What is non-consensus investing?
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Non-consensus investing involves making investment decisions that go against the prevailing market sentiment or common beliefs about which companies, founders, or sectors are likely to succeed. This approach is based on the idea that it is difficult to achieve extraordinary returns by following the crowd, as consensus opportunities are often fully priced into the market. Some key points include:
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Non-Consensus & Right: The goal is to invest in opportunities that are not widely recognized or appreciated by others and to be correct. This often means backing ideas or founders that others view as too risky or unconventional 1 2.
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Higher Risk and Potential for High Returns: Non-consensus investments can appear riskier because they deviate from the common market beliefs. However, this higher perceived risk can lead to significant returns if the investment proves successful 3 4.
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Venture Capital Context: In venture capital, non-consensus investing can be crucial because consensus investments usually attract a lot of capital, potentially diluting returns. By contrast, non-consensus investments might face less competition and offer a higher potential for outsized returns if the underlying assumptions prove correct 5 6.
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Historical Examples: Successful companies like Airbnb, Google, and eBay were initially seen as non-consensus ideas. These companies demonstrated that investing in seemingly "crazy" ideas can yield substantial rewards when those ideas eventually become mainstream 4 7.
In summary, non-consensus investing revolves around taking calculated risks on unconventional opportunities with the potential for significant profits if those investments turn out to be correct.
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