How to discover a major technological trend like Bitcoin earlier than others?

Introduction

Discovering major technology trends in advance is of course of great significance. If you are an entrepreneur, it means you have an advantage. If you are an investor, it helps you discover unicorns in advance. But don't expect to discover these trends early through market research or expert speculation, because everyone can do that.

So how can we discover those trends that may determine the future in advance? See what Saku Panditharatne does.

Many of the most important ideas in technology have humble beginnings. How can we discover these ideas early on?

An idea is born in a relatively obscure place (maybe a garage), then spreads to a small circle of hardcore fans (like Kickstarter and Reddit), and then suddenly surprises the mainstream with its explosive popularity.

Startups all have a similar journey, but this applies equally to big ideas and broader technologies.

Bitcoin is an example of a concept that originated from an interesting white paper that circulated among cryptographers for several years, and then in 2008 began to attract the attention of the startup world.

Now, it has become a cryptocurrency and blockchain protocol that has stepped out of the seclusion of small communities and entered the annals of major media around the world, including the New York Times (Bitcoin was first mentioned about four years ago on the TV show "The Good Wife").

There are certainly countless reasons to want to know what the next big idea in technology is—whether you’re looking to start a business or invest. But is there a way to catch such ideas at an early stage? It’s hard, because these dormant trends seem to emerge from random, obscure places. Of course, this seems to be the case, because if something exciting emerges from an established technology center (such as Stanford or MIT), the mainstream will notice it quickly. Only big ideas from outsiders take longer to surface and be understood.

Where do new ideas come from?

So recognizing such ideas requires a bit of serendipity, but there are techniques we can use to increase our chances of spotting major trends before they become mainstream. These techniques are essentially the same ones that “curio hunters” or trend spotters in the media or marketing world use to get early access to popular culture: one part is looking in the right places and cultivating the right sources, and the other is paying attention to anomalies and acting quickly.

By definition, it’s unpredictable where dormant trends will originate, so it’s important to have a good network of interesting discussion groups or enthusiast communities (either virtual or physical) since these places seem to be great incubators for new ideas.

The next step is to follow what these groups are doing, either by subscribing to mailing lists, setting up RSS newsfeeds or discovering good blogs, and attending conferences.

But one of the best ways to stay informed is to build a network of "social gateways" - people who are close to the community and who you want to watch and hear new things from - but who are far from your normal circle, so that if any particularly interesting ideas emerge, you will find out early.

These people tend to be open-minded, scientific, and have the time and energy to try new things. Any group with these characteristics is a good place for technology to germinate.

Because of this, college campuses are an excellent testing ground not only for finding but also for trying out new products.

A cartoon showing the new product adoption curve, with usage spreading through the stages of innovators, early adopters, early majority, late majority, and late adopters.

According to Rogers, the best early adopter groups tend to be extroverts with lots of social connections, because the more connections a new idea has, the faster it spreads within the group. This is why trends tend to be led by young people in cities rather than spreading from the suburbs, even if the latter are just as willing to try the same new things.

Highly tight-knit groups can be both offline (densely populated cities or neighborhoods) and online (tight-knit online communities). A good indicator of such tight-knit groups is to look for new, temporary online presences, such as dedicated Slack channels or fast-growing subreddits (r/subnames). This generally indicates that the group is not only new, but also has tight-knit members.

But the number of small groups where you can watch new ideas emerge is so huge that you can't possibly look at them all, so it might be better to dig deeper into the paths where ideas are born - these are generally small circles, but they are very important and influential. But these places will have less of a "gatekeeper" or "cultural curator" flavor (such as the influential editor circle), and more of a taste of fashion creators.

We can use the Velvet Underground's "Banana Album" as an example. This album only sold 30,000 copies in the early years, but the buyers were all people who formed their own bands. So although the Velvet Underground was relatively unknown, this album "influenced the influencers."

The tech equivalent of people starting their own bands is programmers and developers, so places like StackOverflow and Hacker News where groups are concentrated are great places to watch trends. If a tool or technology is particularly popular among the best engineers, those forums are worth paying attention to. Programmers' opinions often determine whether a technology is developed, whether it is a requirement for startups to recruit, or whether it can get support from the open source community. It's hard to imagine Linux being as successful as it is today without the enthusiastic developers who selflessly poured a lot of their business time into its development in the early years.

Distinguishing between trends and fads

Once you’ve established a pipeline of promising groups and sources, how do you determine which ones to focus on?

The most important thing to watch for breakthrough ideas is a rapid growth rate. If data is available, any idea that can maintain a 5% week-over-week growth rate is an anomaly and needs to be paid attention to. A second good method is to compare leading indicators with lagging indicators, because the gap between these two indicators is often a sign of rapid development.

