Archive for February, 2010

The Power of Contrarian Thinking

February 25, 2010 1 comment

A few years ago I had the opportunity to move to NYC and work as an equity trader.  While this experience proved brief and unsuccessful, it did make me realize two very important things:

  • Living in Southern California for close to a decade has rendered me unfit to survive in sub 50-degree weather, and
  • Contrarian thinking is extremely valuable, but is rarely taught in college.

A contrarian is one who thinks or acts in a way contrary to the popular opinion.  In terms of investing, acting on contrarian thinking can be very profitable or very costly…but it is always important to at least consider the contrarian point-of-view.  I first learned this lesson as I witnessed experienced equity traders stockpiling (pun intended) Apple shares as the price was plummeting due to rumors circulating on the internet about Steve Jobs’ health.  While the masses (including myself) panicked and sold their stock, contrarian thinkers saw this as an opportunity to acquire a valuable stock at a steep discount.

Unfortunately, this type of thinking certainly didn’t help me out as an investor, but it has proven invaluable in other aspects of life.  Since this experience I have learned to always look for opportunity when others only see problems.  Some examples of this:

  • Discount Buying

Similar to buying a stock when its price goes down, you can save a lot of money if you are buying when everyone else is selling.  Because of all the recent recalls, you can get an amazing deal on a Toyota right now (although I legally can’t advise buying one because I could be held responsible if you blow-up).  Get your snowboard and winter jacket in the spring… buy your board shorts and bikinis in the winter…and if you’re really a true Boston fan, purchase your Patriots/Red Sox apparel any other time than during the playoffs!

  • Getting a Job

Anyone that has attempted to look for any type of job in the past year has certainly noticed that your résumé just doesn’t get noticed at the same frequency that it used to.  Being on the other side of things I now understand why.  Just posting for a part-time position can flood an employer with close to 1,000 applicants!  Not to mention that almost every cover letter submitted was developed according to the “textbook” way that is taught in school.  The applicants that got interviews and eventually got jobs with us were the ones that took a risk with their cover letters and did something different.

  • Entrepreneurship

It may not exactly be contrarian thinking, but I consider it similar.  The most successful entrepreneurs don’t view problems the same way that everyone else does… they see opportunity.  For example, instead of complaining about taking the time to call voicemail and listen to the message (I can’t be the only one that does this) James Siminoff started PhoneTag, a product that converts your voicemail to text and sends a text message to your phone.  Another example of this is the “It’s My Solo Cup” invention.  For years I have been annoyed every time I put my Solo cup down on a table only to look down a minute later and see seven completely indistinguishable red solo cups sitting on the same table.  Recently Solo released a cup with a panel attached that allowed you to scratch your name onto it.  Absolutely brilliant…but it really didn’t take a genius to come up with that one.

In conclusion, contrarian thinking is something that is easier said than done.  It either takes a lot of practice, or in my case several bad equity trades that end up costing you a lot of money.  But if you start thinking this way now, it can end up creating a lot of opportunities for you in the future.

– Kris Alban

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