Herd mentality fuels the hype cycle

THERE is a peculiar nature in Malaysia’s startup and business ecosystem. Whenever a new trend or hype emerges, our young entrepreneurs tend to jump on it swiftly.

These early entrants, however, do not derive any “first-mover” advantage. The reason is simple: a huge number of people jump on the bandwagon, chasing the same hype. We have seen this play out repeatedly across industries.

Some of the more relatable or familiar themes include the bubble tea craze. At its peak, an entire stretch of shops in Subang SS15 (near Taylor’s University) was lined up with bubble tea outlets of different brands and varieties.

Today, most have vanished.

Of late, we are seeing the rise of another trend. Modern “kopitiams” are popping up everywhere, each with a different twist to the conventional ones.

While the colours and designs of the signboards and shops are different, the menu largely serve the same things – Malaysian breakfast staples and classic dishes favoured by the nation.

Even the most differentiated outlets have overlapping menu selections.

Podcasting is another area fast becoming a red ocean. Apparently, many enjoy listening to the sound of their own voice. But do others feel the same? The content produced has to be differentiated enough to capture attention.

Audience attention spans are getting shorter, and not many have the patience to sit through the wide variety of content available on social media today.

So the question is: which will survive, and which will not?

Flavour of the day

There is a famous saying: “Good artists copy, great artist steal.”

While Steve Jobs popularised it during the 1984 Macintosh launch, no one knows for certain if Pablo Picasso actually said it.

That said, I think this phrase is very apt in describing the current entrepreneurial landscape.

Everyone is trying to do what others are doing – but better. It is often safer to follow a proven path than to navigate unchartered waters.

Improving on others’ shortcomings is a much easier route compared to having to open up new paths. That is why we see new brands that closely resemble their competitors or predecessors.

Sadly, this is not the right way to foster entrepreneurial spirit. The essence of being an entrepreneur is to create value for clients, consumers and the society as a whole.

Simply replicating what others are doing based on the flavour of the day does not create or enhance value.

Take the food and beverage (F&B) industry, for example. Barriers to entry are low, moats are almost non-existent, the business is highly talent-dependent, and it involves long hours.

Everyone wants to be the next Village Park, but how many can actually achieve that?

There have been many copycats attempting to replicate the recipe, but few match up.

Even established nasi lemak chains across various brands, while they may generate solid foot traffic and attention, often lack the efficiency of Village Park’s single-outlet model.

Producing 10,000 plates a day and being a bestseller on Grab is no small feat.

Personally, I do not believe in investing in F&B businesses. Even for our fund, we do not deploy capital to the sector.

I genuinely think it is an extremely challenging industry. More importantly, I do not trust Malaysian consumers.

When it comes to food, Malaysians are probably all at Gordon Ramsay’s level. Plenty of comments, hard to please and extremely discerning.

If you love food, enjoying it is good enough rather than building a business around it.

Competition compresses margin

The recent durian glut is another good example of herd mentality. When a Musang King shortage plagued the country where demand outstripped supply, prices climbed to more than RM100 per kg.

Many people then decided to venture into durian farming, buying land and setting up their own orchards.

Even former China national badminton coach Li Yongbo was rumoured to be involved in durian farming in Kelantan.

A listed company, PLS Plantation Bhd, also highlighted durian farming as the next growth engine for the company’s plantation business, venturing into large-scale commercial durian cultivation.

In fact, Tan Sri Nazir Razak also took a 4.75% stake in PLS Plantation via a private placement at 95 sen per share and was later appointed non-executive independent chairman.

This underscores the level of bullishness towards durian ventures in Malaysia.

For context, it takes about five to 10 years for trees to mature before Musang King durians can be harvested.

While supply had remained tight for years, last year’s bumper harvest, weaker exports and maturing trees have led to a supply boom, pushing prices down to as low as RM12 per kg.

While this is great for local consumers who can now enjoy quality durians at lower prices, it is an entirely different story for investors, orchard owners and farmers, many of whom are now under water on their investments.

Innovation driving growth

This is nothing new. History has shown that even in developed countries, it often starts this way.

During the “black gold rush” in the United States, everyone rushed to drill the ground in the late 1800s, hoping to strike oil.

The risks were extremely high, as the odds of hitting a dry well were common. That is why when oil was struck, it was akin to striking gold.

While most were caught up in the frenzy, a young John D Rockefeller had a clear vision of not being part of the herd. He recognised that oil, as a commodity, would be impacted by supply and demand.

Refining, on the other hand, would remain in demand due to insufficient capacity to process the supply coming on board.

When supply surged, refiners would gain leverage, as producers rushed to sell their inventories.

Against this backdrop, Rockefeller quietly consolidated the refining industry, buying up small players and becoming virtually a monopoly in the United States.

In time, Rockefeller amassed immense wealth, becoming the US’s first billionaire on Sept 28, 1916.

That wealth went on to become a generational fortune. He did it by being a contrarian and going against the herd.

Finding your niche

It is important to find your niche in life. Everyone has their own strengths.

If you have a good sense of humour and stage presence, stand-up comedy could be your path to success.

If you are passionate about teaching, setting up an educational institution may be viable.

If you excel in professional services such as accountancy or taxation, the services industry may suit you.

One should not venture into a business or sector simply because it is the hottest theme of the day.

Themes come and go.

Today, it may be data centres and artificial intelligence; tomorrow, it may be something else.

Chasing trends is a never-ending pursuit, as innovation will continue to drive progress. This has been the pattern throughout history across civilisations.

What will not change, however, is your own interests, capabilities and passions. That is what should ultimately shape your future.