Finding the Next Big Wave: Trends Must Last Over Ten Years and Change Industries and User Behavior—James Wang, with Robin’s Commentary

The most important investment skill is finding the next big wave. Opportunities that endure across cycles often arise from needs that have existed for a long time but remain insufficiently met. This also informs his three main criteria for evaluating ventures: Does the need really exist? How long can it last? How large can the ultimate market become? When reviewing the past, people tend to divide cycles into clearly defined periods. But when you live through an era from within it, your view is obscured. The transition from the old world to the new is never a clean break. It involves an extremely long, confusing transition. The investor’s challenge is to seek as much certainty as possible amid the unknown and identify trends as early as possible. Judging trends is the most important investment skill. If you get the trend wrong, no amount of effort within that mistaken trend matters. Take the once-hot sharing economy: many people believed everything could be shared, but only a very small number of use cases proved viable. A genuine trend must meet at least three conditions: first, a life cycle lasting more than ten years; second, a change in industry structure; and third, a change in user behavior. Once the trend is clear, many decisions become simpler. You only need to find the best teams within that wave. --- Traps investors must watch for Examine hot sectors critically: Is this technology a genuine wave? Will it be the ultimate winner? Such skepticism inevitably means missing some ventures, but it also helps avoid many bubbles. The biggest trap in venture capital is not competition, but demand that does not exist. Many startups fail not because their products are poor or their teams lack talent, but because the problem they solve is fundamentally a false need, or merely a temporary one. So ask three questions when evaluating a venture: Does this demand really exist? How long can it last? How large can its market become? Generally, satisfying the first two gives the venture initial investment merit. Market size changes, but the need does not. Often, whether a venture is worth investing in depends not on what it is today, but on what it will become. That is also why contrarian ventures appeal. Consensus means prices are already expensive; a lack of consensus means differences in understanding. Investing is fundamentally about earning returns from those differences. The focus is not just today’s market size, but whether successive technological advances will create new needs. One of the biggest mistakes in innovative ventures is confusing novelty with demand. Genuine needs do not disappear with time. Meeting a need that persists for ten years or longer is what makes it possible to become a great company. --- The next “big wave” Judgments about trends and needs share an underlying logic: aesthetics and taste. We are naturally drawn to technology-driven ventures that improve people’s lives and make them richer and more enjoyable, rather than products that serve only as cold “efficiency tools.” Why would an investor repeatedly discuss aesthetics and taste? Technology solves efficiency problems, while aesthetics and taste solve problems of choice. That is even more true in the AI era. Many products begin by emphasizing the most efficient path, specifications, and value for money. But if a product offers only functionality, it will be very easy to surpass. Everyone competes to be faster and cheaper, and everyone becomes more efficient. Why does the user ultimately choose you? Experience, design, emotional value, and details—all fundamentally matters of aesthetics and taste. More importantly, AI is bringing entirely new opportunities from an explosion of content and data alongside aesthetics and emotional value. AI-enabled smart imaging products, for example, can proactively record a family’s joys and sorrows, analyze each athlete’s technical movements during a game, and give coaches training references. AI creates previously nonexistent data or captures data that was previously hidden. This can generate highly personalized content and services, further advancing product development. The next “big wave.” After nearly twenty years on the investment front line, I still feel tremendous freshness and curiosity about this industry. I enjoy studying technology and products, buying each product to play with and test. Firsthand experience lets you make more discerning comparisons. There are many paths up a mountain. Some investors may prefer purely utilitarian products that prioritize efficiency. In venture capital, however, I place greater value on founders’ curiosity, thinking, aesthetics, taste, growth, and understanding of the future world. These qualities and worldviews also help founders make their most fundamental judgment: finding change before the future arrives, then understanding it, believing in it, and growing alongside it. $ChinaEntrepreneurVisionPlusCapitalJamesWang ---- Robin: “Even pigs can fly in a strong wind. But when the wind stops, the ground is littered with pigs that have fallen to their deaths. Better to understand how the world is changing and prepare for the future. Then, when the wind rises and the wave arrives, you can be in just the right position to rise with the wind and ride the wave forward.”