Being A Contrarian

Efficacy: The ability or capacity to bring about a desired result.

We were recently stuck in traffic in Lima Peru when I took the picture above.

A few questions filled my mind as I sat there for several minutes:

  • Does this driver understand that he IS the problem?
  • Why are drivers in general so bad (including in Utah – sorry)?
  • Is being a contrarian efficacious?
  • Why take the negative effects of leadership (I have to believe the driver of this car felt like a total idiot) only to find out you’re leading in the wrong direction (yes, this could be taken as a political statement)?

It seems to me the only successful investing is to be a contrarian.  That’s the only real way to buy low and sell high.  Most investors do this REALLY poorly.  That’s why index funds are so popular (including with me).  If we’re going to make other investments, how do we make sure we are getting to where we want to go rather than just spinning our wheels?  A few thoughts:

  • Passion not emotion – Passion keeps us looking for good investments while emotion leads to poor decisions.  Passion leads to hard work which needs to be thoughtful and rigorous (emotion is the enemy of intellectual rigor).
  • Honesty and directness – Life is easier with honesty and directness.  Perhaps the hardest thing is being honest with ourselves.  However, self directed honesty is the only way to avoid all the emotional behavior mistakes we all make in investing.  As Ray Dalio suggests, insist on complete honesty.
  • Adaptation and consistency – Tactics will change over time – even often.  Basic principles are consistent.  Keep them separate and distinct.  Understand what your principles are and be consistent with them.
  • Simplify – There is no need to be a contrarian on everything.  Go with the flow and use what others are getting right.  Be a contrarian on a few things that really matter.

Eventually, the traffic jam eased and we eventually got to where we were going.

Hopefully, our investment decisions will be efficacious.

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