The Art of Contrary Thinking

by Humphrey Bancroft Neill

"When everybody thinks alike, everyone is likely to be wrong." The ten words quoted above are, according to Humphrey B. Neill, a potent factor behind the economic booms and busts that blight our civilization. The "Mississippi Bubble", Holland's incredible "Tulipmania" and the New York stock market crash of 1929 are historic examples of disasters magnified and hastened by the pressure of mass opinion. Neill describes these occurrences in detail and tells the reader how to avoid and recognize the dangers that "following the pack" can pose to the discerning investor.

Genres: Psychology, Philosophy, Nonfiction, Finance, Money, Personal Development, Self Help

212 pages, Paperback

First published January 1, 1954

Reviews

[Matthias · Rating 4 out of 5]

First published in 1954 and updated in subsequent editions by the author until 1963, this book predates various observations and topics of modern behavioral economics.
To understand and appreciate it, you need to keep in mind it was written during the era when Keynesianism was ruling undisputed (roughly from 1945 to 1973), and both social scientists and policy makers were thinking of the prosperity puzzle as solved and of human economic activity as predictable.
Neill was going against the grain, part of a skeptical minority. This also explains why he doesn't seem to apply the same strict contrarian rules to his own ideological biases - which become obvious in some black-and-white thinking passages (other than when he self-describes as "Libertarian", "conservative", "realistic reactionary", and when he cites, p. 150, "Ayn Rand's wonderful new book, Atlas Shrugged" - ugh).
The book is heavily and explicitly influenced by Extraordinary Popular Delusions and the Madness of Crowds (Charles Mackay, 1841), Les Lois de L'Imitation (Gabriel Tarde, 1890), and Gustave Le Bon (La Psychologie des Foules, 1895; Psychologie du Socialisme, 1896).
The edition I bought (6th ed., Caxton Press 2010) has way too many typos - the editors did a poor job.

Some key passages:

pp. 42-44:

The public is perhaps right more of the time than not. In stockmarket parlance, the public is right during the trends but wrong at both ends!
One can assert that the public is usually wrong at junctures of events and at terminals of trends.
So, to be cynical, you might say, "Yes, the public is always wrong when it pays to be right - but is far from wrong in the meantime". [...]
The "time element" is the most elusive factor in economics. We need to get that fixed firmly in our minds. (Insofar as I am aware, there is no known method of timing events or trends).
Therefore, when we adopt a contrary opinion, as a guide, we must recognize that we may be too far ahead of the crowd. This is because economic trends often are very slow in turning, or reversing.

p. 80:

Students of crowd psychology know that the average voter pays scant attention to the fundamental facts concerning either the candidate or the platform. He accepts "what he feels". The forces of suggestibility and contagion form the image in his mind.
Mystery is an al-powerful tool. "Tell 'em nothing and promise 'em anything", counsels the politician; "and, above all, never reason with voters; affirm but never explain; repeat what you'll do for 'em, but never argue".

pp. 83-85:

The aim of this writer's contrary comments is to proffer interpretations in the field of economic psychology, still largely unexplored. One does not find, for example, the title "Economic Psychologist" used as yet. The few writers who are paying serious attention to the study of human behaviorism and its influence upon economic trends refer to themselves as sociologists, economists, or psychologists.
However, it is evident from studies and papers presented in recent years - and from the surveys of consumer intentions and attitudes which have been conducted for the Federal Reserve Board - that the field of economic psychology is one in which serious concentration will be focussed in coming years. [...]
So, while we cannot foretell the future, we can be confident that economic psychology will be a required subject for study as we learn more about economic trends and cycles - and what starts and stops them.

p. 92:

However, we need not to be too discouraged, it seems to me, because the whole field of economics remains a "guessy" one. Little, if any, progress has been made over the years in attaining profitable accuracy in economic forecasting. And, mind you, this condition still exists, notwithstanding the extraordinary volume of statistics that is now available to students and which was not known to former forecasters.
It seems to me that the long history of economic forecasting clearly demonstrates that "psychology" is the missing key. You may have all the statistics in the world at your finger tips, but still you do not know how or when people are going to act. Accordingly, the statistics frequently lead you astray.

p. 94:

A basic usefulness of contrary opinions is to guard against predicting the unpredictable; or, to put it another way, to avoid being ensnared by faulty general predictions. [...]
I believe it is correct to say that the theory [of Contrary Opinion] is more valuable in avoiding errors in forecasting than in employing it for definitive forecasting.

