Dan Wong observes that the finance industry, where contrarians constantly bet against the market, is structurally better at encouraging diverse opinions. In contrast, tech culture operates more like a herd, with companies and VCs chasing one big trend at a time, leading to a 'soft Leninism' where dissent is less valued.
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Focusing only on trendy sectors leads to intense competition where the vast majority of startups fail. True opportunity lies in contrarian ideas that others overlook or dismiss, as these markets have fewer competitors.
Venture capitalists thrive by adopting one of two distinct personas: the "in the flow" consensus-driver focused on speed and connections, or the "out of the flow" contrarian focused on deep, isolated work. Attempting to straddle both paths leads to failure.
To achieve above-average investment returns, one cannot simply follow the crowd. True alpha comes from contrarian thinking—making investments that conventional wisdom deems wrong. Rubenstein notes the primary barrier is psychological: overcoming the innate human desire to be liked and the fear of being told you're 'stupid' by your peers.
The difficulty in going against conventional wisdom isn't just intellectual. According to David Rubenstein, it's rooted in the human desire to be liked and respected. People avoid contrarian bets because they don't want to be told they're "stupid" by their peers, making the psychological and social cost very high.
In a world where AI can efficiently predict outcomes based on past data, predictable behavior becomes less valuable. Sam Altman suggests that the ability to generate ideas that are both contrarian—even to one's own patterns—and correct will see its value increase significantly.
Large, contrarian investments feel like career risk to partners in a traditional VC firm, leading to bureaucracy and diluted conviction. Founder-led firms with small, centralized decision-making teams can operate with more decisiveness, enabling them to make the bold, potentially firm-defining bets that consensus-driven partnerships would avoid.
Vinod Khosla differentiates skeptics, who only see failure, from true contrarians. Entrepreneurs are contrarian about the status quo but fundamentally optimistic about what technology can make possible, enabling them to build the future.
Large tech conferences often foster consensus views, leading VCs to chase the same deals. A better strategy is to attend smaller, niche events specific to an industry (e.g., legal tech). This provides an information advantage and helps develop a unique investment perspective away from the herd.
Sequoia's internal data shows consensus is irrelevant to investment success. A deal with strong advocates (voting '9') and strong detractors (voting '1') is preferable to one where everyone is mildly positive (a '6'). The presence of passionate conviction, even amid dissent, is the critical signal for pursuing outlier returns.
The institutionalization of venture capital as a career path changes investor incentives. At large funds, individuals may be motivated to join hyped deals with well-known founders to advance their careers, rather than taking on the personal risk of backing a contrarian idea with higher return potential.
