3 Questions To Test Contrarian Ideas

In the course of my work, I often think about what makes things insightful or compelling. Despite the nuances and complexity that necessarily go into making ideas truly interesting, I believe I’ve found a meaningful shorthand for determining whether an idea is truly new or fresh. I was mainly inspired by Roger Martin’s “The First Question to Ask of Any Strategy” in HBR and Peter Thiel’s Zero to One.
But first, we should talk about what being a contrarian really entails. Simply put, a contrarian is someone who bets against conventional wisdom and herd behavior. It can be a difficult position to maintain because you’re disagreeing with established norms and widespread thought. Furthermore, some people fall into the trap of being contrary for its own sake. That’s often a mistake; betting against the majority without any support for your own position can create really negative outcomes. For example, value investing in Yahoo right now when most people think that a terrible decision is likely a mistake.
Have you ever invested in a contrarian fund comic
To prevent mistakes with decision-making, I’ve come up with a simple test to determine whether something is meaningfully contrarian:
  1. Is the idea obvious? Would someone else be able to come up with the same thing pretty easily? (If something is obvious after the fact, that’s a different story; AirBNB and Uber are obvious today, but were nowhere near so obvious at the time of their founding).
  2. Is the idea stupid? There are many ideas in the world that are not obvious, but that doesn’t automatically make them good. For example, one might want to create a flying peanut butter monster: definitely not obvious, but clearly ridiculous.
  3. Is the opposite of the idea stupid? Since a good strategic idea is never a yes-or-no question, it necessarily has an opposite. If you say you want to “focus on excellent customer service,” the opposite of that is “providing crappy service” which is stupid. If the opposite of your core choice looks stupid, every competitor is going to have more or less the exact same strategy as you; since no one strives to provide crappy service, everyone will more or less try for good service.
When it comes to his music, Kanye is definitely a successful contrarian.

For an example that passes this test with flying colors, let’s turn to Union Square Ventures’ investment thesis. In a tweet, their thesis in 2011 was “invest in large networks of engaged users, differentiated by user experience, and defensible though network effects.” That statement, at the time, wasn’t obvious; while Facebook was succeeding, many of the other social networks hadn’t quite crossed the threshold of success yet. It’s also clearly not a stupid position to take; USV has defined a specific territory along with some of the traits needed to fend off competition in that territory. Finally, the opposite of their strategy isn’t stupid. It’s easy to invest in companies that have smaller cohorts of less engaged users that don’t rely on UX or network effects; in fact, that describes a lot of B2B products like medical records systems, CRM tools, and many more. So if your ideas can pass this litmus test, you’re on the road to being meaningfully contrarian.

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