pp. 101-102

Making predictions has become a mania. Practically all economists are called upon for their future views - and many go out of their way to write articles and make speeches about "what's ahead". [...]
But the significant fact for us to hold before us is that the more prominence predictions receive the more inaccurate they are likely to be. [...]
If you believe the predictions, you go against them to protect yourself. Thus, you help the predictions to go haywire.

p. 104

Most of us can't stand being alone more than half an hour, and our idea of reflection is merely to reflect and repeat what someone has told us! (We're imitators, that is.)

pp. 106-107

[Entrepreneurs] built so fast and furious that their second step - of combining enterprises and pyramiding one on top of another - has led to the submersion of individual effort and the fostering of group effort and the conformity of the individuals to a mass pattern. [...]
Business organizations have become too large for individual management. We have entered the era of group management. Mass conformity has, naturally, gone along. [...]
May it not be that cyclical movements will be of greater (rather than lesser) intensity in the future, because of this development of mass conformity?

pp. 110-111

It takes us average humans a considerable interval to shift our viewpoints, once we have established a given mental outlook.
That is, if we have (mentally) accepted a trend as moving in one direction, we are not inclined to change our outlook until well after the trend turns. [...]
However, if we adopt a contrary course and try to anticipate a change in the current, we're more likely to recognize the signs of an approaching whirlpool or precipitous drop than if we merely assume that if the river is smooth here it must be smooth all the way.

pp. 113-114

As you browse over the opinion which have been published through the years - in eras of good times and bad - you are struck over and over again by how often the prevailing conditions produced the opinions; [...] Little effort was made to analyze what had happened previously - things which would cause a change in the future.

p. 118

When economic affairs are booming and "everybody" feels cheerful, optimistic, and prosperous, no one wants to hear disparaging remarks or bad news about how things are going. [...] If someone suggests that booms and periods of optimism always overshoot the mark and bring about corrective reactions, that said someone is called a "prophet of gloom". He is politely (or unpolitely) told to shut his pessimistic mouth. [...]
At another time, when the economy has been slumping and "times are bad", then the opposite psychology prevails. People [...] get into the frame of mind that allows them to believe that everything is in bad shape. What is more, they expect things will remain that way. [...]
Rut-thinking is a common trait. I have said that the art of contrary thinking may be stated simply: thrust your thoughts out of a rut.

p. 125

The "crowd" is most enthusiastic and optimistic when it should be caustious and prudent; and is most fearful when it should be bold.

p. 128

I'm confident you are aware of how different a wellthought-out opinion is from one that is caught on the fly, so to speak, or one that is merely a reflection of a crowd's fears or hopes. An individual may think out his opinions, whereas a crowd is swayed by emotional viewpoints rather than by reasoning or reason-why arguments.
Emotional and thoughtless opinions spread widely from imitation and contagion.

p. 131

Being positive, specific, and dogmatic is about the most harmful habit one can fall into. [...]
The value of the contrary approach is the opposite. It prevents one from being a dogmatist; one avoids being positive about conjectural matters; as one reads, he mentally needles the writer or commentator.

p. 133

Instead of leaping abruptly from affirmation to its opposite (from general opinions to contrary opinions), we need to consider the synthesis (combination) of parts of general opinions and their opposites. [...]
Take the leap from the General Opinion to its Opposite (or from affirmation to negation) and then, from the ideas thus released, work back to a speculative and reflective conclusion, or synthesis. In this way, we may avoid denying facts which are elements in the generalized opinions we are analyzing contrarily.

p. 140

It is evident, I think, that propaganda, skillfully engineered, manipulates opinions. [...]
We are now witnessing, and shall increasingly experience, "thought and desire manipulation" which is almost firghtening to contemplate. I do not hesitate to assert that contrarianism offers protection against the Depth Manipulators.

pp. 155-156

Remarking that to be able to be caught up into the world of thought - "is to be educated", Miss Hamilton emphasizes that the Athenian method of education was not geared to mass production. It did not produce people who instinctively all went in one way, and were conformists. There were countless contrarians in Greece back in Socrates' day.

p. 166

Many devotees of chart reading, for forecasting stock prices, subscribe to the idea that a chart is worth a thousand words of analysis and statistics. Permit me to twist this around. I maintain "the right contact is worth a thousand charts".

pp. 173-174

The sameness of writings on business, finance, and economics - and of course on the stock market - is such that it is almost impossible for an individual to think for himself. He is brainwashed.
The protection against brainwashing is contrary brainwork. It is hard work to think, but it is worth it.[...]
If Washington experts appear before our television screens with brave predictions of things to come, let us not forget that they are there to persuade us to think their way. The open-mouth policy is a scheduled phase of modern government.[...]
There is one noticeable trait - a paradox - that is pertinent to today's trends of opinions: a) A person is commonly slow to change his mind, while being b) Quick to pounce on a new fad or shift to a new fashion.
Which is to say we are quick to conform, but slow to differ.

