The perennial contrarian

You can position yourself and build a reputation in basically three different ways: 1) you go mainstream and espouse average opinions, the safest and most popular choice but a recipe for mediocrity. 2) You follow your own instincts and convictions, regardless of what others say. That can be risky but your opinion will occasionally chime with the consensus, so you will not be branded an outcast and may even be complimented as an independent mind. 3) You don’t care about either 1) or 2). Instead, you frame your point of view in opposition to what others argue in any given debate. Always, as a matter of principle. If you do that, you can call yourself a contrarian. Unlike 1) and 2), being a contrarian is not merely a choice, it’s a way of life.

In investing, the contrarian mindset is quite common. It works very well because consensus trades (i.e. stock tips you get from your hairdresser) tend to get crowded, leading to price distortions, and betting against them can generate outsized returns. This implies in turn that markets are not efficient, at least not perfectly. The winners of today are the losers of tomorrow and vice versa. Fair enough. But translating that into real life raises all sorts of questions. How does it affect your personality if you define your opinions as a mirror image of those of others? Does it make you lonely? Interesting? Is it an asset or a liability? All of the above, but it depends on the context.

Being a contrarian has a lot to do with ego. First of all, you have to be headstrong in order to stand up against widely accepted assumptions and question conventional wisdom all the time. Second, you need to enjoy the spotlight because your views will invariably attract attention and raise eyebrows. Third, you need a competitive streak. That’s why some of the most successful people tend to be contrarians. They often suffer as a result in earlier years, only to be rewarded with mental toughness and tenacity when it counts. Jeff Bezos is a great example for that. I recently read “The everything store”, an account of Amazon.com’s history to date that includes a lot of anecdotes about Bezos. With all successful people, I try to ask myself what sets them apart. Well, the man is unquestionably brilliant but so are other people. He’s also exceedingly intense, passionate and focused, but again, so are other people. The defining factor, though, is that he’s a contrarian. That’s true for his decision to leave a successful hedge fund career during the early stages of the Clinton-era boom years when the internet, let alone e-commerce, were still obscure gimmicks for nerds. It’s also at the core of his extremely demanding management style. Nothing remains unchallenged and pushback is the norm. Many of his reactions to ideas and suggestions are counterintuitive and signature contrarian: “Communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more.”

Being a contrarian is no walk in the park. It only works if you’re consistent and that requires a high tolerance for rejection. In many cases you end up attacking or defending something, although your inner conviction might say otherwise. And that’s the whole point. It’s not about convictions, it’s an intellectual contest for the best argument in which the contrarian routinely holds the short end of the stick. That’s why contrarians often appear unprincipled, self-righteous and hellbent on having the last word. And yet it’s the most rewarding way to debate and argue. Because it challenges not only your opponent but mostly yourself. Even if the contrarian argument doesn’t win, the final outcome will be better because of it. It’s the ultimate vetting process. Food for thought for all the consensus lovers out there.