“You are either a contrarian, or you are a victim,” we said to Elizabeth, quoting our old friend Rick Rule.
Rick uses the expression to describe how the resource markets chew up trend-following investors. We use it in a broader sense. What follows seemed like such an interesting conversation, we decided to pass it along:
“The average person spends, votes, invests, and signs up for military service driven by the same impulse…” we said, “…to do his duty…to take his place in the great mass of his brethren…to fit in…to go along. Typically, he spends money he doesn’t have on things he doesn’t need – just because everyone else is doing it. He wastes his time in the voting booth, because the candidates are usually as hollow as an empty jug; and the odds that his vote will determine the outcome are vanishingly small, anyway. Then, investing along with everyone else, he is a chump for the financial industry, the insiders, and the hustlers. He comes too late, stays too long, and pays too much.
“But it is in war where he really suffers. England [we were watching the old veterans go by] hasn’t faced a serious threat of foreign invasion for 1,000 years. But millions of English, Scottish, Welsh and Irish soldiers have served and died in countless wars…all pretending to protect the homeland. Everyone would have been better off if they had stayed home and delivered the milk. But to do that, they would have had to be real contrarians… And even if you don’t pay with your life…you pay with your time, your money, your attention, your emotion. Either in war or in the investment markets, or in trivial consumption…you get caught up in the spirit of the thing…and pretty soon, you’re in it. It is you; you are it. You’re wearing a Che t-shirt and standing in line at the polling station. You care. It’s a part of your life…”
“I see your point,” said Elizabeth. “But I also see the danger you are running. By alienating yourself from what you consider the fads and fashions of group thinking, you are alienating yourself from the group itself…from feeling like a part of it…from being a part of it. I understand; you don’t want to buy a Ralph Lauren shirt because you don’t want to be a victim of the fashion industry…or pay more than you have to for a brand name. Maybe you don’t bother to vote.
“You invest as a contrarian, of course…doing the opposite of what everyone else does. And you don’t want to get caught up in some great, patriotic war that you think is a fraud. Of course, some of that may be commendable. But you run the risk of alienating yourself too much…of becoming a victim of your own contrarianism…a man without a country…without a people…without a vote…without a say in how things work out…a man without a home. You run the risk of becoming marginalised…a permanent outsider…an outcast. Maybe it makes sense intellectually…but we were not meant to live that way. We have instincts and emotions, not just a brain. And those instincts and emotions are what make us what we are. They make us part of a group, not solitary animals. You can deny those emotions and instincts…but you can’t escape them.”
Markets and Money