Imagine this:

Your early adopter friend tells you about a new app that’s still in Beta but they’re already claiming it’s the next Facebook. You ask what makes it so good and their response sounds something like: 

“It’s hard to explain – you’ve got to experience it to believe it”

You start to hear about this app everywhere. You feel a jealous tension rise in your chest when people mention it because you don’t yet have access. This makes you want it even more. 

But when you finally get access to the app, you realize it’s not nearly as amazing as you’d envisioned it to be.

In today’s edition of Why We Buy, we’re taking a look at Market Bubbles – why we get caught up in whatever like-minded people are excited about.

Let’s get into it.

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Inside Your Buyer’s Mind🧐

People are always looking to be part of something bigger than themselves. That’s why we join clubs, cheer for sports franchises & musicians, and buy certain brands over others. 

Market Bubbles are created when like-minded people get overly excited about a specific idea to such an extreme that they ignore the true value of what it is they are excited about. 

And while groups of people with the same idealogy can accomplish great things together, they can also become so oblivious to the rest of the world around them that they let their emotions and excitement get the best of them.

The Psychology of Bubbles 🧠

The most common examples of Market Bubbles are the Dot-Com stock market bubble of the mid-1990s and the housing bubble of the mid-2000s. Both were fueled by investor enthusiasm and emotion, which blinded them from the economic realities of what they were throwing their money at.

However, bubbles don’t need to be so large and devastating.

In the case of trading luxury sneakers, a relatively small group of people trade shoes back and forth, creating their own Economic Bubble. Most people would value a shoe as the sum of all the material parts – a shoe is a commodity.

But within that bubble, the value of a shoe is much higher than the market value because there is emotion, status, and scarcity at play.

How To Apply This 🤑

Alright, so how can we apply this right now to sell more?

Scarcity Creates Hype

Scarcity is one of the biggest emotional drivers in a bubble. Creating scarcity encourages action at the risk of being left out.

Look Up To Breathe

Bubbles aren’t always negative – they can also lead to some truly remarkable innovations. But remember to pull your head out of your social media newsfeeds every once and a while. The world is a lot bigger than we realize. 

Know The Culture

To truly understand a market bubble, you need to learn the cultural and economic incentives that are driving decisions. Interviewing your customers and becoming embedded in the culture is the fastest way to understand what’s going on.

The Short of It💥

Market bubbles are driven by emotions, scarcity, and status games, not by the true value of what’s being traded. Knowing the culture is the fastest way to understand the intangible value being generated by a bubble. Look around at those not in the bubble to get a sense of whether or not the bubble is going to pop.

Pssssttt…

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