Consensus vs. Non-consensus

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I recently heard a technology investor say that if most of his friends don’t laugh at him for investing in a company, then he knows it’s not a good investment. While this is a little strong, there’s definitely some truth to the statement, particularly in venture capital, where your big winners drive most of the returns. If you’re investing in a company that everyone believes will be successful, then you’re investing with the crowd, and your returns are limited. To maximize returns, you have to bet against the consensus and be right when everyone else is wrong.

Consensus and wrong — you lose your money
Non-consensus and wrong — you lose your money
Consensus and right — small ROI
Non-consensus and right — big ROI