Imagine two people at a fork in the road of ideas, choosing between a standard and a contrarian view on some subject. One takes a standard view, and gains a bit more favor with the "powers that be." This helps him gain the right sort of contacts and opportunities to move up in the world. Eventually he has somewhat more prestigious publications, affiliations, contacts, experience, and so on.
Many of the investors who profited from the housing bust copied the ideas and methods (put options on CDOs) of an aspergery nobody named Michael burry (story told well by Michael Lewis in The Big Short; really a tremendous example of what robin is describing). Since burry worked solo, is a poor speaker, and doesn't deal well with people it seems obvious the only reason we know he was the first to generate key insights - and the only reason he benefitted from them - is that he had a market in which to leave a paper trail of obscenely profitable bets.
(And re bartletts point about stopped clocks, burry is anything but. He'd multiplied his small pool of capital exponentially in his first few years as a standard stock picking value investor. His pivot towards a particular negative macro bet was a reluctant one; and his impatient investors almost forced him to abandon it before it enriched them.)
Your idea is contrarian, and so are you. I deny it and distance myself from you.
There is a phenomenon in which someone gains great fame and wealth by holding a radical position; is empirically proved to have been completely wrong; and yet continues to enjoy fame and wealth for continuing to hold the same opinion that was proven to be wrong. George Gilder ("Trust the Internet now more than ever"), Paul Ehrlich (The Population Bomb: Hundreds of millions of people will die of starvation in the 1970s), and Hal Lindsey (The Late Great Planet Earth: Christ will return in the 1970s) come to mind.
If this website used a forum instead of a typepad format, there would be much more incentive to follow up to old topics like this.
Robin - in my case, at least, the reward of contrarian thinking is in being correct. (As, if I didn't believe I was correct, I wouldn't hold that viewpoint.) The reward of being open about those views in which I am contrarian is that it gives my ideas an opportunity to develop - that is, if I am wrong about something, somebody is likely to point out my mistake, giving me the opportunity to learn from it, that I might be correct the next time. And insofar as I am correct, and by this process develop a tendency to be correct more often, I gain on the whole, even where some individual ideas may be less individually rewarding than would otherwise be the case. (That is, I am most often on the right side, and thus minimize the risk that the non-contrarian undertakes by attempting to run with a rising popular current, when the new position might fall flat on its face - as Carl Sagan did with nuclear winter and many other popularists have done by embracing other rising minority issues.)
Zubon, it should be clear from my post that I wasn't talking about pundits.
Mark and Adirian, yes it is plausible that people who choose contrarian strategies have somewhat differing preferences, though it is hardly obvious what exactly those differences are. Nevertheless, they do care about some of the same things, and so it is important to consider whether they are sufficiently rewarded for the risks they take.
I'm going with the contrary position, which a few have already put forward - that perhaps you are using the wrong currency when considering the advantages or disadvantages of a contrarian position. If your intellectual position is nothing more than a means to fame or fortune, then your intellectual position means little, particularly to yourself. But to what ends do we desire fame and fortune? What good is fame, if it is for qualities you do not possess? (Who wants to be respected for being somebody they aren't?) What is the point in fortune, if you have thrown away everything you valued to achieve it? You can't replace self-respect with group-respect, and you can't buy back your integrity, or the things that integrity protected.
You are correct. In my post I was not drawing onmy own experience. But that would be difficult.I do not play in your league -- almost no one does,after all -- so there is no realistic way tocompare my experiences with yours.
So I tried to think of analogies. And the moreI think of them, the more I see different waysto be a contrarian.
Perhaps by mentioning some of them in the samecomment I was only confusing the issue.
I may recall a better citation later, but I did a quick search for the discussion this reminded me of. Unsurprisingly, it has its roots in an Overcoming Bias post from Robin Hanson. A chain of links:
Key quote (from the second link, unnamed Economist writer, Ms.McArdle?):
Overall, though, the influence seems to be very different from that in academia. Mr Hanson implies that career considerations make academics more conservatives, handing their peers and superiors things they expect to hear. In journalism, I suspect that the incentive is to take unlikely positions. It's sort of like having a stock option. The problem with giving executives stock options is that there is no downside to them if the company does poorly; from the newly-endowed executive's perspective, a company that muddles along doing exactly as well as expected is just as bad as a company where the stock has lost half its value, because his options only pay off if the company does better than expected, causing the stock price to rise. That gives him an incentive to take unnecessary risks.Similarly, pundits are almost never punished for being wildly wrong about something. Nor are they rewarded for being right about something—along with 7,000 other pundits. For journalists, a prediction pays off only if it is both right, and unusual. This gives them an incentive to take unnecessary risks, making somewhat outlandish predictions on the off chance that they will be right.
