• A tsunami is only for the really bold and well-funded entrepreneur! These are the really, really, really big waves that take decades to roll out. Think Internet, alternative energy, and personalized medicine. If you catch it too early, you'll probably get washed up by the waves that follow. If you catch it too late, you'll be one of about 10 million wannabes. One or two people catch it early and surf it all the way to the end: think Bill Gates with the PC tsunami and Jeff Bezos with the Internet tsunami. But they are the exceptions that prove the rule.
• A wave is ideal. Waves appear within tsunamis. Within the Internet tsunami, think social networking, SaaS, blogging, online video, paid search, and so on and so on.
• A ripple is hyped as a wave but peters out before it becomes one.

Distinguishing the early stage of a wave from that of a ripple is very hard. There is no magic formula to doing this right. If it were easy, then everybody would get it right and there would be no opportunity.

So, the only way to distinguish ripples from waves is to use the wisdom of Pooh Bear...

The Pooh Corner Debates

If you have never read a Winnie the Pooh book (ahem), skip this section because it won't mean a lot to you.

Every debate about a new wave or ripple features the following characters:

• Tigger, the bouncing, ever-excitable tiger, who thinks everything new is simply marvelous and exciting.
• Eeyore, the old gray donkey, who thinks that Tigger, constantly running around and getting excited about new technology, is just, well, ridiculous.
• Piglet, who is scared of anything new and big.
• Rabbit, who does not mind anything as long as he can organize it.
• Pooh, the self-described "Bear Of Very Little Brain."

The Wisdom of Pooh is to just humbly ask questions.

Most entrepreneurs are Tiggers. You need that energy and enthusiasm to start a venture. But being more like Pooh and even listening to Eeyore on occasion is useful. They are smart, and you will encounter a lot of them in the market, so you need to understand how they think. And sometimes Eeyore is right and will save you the embarrassment of plunking your surfboard on a ripple!

Rabbit is no good in the conceptual phase, but you will really need him when you reach the grind-it-out execution phase.

As for poor little Piglet, just be his friend, all right?

Take the Time to Listen to Odd Messengers

Around 1992, I recall speaking to a rather eccentric network engineer who was getting all excited about this "Internet" thing. I was not ready to listen because I considered him a bit, shall we say, flaky. And of course, I was super-busy and the Internet was a distraction.

The next big undiscovered wave is right in front of your nose, right now. Do you see it?

There are two remedies for this:

1. Don't work so hard all the time that you cannot recognize the next big opportunity when it walks through your door. A wise man who ran a big operation would tell his managers to take more time off work to avoid this problem. There are times when you have to sprint, to give it absolutely everything you've got. But you cannot sprint all the time.
2. Try to separate the message from the messenger. This requires cultivating good listening skills, which takes time and effort. But also very useful is operating on the assumption that everybody has something interesting to say; you just need to guide the conversation until you find it.

Can You Create Your Own Wave?

No. It's a tempting thought. The old Valley wisdom is, "You forecast the future by inventing it." But nobody invents waves. They exist independent of any venture. You can only invent a product or service that rides a wave. For example, you can invent a better way to deliver online video, but you cannot invent the online video wave itself.

Timing Is Everything

Timing is everything. You need to catch the right wave at the right time and know when to get off.

In the summer of 2001, I was sitting in Silicon Valley with three entrepreneurs, all originally from India. All of them spotted the Internet tsunami and had started ventures in response to it. The results were very different. Timing was the factor that separated the one winner from the other two.

The first guy started a company, got capital, and launched a product just as demand was falling off a cliff. The venture folded. He desperately searched for other work, was running out of savings, and was planning to return to India, where the joke was that B2C meant "Back to Chennai" and B2B meant "Back to Bangalore."

The second guy did all the same things but caught the wave a bit earlier and sold his venture for stock to a company that then went public. He saw the paper value of his stock turn into fortunes. However, the lock-up period prevented him from selling. By the time he was able to sell, the bubble had burst, and he got only a few hundred thousand dollars in cash. But he was older, wiser, and ready to jump back in the game.

The third guy got it totally right. He sold out in time to get a few million dollars off the table. We were sitting in his beautiful home in one of the best areas of San Francisco. He was spending a lot of quality time with his young family.

The third guy was the first to tell us that luck made all the difference. He was too modest. There is such a thing as smart luck. The lucky bit is being in the right place at the right time. Seeing the Internet tsunami early on does little good if you live in Ulan Bator, Mongolia. Nor does being in Silicon Valley do much good if the bubble is bursting. You need both the right place and the right time.

Which is why you need to understand the difference between secular and cyclical trends.

The next post/chapter is about cyclical trends, which are very different from secular trends. But confusing them is easy to do.

Image credit: colmsurf on Flickr.