As soon as we talk about trends in public, we can easily predict that we will hear a comment like this: “That’s just hype!” And we are immediately gnawed by doubts as to whether the person is right, whether we ourselves have missed something, or whether we should simply ignore this comment.
After all, it’s not easy to spot trends early on, and they require quite a bit of effort to identify signals that might indicate a trend. The chances that it might just be hype, a fad, or whatever you want to call it, are not at all far-fetched.
But how do you really distinguish whether something will be a hype or a real trend after all? If we were to believe the Italian filmmaker Federico Fellini, then a hype would be the following:
“A hype is an embarrassing and desperate attempt to convince journalists that something you’ve created is worth the misery of writing a review about it.”- Federico Fellini
That doesn’t sound like what we would expect from a definition of hype, but certainly good enough to inject humor into the conversation. To understand the criteria for hype, let’s first consider another term: information cascade.
Let’s imagine an auction involving oil production contracts, with multiple bidders. Each of the bidders has done their own geological surveys. The results suggest that there really isn’t much in the way of oil deposits in this region here. The geological survey results are not clear enough.
During the auction, one of the bidders offers a price for the oil production contracts that is far above what anyone else would offer. Everyone begins to think whether they might have overlooked important information. As soon as another bidder jumps on the high offer, the dam breaks. Everyone else also bids more simply out of fear of missing an opportunity. The behavior is clearly irrational and leads us to a bubble.
This is an information cascade, where the behavior of one participant with apparently more information leads all others to imitate that behavior. This self-reinforcing effect is not supported by real data and can sometimes be triggered by participants acting maliciously, ultimately leading to a market rise with subsequent collapse.
The information cascade is based on our thinking what others think, confusing that with what the others really know. Making predictions based on what others think and adjusting our own behavior based on that is something the others are also aware of. Therefore, their thinking about what we think about their thinking leads to strange results. Everyone looks back at everyone else as if looking in a mirror.
So such hype is fueled by information cascades and the resulting behavior. If one wants to separate real trends from hypes, then it is advisable to look at whether it is based on real data or rather based on behavior. It can be hard not to follow a hype. After all, you could be wrong and miss a real trend. But dismissing a real trend as hype can maneuver you into a dangerous position yourself.
Foresight practitioners would rather err by following, investigating, and testing hype than losing the opportunity to investigate early. Translated with http://www.DeepL.com/Translator (free version)