pp. 182-183

It seems impossible that in the gret Tulip Mania in Holland in 1640 the human herd could be such utter fools as to bid up tulip bulbs to 5500 fiorins each (equal to approximately $3,000) and crack a nation's banking system in the process.[...]
And did it really happen in our lifetime that clergymen demanded "a life (sentence) for a pint"; and the confiscation of automobiles and the closing of huge hotels for what is now completely legal?
When mass manias are tied to a personality (Napoleon), patriotism (war), or God (the Crusades, or witchcraft), the hypnotic contagion of the crowd has no limits. It must wear itself out, as in the case of the Crusades, that took two hundred years.

[Theo Milos · Rating 5 out of 5]

“When everybody thinks alike, Everyone is likely to be wrong”

[InvestingByTheBooks.com · Rating 3 out of 5]

This is one of the few general books on contrary thinking that exists. More specifically, there are gazillion publications on value investing but only a handful on contrarian investing. This book is built on a pamphlet and a collection of essays from the 1940s and 1950s. Humphrey Neill was a stock market trader who had retired to the scenic landscape of Vermont from where he sent out the monthly Neill Letters of Contrary Opinion.

Although the language is a bit formal it is also obvious that the author had a way with words and one could choose several good quotes from the text. Take these two for example: “When everyone thinks alike, everyone is likely to be wrong” and “If you don’t think things through, you’re through thinking”. Not only do these quotes give example of Neill’s writing they represent the two main themes of the book – contrarianism and independent analysis.

The crowd is governed by feelings rather than thinking and at times it will be profitable to be contrarian to a consensus opinion that most often will be a belief in an extrapolation of the current trend. An individual who can stay independent of the crowd psychology thinks with his brain instead with his less analytic heart. To accomplish this he must cultivate a practice of contrary thinking, he must be able to fight his own psychological biases and also to correctly judge what the contrary opinion is and the strength of it.

The tricky thing is timing as trends tend to continue longer than one might want to. The crowd is only wrong at trend reversals. Perfect timing will always be impossible but with divergent thinking a person can pick up early clues and act before they are visible to others. Most probably the contrarian will be too early never the same.

According to Neill, contrarian thinking doesn’t mean a person simply takes the exact opposite view than the crowd; it’s simply a different view. To be able to do this he needs to perform a thorough analysis of the subject. It would for example serve him well to think of longer term aspects, to ponder secondary effects, to weigh in more alternative explanations, to imagine that the consensus view in the future turned out to be wrong and then brainstorm about why this happened and so on. With alternative views of how the future will turn out the contrarian can then anticipate specific changes instead of making specific forecasts that very rarely turn into reality.

Time and again the author comes back to a number of previous writers that had a lasting influence on him, the three most common being Charles Mackay with Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, Gustave Le Bon with The Crowd – A Study of the Popular Mind and William Trotter with Instincts of the Herd in Peace and War. The first two had a huge impact on my thinking as well.

However, I don’t think that Neill’s writing has aged with the same dignity as that of his heroes. Where the others dig into practical details and brings mass psychology into life, Neill discusses crowd psychology on a high analytical level and in a wide variety of areas. The problem is that so much has happened within behavioural finance the last 30 years so the theorizing feels quite thin. While practical mass psychology hasn’t changed the academic understanding has developed. Further, if a book consisting of one pamphlet and a number of short essays is to work as one story, the various texts cannot be too similar to each other. Too many of Neill’s texts are too alike.

I like the combination contrarianism and independent analysis which is parallel to Seth Klarman’s quote on value investing being a combination of a contrarian streak and a calculator, and the author also sniffs around George Soros concept of reflexivity when he concludes that the influence of forecasters void their predictions since investors adapt to them. Too bad then that the text feels a bit too dated.

[Dave Lefevre · Rating 2 out of 5]

The thesis "When everybody thinks alike, Everyone is likely to be wrong," is instructive, though the vast majority of this book is not. First, it has not aged well. If you are reading this for insight into the way of the world today the second section of the book won't help a bit. Second, Neill often fails to apply his own contrarian thinking strategy to his own dogma. He's anti-Communist, pro trickle-down economics, anti "liberal" in a way that challenges any current right-wing zealot, and he can't seem to apply is own contrarian theories in any way that makes him think those ideas out. A lot of it looks rather silly in 2012, and not only because the circumstances have changed so that his reasoning no longer holds.

