Bubbles

The next Harry Potter? Probably not.

I was reading a news story today about Fox’s search to find the next “Harry Potter”. They’re not looking, of course, for the next story about wizardry and schooling, but the next cultural phenomenon. Fox believes they’ve found it with a novel by Catherine Fisher called Incarceon. Granted, the premise does sound interesting (a dystopian future where prisons are run by computers), but this is hardly the stuff that cultural phenoms spring from. Eragon, The Golden Compass and even The Chronicles of Narnia were all supposed to be the next big franchises after Harry Potter, and instead, the only thing that’s gotten big is Twilight. Ugh.

The problem, of course, is that Harry Potter created a bubble in the marketplace, and everyone wants to find that next bubble because bubbles tend to make a lot of money. But what these folks don’t seem to understand is that bubbles are not caused by aggressive marketing or searching for “the next big thing.” They occur almost at a grassroots level and bubble up because they start to get big before anyone realizes how big they’ve gotten. Twilight did not cement itself in the cultural consciousness until the fourth book and the first movie came out. Harry Potter went through the same process. Neither series hit the ground running; both came out, built up audiences and support, and then bubbled up into becoming culturally relevant.

Bubbles aren’t restricted to entertainment media, of course; they occur all over the marketplace. We recently saw a bubble pop up for the Snuggie / Slanket / Freedom Blanket products. We saw a premium coffee bubble emerge over the last decade. We see bubbles on Wall Street all the time. We even just saw a housing bubble go bust.

The thing about bubble is that it’s very hard to capitalize on them once they’ve started to rise, because many people will jump in with the same idea. Some bubbles get very large and then shrink down to a more permanent size. Some deflate over time. And some burst, causing everyone to lose.

It seems to me that the more people there are trying to capitalize on a bubble, the more likely it is to burst. The housing market is a great example — you had all these individual people trying to make a fortune on homes, and that sort of thing led to a lot of the practices that caused the housing market to eventually collapse. It was possible for a few people to make money with these practices, but when everyone got into the game, the bubble couldn’t support them all.

The trick in expanding business is to examine new markets carefully and to understand how they are going to make money. I have been surprised by the number of times I’ve seen businesses attempt to expand into a realm where many other businesses are already competing just on the logic that since everyone else is making money there, they should too. It’s far better to find the potential for a bubble and to position one’s organization to take advantage of it than it is to jump onto a bubble with a structure that others are already stressing.

I’ll conclude by saying that bubbles tend to have another characteristic that is often missed by those coming in later: they rose up because a market that was not being targeted rose up to increase demand. In the case of Harry Potter, the bubble initially arose because adults were as excited about the books as kids, and many adults bought copies of their own. In the case of housing, individuals watching shows like Trading Spaces got the bright idea that they could buy, fix and flip houses because it looked so easy on TV. In the case of coffee, a bubble rose up because people wanted on-the-go energy, and coffee was able to meet that need.

I realize, of course, that I’m grossly oversimplifying some economic concepts, so please… share your thoughts below!