Going against the herd is usually seen as a high risk strategy. Why would everyone else be wrong? I tend to think of contrarians as courageous and supremely confident. It isn’t easy standing out on your own. I’ve started to rethink my views on this lately. With simple things, going against the herd is risky. But as the world around us is getting more complex, that risk is dropping quickly. Complexity involves many more variables and much more possibility. In fact, in a complex situation, it could be more risky going with the herd.
Blinded by the herd
Let me illustrate this with an example. I recently interviewed Himalaya Rao, the Managing Director of the Black Founders Matter investment fund. Himalaya explained why it is so hard for black founders to raise capital. Their families on average have much lower generational wealth, eliminating friends and family as a source of funding. Since they don’t have access to capital their progress is slowed. If the founder hasn’t been able to raise capital and their progress is slow it is a red flag to a potential investor. They don’t invest and the cycle continues.
We can also look at this a different way. Because it is so hard to raise capital and grow their business, any black founder making some progress is doing extremely well. They must be lean and frugal, and have grit and resilience. They have to be able to get things done with less and overcome major barriers. These are all critical behaviors for successful founders. Now imagine if they did have access to capital, they will likely do very well.
When going against the herd is a great strategy
In this case going against the herd is a great strategy. And because the herd has not invested in black founders, there are many high potential black founders to back. It didn’t require an extreme contrarian viewpoint or supreme courage. You just need to look carefully and be open to see what others don’t. When you follow the crowd, you are following your bias and being lazy. After all, can everyone be wrong? The answer is increasingly yes.