[Dominik · Rating 4 out of 5]

A solid book about contrarian principles.
If you are looking for in-depth knowledge on contrarian investing or how to spot pivotal moments in markets, that's not it. If you are looking for recent research on "contrarianism" and money-making swing trading, you won't find here anything of value. However, the book is good as food for thoughts, to read just before the bed.
Generally, I don't like books consisting of loosely connected articles or essays. They are quite difficult to read and follow. That's why the best is to have this book at your night table and read it over a span of many evenings. This is not a book to consume in one or two days. You will lose a lot of the content if you try to speed-read it. This a thought-provoking book. Use it the right way.
The first part of the book is where the meat is. The second part consists of loosely connected articles about the use of contrarian principles in life. The third part is a rumination on the "Theory of Contrary Opinion", which mostly focus on politics, social organisation and crowd behaviour.
I don't understand why some people criticize the book for being not up-to-date. Of course it is outdated, it was written more than 70 years ago. What do you expect? I bet that most recent books on the subject will age much more poorly once the field and research advance. This book at least provokes you to think, and this is what contrarians should be looking for. Ready-made formulas to implement in trading you can find in other books.

[Daniel · Rating 5 out of 5]

The central idea of The Art of Contrary Thinking is to accept, humbly, that most opinions are ill-formed--including our own. Opinions are emotional, imitative, and usually driven by contagion, either from other people or from propaganda. Worst of all, opinions are usually built upon embarrassingly little thought, yet we aggressively defend, justify and rationalize them.

The practice of contrary thinking "is a wa... [see the rest on my book review site.]

[Hakan · Rating 3 out of 5]

"When everyone thinks alike, everyone is likely to be wrong"

Also ich begrüße das Thema konträres Denken sehr, auch dass der Autor anscheinend viel von Gustave Le Bons "Psychologie der Massen" hält und geschickte Meinungsmache als Propaganda bezeichnet. Aber die Aneinanderreihung von den ganzen Essays war eher anstrengend.

Der Autor gibt viele gute Bücherempfehlungen, das ist ein plus.

[Amy Turner · Rating 3 out of 5]

Both my father and his sister owned this book, and they were certainly independent thinkers, certainly before the book was publised in 1954. I was disappointed that the book is almost entirely about buying stocks that most people aren't buying, on the theory that most people are often wrong.

It was interesting to see that this book is still considered influential.

[Jørgen Astrup · Rating 4 out of 5]

Interesting read. Did not like the structure of the book, one pagers with topics that are not arranged in a manner that makes sense. A lot of repetition or the same concepts. Still a lot of good content on the concept of being contrary. Did enjoy the parts about mass crowd psychology best.

3/4 stars out of 5

[Ricardo Hernández · Rating 5 out of 5]

This is an excellent piece of financial, economic and -overall- lessons of life. The writing is obviously old style, but enjoyable; each paragraph contains its own idea and the author communicates their point of view in a simple, straight-forward way.

It's enlightening to see that contrary opinions follows the mood of the crowds during the business cycles. Great book!

[Jenna Renée · Rating 3 out of 5]

Brian Belski said at a conference I went to this year that this was the most powerful book he’s read on developing himself professionally as a contrarian investor. I think I need to re-read this to appreciate it more, because I’m in a very need-to-escape-the-real-world place mentally right now.

[David · Rating 4 out of 5]

Very good thinking manual for value investors

[Trung · Rating 5 out of 5]

There are 2 books that Nicolas Darvas re-read each week:
Gerald Loeb's "The battle for Investment Survival" and
This One.

[Trang Nguyễn · Rating 2 out of 5]

Bài học rút ra từ csach: hãy suy nghĩ kĩ 1 vấn đề về mọi khía cạnh, không nên đi theo đám đông chỉ vì họ nghĩ như thế

[Linda Simmons · Rating 4 out of 5]

Read again

[Jordan Mcculloch · Rating 4 out of 5]

Fun read. Contrarian thinking combined with stock market thesis. Need 2nd read thru and need to pull quotes.

[Joel Mitchall · Rating 1 out of 5]

"When everybody thinks alike, everyone is likely to be wrong".

First published in 1954, this has become one of those books that no doubt sits on many people's bookshelves gathering dust, and, judging from the 3.7 rating on Goodreads (from 111 ratings, #99,102 on the Bestsellers Rank), I would hazard a guess that most people haven't actually read the thing.

