The Next Big Thing Is a Bad Idea

The Next Big Thing is here. It wants to steal your money.

Everyone wants to buy the next Microsoft stock at ground level. You probably shouldn’t. For 300 years, the next big thing has been the investment world’s greatest magician, drawing money in and making it disappear.

History gives the illusion that the next big thing is easy to spot (it isn’t), and that if you do spot it, you can time it (you can’t). That doesn’t mean you should never expose yourself or your investments to the future. You should, mostly because other people will get overly excited about the future’s arrival and drive prices upward for a while. Remember, people believe history happens quickly, but it mostly unfolds in Slow Time. Everyone hopes the next big thing will make them rich. It usually leaves them with losses.

When I began experimenting on myself with investments, all the cool kids wanted to be angel investors who helped fund the next Facebook-Uber-Instagram. That was difficult if you didn’t live in San Francisco and already have gobs of money. I finally got my shot in Oklahoma after visiting an innovative college featuring bright, hardworking heartlanders creating marketable business startups. The school had an entrepreneur-in-residence. Previous students ended up doing all kinds of interesting things, including building toys for the new Star Wars movies. The most recent class had invented a tech device delivering electronic speech for disabled ALS patients at just $3,000 per unit, one-tenth the nearest competitor’s price. By the time I found them, they had already been on an “I’m not crying, you’re crying” Today Show feature. They soon got FDA registration, export approval for foreign markets, and were hiring sales staff.

I asked to invest on the spot. Determined not to miss my unicorn¹, I didn’t tell my wife until after the check cleared.

I lost the entire investment. The people who built that company tried to do something truly good in the world, and if you ran the scenario 100 times, they probably would have succeeded in at least 10 of them. But doing something new is hard, and doing it profitably is even harder. To their everlasting credit, the students gifted the IP back to their college to continue serving the few remaining customers whose lives were changed because they could afford to talk to their families before they died.

Believe it or not, this experience of rushing into the future only to watch it disappear is very old. The train to tomorrow pulls up, and we are so anxious to push past the crowd of other time travelers for a spot aboard that we forget to confirm it’s the right route. If we don’t jump now, we’ll miss our chance! Alas, the future rarely arrives on our schedule.

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The future was arriving in a hurry in the 1830s, too. “We are all so anxious to be rich in a hurry,”² one writer noted fearfully in 1832. There was so much future to invest in. The wildly successful Erie Canal, funded with 6 percent bonds, spawned imitators in every municipality that touched water. If you missed out on the Erie, here was your chance to connect the Chesapeake to the Ohio. Private toll road companies promised monopoly profits to access the farms canals couldn’t reach. Hot new railroad technology offered to skip water altogether from Baltimore to South Carolina. The first American factories reported 25 percent annual dividends; investors were doubling their money in three years. Everything was promised in Fast Time: a world of rapid change that would make investors wealthy in a short span.

Yet this wasn’t Fast Time; it was Slow. Canals must be dug. Roads must be cleared. Crossing mountains is expensive. And all this, always, took more time than planned. Moreover, as each new nodal point connected, as each new factory came online, prices and profits went down. Everyone jumped into the future in the same long decade not remembering that everyone else was jumping, too. Factory profits fell to barely 1 percent. Most canals were abandoned mid-stream, as highly indebted developers found they were digging toward a future they could no longer afford.

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Lydia Maria Child’s husband, David, believed that God was bringing that future here quickly, and the Lord was using root vegetables. The sugar beet industry³ got its start when Napoleon closed Europe to British trade, which had the unfortunate effect of cutting his subjects off from Caribbean cane sugar. Getting sweets from beets seemed like a reasonable substitute. In 1811, the Emperor issued a beet decree, setting aside land for production and establishing special beet schools. There were beet scholarships, beet factories, even beet bounties—rewards for growers of the sweetest roots in France. By 1812 the nation was producing over 3 million pounds of root sugar. Then Napoleon was defeated at Waterloo, and the beet stopped.

American abolitionists saw this as a sign from heaven. If sugar cane could be eliminated, so could the Caribbean slavery that grew it. David Child, who possessed far more passion than prudence, sought to make the world and his family better off by being an early adopter. In 1836 he traveled abroad for a crash course in agriculture and returned the next year to establish one of America’s first beet manufacturing centers. He would not be the last. In Utah, Mormon leaders imported 500 bushels and much machinery. From Maine to California, zealous farmers leaned into the next big thing of American agriculture. Politicians erected trade protections for the industry by charging tariffs. The stars were aligned: there was a market, a method, and the political will to make sugar beets work.