I thought the argument about pundits and the sorts of "public experts" you see on TV was that they had an incentive to make contrarian predictions because there are large rewards for being surprising and right, no effects from being conventional, and virtually no penalties for being surprising and wrong. Going with the herd will not sell many books, but making wild predictions pays off handsomely if you win, and everyone will forget in a few months if you are wrong. Once everyone forgets, get back on TV with your new wild prediction, sell your new book for as long as you can, and either really cash in if you are right or move to the next one if you are wrong.
It is far from being a scientist or academic, but I would think that there would be some carry-over. If nothing else, the contrarian should be able to catch this wave with a book and some self-promotion. If we have pundits cashing in on radical ideas, the same opportunity should apply to any idea marketable to the public. Maybe contrarians just need a bit more media savvy.
Heck, if someone can sell conventional academic ideas as "heterodox economics," we should see Seth Roberts on TV every night under the heading, "Check out this wild idea, and buy his new book!"
In investing I think ofBenjamin GrahamWarren BuffettMark Hulbert
In banking, Muhammad Yunus
In physics,Nicolaus CopernicusMarie CurieAlbert Einstein
In medicineWilliam HarveyJoseph Lister,Barry J. Marshall
And the more I expand the list, the less I see anypattern other than that new ideas are hard to establish.No physicist more famous that Einstein, no investorwealthier than Buffett, no banker more honoredthan Yunus.
Michael, you ask for a lot. My best guess is that our best lever is shame; patrons could be shamed to back bigshots whose claims are contradicted by reliable betting markets.
Bill, yes, this is at best an unconscious career plan; self-deception works best that way.
Eliezer, your suggested strategy requires quite a delay before pursuing the RIF. Few people passionate about such a RIF are willing to wait that long.
Bruce, stopped clocks are sufficiently discouraged by being punished when they are wrong; punishing them when the are right is too much, as that also punishes those who have good reasons for being contrarian.
Bruce (and any 3rd party reader), to what degree do you think what you're describing is economically wasteful? Particularly your second paragraph. I think that's the more important question than whether it's "fair" or not.
A perfect example of this phenomenon that may be testable has to do with economic forecasting, a field I have some personal familiarity with. Those outside the mainstream tend to suffer professionally even when they are right, while many of the most "successful" forecasters are seldom ever right about key economic turning points.
I used to think this was unfair, but now I don't. First, unconventional forecasters who make a correct call when the mainstream is wrong are seldom ever able to repeat the performance. Oftentimes, they are what I call "stopped clocks" who forecast the same thing year after year--think of gold bugs--and luck out once in a while. You might have made money taking their advice that one time, but you would lose your shirt if you followed them year in and out.
Second, what people are paying for when they buy an economic forecast is precisely the mainstream forecast. This is important for money managers, trustees and others who may need to justify their decisions as "prudent." If the consensus forecast showed no recession, they can't be sued for missing it.
1) how much evidence do we have that it's easy to be influential as a contrarian. Counter-examples leap so much more readily to mind than examples on this point. I can think of both, but the very first example that sprang to mind was that of an extraordinarily influential outsider, John Boyd. His refrain was, "To be or to do."
Clearly, the regular incentives did not apply; he once said, "The most important thing in life is to be free to do things. There are only two ways to insure that freedom — you can be rich or you can you reduce your needs to zero. I will never be rich, so I have chosen to crank down my desires. The bureaucracy cannot take anything from me, because there is nothing to take."
I don't know if Boyd represents an exception to the rule or just a notable example of what happens in many organizations, but having nothing to lose except a sense of purpose does give a certain edge to outsiders.
