• Fast Followers investing targets companies that perfect proven markets, not create new ones.
• This strategy lowers development costs and risk by learning from first-mover mistakes.
• Fast Followers like Uber and Coupang gain market share through superior execution and timing.
• These stocks may offer attractive growth potential with reduced investment speculation.

Why Being Second Best Might Be a Winning Strategy

There’s a romantic myth we all love, the one about the lone genius toiling away in a garage, inventing something the world has never seen. It’s a lovely story. It’s also, from an investor’s point of view, often a terrible business model. For every pioneer who strikes gold, the landscape is littered with the forgotten bodies of those who came first but finished last. Remember MySpace? Of course you don’t.

I’ve always found that the real money, the smart money, is often made by those who let someone else take the arrows in the back. It’s the art of being a ‘fast follower’, a strategy that sounds suspiciously like letting your mate buy the first round just to see if the pub’s any good. It’s about strategic patience, and frankly, it’s a far more sensible way to approach the chaos of the market.

The Glorious Art of Pinching an Idea

Let’s be brutally honest. Being first is expensive. You’re the one spending a king’s ransom on research, development, and trying to convince a sceptical public that they absolutely need your newfangled gadget. You’re navigating regulatory minefields and betting the farm on unproven demand. The fast follower, meanwhile, sits back, watches you do all the heavy lifting, and takes copious notes.

They wait for the market to be proven. They watch to see what customers actually like and what they hate. Then, once the path is cleared and the expensive mistakes have been made, they swoop in with a version that’s cheaper, slicker, or just plain better. They sidestep the astronomical costs and the uncertainty, focusing their resources on execution rather than invention. It’s not about being the most creative, it’s about being the most effective.

Learning from the Trailblazers

You can see this pattern everywhere if you look. Take a company like Super Micro Computer. They don’t bother with the brain-bleedingly complex business of designing semiconductors. Instead, they let giants like NVIDIA and Intel burn through billions doing that. Super Micro’s genius is in quickly grabbing those new, powerful chips and building them into optimised server systems faster and more flexibly than anyone else. When the AI boom hit, they were ready, not because they invented the technology, but because they had perfected the art of using it.

Then there’s Uber. They didn’t invent the taxi, and they certainly didn’t invent food delivery. But after establishing themselves in ride-sharing, they watched others struggle with food delivery and thought, "we can do that better". They already had the drivers, the app, and the brand. They just applied their logistical muscle to a proven market and executed flawlessly. Or look at Coupang in South Korea, a company that studied Amazon’s model and then perfected it for its local market with an almost obsessive focus on delivery speed. They didn’t invent e-commerce, they just won it.

A Sensible Bet on Growth?

To me, this is the core idea behind a portfolio of what you might call Fast Followers, companies that have mastered this art. The investment case is compellingly simple. You are looking at businesses that may have the growth potential of an innovator but without the same level of speculative risk. Their path to profitability is often clearer because the market demand has already been established by someone else.

Of course, this isn't a risk-free strategy. Nothing in investing ever is. The fast follower has to get the timing just right. Arrive too late, and the market is already sewn up. They also need to be ruthlessly efficient. It’s not enough to copy, you have to tangibly improve. But for an investor who prefers a calculated strike over a wild swing, looking for companies that perfect rather than pioneer could be a very interesting approach indeed. It’s a reminder that in the race for returns, sometimes the tortoise with a jetpack wins.

Deep Dive

Market & Opportunity

• Fast follower companies often present superior risk-adjusted returns compared to market pioneers.
• The strategy is particularly effective in the technology sector where innovation cycles are accelerating.
• These companies typically demonstrate stronger financial metrics due to lower development costs and a clearer path to profitability.
• The business model focuses on perfecting proven markets rather than creating new ones, reducing risk while maintaining growth potential.

Key Companies

• Super Micro Computer, Inc. (SMCI): Incorporates innovations from chip giants like Intel, AMD, and NVIDIA into optimized server systems. This allows it to offer cutting-edge solutions for markets like AI computing without bearing the high R&D costs of chip manufacturing.
• Uber Technologies, Inc. (UBER): Entered the food delivery market by refining models from pioneers. It leveraged its existing driver network and technology platform to focus on superior logistics, faster delivery times, and an improved user experience.
• Coupang, LLC (CPNG): Revolutionized e-commerce in South Korea by building a hyper-efficient logistics network. Its "Rocket Delivery" service offers same-day or next-day delivery, addressing a key weakness of earlier models in that market.

Primary Risk Factors

• Companies must maintain the capability to rapidly develop and deploy improved products to succeed.
• Market timing is crucial, as entering too early makes a company a pioneer, while entering too late means the market may be consolidated.
• Patent protection and other intellectual property can create strong barriers to entry, limiting opportunities for second-movers.

Growth Catalysts

• The strategy eliminates guesswork by learning from the market research and mistakes of pioneers.
• Companies can focus resources on proven demand, leading to better products and lower development costs.
• Fast followers can enter markets at an optimal time when consumer awareness exists but competition has not yet solidified.
• As the costs and risks of true innovation rise, the fast-follower strategy may become more valuable.