In part I, we talked about the differences between Fads and Trends and why they’re important.
Forgot what I talked about in part I? Here are the main points
- Fads explode but fade, trends grow and last
- Most of the so-called trends are actually fads
- The Media is forced/incentivized/unaware of framing fads as trends
- Fads still have value, but machines can chase them better than humans
You can also check out the full blog here to get the details.
In part II, we will look at ways to distinguish between fads and trends and how it can impact our lives.
So, how does distinguishing between fads and trends help me make better decisions?
- It matches the time horizons of our decisions and our goals
As we mentioned last time, traders make a living on catching fads. If you were a trader, you would naturally focus more on stocks impacted by current events, rather than the long-term development of an industry. (Although I strongly recommend that you write a script to execute trades for you).
On the other hand, when making long-term decisions in business and life, you wouldn’t want to base them on fads.
What does it all mean? Let’s go back to our previous example:
- The sales of red smartphones are 50% higher than other colors, because a local pop singer recently sported a red smartphone — -> which is a fad
But what if you mistook this fad as a trend? To make things even worse, you happened to be a smartphone manufacturer.
- You will get an Aha — -> Consumer preferences have shifted toward red smartphones! The data also supported this conclusion.
- Being the first mover to catch this trend, you decided to mass-produce red phones.
In startups, building products for a non-existent demand is one of the most common mistakes. In the real world, these wrong decisions can lead you to learn skills that will be obsolete soon or join a company that is high-paying but in a declining industry or marry a person based on his/her appearance.
2. It helps us focus on things that really matter
Fads consume our time and energy. It’s pretty straightforward to see that separating trends from fads helps us to prioritize and be more productive. What’s not so straightforward is how this can actually make us happier.
Often, we feel a sense of dejection once we realize we’ve mistaken a fad as a trend. This could be overestimating the long-term impact of an adverse event or blaming ourselves for the impact of factors that are outside of our control.
In finance, shocks from short-term events don’t affect the fundamental value of companies. Hence why Warren Buffet bought Bank of America in 2008 while others were dumping it.
In our lives, we sometimes fight with our loved ones. These flights represent short-term shocks on our relationships, and they shouldn’t affect the fundamental value of our relationships — therefore, we wouldn’t think we don’t love each other afterward.
However, I did, and many other people I know also have.
You can test yourself by asking yourself a question:
“What was the most important event for you last year?”
I thought about this question when reflecting on 2017, and the answer surprised me. It turned out that most of the things that used to keep me up at night weren’t even close to being on the list!
This experience taught me a great lesson in managing my emotions. Now that I am more aware, I can apply my knowledge before similar incidents occur.
For example, when we encounter an unpleasant event, we can image how we would feel as if we were looking at this from some point the future. This can help pull ourselves out of the negative emotions of the moment — which is also a way of Emotional Detachment in Psychology.
3. This could also assist us in conveying negative messages in a positive way.
For example, if you were to find a material bug just a few days before launching your product, how would you convey this message to your team?
“I couldn’t believe you missed such an important bug! ”
v.s.
“Good news! We just found something that is going to save us from tons of negative reviews.”
Sometimes, I was forced to give bad news to people. This helped me to smooth things over and keep others motivated.
But how do we distinguish between fads and trends?
Here, I recommend “Flash Foresight: How to See the Invisible and Do the Impossible” by Daniel Burrus.
In his book, Daniel categorizes trends into soft trends and hard trends, which I refer to as fads and trends.
Daniel believes that trends represent the, “future that can be deducted using principals with certainty”. Trends are one-directional, such as the aging of the Baby Boomer’s, or cyclical, such as the stock market.
Here are two little tricks I use to distinguish between fads and trends.
1. Find the fundamental drivers
Continuing with our smartphone example, if the average frequency of phone replacement just doubled in neighbourhood A, it is a fad or a trend?
Answer: it depends
- If the residents bought new phones because they lost their old ones in the recent thefts in this neighbourhood → it’s a fad
- If the residents replaced their old phones because their disposable income increased → it’s a trend
2. Adjust the time horizon of your thinking
For example, a TV is 50% off on Black Friday. Should you buy it?
Time horizon — Days
- I won’t save this much after Black Friday, Buy it!
Time horizon — Months
- Do I really need a new TV? Would a new TV make my life different?
- The new TV has better features than the old one, but do I care?
- If all the answers are no, why would I waste my money on this?
Time horizon — Years
- My old TV is likely to stop working by next Black Friday. It’s cheaper to buy it now.
- I can still sell the old TV for a few bucks, whereas it will be worth nothing when it’s broken.
- Let’s buy it.
Of course, this is just a hypothetical example. If you were thinking about getting a new TV, I wouldn’t recommend you analyze it this much.
Let’s spend time on things that matter more to us.
To wrap up
- Fads fade, trends last
- Distinguish between fads and trends in two ways
a) look at the fundamental drivers
b) adjust the time horizon of our thinking - Use fads and trends to
a) Prevent us from wasting precious time and energy on fads
b) Make better decisions that match the time horizon of our goals
c) Manage emotions by taking a long-term perspective
d) Convey negative messages in a positive way
What’s your trick to distinguish between fads and trends?
Comment below and share your thoughts!
Claire Liang is the person who wrote this article to distract herself from the pain of losing two wisdom teeth. She led multiple tech startup projects, worked as a management consultant in Accenture and A.T. Kearney, and spoke at TEDx. | Learn more or contact her on LinkedIn
As always, thanks our editor Paul Crognale, who decoded all the alien languages in the article before it’s public
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