Many of the investors who profited from the housing bust copied the ideas and methods (put options on CDOs) of an aspergery nobody named Michael burry (story told well by Michael Lewis in The Big Short; really a tremendous example of what robin is describing). Since burry worked solo, is a poor speaker, and doesn't deal well with people it seems obvious the only reason we know he was the first to generate key insights - and the only reason he benefitted from them - is that he had a market in which to leave a paper trail of obscenely profitable bets.
(And re bartletts point about stopped clocks, burry is anything but. He'd multiplied his small pool of capital exponentially in his first few years as a standard stock picking value investor. His pivot towards a particular negative macro bet was a reluctant one; and his impatient investors almost forced him to abandon it before it enriched them.)
Your idea is contrarian, and so are you. I deny it and distance myself from you.
There is a phenomenon in which someone gains great fame and wealth by holding a radical position; is empirically proved to have been completely wrong; and yet continues to enjoy fame and wealth for continuing to hold the same opinion that was proven to be wrong. George Gilder ("Trust the Internet now more than ever"), Paul Ehrlich (The Population Bomb: Hundreds of millions of people will die of starvation in the 1970s), and Hal Lindsey (The Late Great Planet Earth: Christ will return in the 1970s) come to mind.
If this website used a forum instead of a typepad format, there would be much more incentive to follow up to old topics like this.
Robin - in my case, at least, the reward of contrarian thinking is in being correct. (As, if I didn't believe I was correct, I wouldn't hold that viewpoint.) The reward of being open about those views in which I am contrarian is that it gives my ideas an opportunity to develop - that is, if I am wrong about something, somebody is likely to point out my mistake, giving me the opportunity to learn from it, that I might be correct the next time. And insofar as I am correct, and by this process develop a tendency to be correct more often, I gain on the whole, even where some individual ideas may be less individually rewarding than would otherwise be the case. (That is, I am most often on the right side, and thus minimize the risk that the non-contrarian undertakes by attempting to run with a rising popular current, when the new position might fall flat on its face - as Carl Sagan did with nuclear winter and many other popularists have done by embracing other rising minority issues.)
Zubon, it should be clear from my post that I wasn't talking about pundits.
Mark and Adirian, yes it is plausible that people who choose contrarian strategies have somewhat differing preferences, though it is hardly obvious what exactly those differences are. Nevertheless, they do care about some of the same things, and so it is important to consider whether they are sufficiently rewarded for the risks they take.
I'm going with the contrary position, which a few have already put forward - that perhaps you are using the wrong currency when considering the advantages or disadvantages of a contrarian position. If your intellectual position is nothing more than a means to fame or fortune, then your intellectual position means little, particularly to yourself. But to what ends do we desire fame and fortune? What good is fame, if it is for qualities you do not possess? (Who wants to be respected for being somebody they aren't?) What is the point in fortune, if you have thrown away everything you valued to achieve it? You can't replace self-respect with group-respect, and you can't buy back your integrity, or the things that integrity protected.
Maybe contrarians aren't as interested in fame and fortune as they are in being *right.*
Robin Hanson,
You are correct. In my post I was not drawing onmy own experience. But that would be difficult.I do not play in your league -- almost no one does,after all -- so there is no realistic way tocompare my experiences with yours.
So I tried to think of analogies. And the moreI think of them, the more I see different waysto be a contrarian.
Perhaps by mentioning some of them in the samecomment I was only confusing the issue.
My apologies.
John
Is that a desire for anecdote?
I may recall a better citation later, but I did a quick search for the discussion this reminded me of. Unsurprisingly, it has its roots in an Overcoming Bias post from Robin Hanson. A chain of links:
http://www.overcomingbias.c...http://www.economist.com/bl...http://econlog.econlib.org/...http://www.economist.com/bl...
Key quote (from the second link, unnamed Economist writer, Ms.McArdle?):
Overall, though, the influence seems to be very different from that in academia. Mr Hanson implies that career considerations make academics more conservatives, handing their peers and superiors things they expect to hear. In journalism, I suspect that the incentive is to take unlikely positions. It's sort of like having a stock option. The problem with giving executives stock options is that there is no downside to them if the company does poorly; from the newly-endowed executive's perspective, a company that muddles along doing exactly as well as expected is just as bad as a company where the stock has lost half its value, because his options only pay off if the company does better than expected, causing the stock price to rise. That gives him an incentive to take unnecessary risks.Similarly, pundits are almost never punished for being wildly wrong about something. Nor are they rewarded for being right about something—along with 7,000 other pundits. For journalists, a prediction pays off only if it is both right, and unusual. This gives them an incentive to take unnecessary risks, making somewhat outlandish predictions on the off chance that they will be right.