Things like brand awareness, reputation, and perceived importance are lagging indicators. Leading indicators are things that are inherent to the idea or product itself, like how much people care about it, how much better it is than the alternatives, how many positive reviews it has, etc. For example, a movie like Avatar is an example of lagging indicators outperforming leading indicators, as the movie had a lot of marketing but seems to have had relatively little cultural impact.

When I come across early but fast-moving trends (like Bitcoin in 2011 or the Oculus Kickstarter), the two indicators feel out of sync. In both cases, the user and developer communities are enthusiastic about the new technology and see it as a true breakthrough. But the trend seems so important that no one outside of that community notices it. In other words, the leading indicator far outweighs the lagging indicator.

Most people have a natural tendency to ignore or dismiss these feelings, but you can train yourself to pay attention to them. It's important to act quickly in this situation because if something is developing quickly, it will soon become public knowledge.

Identify important trends

In the early days of a new idea, it’s often the case that no one will pay for anything. So how do you assess its economic impact? One way is to look at a “demand proxy” — how many people will pay for the substitute, and a “supply proxy” — how much it cost to produce something similar before.

Even here, the situation is tricky because the economics of disruptive technologies are hard to assess. Ignoring or embracing trends for that reason alone is dangerous.

Finally, while rapid exponential growth is a good sign, it’s not everything. Internet memes also have huge growth. Most ideas that quickly attract large audiences are actually just fads, so it’s important to be able to pick out the ones that matter. A good way to do this is to look for signs of “secrets,” or plausible reasons why the idea shouldn’t be revealed now.

The secret of Bitcoin lies in the technological breakthrough described in the Bitcoin paper; it solves problems that previous efforts to distribute trust and resource provision had failed, using Bitcoin (as an incentive) and the blockchain protocol (a distributed ledger).

Of the real trends that are growing fast, only a few have the potential to truly and radically change the world. Only a handful of truly important macro trends emerge each year, and even fewer of them are in computer science. It’s hard for a technology trend to have a significant impact unless it benefits from these larger transformational trends, although it can take a curvilinear form. For example, ride-sharing apps are an important trend, but they didn’t see widespread adoption until the larger trend of smartphone adoption emerged.

Entering the mainstream

It’s not enough to break through or win over a small circle of early adopters. What distinguishes a trend that’s here to stay from a passing fad? The key is that the trend needs to spread from a small circle of early adopters to the rest of the world, and for that to happen, there needs to be a real path.

Before the internet, the path from the suburbs to the rest of the population was through the urban center. For ideas that spread purely online, that path might be through larger aggregators like Reddit. Another model is through institutional similarity: Facebook spread easily from Harvard to a group of students at other schools because, despite other differences, most universities are structured in a fundamentally similar way.

Another path is to try out another fast-growing community first. One of Sprite’s big marketing triumphs in the 1990s was advertising in the hip-hop subculture before going mainstream. This approach is especially important in the tech space, where the process of achieving massive exponential growth in subcultures is similar. Targeting fast-growing communities is a common strategy for startups looking to grow their customer base.

In 2007 mobile developers were a niche group, but now they are a large mainstream developer community - but today's community still retains many of the tastes and technical preferences of the old community. Curiosity hunters can do the same thing, but in reverse, find the fast-growing community first, and then see what they are using.

Whatever the path from early adopters to the mainstream, some early adopters certainly have some traits that help ideas spread. In the fashion world, social media marketers often target fashion-conscious Internet types who post Instagram-style photos of food or live events.

In the tech world, the person that others want to emulate might have another trait, maybe being famous through open source, or being a famous blogger, but they all have to have the same influence. The same principle can be applied to groups. For example, a Python programmer might have more influence than a Java programmer.

Use reverse thinking

You can recognize a lot of new ideas just by watching the developers, the people in big cities or schools, the other early adopters and the trendsetters… but other people are watching them, too. Finding the right people and places to watch requires you to see the world differently—and to develop hypotheses about what is overrated and underrated.

The gaming community is a great example of an underrated community over the past few years—despite its lack of prestige, the subculture is incredibly large and influential, and gamers have always been early adopters of new ideas like live streaming and VR.

Beyond any desired value, there are broader applications for finding technology trends. These ideas have huge and often sudden impacts on the world, and it is very difficult to know in advance what they will become and what industries will be most affected. Although in an ideal world, futurists can reasonably infer what the next big trend will be, in reality these systems are complex and more uncertain, and various changes will have an impact, so there will be many, many unknown factors.

This means that compared to traditional market research or expert reasoning, "hunting for novelty" may be a good way to capture potential big changes. This technique invented by post-90s fashion marketers is really good!