The Magic Of Going Against The Wisdom of the Crowd
How to succeed by doing things others aren't
It's always so tempting to tag along with what everyone else is doing--what we've come to call the wisdom of the crowd.
But the truth is that really successful people take a different tact. When they see the crowd headed in one direction, they head off in an opposite direction. Why? Because there are often great opportunities to take advantage of when others are ignoring them.
Just consider what happens in the stock market or investments. Remember a few years ago when you couldn't pull up a news story without reading about people making money off Bitcoin? Wasn't it tempting to join them? Nobody likes to be left out of the party. It's a pretty typical story that has repeated in real estate and the stock market, with early returns attracting more and more people until the profit potential is eliminated. When that is obvious, everyone rushes to the door and the market crashes.
But smart investors did the opposite. If they held Bitcoin, they sold it--at an incredible profit. They knew that there was no profit in buying more; it had already become fully priced. The price of Bitcoin then tumbled, and it's never reached that same level again. It's a reminder that the only way to make extraordinary gains on investments is to be early--and then wait for the crowd to show up so you can sell. In other words, buy when things might be out of style but still solid investments.
We also see this in areas like collectibles. If you're old enough, you might remember the Beanie Baby craze from the 90s. They were these little stuffed animals you could buy for something like $5. But all of a sudden, the market for them exploded to the point where some of them were going for thousands of dollars apiece. Then the craze ended--leaving people with worthless toys they didn't know what to do with. There's even a cautionary story about a family that sunk everything they had, some $100,000, into buying an inventory of Beanie Babies that--wait for it--is now basically worth nothing.
What do you think was the smarter move at that time: to buy those toys for $100,000--or sell them and take the profit? I think I'd like to be the seller in that transaction. To be fair, there a few very rare ones that are worth some money today, but it's unlikely you would have selected those to hold.
It turns out that this rule also applies to your time. For example, the most popular time for people to fly at the airport is late morning. So what happens if you show up at that time as well? You'll find yourself stuck waiting in security lines and waiting again to get on your plane. Since there are so many flights scheduled, you'll also increase the chances that your flight will be delayed for a variety of reasons. In other words, be prepared for the hassle.
But this is exactly why I always strive to fly out on the first flight of the day--even though it might mean I have to get up at 4:00 a.m. to do it. I relish the fact that everything is quieter, less busy, less crowded--and the probability that flight will take off on time is higher. In other words, by avoiding the crowd, I enjoy my traveling experiences much more (at the expense of some sleep).
You can see how this same dynamic applies to just about everything, from where you go on vacation or to what movie you decide to see. If everyone is headed to Disneyworld in Florida for spring break, go somewhere else where it's the off season. That way you'll pay less and avoid the hassle of crowds. Rather than going to see the latest Star Wars movie on opening weekend, where you might have to wait in line or even be forced to sit apart from your date, wait a week or two after the crowds have come and gone. You might find that you have a much better experience than being crammed elbow-to-elbow with everyone else.
I'll admit there are going to be times when the crowd might be right--those situations where there is truly a wisdom of the crowd. But when it comes to investing your money--or your time--I'm encouraging you to think about the power of avoiding the crowd and how you can better use your time and money by doing things others aren't. Just because everyone else is doing it, it doesn't mean it's the right answer.
Imagine what could be possible if you were smarter than the crowd -- because you are.