If you take a step back and observe how most people live their lives, you’ll notice something striking: they tend to copy what everyone else is doing. They buy the same brands, invest in the same things, dress the same way, and even talk the same way. They’re carbon copies of each other. This phenomenon is called herd mentality, and it’s deeply ingrained in human psychology.
But why do we act this way? It all goes back to how we evolved as a species. Humans evolved in small, tight-knit tribes where conformity was essential for survival. If you didn’t fit in, you risked being ostracized or even killed. So, to survive, we learned to shut up and blend in with the crowd.
Fast forward to today, and even though we live in a modern world where survival isn’t a major concern, this need to follow the crowd is still hardwired into our brains. It shows up in everything from stock market bubbles to people choosing Starbucks over the cheaper, better coffee shop next door. We’re drawn to what’s popular because, deep down, we think that if everyone else is doing it, it must be the right thing to do.
But here’s the truth: if everyone agrees on something, they’re probably wrong. And if you want to be successful, you need to break free from this herd mentality.
Warren Buffett’s Wisdom: “Be Fearful When Others Are Greedy, Be Greedy When Others Are Fearful”
Warren Buffett, one of the greatest investors of all time, once said, “Be fearful when others are greedy, and greedy when others are fearful.” This quote perfectly captures the idea that when everyone is jumping onto something, it’s time to be cautious. But when everyone is running away from something, that’s when you should dive in.
Most people think value is found in things that everyone agrees is valuable. But real value is often found in things that very few people see the potential in. This doesn’t mean that just because something is unpopular, it’s automatically valuable. Rather, it’s about looking at things which most people disregard, and identifying hidden value in that think that everyone else overlooked.
Most people are mentally lazy. They lack the courage and conviction to think deeply about things. If their favorite influencer or friends endorse something, they jump right in without question. This couldn’t be reflected better than during the 2021 NFT Bubble. The madness of crowds and overly simplistic decision making framework of “my favorite influencer endorsed this so it must be good” kicked in, leading to people buying and losing thousands on useless JPEGs of monkeys.
The Importance of Being a Contrarian
Being a contrarian means going against the crowd. It means having the courage to do something different, even when everyone else thinks you’re wrong. However, most people are stuck in a cycle of herd mentality, unable to think for themselves or make high-quality decisions.
If you can break free from this cycle, you’ll find opportunities that others miss. For example, let’s look at Nvidia’s stock. Over the past two years, Nvidia’s stock has exploded by around 700%. Everyone is talking about it, and most people think now is the time to buy. But here’s the thing: if everyone is buying, you should probably be selling.
We know from history that bubbles always burst. Nothing goes up forever. The real money in Nvidia wasn’t made by the people who bought in the last two years. It was made by the early adopters—the founder, Jensen Huang, and the early investors who got in back in 1999.
If you had invested $1,000 in Nvidia in 1999, you’d have $2.98 million today.
But if you invested $1,000 two years ago, you’d only have $7,000.
The point is, real value is found when others can’t see it. If everyone agrees on something, it’s probably too late to get in.
The Party Analogy: Why Being Early Beats Following the Crowd
An analogy I often use to illustrate the importance of being contrarian is that of attending a party. Most people show up to a party only after everyone else has arrived. Why? Because they don’t want to be the odd one out, standing around awkwardly while waiting for the party to start. But if you think about it, arriving early is where you get the most value.
When you’re the first to arrive, you get access to the freshest food, the best drinks, and you might even get to chat with the DJ before the party officially kicks off. Sure, there’s a small downside—you might feel a bit out of place or be seen as a “weirdo” for showing up so early. But compare that to arriving late, when all the food is gone, the drinks are watered down, and the place is a complete mess. The only “benefit” of arriving late is that you avoid feeling awkward or out of place—you get social approval. But is that really worth it? The negatives of arriving late far outweigh the fleeting comfort of blending in.
This analogy applies to almost everything in life. Take dining at a restaurant, for example. If you choose the crowded, “popular” spot that everyone approves of, you’ll likely end up waiting two hours for a table. Once you’re finally seated, you’ll probably feel rushed because the restaurant is trying to turn over tables for the next wave of customers. Sure, you’re doing what everyone else is doing, so you don’t feel like an outsider. But are you actually getting a good experience? Probably not.
Now, imagine dining at the quieter restaurant next door—the one no one is lining up for. You walk right in, get served food that’s cooked with care, and enjoy personalized service from the staff. No waiting, no rushing, just a great experience. The only “downside” is that it’s not the trendy choice. But isn’t that a small price to pay for a far better experience?
This is the essence of being contrarian. The crowd might give you social approval, but it rarely gives you the best value. Real value is often found where others aren’t looking. Whether it’s a party, a restaurant, or an investment opportunity, being early and going against the grain is where the real rewards lie.
The Product Adoption Lifecycle: Early Adopters vs. Mainstream
The product adoption lifecycle is a great way to understand why early adopters make the most money. At the start of the cycle, you have the innovators and early adopters—people who see the potential in something before anyone else does. These people are willing to take risks because they understand the core value of what they’re investing in.
