Why Trends Are For Suckers

It feels good to be trendy.  You can be sure that you’ll have a lot of company.  And that’s exactly the problem.  It’s easy to go wrong when everybody around you thinks it’s right.

Watch at a movie from the 80’s.  See how ridiculous people looked?  We all thought we were pretty cool back then.  And the recent financial crises? Nobody thought they could lose money in real estate!

All trends fail at some point because they sow the seeds of their own demise.  Here’s a quick guide to how it happens.  Learn the signs and don’t be a sucker!

The “S” Curve

One common way to look at new technologies is the familiar “S” curve, which describes how technology is diffused.

When something is new, only early adopters are interested.  It usually doesn’t work very well and isn’t compatible with other stuff that’s around.  Moreover, because not too many people are using it, there is very little pressure for others to adopt it. In other words, it’s a crappy innovation.

Eventually, critical mass starts to build and the trend hits an inflection point.  People start catching on and exponential growth ensues.  Though, at some point, growth will flatten out, either because enthusiasm peters out, adoption reaches near 100% or maybe just something better comes along.

Here’s the thing:  It is very hard, if not impossible, to know when the trend will falter.  That usually depends on factors that don’t seem important at the time.  So if you’re buying in near the 2nd inflection point, your growth assumptions will be widely off the mark.

The Hype Cycle

While the “S” curve is very useful in understanding how new things get adopted, it’s somewhat limited.  After all, trends aren’t driven only by what people do, but by what they talk about.  Gartner’s Hype Cycle very effectively shows how many trends die out only to be reborn later.

New trends usually start with a real event.  The possibilities seem boundless and people get really excited about them.  They start talking and eventually the media picks up on it.  Before you know it, expectations far outpace reality.

Of course, the new technology and the lifestyle changes that were supposed to go with it end up being not quite what we thought.  We’re understandably disappointed and insist that we knew all along that it was hooey. Then, after some time, it gets reborn in a more realistic way and the “S’ curve of adoption ensues.

The Flattening Curve

Another, more subtle way that trends fool us is they are often not trends at all, but an increase in diversity. As Stephen Jay Gould pointed out in his book Full House, while it may seem that evolution trends towards more complex forms of life, there is really no reason to believe that is true.

Look at the chart above and you can see what he means.  Just because some forms of life get more complex, that doesn’t necessarily mean that there is a tendency in that direction.  Simple bacteria are still amazingly abundant and continue to evolve without becoming more complex (which is why we always need to invent new antibiotics).

Many make the same mistake by assuming that there is a dominant trend towards new media.  In actuality, the real trend is toward greater media diversity.  Most of the old stuff will continue to prosper.

What The Kids Are Doing

Get into any discussion about future trends, and someone will surely bring up what the kids are doing.  They watch less TV, have short attention spans, spend their time differently than the rest of us and so on.

We hear a lot about the “Millennials” these days and they are purported to be strange new beings.  I found a list of their peculiar habits on this web site which featured the chart below:

Now according to the experts, while those of us in Gen X accepted diversity, the Millennials celebrate it.  While we rejected the rules, they want to rewrite them.  While we wanted a “killer life,” they now want a “killer lifestyle.”

Maybe I’m being obtuse, but it all seems like a load of crap to me.  Kids in their teens and 20’s tend to act like kids in their teens and 20’s.   That’s not saying that there aren’t generational differences, but they tend to be defined by events rather than indicative of them.

One thing that rarely gets pointed out is that kids grow up.  I’m a card carrying member of “Generation X”.  We were supposed to be slackers, and we were (me especially!).  Then something funny happened.  We got jobs, added responsibilities and before we knew it, we were working our asses off.

How Not to Be a Sucker

The problem with trends is that they are crowd driven phenomena and, as I wrote in an earlier post, crowds are often stupid.  Nevertheless, it’s easy to get taken in.  Here’s three strategies that can help you keep your head.

Build Weak Ties: We tend to seek out people with views similar to ours.  Therefore, it’s easy to believe that a local majority view is a global majority view.  I’ve lived in five different countries and it’s never failed to amaze me how local cultural preferences are assumed to be global norms.

If you work in social media, the people around you will be much more enthusiastic about social media and you will be too.   If you live in Russia, a series of 10 minute long toasts at dinner won’t seem odd to you.  Spend too much time in Manhattan and you might think you’re just being straightforward, while others may see it as being rude.

The only way to get a more balanced view is to actively seek out those from other social networks.  That’s easier said than done, and it’s often uncomfortable, but it’s probably the best way to avoid the trap of believing everything you think.

Be Value Focused: As I wrote in an earlier post, there is usually enough data around to figure out when a trend becomes invalid.  Too much money goes where it shouldn’t, extrapolating current trends leads to some ridiculous conclusion and explanations of “why it’s different this time” get pretty outlandish.

In his book, Irrational Exuberance, professor Robert Shiller showed why the stock market and then (in a second edition) why the real estate market would go bust.  He made clear, reasoned arguments and used publicly available data.  It seems obvious now, why didn’t it back then?  Because everybody was focused on the trend rather than underlying value.

Look for Problems to Solve: One person who seemed never to be fooled by trends was Richard Feynman.  While often skeptical about the various zeitgeists of his era, he nevertheless was able to see important developments, like nanotechnology and quantum computing, decades before they were possible.

He was, however, not the usual trendspotter.  He wasn’t predicting, but looking for interesting and important problems to solve.  And therein lies the difference between a trend and fundamental change.  Trends are useless unless they make our live better in some way.

So don’t get taken in.  No matter how many people are talking about the hot trend, unless it is creating true value by solving real problems it will die out soon enough.

– Greg