I just finished a great book that I think is very fitting to read in this election year. It’s called The Art of Contrary Thinking, by Humphrey B Neill. It’s a collection of articles he wrote in the early 1950’s. You might think a book this old isn’t useful today but things haven’t changed all that much. You can apply his writings to just about everything, from economics & finance to politics, because it’s more about the psychology of how we think. As individuals we tend to think through things but as a group we’re often influenced by the crowd. This is why “the masses” are so often wrong at the extremes and it pays to be contrarian. We can see this in investing when everyone has the same view. For example, if everyone is bullish on some stock, odds are that they already own it… and if everyone already owns it, this usually means there isn’t anyone left to buy so the stock starts to slip.
I’m recommending this book for two reasons that are tightly linked and at the forefront of most conversations today: politics and economics. At a time when there is so much propaganda trying to influence the way we think (and thus vote), I found this book helpful to take a step back and think through things on my own. The author doesn’t advocate to always assume a contrary view is correct, but rather, says that his theory of contrary opinion is a way to look at things from all angles, including the opposite or counter-intuitive, before making a decision because a counter-intuitive approach so often yields the best results.
Here’s a fitting paragraph from the chapter titled More on Socio-Political Trends:
Basically, people desire stability and security. But in seeking this social “constant” they may succumb to socio-political “myths” and delusions that lead to instability and insecurity. There is then the return road which has to be traversed.
And here’s an excerpt discussing socio-economic systems that applies to my criticism of Central Banks:
…If you impress people (who have neither the time nor the inclination to study socio-political trends) that you believe the capitalistic cycles of business activity, production, employment, and prices, can be eliminated, or at least be “smoothed out” (a popular middle road expression), you are, in my judgment, deluding the masses. There is no evidence in history which demonstrates that this has been accomplished, short of dictatorships or during periods of tight wartime controls.
You cannot control or regulate the laws of demand and supply and at the same time retain the freedom of action which is the fundamental concept of the American system of private enterprise.
Hopefully you enjoy the book as much as I did!
-Nick