I’ve learned that 99% of “trends” are not worth paying attention to.
Every couple of months, there is something new that everybody is losing their mind over. It could be a new form of tech, a new business model, or a new company that shakes things up. VCs are notorious for paying too much attention to “the current thing” and blowing things out of proportion.
That said, you still have to stay up-to-date on trends if you want to make it as an investor. The game is figuring out what trends matter.
This post details my thought process on how I do exactly that.
Trends are a double-edged sword.
They can either provide valuable insights that lead to successful investments or lead investors down a rabbit hole of wasted time and resources. I’ve learned that most trends aren’t worth following.
Instead, I try to focus on the 1% of signals that truly matter over a ten year horizon. To do that, I try to ask myself three questions whenever a new trend pops up:
It’s easy to answer ‘Yes’ to the first question, but the second one forces you to drill down on your thinking. The more variables that pop up in the second question, the less likely it is to occur. The third question then forces me to think about the upside opportunity if things end up playing out in the optimist view.
This approach helps me avoid getting caught up in the hype and remain objective.
Finding the trends that matter means you have to understand the difference between noise and signal.
Noise = the buzz that surrounds a new technology or idea that ultimately fades away without making a significant impact.
Signal = the emerging technology or idea that is likely to have a significant impact on the future.
Finding signal becomes harder when you have to filter through more noise to find it.
I’m selective with who I meet with, I don’t watch the news, I ruthlessly curate my feed on Twitter, and I only subscribe to a small number of newsletters that consistently give me quality new information.
By curating an environment with a high signal-to-noise ratio, I’m able to think more clearly and find signal with less work.
There are several places where I find signal.
Private online communities, like those listed on the Hive Index, are a great source of information. These communities provide access to a network of like-minded individuals who are passionate about emerging technologies and trends that are likely to have a significant impact on the future.
In addition, I rely on resources like Trends.vc, Trends by The Hustle, Exploding Topics, Confluence.VC, newsletters, and Reddit. These resources provide valuable insights into emerging technologies and directions that are worth paying attention to.
Trends.vc is a great resource for staying up-to-date on emerging technologies and signals. It provides a weekly report that summarizes the most important directions happening in the startup world.
Trends by The Hustle is another great resource. It provides a daily newsletter that summarizes the most important currents in business, technology, and culture.
Exploding Topics is a tool that uses AI to identify emerging topics and signals before they become mainstream.
Confluence.VC is a private community for venture capital and growth equity investors. It provides insights into the latest trends that these investors are seeing in their portfolio.
Newsletters like The Information, StrictlyVC, and The Twenty Minute VC are also great resources for staying informed on emerging technologies and signals.
Staying on top of trends has helped me in my career.
Repeatedly trying to find the next big thing has helped me develop a better filter to scope out noise vs. signal. By understanding the difference between noise and signal, I’m able to focus on the directions that truly matter and avoid wasting time on the ones that don’t.
It’s also allowed me to be the first to know when a new technology pops up. Keeping track of different trendlines will lead you to different companies building in the space, and this early knowledge can provide a huge advantage when it comes to making investment decisions.
Finally, trend chasing has helped me become somebody that others come to for advice. By staying informed on trends, I’m able to add value to people in my network and help them navigate changing landscapes.
Staying up-to-date on trends is crucial for anyone working in venture capital, but you’ll lose your mind if you do this the wrong way.
By focusing on the 1% of trends that truly matter over a ten year horizon, understanding the difference between noise and signal, and leveraging the right resources, you can stay ahead of the curve and make informed investment decisions.
Remember, it’s not about following every trend; it’s about identifying the trends that truly matter.
