Unique thinking has always been something of a rarity among the human race. Humans are social creatures that like to fit in. We love to talk, tell stories, share ideas, and even copy some of the best ideas. We also tend to follow the people we believe to be authorities.
This behavioral tendency leads to fads and faddish behavior. Take for example Tulip-mania. According to historians, many Dutch investors believed paying ridiculous sums for tulip bulbs was a good investing idea.
Unfortunately history didn’t treat those investors very kindly. It was a ‘investing fad’, and many tulip investors got burned when the bubble popped. They forgot the fundamentals of investing. In the 1990’s something similar happened again, this time with Beanie Babies.
People went nuts for beanie babies — paying ridiculous prices with the intent of reselling them to making money. It was of course a giant fad that wasted a ton of people’s money.
What I find most interesting about the beanie baby fad, is that it was the very first internet fad. The toy company Ty Inc. was one of the first businesses to use a website to “engage its audience”.
Every beanie baby tag had the company’s website on it, and a call to action: “Visit our webpage!!!”. Certainly the audience for beanie babies was already going online — either to check the market value of the toy OR to sell it on Ebay. Ty Inc. just stoked the fires.
Reportedly, some beanie babies sold on Ebay for as high as 10x retail price.
Tulips and stuffed toys were only the beginning of course. This tendency of the human race to flock together like lemmings isn’t going away anytime soon! In fact, evidence suggests that the internet and social media are making this particular human trait even worse…
New Fads Move Fast
Unless you’ve been living under a rock for the past three years, you’ve almost certainly heard of the Instant Pot. In the span of just a few years this kitchen device has wormed its way into our homes at an unprecedented rate. According to the Chicago Tribune, 11% of U.S. households now own an Instant Pot.
A rise in popularity that fast for a kitchen device, just screams FAD to me. Fads catch hold quickly like that, and then die-out as the zeitgeist moves on. Long term societal changes typically happen at a much slower rate of change and maintain that importance over a much longer period of time.
Perhaps I’m being a little too harsh. Maybe this amazing new “wonder device” can do something no other cooking gadget can?
Nope. It merely combines the functions of a pressure cooker and a slow cooker together. Devices we’ve had in our kitchens since the 1950’s.
Critics might argue it frees up space in our already crowded kitchen cabinets with one master “do-all” gadget that handles everything. Okay…
Jack-of-all trades and master-of-none, I say. At any rate, I’m not buying into the fad and forking over money for one of these cookers. The more interesting part of this story is how I benefited from the fad.
You see, over the last two years Mrs. Tako and I have seen a rash of pressure cookers and slow cookers showing-up in our local free-cycle groups. People are just giving them away!
We’ve been able to upgrade our home slow-cooker and pressure cooker to some very high-quality models for absolutely free.
You see once someone buys a Instant Pot, they no longer need a separate pressure cooker or slow-cooker. They simply dump their previously treasured small appliances on the “free” market or donate it to a thrift store.
It’s a ‘win’ for them and a ‘win’ for me, except I’m not forking over $100 for one.
A Product Of The Internet Age
As previously mentioned, very little about the Instant Pot was true innovation. Not only did we already have slow cookers and pressure cookers in our homes, but electric pressure cookers already existed in Asia for quite some time. If you’ve ever traveled to Asia, you probably saw a similar device for sale in stores.
No, the real innovation of the Instant Pot explosion was how the product marketed itself — The fledgling company was started in 2010 and DID NOT engage in traditional marketing. They paid for absolutely no TV or print advertising, yet it’s been a overflowing success.
Sales in the first few years were slow (about 500 units the first year), but really started to catch fire once the company embraced a social media marketing strategy. In 2015, the company created a Facebook group, and started advertising on Amazon’s Deal Of The Day. Instant Pot also started handing-out free Instant Pots to popular food bloggers.
In my mind, this is when things really started to take-off for the company (and where I first heard about the Instant Pot brand). Food bloggers really took to the product, giving it rave reviews. They also started posting their favorite recipes online.
Those early food bloggers were influencers, commanding legions of faithful devotees to go on Amazon, buy the product, and make the recipes they posted on the internet. Success was lightning fast, and the pressure cooker can now be found on store shelves at the most popular US retailers, like Walmart and Costco.
It’s Better Than Celebrity Endorsement
Using influencers is nothing new of course. Since the earliest days of the 20th century, companies have used atheletes and movie stars to endorse products. Those were the big influencers of that day and age.
The difference today, is that the internet and social media has changed the game. While celebrity endorsements still increases sales, celebrities are expensive. They expect to be paid well, and companies run the risk of receiving backlash if a celebrity does something unpopular.
Recent examples like the Instant Pot have shown that grassroots social media advertising (like creating a Facebook group and handing out free pressure cookers) is much cheaper and (in some cases) considerably more effective than using celebrities.
Why does the grassroots marketing that Instant Pot used work so well? I think it’s partly because when a celebrity promotes a product we already know they’re being paid to promote it. The credibility of celebrities is pretty low even though their audience is large. We’re so used to celebrities selling stuff, that our brains kind of turn-off the sales pitch.
With small bloggers and other small social media influencers, we don’t often think of them as being paid to promote products. Credibility is much higher with these non-celebrity influencers — They’re just like us, and their passions for the product really shine through when they love something.
Low-level influencers also directly interact with their audience, answer questions, and are far more relate-able than a paid celebrity who makes millions of dollars per year shilling for a product.
That solid credibility sells products, and it can do so incredibly quickly. Smart corporate marketing teams have caught-on to this and are now using it to promote new products and brands that wouldn’t normally be able to make headway against the larger well founded products.
I’m no a marketing expert, but evidence suggests this is leading to faster fads and more of them.
