Larry Cheng on Contrarian Ideas

Unedited by Larry Chiang

One practice I highly recommend as an investor is deliberately and consistently spending some (not all) of your time working on contrarian ideas. Absent that, then by definition, you are spending all of your time working on conventional ideas which is not a recipe for success.

If you’re spending all of your time pursuing conventional ideas, looking at the same sectors, same geographies, same business models, same companies, running the same analysis, doing the same diligence, focusing on the same metrics, exactly the same as every other investor – why would you expect a differentiated result? You’ve commoditized yourself.

How do you know you’re working on a contrarian idea? When the idea has business merit in your mind but other seasoned investors say that it is “crazy”, “a waste of time”, “nuts”, etc. It’s not the presence of social validation that you’re looking for, it’s the absence of social validation that becomes the positive indicator that you may be into something.