“Contrarian” is one of the favorite words of Silicon Valley. Investors want to be contrarian in their picks, founders want to be contrarian in their ideas, employees want to be contrarian in the company they choose to join. In today’s age of near-perfect information flow, one has to be a contrarian to generate any sort of “Alpha” as a professional. This is in terms of both spotting opportunities, as well as timing your entry and exits. Of course, just being contrarian isn’t good enough. As Howard Marks (legendary value investor and Founder of Oaktree Capital) cheekily says, “you have to be a contrarian…and you have to be right!!”.
Over my career, I have made several moves that, at least at the time, I thought were fairly contrarian. Left a Partner track VC job to move to the Bay Area and start from scratch as a startup operator in a brand-new ecosystem. Had 2 startup offers — one from a pre-IPO enterprise software company and other from a maverick Series B startup trying to beat Google in search; joined the latter. Left a meaty role at Alibaba to start Workomo at a tricky mid-stage of my career. Invested in several companies at Operators Studio, where the businesses were (and are) considered “unsexy” from a VC perspective. Whether the above moves turn out to be right or wrong, I need a decade more to find out 🙂
Am a believer in what Robin Sharma says “if you do what everybody else is doing, you will get the results that everybody else is getting” (which is, being average). Through-out my career, I have consciously sought risk and tried to keep myself uncomfortable.
Since early 2018, when I started institutionalizing the Operators Studio investing thesis as well as ideating for my startup, I noticed something interesting. When I discussed some of my previous contrarian moves with friends & colleagues, while they perceived them as “hard to understand” or “highly risky”, I was able to naturally see those opportunities as “an obvious gap” or “the downside is really quite limited”. Clearly, these choices were taking me down a different path compared to my peers, and therefore, perhaps I was being contrarian in spotting & evaluating those opportunities. But I hadn’t articulated the mental model that I was intuitively using while making those decisions.
Over last year or so, I have tried to de-construct the above decision-making process, and then put it together again to arrive at what I call my “Zone of Real Contrarianism”. One caveat — this is my deconstruction of how I attempt to act in a contrarian way during big decisions. Not claiming this as a universal mental model but perhaps, you might derive some value out of it.
The diagram is pretty self-explanatory — to me, real contrarianism is at the intersection of what you have really high personal conviction on, and what the majority are unable to see or agree with. However, it’s important that your personal conviction is:
- Authentic — needs to come from an authentic place inside you; represents your personality, values, ideals, and what you stand for (not copied or overly influenced/ inspired by others)
- On-the-ground — original beliefs result from exhibiting skin-in-the-game in this world; being out there, understanding & playing the game (not deriving ideas & conclusions from being a desk-jockey or paper-pusher)
- Execution-led — observing your environment as you execute; the unpredictable, unplanned & idiosyncratic nature of execution makes it a prime breeding ground for non-obvious ideas & gaps
Nassim Nicholas Taleb defines complex systems as where the behavior of individual elements doesn’t explain the behavior of the collective or the ensemble (eg. while people are individually sane, they are prone to exhibiting irrational mob behavior as a collective). My thesis is that due to this very nature, complex systems are a gold-mine for contrarian ideas, provided you operate with skin-in-the-game in it. As a professional, I seek them out proactively (starting companies, venture investing, white space opportunities in large companies, operating in radically-new geographies & markets) to at least have a shot at generating career alpha.
Would love to hear your feedback on this mental model, and your thoughts on how to be a true contrarian in one’s career (& life).