational

You've hit the nail on the head. This is what's called the measurement problem in quantum mechanics and it's arguably the biggest open question in foundational quantum theory. Nobody knows what a measurement actually is nor does anyone know what happens during a measurement. There are some modified versions of QM that tries to place this on a more rigorous footing, but none of them have convinced everyone that they do. My personal favorite is the many world's approach that in many ways is simpler than traditional QM because it says that there's no such thing as a measurement. Instead, when you think you're measuring something what you're really doing is entangling yourself with the system you're measuring which means that your state is no longer separate from the state of the system. There's a part of you that sees each outcome. This is actually already how microscopic systems work: if two particles collide and get entangled, the state of each particle sort of splits in two. The only thing that MWI says is that this dynamics also applies to macroscopic objects.