Finding Your Variant Perception: Why Being Different Isn't Enough

‍"You have to have a view that is different from the consensus, and you have to be willing to stay with it, and you have to be right." - Howard Marks

In investing, "contrarian" is a buzzword. Investors love to say they are betting against the crowd. But betting against the crowd just for the sake of it isn't a repeatable strategy.

As Howard Marks warns, if you bet against the crowd and you are wrong, that is how you lose the most money. True success lies not just in being different, but in holding a Variant Perception.

Your View vs. The Consensus vs. Reality

Successful investing happens at the intersection of three forces: Your View, The Consensus, and Market Reality.

If your view is right, but the crowd also agrees with you, then there is rarely an opportunity for outperformance as the market has likely already priced it in. The Sweet Spot lies where your view plays out but diverges from the crowd.

A Repeatable Variant Perception

The challenge is that differentiated insights often feel random - like a stroke of luck. To address this, we have developed a robust framework to find repeatable Variant Perception.

There are two components:

A) Connecting the Dots Unique views come from seeing connections others overlook. We take an interdisciplinary approach to map the true state of the world:

• ‍The Capital Cycle: Understanding supply and competition.
• The Business Cycle: Spotting macro turning points.
• ‍Behavioral Biases: Contextualizing fear and greed.

B) Understanding the Game Investing is not just about understanding how the world works, but also about understanding the players. Why is the crowd positioned the way it is? Are fund managers hugging the index just to protect their jobs? Are investors panic-selling simply because they need to raise cash?

By understanding the "game," we can identify why the consensus has diverged from our views, giving us the conviction to act.

The Takeaway

To generate better returns, you must be willing to diverge from the crowd. But divergence also requires discipline.

Our discipines comes from blending quantitative rigor with human intuition. Because in the end, it’s not enough to be different. You also have to be right.