One phrase has wiped billions of dollars off the balance sheets of individuals and companies: “This time is going to be different because….” It is how people often rationalize jumping on a trend or bubble, even when past experience shows it will not last. The rise of Trivia Crack (which I play frequently), and the commentary accompanying it, is the latest example of this phenomenon.
The housing crisis
During the height of the US housing market bubble, I remember seeing multiple experts explain why the steep run-up in prices was not the same as past bubbles. They explained that it was due to changing demographics, realignment of wealth, new consumer behavior that favored home ownership over other asset classes, and other arguments that made them sound very smart on CNBC. Years earlier during the dot.com boom, experts (many of them the same) explained how that was not a bubble and companies would no longer be valued on profitability (but on market share) and how the economics have changed.
In each of these boom times, experts and laymen alike refused to look at past history, such as Tulip Mania, and picked facts to justify a difference where none existed. Turns out these arguments, while factually correct in some cases (i.e. demographics have changed in the US) were simply noise and did not truly impact the underlying asset value.
This same phenomenon is evident in the technology and digital game space. A game becomes very popular and immediately the entire industry thinks there is a new formula for success. The company behind the game may sell for millions and literally hundreds of companies try to “fast-follow” or add the mechanic to existing products. Continue reading “It is NOT going to be different this time”