On being a contrarian

August 20, 2018

It's well-known wisdom in the investing community that excess return ("beating the market") comes from doing things others can't or won't. Often, this advice takes the form of "buying when everyone is selling" or something similar.

So, sure, you have to do what others won't. But you also have to be right. People sometimes forget that second part.

Coming out of college, I ended up in Seattle because it seemed the contrarian thing to do vs. the consensus choice of moving to San Francisco. I still think that choice wasn't entirely incorrect. California is an absurd place to live with outrageous taxes, overpriced housing, and dysfunctional government.

But it's also where a lot of smart, driven people live, which makes its own gravity.

So any time you think you're outsmarting the herd, ask yourself, what do I know that others don't?

A lot of what I've learned in the past few years is what a gigantic dunce I was about things. It might be that I'm benchmarking myself against much more accomplished and intelligent people. Or maybe I'm just growing up.

Either way, be careful when you decide to go your own way, that your choice is founded on genuine insight, and not pig-headed stubbornness pursued for the sake of "not following the crowd".

Sometimes, the crowd is right.

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