How to Start Trends and Not Just Follow Them?

Today is a big day for the economy. And, it made me think of start-ups, trend-spotting and entrepreneurs.

But, bear with me as I explain.

It was announced today that housing prices are back on the rise, and the stock market has rallied strongly. I looked at the data and was surprised to find this: the rate of house price increases is accelerating. Below is a chart I made after downloading some data (the S&P/Case-Shiller Home Price Index). It shows year over year price increases.

Boston house prices

I was surprised to find that housing is not only up but, every month, the price increases are accelerating.

I write about this because it highlighted to me how sometimes tipping points happen right under our noses.  In the case of housing, prices stabilized last June, and then, gradually began to rise.  And, kept rising and rising, faster and faster.

This is a big deal as rising home prices create a positive “wealth effect” that encourages consumers to spend more.

Now, the housing recovery is “obvious,” but it wasn’t clear just a little bit ago. And, if you bought housing stocks last summer, you’d be up a fair amount today. If you just jumped in the stock market today, it might be too late, as the big gains may have already happened.

Similarly, entrepreneurs need to not just follow trends, but be early enough to start trends.

It’s not easy. It takes a lot of guts to jump back in the stock market when the data are still murky. But, as in entrepreneurship, you don’t get rich by doing what everyone else is doing.

It’s something I think about a lot: how to start trends vs. just follow them?

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2 thoughts on “How to Start Trends and Not Just Follow Them?

  1. It is much more important to understand a market than to follow a trend. If you know and understand a market you know what trends are inevitable. What happened in the real estate market before, during, and after the crash was very predictable to thoughtful non-speculators.

    Not to get into semantics and not to disagree with you, but I don’t think entrepreneurs start trends. They see where the market is going and position for that, maybe call it “anticipating” a trend. That is very different from starting a trend. I think it is an ego trap for entrepreneurs to think that they can or should try to start a trend, and it reveals an empathetic disconnect from the people in their market.

    Anyway, I always enjoy your blog posts and wish you would publish the recipes from your meal posts…

  2. We ought to distinguish between product trends and economic trends. Neither US population nor US wages are expanding at these rates or with this shape. So the chart is a story about the Fed, not houses. Is it sustainable, and worse, what if it is sustained?

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