[C19fan]

if it takes observation to collapse the wave function, wouldn't the cat suffice?

I think that is the standard answer to the paradox. The cat itself is an observer.

[linear]

It is assumed that particles generally don’t know what state they are in. Think about it like a toggle set to one of two positions. Einstein didn’t like the thought that, for a given period of time, the switch could be in either position.