Predictable Bases III

...they predict that the future winners will be, or will look like, the current apparent winners.

A third common bias is that, in a time of transition, the standard advice offered by consultants and other analysts will be to adopt the strategies of those competitors that are currently the largest, the most profitable, or showing the largest rates of stock price appreciation.  Or, more simply, they predict that the future winners will be, or will look like, the current apparent winners.  Examples are:

• As aviation was deregulated, consultants advised airlines to copy Delta's Atlanta-based hub-and-spokes strategy.  But, unfortunately for the copycats, Delta's profits had come from subsidized prices on the short-haul routes to rural towns it served from Atlanta--subsidies that were disappearing with deregulation.
• While WorldCom's stock price was flying high, consultants urged clients to emulate the company and get into the game of putting fiber-optic rings around cities.  That advice had to be withdrawn when sleepy telephone companies awoke and began to cut prices.  WorldCom then crashed and burned.
• In 1999, the Web start-up advice was to create a "portal" such as Yahoo! or AOL--a website the acted as a guide to the internet and provided a protected "playground" or specialized Web pages that users were herded toward.  But although these companies were the stars of the moment, their initial strategies of capturing and channeling Web traffic were soon made obsolete by the sheer scale of the expanding Internet.

ACTION POINT: Recognize that times of transition may change the entire face of what future winners will look like.