Profiting From The Rise Of Fast Fads
If you look closely, most popular viral fads are selling a product. At you would expect, the product always sells for full retail price as it gains in popularity. After the market for the product is completely saturated, then the (price) discounting begins. Retailers want to get rid of excessive inventory, so they use discounts to attract late adopters.
Knowing when to “buy” a fad product is key to saving yourself money… if you still actually want the product after the fad has run its course.
So how do we know when to buy?
Google trends is the tool I use. It can tell me the relative popularity of internet search terms over time. In other words: what’s trending.
For example, the Spiralizer fad took 4 years to peak, and has slowly tailored off since then. Discounting on the product has begun, and manufacturing volumes are probably slowing down to match lower retail volumes.
A quick search on Amazon reveals that many spiralizer brands have coupons varying from $1 to $10 off right now. You could probably wait a little longer and score even bigger discounts.
In 2017, the big fad was fidget spinners. They came and went in a matter of months. This is a perfect example of a viral hit that peaked and then disappeared in a very short amount of time.
If you still hold any interest in fidget spinners, I’m almost positive you can find someone willing to give you one now. Or, check your thrift store toy section. They’re everywhere!
Netflix Can Create Social Media Fads
As far as more recent fads go, the Marie Kondo “Tidying-up” fad looks like a candidate for being a fast fad that’s almost done. This one launched and peaked in 4 months. That’s incredibly fast.
According to Newsweek, her book sold over 8 million copies before the Netflix show… but I bet you’d never heard of Marie Kondo until the Netflix show happened though. Yes, the Netflix-effect is a real thing. What Netflix chooses to recommend (or promote) strongly effects social media popularity, and social media popularity now controls how many consumers think, act, and feel.
The amount of internet mind-share Netflix controls is kind of scary.
Should you still be interested in Marie Kondo’s book, now is definitely the time to check your local library. Or, ask around your friends to see if you can borrow a copy. They might have a few gathering dust on a shelf somewhere. 😉
Failing those options, Amazon is selling the book at half price. Even less if you don’t mind a used copy.
The Paleo diet is a great example of a “diet fad” that’s now past its peak and starting to disappear. If you have any interest in the paleo diet, now’s the time to start looking for the books that people are giving away (or giving to the thrift store thanks to Marie Kondo).
Maybe you’ve already moved onto the Keto diet however. That’s the new hotness. This new diet seems to have repaced paleo, but has yet to reach its peak:
I don’t understand why, but almost 100% of the time food diets exhibit very fad like behavior in the human population. Show me a new diet and I’ll show you a new fad!
The Instant Pot Fad
So, your probably wondering…. “What about the Instant Pot?” Well, that’s another fad that hasn’t reached its peak yet. The Instant Pot trends data shows the typical fast rise of a viral fad, but it also seems most popular during the Christmas season. So we really won’t be able to tell if the Instant Pot has peaked until next Christmas.
Based upon that evidence, it could be a long while before I can find an Instant Pot for free (or at my local thrift store for a couple of bucks), but that’s totally fine! I’m quite happy with my free Hamilton Beach slow cooker (retail price is $39) and my free Splendid pressure cooker (retails at around $80).
Internet Investing Fads
It’s not just physical things that become viral internet fads either. Investing also has it’s fads, and one of the most entertaining in recent memory was bitcoin.
This so-called “digital currency” spiked in popularity when blogs, social media, and even traditional news media started reporting on all the incredible ‘investing’ gains’ early adopters were making. Near the end of 2017 everyone was talking about bitcoin. Even the Financial Independence community.
Now, as any half-awake economics 101 student can tell you, when you have fix supply of something (bitcoins), the price will vary with demand. As it did with bitcoin. When the viral internet buzz hit its peak, so did the price of a bitcoin. When the buzz finally faded, so did the price of a bitcoin.
Coincidence? Not at all. If you look closely at the graphs above, they’re almost mirror images of one another. If internet searches are a proxy for demand, then the price should absolutely move in response to that demand.
Remember: Investing is not about capturing popularity — that’s just speculation. Investing is about capturing economic gains from compounding.
Is Financial Independence A Fad?
Recently, Joe over at RetireBy40 asked the question “Is The FIRE Movement a Fad?” and I’d be absolutely remiss if I wrote a post about fads without addressing this question.
Joe thought it was a fad, but my analysis shows financial independence as a slow-burning trend that’s been around for a very long time.
Unfortunately you can’t just put FIRE into Google Trends to get a nice graph. In that case you just end-up with a common search term that peaks during fire season or during particularly bad fires.
“Early retirement” itself shows up as a steady state like “financial independence”
So my analysis says that Financial independence really isn’t a fad, it’s a societal change where people are slowly waking up to the fact that companies don’t have our best interests at heart. There are no pensions funds anymore. Social security isn’t going to pay the bills for a comfortable retirement. I’ve said it already — The FIRE Movement Was Inevitable.
There you have it my friends. Fads and crowd behavior have long effected humanity. With the rise of the internet and social media this phenomenon seems to be getting worse, and now companies use it to market products more effectively.
Identifying when something is a fad and avoiding it is a skill that can save you money. The trouble is, when you’re in the midst of a fad it’s almost impossible to identify that it is a fad. For me, Google Trends is a huge help. I can quickly gauge the velocity with which a new product takes hold of the world. When you compare these trends against a similar yet more “solid state” ideas, fads become very evident.
This understanding also provides key signals for when to buy and when to avoid fads.
For me, the Instant Pot looks like a perfect example of one of these internet marketing fads. One that hasn’t fully run it’s course yet. Once that fad is over, I’ll probably pick one up for free…
Just to try it out. 😉