Then comes the mainstream. These are the people who jump in only after something becomes popular. Meaning, they only jump after the risk of “looking like an idiot” has disappeared because that thing is now endorsed by the mainstream. They don’t understand the fundamentals; they’re just following the crowd. By the time they get in, most of the value has already been captured by the early adopters.
Take Bitcoin, for example. The early adopters—people like Satoshi Nakamoto and the developers who built the technology—understood Bitcoin’s core value as a decentralized, censorship-resistant form of money. But the mainstream adopters? They’re in it because it’s trendy or because they think they can get rich quick. They don’t understand the fundamental reasons why Bitcoin is a superior technology and form of currency, so they’re easily swayed by price fluctuations and public opinion.
Ironically, its the early adopters who made the real money in Bitcoin. Imagine having a $73B net worth. Yeah, that’s how much the inventor, Satoshi Nakamoto currently has of Bitcoin to his name.
The Affinity Diagram: Understanding Core Value
To visualize this, think of an affinity diagram. At the center is the core value—the truth or core value of something. The early adopters are closest to this core value. They understand it deeply, which is why they’re so loyal to it.
The mainstream, on the other hand, is far removed from the core value. They’re swayed by societal trends and media hype, which is why they’re constantly changing their minds. The mainstream isn’t drawn to things because they resonate with their core values or understand their intrinsic worth. Instead, they’re attracted to what’s popular because it gives them a sense of social approval or ego gratification—whether directly through association with that thing or indirectly through the promise of money, fame, or status.
Their choices are driven by the desire to fit in, not by a genuine appreciation for what something truly offers. As soon as the mainstream sentiment abut something changes, their opinion on that thing flips just as fast. Think about fashion trends, why is it one decade skinny jeans are “in”, and the next decade they’re “uncool”?
It’s because most people have no sense of adherence to timeless values or principles, instead their decisions and thoughts are constantly at the whim of whatever the mainstream thinks is “cool” at the time. As soon as something becomes “uncool” in the mainstream, they no longer adhere to that thing.
This is why early adopters are so successful. They base their decisions on the core value of something (which doesn’t change), not on what society thinks. Mainstreamers, on the other hand, are perpetually screwed because they’re always chasing trends without understanding the underlying value.
Getting to the Source of Truth
One of the biggest reasons mainstreamers fail is that they don’t go to the source of truth. Instead, they rely on secondhand information, which is often flawed. Think of it like a game of telephone: the original message gets distorted as it’s passed from person to person. By the time it reaches the mainstream, it’s completely wrong.
If you want to be successful, you need to go straight to the source. Don’t just believe what other people tell you. Do your own research, analyze the facts, and come to your own conclusions. This is how you uncover hidden value.
For example, during the COVID lockdowns, I wanted to visit my girlfriend in Sweden. The rules said I couldn’t enter unless I met specific exceptions. But instead of taking the rules at face value, I went to the source—the Swedish government’s website—and found a loophole. By doing my own research, I was able to travel when others couldn’t.
Finding Value Where Others Can’t See It
Finding value where others can’t see it means two things:
- Thinking for yourself: Go to the source of truth, analyze the facts, and form your own opinions.
- Having courage and conviction: Be willing to go against the crowd, even when others disagree with you.
For example, I currently live in Kuala Lumpur, Malaysia, because I’ve done the research and found that it offers better value than more popular cities like Bangkok or Manila. Most people think those cities are cheap, but when you actually look at the numbers, they’re not. This is what it means to find hidden value.
The Dunning-Kruger Effect: Why Confidence Doesn’t Equal Competence
Finally, let’s talk about the Dunning-Kruger effect. This is the phenomenon where people with low competence are overly confident in their abilities, while highly competent people tend to underestimate themselves. In other words, the dumber someone is, the more they think they know. The smarter someone is, the more they question themselves.
This is why you should take everyone’s opinions with a grain of salt. Just because someone speaks with confidence doesn’t mean they’re right. In fact, the people who are most confident are often the most wrong. The truly smart ones are the ones who are humble, thoughtful, and always seeking to learn more.
These are people who are usually a tad “insecure” about themselves. Society has deemed these people as wrong because they’re “insecure”, but in actuality, the fact that they’re “insecure” about their beliefs is what causes them to seek facts and information to back up their beliefs, leading them to actually be more right about something than everyone else!
Conclusion: Break Free from the Herd
To recap, here’s what you need to take away:
- Escape herd mentality: Fitting in with the crowd might feel safe, but it won’t make you successful.
- Find hidden value: The best opportunities are the ones others can’t see. Think for yourself and go against the crowd.
- Go to the source of truth: Don’t rely on secondhand information. Do your own research and analyze the facts.
- Beware of the Dunning-Kruger effect: Confidence doesn’t equal competence. Be skeptical of people who speak with too much certainty.
- Embrace insecurity: If you’re slightly unsure about something, it means you’re willing to learn. That’s what makes you smarter than the overconfident crowd.
The path to success isn’t about following the crowd—it’s about thinking for yourself, finding hidden value, and having the courage to go against the grain. That’s where the real opportunities lie.