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If your financial advisor is an oddball, you may be in luck.
According to The Wall Street Journal’s Brian Hershberg, contrarians do much better at picking stocks than do conformists. “Year in and year out, the best analysts have proved to be those who advise investors to buy or sell a stock before the pack,” Hershberg noted in a recent analysis. “They’ve also been the ones who will go against the grain. Stock analysts tend to move in the same direction.”
The same could be said of managers, or people in general. Writing in the 1940s, Peter Drucker, listed many admirable qualities of Americans but also noticed a “preference so often shown for ‘safe’ mediocrity or the premium on conformity.”
In Drucker’s view, successful business leadership involves daring to defy the herd. “When innovation is perceived by the organization as something that goes against the grain, as swimming against the current, if not as a heroic achievement, there will be no innovation,” he warned in Innovation and Entrepreneurship.
In The Effective Executive, Drucker offered five historical examples of crucial business decisions and explained that part of what made them tough, although correct, was that they defied conventional wisdom. “They were all highly controversial,” Drucker wrote. “Indeed, all five decisions went directly counter to what ‘everybody knew’ at the time.”
That said, even a contrarian stock analyst will make some bad mistakes. A person of great ability must be judged over the long term, not the short term, so that missteps can be placed in perspective. As Drucker wrote in Management: Tasks, Responsibilites, Practices, “A management that does not define performance as a balance of success and failure over a period of time is a management that mistakes conformity for achievement, and absence of weaknesses for strengths.”
Where have you seen contrarianism pay off in your line of work?