Investing in an instance of a social phenomenon

Social fad or social phase or phenomenon is a thing which is never constant – it's a thing which changes over time. Take any manifestation of this – say fashion trends – they change. What remains constant though are the fundamental needs – the actual needs to which the social fad caters to. In case of fashion the actual need is wearing clothes, that never changes – being nude will never be in fashion :).

Like fashion another social phenomenon is Facebook – a tool which enables people to connect to each other, share personal moments, make friends and do a host of other social activities. These activities are what this fad caters to – these are activities which humans have been doing since long. (Be it festivals, social events, religious gatherings, parties ). Some years back it was Orkut now it is Facebook – in future something else might come up.

Why I am saying all this ?

The point I am making is that these fads are never constant so if you are thinking of investing your money in companies which just happens to be doing good 'at the moment' – be alert. Never invest with a long term perspective because fundamentally they will go out of trend and you might lose money if you do not exit on time.

Once people try the fad for some time they would get bored and would move on to the next thing that comes closest to giving the real feeling. In case of social media - people would look for some other way which can simulate social interactions in a more realistic way. For example say I develop a virtual kissing app – where anyone can kiss anyone else of his/her choice and get a close to real feeling. Initially it will be quite a hit – people would go crazy but after using for sometime they would realize that this pseudo kissing is not the actual thing – they will start loosing interest and if I have not done enough innovation on my product, might gradually be out of business. All those who would have invested in my company would lose too.

So never make long term investment on products which cater to an INSTANCE of a phenomenon.