This will not be a shock for folks who know me, but once upon a time I went dancing. In the midst of a crowd where I didn’t fit in, I realized an entertaining way to rebel legally is to ignore the crowd. It may seem odd, but that helped me pick my investment strategy. But first, let me reminisce about dancing, because, why not?
Set the way back machine to the late 80s. I hadn’t danced in a decade, but when a friend asked me out, I said yes. (This was back when women asking men out was scandalous, almost. Actually somewhat rebellious, upon reflection.) Life in the suburbs was not for her, so she suggested we head into the heart of Seattle’s avant garde scene. It was a goth club. The walls were black. The clothes were black. Much of the make-up was black or bright red. Practiced scowls were more common than smiles. She wore something a bit more fitting for the place. I was an engineer; so of course, I wore a polo shirt and chinos. I stood out.
A few years earlier in my early twenties I would’ve felt the peer pressure as a bunch of strangers peered at me. Instead, after a few minutes I began to smile, then enjoy the evening. I was rebelling.
The others in the club were rebelling, too. Goth was new. They were serious about it. They were doing something different. They were so determined to do something different that they were all doing the same thing. They’d accidentally turned unconventional into something conventional, at least within their environment. By being conventional I was unconventional in their space.
Rebelling, or being contrarian, does not have to mean breaking the law, or regulations, or even guidelines. There is an infinity of possibilities within society’s borders that can startle most people. Treat the speed limit as a limit, not as a minimum, average, median, or a goal. Try driving one or two miles an hour below the legal limit, and get comments and gestures. Become a minimalist and a millionaire during the Me Decade and make people wonder what’s wrong. Be honest, and people may not trust you because why would anyone tell the truth, at least in some circles. Imagine an honest politician. Some can’t even though they must exist.
Investing in stocks is risky. Many individual investors invest by following the crowd. Everyone else is buying MSFT? OK. Buy MSFT. Everyone’s doing it so it must be good. I bought stock in AOL. (I’m realizing some people no longer get the reference. Oh, how the mighty have fallen, or at least faded.) People and pundits laughed at it. How can an online business make money? SBUX. Who will pay over $3 for a cup of coffee when 7-11, Denny’s, and Dunkin Doughnuts has it for far less? PIXR. Movies made on computers? That can never compete with Disney’s hand-drawn art on every frame. Want details? They’re in my book, Dream. Invest. Live. I also have examples where that approach didn’t work.
(Late addition: Imagine using social media as something social instead of as advertising, and being grateful for what it provides for free because it is free.)
Maybe I am on to some radical, rebellious strategy. Nope. Charles Schwab advocated buying overlooked companies that are therefore temporarily cheap. Warren Buffet is known for buying unexpected companies.
“Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.” – Warren Buffet on Motley Fool
With an attitude like that, bad times can be good times.
The stock market reports in the evening news are about the crowd, the companies and stocks that were also in last night’s news, stories that can be told in fewer than ten sentences. Listen for the “moo” as the herd heads this way or that based on the movement of the herd. The herd may not know where it is going or who decided to go that way, but that’s the norm.
The stock market swings from irrational optimism to irrational pessimism. In both cases people respond as if whatever is happening will continue happening forever. Has anything ever happened forever? Even the universe has phases. Why pretend anything is eternal?
Unfortunately for me, I don’t have any recent success stories to celebrate. Yet, I continue to invest and write about the experience. Within personal finance, money is used as the measure of intelligence and wisdom, even though luck and chance can be just as important. Rich investors who are also writers pontificate as if they are infallible. Investors who are writers who lost their money fade away. I rebel by continuing to write about both sides of the experience. A couple of my strengths, or at least characteristics, are persistence and perseverance. As a friend pointed out, if you want good relationship advice find someone who has been in more than one relationship, both good and bad.
Currently, my portfolio is very contrarian. I purposely invest by buying stock in companies that are based on positively disruptive technologies and products: energy efficiency, advanced biotech, and innovative electronics and optics. The topics are popular, but most investors are drawn to incremental business strategies, ideas that nudge the boundaries. After my experience, I favor companies that are erasing and redefining the boundaries, at least.
Stay tuned. Even my patience is being tested.
Normal and conventional are currently being redefined. As we pass through this crisis, someone is going to create a new business model that revolutionizes their industry, or creates a new one we didn’t know we needed and wanted. (Drones and robots allowing touch-free delivery solve a lot of hygiene problems. Automation may take over a large swath of low-income jobs. See CGP Grey’s popular video from a few years ago; “Humans Need Not Apply.“)
Reaching back a post or two is the reminder to challenge fundamental assumptions. I expect either significant improvements in tax policy, or an entrenchment of our current dysfunctional economic model. Ideas that were overlooked are probably being looked at. That will benefit some companies, but which ones? Changes favor companies that can adapt, regardless of size. Entrenchment favors companies that are already in that trench.
I don’t know how things are going to go. The pandemic is bad news. Subsequent waves in pandemics can be worse news. So many people are doing so much to avoid or mitigate the subsequent waves that they may be creating good news. Ironically, they may be chided rather than cheered for it if it doesn’t arrive, even if it doesn’t arrive because we stayed and worked and learned from home, wore masks and gloves, and washed our hands.
I don’t know how things are going to go, but this feels like that moment in one of the original Star Wars movies where Han Solo sits and waits for the fleet to break up and fly off in one direction before flying the Millenium Falcon on a path he prefers. As I was taught in karate, “Do not move until it is to your advantage to do so.” Then do so.
I do know how one thing went. Soon after trying to dance at that goth club, she fell in love with a guy who was just right for her. I was the maid of honor. (Unconventional! at least for that era.) A few years later, I decided to actually take dance lessons from an instructor who was a fan of being unconventional, but within guidelines. There’s a lot of fun to be had playing inside the bounds but in the places few play. Have you ever cha-cha’d through a waltz? Try it sometimes – after social distancing is appropriately relaxed, of course.