My family has always loved long road trips. So, one of my earliest memories is waking up in the car, in the middle of nowhere, with a mix of Pop, Rock, and Ghazal playing on the cassette player. Fast forward 20 or so years, whenever I’ve had a long day, I crank up the same weird concoction of Bon Jovi, Ghulam Ali, and Michael Jackson and my day’s just a little better. This leads me to two interesting facts about the human brain.
One - Nostalgia is one of the most powerful emotions we feel. Opening credits of a cartoon show you loved, Pokemon stickers, or that very questionable sugar candy that looked like a pack of cigarettes; come across any of these and chances are you would find yourself smiling.
Two - You love the songs you used to listen to while growing up. This is because, compared to your adult brain, your teenage brain produces more dopamine when listening to your favourite jam. So, even if you’re ‘into Indie’ music now, it’s scientifically valid that you’d want to dance to ‘It’s the time to Disco’ from time to time.
Taylor Swift’s re-release of her old songs tapped into both of these impulses. But were these the only reason the album broke records? More importantly, what can Tay Tay teach you about investments?
Let’s brush up on the back story first. Long story short, Taylor signed with a recording company called Big Machine Label in 2005. They owned all the songs she had released, she wanted to own them, they refused, thus she promptly left them for a label that allowed her to own her own music. As fate would have it she wasn’t even allowed to buy back her old songs. This meant that she could not sing many of her old songs on stage simply because she didn’t own them.
The re-recording, it’s an attempt to change this, and boy did it work in her favour. This album, red, reached 300 million streams on Spotify, becoming the fastest female album to reach this target in history.
Pop stars have herds of people following them. If one pop singer is considered ‘in vogue’ you would have to listen to them or risk being a social pariah in college. Taylor Swift has one of the biggest and the most loyal fan bases in the industry. If she releases an album they’re going to buy it, if you bad mouth her on social media, Swifties will come for you tweets ablazing. But, all this loyalty doesn’t entirely have to do with her songs. Hell, a lot of people will argue that she’s not even the best singer or songwriter, mediocre at best. But one thing they can’t deny is her marketing prowess. She has an army of fans behind her because she worked for it, arguably more so than any other artist.
Now let’s look at a different breed of herds. One that you find in the financial markets. The old thumb rule to speculate in any market was to never follow the herd. But does this rule still hold true, especially in today’s context? The answer can be tricky, more so with crypto coming into the picture. Here’s the thing, we live in a world where cryptos inspired by dog memes attract billions of dollars from investors (courtesy Dogecoin & Shiba Inu), and a crypto scam inspired by a gory Netflix show (courtesy SQUID) makes thousands of people lose all their money. Both of these were followed and driven by ‘herds’ of people, for different reasons. But only one of these herds made it through unscathed. So, maybe we’re looking at it wrong. Maybe, instead of following the herd, it would make more sense to evaluate what value the messiah of this pack is adding to your investments.
Taylor swift’s brand stands for personalisation. Here’s a song about the heartbreak you experienced for the first time. Here’s one about being the dorky girl growing up, and here’s one about the fight you had with your best friend. Of course, there are occasional songs about snakes and diamonds, but you get the point.
Her personal marketing takes this same train of thought to the next level. She was one of the few people who wrote personalised letters on Christmas to her fans, accepted random invitations to one of her fan’s bridal showers, and even interacted with fans who were victims of bullying on social media. All this takes time, effort, and a PR team of course, but this doesn’t discredit the former. Her biggest marketing genius yet was launching her own platform on Ticketmaster. So, traditional ticket buying meant a mad rush at the opening of the ticket portal and some quick prayers that you land a seat. Also, this was a hot spot for bots, who bought tickets to resell them for extra money. Ticketmaster eliminated this whole process. It was an easy-breezy ticketing platform where you could get in and improve your position in line by doing simple things like, buying her merch, buying her album, and sharing her songs on social media. Simple as that!
In a world where social media was cluttered with PR stunts, she chose to jump on a platform that allowed her fans a better experience. And it worked like a charm. She made an additional $50 million on this tour and reduced the resale of tickets from 30% in 2015 to 5% in 2018. All this despite having 600 unsold tickets on the table.
She added value to her fans’ investment in her, by showing that she valued them.
Perhaps the same can be said about people investing in meme coins or stocks of a company. Instead of following the herd, look for reasons to invest in the person/thing that they’re following. Is it just a fad, or does it have some real value? If it doesn’t really have any value at the moment, does it have future potential value? Take the E.V (Electronic vehicle) company Rivian, for example. It’s a California-based company that manufactures electric pick-up trucks and SUVs - and is only topped by Tesla and Toyota. It operates at zero revenue (for now) and has sold only 156 vehicles as of October. To add to this, it has a backlog of more than 55,000 vehicle pre-orders. So why did its valuation blow up in the recent IPO?
Rivian is backed by big guns like Amazon and Ford. But another big tick mark in Rivian’s report card is that it reserved 7% of the IPO allocation for loyal users who pre-ordered their electric truck or SUV. See a pattern? Create value for customers and get their loyalty in return.
The same however is not the case with a lot of cryptos. Bitcoins were created with specific technology to boost trading and transaction in the crypto market. Ethereum was created to counter Bitcoin’s disadvantages. They created value for customers by operating this way and thus attracted a bigger herd over time.
Meme coins on the other hand have no inherent value. In fact, even NFTs like that of digital art creator Beeple, or of our very own Bhai, Salman Khan’s would have no inherent value. But the truth is Beeple’s art was sold for USD 69 million and if Mr Khan’s box office numbers are any testament to his fan following, his NFTs are going to be blockbusters as well.
So, do you lose out on a chance to ride these waves to your advantage? Not entirely, meme coins are a fun way to increase your risk appetite and earn a quick buck. But know that these investments don’t demand complete loyalty. Meaning, you wouldn’t want to invest more than 1%-2% of your wealth here. It also means that when these investments don’t work to serve you, then your loyalty is misplaced, and it’s time to disinvest.
In pop music or in investment decisions, choose who you follow carefully. If they come in a snazzy blockchain technology that will promise to double your money in no time or have no inherent value of their own, limit your risk. If, however, they come with red lipstick, blonde hair and pop music that helps you when you’ve had a long day, by all means, join the herd and crank the volume up.