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The Best Interest » Chasing the Fad

Chasing the Fad

Take a guess: which search term created the Google data shown below, with a massive search volume spike in 2017?

It’s plastic.

It’s a toy…

It spins…

Fidget spinners were the fad du jour for young kids and teens in 2017. By proxy, their parents and the rest of us found out about them too.

These simple toys – a three-lobed plastic structure sitting on a ball bearing – became a viral school fad. It seemed like every kid had one (or ten).

But why? Why did fidget spinners “go viral?” Where do school fads come from?

As a bystander, they crop up out of nowhere. We see the rise of fidget spinners and think, “But…it’s so stupid…”

When you ask the experts…they agree! Author and behavioral engineer Nir Eyal writes:

If you take a product like a fidget spinner, there is no good reason why people should like them other than the fact that they see other people liking them, and that gives them value. So once a few kids start bringing fidget spinners into class, other kids want to know what these things are.

Even though they’re just a piece of cheap plastic, the fact that some kids are getting really into them and won’t let other kids play with them increases the value of the product through mimetic desire.

Nir Eyal

Mimetic desire” is social scientist Rene Girard’s magnum opus, which states that:

Man is the creature who does not know what to desire, and he turns to others in order to make up his mind. We desire what others desire because we imitate their desires.

Rene Girard

Follow the leader. Copycat. Simon says. Go with the crowd. Innate, primal jealously. We’ve all succumbed to it and, most likely, unwittingly influenced others by it. Humans like stuff because we see others liking it.

School fads are textbook examples of mimetic desire.

Any parents who’ve asked, “Why in the world is my kid doing [insert irrational behavior]”…can likely find the answer in mimetic desire.

And anyone looking back at their yearbook wondering, “What the hell was I thinking?!”…Well, you were probably filled with mimetic desire (and teenage angst).

Social media only compounds the issue. As Thrive magazine writes on school fads,

Social media platforms provide endless opportunities for young people to exchange ideas, share images and links, and overall employ a significant amount of pressure on everyone to possess whatever the sought-after craze might be this time.

If all the cool girls share makeup tutorial videos, you start wearing makeup. If the cool guys are sharing sports highlights, you play sports. It’s not rocket science. It’s human nature.

Social Media Fads

Each social media app has its own fads.

TikTok has dance memes. Instagram has Reels. Twitter has threads. LinkedIn has all-too-personal confessions camouflaged as humility. Facebook has…anger?

[Of course, these fads have all been engineered by the social media platforms to capture our attention (and that of our children, parents, friends, coworkers, etc. – we’re all being captured by social media). If you haven’t watched The Social Dilemma, it might be worth your time.]

I fully confess to falling victim to some of these social media fads, as both a content creator and consumer. I thought, “Well…if everyone is enjoying it, then why don’t I try? Why don’t I spread The Best Interest via social media?”

But after months of social media “content creation,” I’ve realized many, many problems. The two most important are: I don’t enjoy it, and it’s a massive time-suck.

When multiplied by millions of similar users, what does that time, effort, and attention obtain? We get thousands of computer engineers and engaging “creators” finding ever-more-efficient methods of hacking their “followers'” brains to sell them shit they probably don’t need.

Courtesy FourWeekMBA

Is that a fad I want to follow?

Not really…

But I feel completely different about writing these blog posts.

First, I love writing. I started writing here to nobody. But I kept writing because it was fun. I learned. I grew. Any “influence” I’ve garnered from The Best Interest is not contrived, but genuine.

Have I sold people shit they don’t need? I don’t think so. I wrote my own book that’s sold ~1500 copies, and I recommend other books I’ve read and enjoyed. I work professionally with a few readers as my financial planning clients. That’s fantastic. To me, that’s an affirmation of trust. It’s an honor.

I don’t know if I’m a good enough writer for big-time fame and fortune, but I’m good enough to educate and entertain my audience. That’s enough. I don’t have to be a world-class videographer or a sexy TikTok dancer or the most charismatic guy on #moneytwitter. As Uncle Warren Buffett said,

Investing is a no-called strike game.

Warren Buffett

Much of life is exactly the same. You don’t have to swing at opportunities simply because they are within reach. You can let them pass. More are on the way. You can wait for the sweetest “pitch” to pass by and smack a home run.

You don’t have to follow every fad.

Investing Fads

Investing is much the same.

A small crowd starts a trend or finds a golden opportunity (literally – think of the California gold rush), then a large crowd follows them. What the wise man does in the beginning, the fool does in the end.

This is the same dysfunction that creates school fads, but manifested in a different form. Our brains are susceptible to the madness of crowds. It’s true in investing, on social media, and even at rap concerts.

The late 90s Dot Com bubble is a famous investing fad. Any company could market itself as an Internet company and 10x its valuation overnight. As of October 1999, the 199 so-called “internet stocks” had:

  • A total value (market capitalization) of $450 billion
  • Total prior year’s sales of $21 billion
  • And total prior year’s profits of…negative $6.2 billion.

That’s a price-to-sales ratio of 21, and a price-to-earnings ratio of…infinity.

In the short run, losing money is ok. Many companies do it in their nascent years. But in the long run, reality always wins. And the reality of losing money is it causes businesses to fail. One infamous investment banking quote from 1999 is:

“[Companies] come in here all the time and say, ‘The last thing I want to be is profitable,’ because then I wouldn’t get the valuation of an internet company.”

That’s right. Companies would avoid profit because that’s what the “smart money” did. In other words, the fad was:

  • Call yourself an Internet company (…whether you are, or not)
  • Intentionally try to lose money (…which can be a sign of rapid growth…or of impending doom)
  • Get evaluated as if rapid growth is inevitable (…which is far from the truth)
  • Profit immensely (…at least in the short term)

Many investors bought this story hook, line, and sinker. Oops.

Note: the NASDAQ is the “tech heavy” index. The S&P is broader, more representative of the entire market.

And as their neighbors got rich, more investors piled in. It’s mimetic desire. We are wired to do what the popular/successful/rich/influential people do. And if the story makes sense – “the Internet is taking over the world…better hop on before it’s too late” – then our poor monkey brains turn to mush. We blindly follow.

Nothing so undermines your financial judgment as the sight of your neighbor getting rich.

J.P. Morgan

It’s happened before. It happened to us as kids. It’s happened to generations of investors. And it will surely happen to us again. So be prepared!

But remember this: fads come and go, whether we follow them or not. And you never have to follow them!

That is perhaps the greatest lesson I’ve learned from Warren Buffett. You don’t have to “swing at pitches” you don’t like. It’s the same as our parents saying, “Well if your buddies all jumped off a bridge, would you follow them?!”

No. I wouldn’t. I guess I’d go play with my fidget spinner instead…

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