When I was studying for my licensing exams to become a Financial Advisor, I spent every waking moment for two months learning about complicated options strategies and every obscure investment act that could possibly come up on the six hour exam. And yet, one of the most interesting things I discovered was so simple in concept and yet so applicable to all aspects of life: The Odd Lot Theory.
Basically, a round lot is when you buy shares of stock in multiples of 100. An odd lot is when you buy in any other amount. Large institutions with loads of money and tons of expertise typically buy in round lots, which mean the majority of odd lot purchases are made by smaller, less experienced investors. Joe Schmo is more likely to buy only four or five shares of Apple stock than Goldman Sachs.
The Odd Lot Theory says that when there is an influx of round lot purchases, it’s probably a good time to buy (because that’s what savvy investors are doing), whereas when there are mostly odd lot purchases, the ship has sailed and it’s probably time to sell. It’s not that the people buying odd lots are stupid; it’s just that they’re hopping onto the investment trend at the tail end, after it’s already gained all the momentum it’s going to gain.
In other words, when something gets SO popular that even grandma is doing it, chances are it’s glory days are over and its bubble is about to burst.
The second I learned about the Odd Lot Theory, I started seeing it in action everywhere I looked. Think about it… when was the last time you heard the phrase “fo shizzle?” This charming expression met its kiss of death the second you heard either your mom or dad say it.
Is Facebook falling victim to the Odd Lot Theory? When you first joined Facebook, you hardly worried if any of your friends would take offense to your status updates or be shocked by any of your photos. Then employers started looking into job candidates on Facebook and we all got a little wiser and adjusted our privacy settings so only our friends could view our pages.
But what happens when our “Friends” get overrun with parents, coworkers, nieces, and the like. Is that a game changer? Now that half your “friends” share the same last name as you, suddenly your message isn’t just targeting your buddies, it has to be appropriate for your boss, your neighbors, and a whole slew of relatives.
Now that everyone is on Facebook, is its momentum running on fumes?
The Odd Lot Theory explains the housing bubble burst and can predict the rise and fall of skinny jeans, but it neglects one thing… when a trend becomes SO mainstream that it’s no longer a trend – it’s a necessity. When I was a sophomore in high school, my friend Christine helped me set up my very first email account on Yahoo. My original password was based on pager code. (Insert “I’m so old” comment here). I can’t remember the last time I used a pager, but I still check that same email account every single day.
Think of the billions of photos and years of status updates stored on Facebook profiles. Consider the sheer amount of time that you’ve invested into your account. How do you walk away from that?
It’s entirely possible that Facebook has become SO mainstream that it’s not even about being trendy anymore. It’s simply a necessary part of staying in contact or running a business, just like email.
Just keep your eyes peeled for a Friends Request from Grandma. It can mean only one of two things: 1) So long Facebook, It was fun while it lasted! Or 2) Congratulations, Facebook! You’ve become a permanent fixture of the online landscape.
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