Every one of them failed. Not until the late 1880s—fifty long, Slow years later—was there a single successful beet farm in the United States. And that was only after the newly established Department of Agriculture expended serious funds adapting the root to American soil. Today, after decades of expensive seed hybridization by scientists, beets make up 55 percent of all the sugar grown in the United States.

Meanwhile, David went broke. It is no accident that his wife, who appears in today’s history books as an abolitionist and early feminist, was most famous in her own lifetime for an entirely different work, The American Frugal Housewife.⁴ This was Child’s bestselling book by far, going through over thirty printings. With a husband who bet big on the future and lost, frugality was necessary in the actual, Slow present.

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Then there is energy independence. Shale oil promised a bonanza⁵ of American wealth. Only it did so too early: in 1859. The number of shale gas companies in the United States went from three to forty in two years. By 1861, nearly all were gone. This happened again, in World War I when there was an oil shortage. And again, it busted because of cheaper competition from oil wells. And again, in the oil crisis of the 1970s. That one ended with one billion dollars in losses, laid off thousands of workers, and created ghost towns—like something out of Deadwood—that are still rotting in the desert today. And again, in the early 2000s. It will probably keep happening, or some green-energy version of it. The future just takes a long dang time to get here.

What about real estate—the path of progress, and all that? Florida is the destination state for beach vacations. People predicted it would be when Andrew Jackson was president, at a time when not a single paved road went through the inaccessible swamp land that was Florida. The first boom retreat town was St. Joseph⁶, on the Gulf of—then—Mexico. The American vacation industry got its start there. “I wish I had a villa⁷ in Florida or somewhere else, to retire to” is a sentence from a letter in 1830s Baltimore. Your grandpa wasn’t the first to spend cold winters dreaming of being a snowbird.

Land speculation on the Gulf went off the charts. You could buy land and order a vacation home by mail from the comfort of your newly built New York brownstone. The Florida Constitutional Convention was held in America’s next big getaway on the beach. In just four years, St. Joseph became Florida’s largest, wealthiest city.

But getting to St. Joe proved tough. With no railroad, the trip was exceedingly long. In 1840, vacationers were swamped by a hurricane. Yellow fever hit locals, who all fled. It being hard to run resorts without staff, the last vacant buildings were swept away in storm surges by 1844. The future of Florida came and went in less than eight years. No one resettled the area until the twentieth century.

Investors were correct that Florida would become the national vacation destination. They simply got to the future too soon.

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In the 1990s, did you believe Amazon would one day achieve same-hour delivery for kettlebells and ketchup? They spent billions of dollars on the infrastructure to do it. It also took decades of laborious effort to build out the logistical supply chain. They’ve requested that governments change aviation law to allow drone flights. Same-day delivery is a big, bold, world-changing idea that came to pass in our lifetimes.

So let’s talk about Kozmo.com. The website (now gone) lingered with a sign that said “temporarily closed,” more or less from 2001 to 2020. Way back in 1998, Kozmo.com staked its claim on the one-hour delivery world. The vision was bold. The idea was doable. Investors sunk $280 million into it. For the most part, it was all lost in under four years. Here we sit, nearly thirty years later, anxiously awaiting that yoga mat we just ordered. No one, not even Amazon, could deliver it in less than a quarter century.

Google, the multi-billion-dollar company that started as a search engine in 1998, was not the first search engine on the web.⁸ It wasn’t even the second or third or fourth. Who was? No one you’ve heard of, unless you are at least forty-five years old. The idea was proposed the same year the United States dropped atomic bombs on Japan: SMART, Archie, Wandex, ALIWEB, JumpStation, World Wide Web Worm, RBSE, Excite, Global Network Navigator, Yahoo!, LookSmart, WebCrawler, Lycos, AltaVista, Hotbot . . . shall I go on?

AskJeeves was my first. You always remember your first. Fun aside, Google’s original name was BackRub, which does not sound like the type of website you’d use to settle a debate with your mother.

This brings us back to Microsoft. Since its 1986 IPO, the company has offered investors an astounding 23 percent annualized return. That assumes, of course, that you held it for nearly forty years. If you bought at age forty, would you really have held it until you were eighty? Maybe. The real question is, what else would you have bought and held in 1986 to bet on the future? Commodore, Atari, Lotus, Wang, and MIPS were all making the computer future happen, and every one of them went bust before it got here. The chances you would bet only on the right horse is, well, gambling.

The future takes a lot longer to get here than you think. Nearly every huge American bust was an idea that eventually boomed. Over and over again, the next big thing gets here . . . in laborious Slow Time.

Most investors think they live in Fast Time. They do not.