The Power of the Contrarian

I was at a meet up recently, and I got into a discussion with someone sitting across the table in the brewery. He made the claim that,

“I need to buy a house because that is the best way to get rich.”

Now, if you’ve been around here for a while, you know my thoughts on real estate, at least local residential real estate. Mind you he was talking about a primary residence, not investment properties.

I have a little bit of trouble trying to bite my tongue, so a rather heated discussion ensued.

I brought up all the usual points.

• A house isn’t a cash flowing asset.
• A house isn’t diversified.
• A house isn’t liquid.
• The real estate market fluctuates just like the stock market.

We went back and forth about how people that own houses in LA are rich, while people that rent are… well, not.

Our discussion ended rather abruptly, when he got up to go to the bathroom and never came back. Now, Mrs. Wow just chalks this up to my abrasive personality. I tend to come off “attacky” in heated discussions, despite my best efforts to be diplomatic as possible.

But, I don’t want to discuss the merits of owning property as a primary residence. The purpose of this discussion is to understand the value of opinions contrary to your own.

Falsification

There’s a modern philosopher named Karl Popper. His main theory is what is known as “Falsification“.

Now there’s a lot of theory and logic behind this, but the basics are this:

Science and fact is based on proving a hypothesis false.

That sounds weird. And there’s more to it, Watch this short video if you’re curious.

But, let’s give an example.

Say I give you a series of three numbers

2-4-6.

And now I ask you to find the rule that governs this series of numbers by guessing 2 more series of numbers.

Some of you are thinking:

4-6-8

Yes, this fits my rule.

Hmm… Ok then, how about 8-10-12?

Yes, this fits the rule as well. So you jump up and down quite giddy.

I know the rule! It’s even numbers increasing by 2!

WRONG!! You have simply continued the initial line of thinking and confirmed your original hypothesis.

According to falsification, we need to look for sequences that break the rule, in order to find the actual governing rule.

How about 3-4-5?

Yes, that fits the rule. What did we learn? It’s not only even numbers. The increment doesn’t have to be 2.

How about 3-2-1?

No, that does not fit the rule. AHA!!!! Now we found something interesting!! The numbers can not decrease through the series.

I’ll guess the rule is simply increasing numbers.

Correct!!

Two Types of Learning

Some of you know that I was a mechanical engineer in my former life, before I went to business school, and got into this whole data analysis/engineering/science thing.

I loved engineering, there’s something undeniably beautiful about building something with your hands and watching it function the way that you originally imagined in your head.

But, engineering is a valuable degree beyond just learning to build stuff and understand how things work.

It teaches you a way to think about the world and problems that is unique, and this was never more apparent then when I went to business school.

With engineering, the idea of falsification is built into every aspect of learning.

Want to know the steel in this bridge is strong enough to hold the cars you expect to go over it?

Load up the steel until is breaks, then don’t put more than that amount of load on it when there are actual people involved.

With business school, a lot of the learning was based on case studies.

Company XYZ did this thing that was really successful. Replicate that and your company will be successful as well.

Now, imagine if engineers looked at the world through case studies?

This plane crashed, why?

I don’t know! But that one over there is flying just fine. Build more like that one, less like the crashed one.

Engineers need to push a system to find its limits, then play within those limits.

There’s a subtle, but distinct difference:

One says, try to replicate and confirm the good.

The other says, find the bad and avoid doing that.

Finding a Contrarian

All of this goes to say:

When you are thinking about something, find someone that disagrees. Someone to poke holes in your argument.

When ever you ask someone about their experiences and what they’ve learned, you’ll never hear anyone say they learned a lesson from how easy everything was.

That’s simple! Why even prepare for it?

You should listen to the lessons from what people did wrong. And try your damnedest to avoid following in their footsteps. After all, they made the mistake for you! Learn from it!

Not only is this a good thing for financial plans, or life plans. It’s just good practice for life in general.

If you look at the “News” folder on my phone. It’s pretty funny:

Often, I’ll open CNN to see what is trending, and if there’s something political or something I find interesting, I’ll read it. Then close down CNN and open up Fox News, and read a story about the same issue. Just to get both sides, to understand both points of view.

I guess you could make the argument that it’s all drivel, but I digress.

The point is that it’s important to understand and appreciate differing opinions. While you don’t necessarily have to agree, it’s also important not to take a differing opinion personally.

You just might learn a different way of looking at your original thoughts.

That being said, while I believe my local real estate argument is valid, I’m fairly certain I could work on my delivery.