Shakespeare and Zubon, you don't seem to be speaking from personal observation or experience.
I thought the argument about pundits and the sorts of "public experts" you see on TV was that they had an incentive to make contrarian predictions because there are large rewards for being surprising and right, no effects from being conventional, and virtually no penalties for being surprising and wrong. Going with the herd will not sell many books, but making wild predictions pays off handsomely if you win, and everyone will forget in a few months if you are wrong. Once everyone forgets, get back on TV with your new wild prediction, sell your new book for as long as you can, and either really cash in if you are right or move to the next one if you are wrong.
It is far from being a scientist or academic, but I would think that there would be some carry-over. If nothing else, the contrarian should be able to catch this wave with a book and some self-promotion. If we have pundits cashing in on radical ideas, the same opportunity should apply to any idea marketable to the public. Maybe contrarians just need a bit more media savvy.
Heck, if someone can sell conventional academic ideas as "heterodox economics," we should see Seth Roberts on TV every night under the heading, "Check out this wild idea, and buy his new book!"
In investing I think ofBenjamin GrahamWarren BuffettMark Hulbert
In banking, Muhammad Yunus
In physics,Nicolaus CopernicusMarie CurieAlbert Einstein
In medicineWilliam HarveyJoseph Lister,Barry J. Marshall
And the more I expand the list, the less I see anypattern other than that new ideas are hard to establish.No physicist more famous that Einstein, no investorwealthier than Buffett, no banker more honoredthan Yunus.
Bruce, I meant your 3rd paragraph, not second.
Michael, you ask for a lot. My best guess is that our best lever is shame; patrons could be shamed to back bigshots whose claims are contradicted by reliable betting markets.
Bill, yes, this is at best an unconscious career plan; self-deception works best that way.
Eliezer, your suggested strategy requires quite a delay before pursuing the RIF. Few people passionate about such a RIF are willing to wait that long.
Bruce, stopped clocks are sufficiently discouraged by being punished when they are wrong; punishing them when the are right is too much, as that also punishes those who have good reasons for being contrarian.
Bruce (and any 3rd party reader), to what degree do you think what you're describing is economically wasteful? Particularly your second paragraph. I think that's the more important question than whether it's "fair" or not.
A perfect example of this phenomenon that may be testable has to do with economic forecasting, a field I have some personal familiarity with. Those outside the mainstream tend to suffer professionally even when they are right, while many of the most "successful" forecasters are seldom ever right about key economic turning points.
I used to think this was unfair, but now I don't. First, unconventional forecasters who make a correct call when the mainstream is wrong are seldom ever able to repeat the performance. Oftentimes, they are what I call "stopped clocks" who forecast the same thing year after year--think of gold bugs--and luck out once in a while. You might have made money taking their advice that one time, but you would lose your shirt if you followed them year in and out.
Second, what people are paying for when they buy an economic forecast is precisely the mainstream forecast. This is important for money managers, trustees and others who may need to justify their decisions as "prudent." If the consensus forecast showed no recession, they can't be sued for missing it.
Michael Vassar -
1) how much evidence do we have that it's easy to be influential as a contrarian. Counter-examples leap so much more readily to mind than examples on this point. I can think of both, but the very first example that sprang to mind was that of an extraordinarily influential outsider, John Boyd. His refrain was, "To be or to do."
Clearly, the regular incentives did not apply; he once said, "The most important thing in life is to be free to do things. There are only two ways to insure that freedom — you can be rich or you can you reduce your needs to zero. I will never be rich, so I have chosen to crank down my desires. The bureaucracy cannot take anything from me, because there is nothing to take."
I don't know if Boyd represents an exception to the rule or just a notable example of what happens in many organizations, but having nothing to lose except a sense of purpose does give a certain edge to outsiders.