But then again, maybe that's the joke? One of Neill's arguments (though it's not his own, at least it's relevant) is that crowd behaviour influences the behaviour of the individual. In this case, let's say you see a bunch of people rating this book at 5-stars: how will this influence your behaviour? As has been proven in experiments time, and time again, that one-star rating you were about to hand out is now turned to a 3 or 4. After all, maybe it's just the wisdom of the book just "went over your head"?

If I was to be generous, I would say that there were a few interesting bits and pieces interwoven between Neill's anti-communist rants. For example, his comments about the crowd optimism immediately prior to stock market crashes, and crowd pessimism at market low-points. But even this is largely anecdotal and lacking a proper analysis. Actually, that is another problem with the book: most arguments are prosecuted using anecdotes from one-off events, or weak analogies that are pulled from thin air. It's almost like Neill lacks the self-awareness to differentiate between the hubris that gets tied up in herd behaviour, and his own self-importance (it's a bit like he is saying "don't trust anyone...but trust me").

It is a shame, really, that this book was written as...erm...a book. It could have been summed up beautifully in 3, maybe 4, pages - a bit like Charlie Ellis did with 'The Loser's Game' (a brilliant, and much more thought-provoking piece). This would have made it more readable, relevant, and helpful to the general audience.

In summary:
*The key message for readers is "don't be so gullible" (this isn't what he says, but it's what the message boils down to).
*There are much better (better written, better content, more relevant and more valuable) books out there.
*If this is taking up room on your bookshelf....why??

[Qori Ilmanudin · Rating 3 out of 5]

This book is a breath of fresh air for someone like me who is interested in economic events. However, the most enlightening sentence actually appears near the end:

“C.T is not meant for facts, but for words. Propaganda is words.”

As someone who pushes myself to read English books despite not being fluent, I initially struggled with the conflict between C.T and facts.

The content of this book can also be described as a collection of writings discussing C.T. So it's like a compilation of journal articles or essays that are then explored further.

Some may like it, some may not — but for me, it's a good thing. It means there’s more material and a variety of perspectives.

I have no regrets reading this book. However, the topics in each chapter aren’t always connected, especially when it comes to the essays. The fragmentation is quite noticeable for me.

[Jan Bos · Rating 3 out of 5]

Nice argument in favour of the contrarian way of thinking. Written in the early 50s, it is striking how many issues still prevail today, or have become even bigger problems. For example, on the need to be sceptical about what one reads in the press, Neill writes:

"None of us can estimate the vast amount of opinion-forming that is attempted in our reading matter. Newspapers and magazines (and privately printed "letters") are loaded with viewpoints and impressions - some true-to-facts, a lot of it misleading, and a good deal of it misinformed or false. Propagandists of all stripes run their mimeograph machines night and day to create ideas and opinions in our minds. One editor in a large news-syndicating office told me that 90 per cent of the news we read is "manufactured" by publicists, public relations experts, and by specialists in influencing the Mind of the Crowd. The figure is no doubt exaggerated, but the condition exists to a far greater degree than readers realize. (p. 138)"

[Venkat · Rating 4 out of 5]

Although the book is written in early 50's, it is still relevant. One must however acknowledge that being contrarian does not work all the time. There is a famous saying that markets can be irrational longer than you are solvent. One should also remember that the markets are now linked globally than ever. This has been evident from the market turmoil due to Asian crisis in 90's, credit crisis and reaction to Brexit. A contrarian now has to view all facts and possibly weigh in some unknowns into his opinions. The book is interesting in the first half and becomes repetitive afterwards.

[Nicolai · Rating 5 out of 5]

a classic from 1954 - eitehr you have a money mind or you do not!!

when everyone thinks alike they are likely to be wrong

ruminate in directions opposite to prevailing public opinion

it is extremely hard to admit to error in judgment or opinion

tidal movements and waves of public opinion

economics is guessy

the more prominence a forecast is the less likely it is to be accurate

fear hope greed wishful thinking

[AJ · Rating 3 out of 5]

I found the book often repetitive, but Neil does makes good points about crowd behavior and the desire to be involved when one really shouldn't. I wish it would give examples of when groupthink ("wisdom of the crowds") trumps the contrarian individual.

[Pyoungsung Choi · Rating 2 out of 5]

공산주의와 사회주의에 대한 비난이 30%는 차지하는 느낌이다. 그리고 다른 도서 추천이나 인용이 많고 자신의 주장에 대한 근거는 빈약하다. 사회과학도서들도 데이터에 기반하지 않으면 부실함을 비난받는 요즘에는 너무 시대에 뒤떨어지는 책이다. 책이 출간되었던 당시 상황을 감안하면 이해가 안 되는 것도 아니지만 앙드레 코스톨라니의 책들이 그럼에도 많은 지혜를 제공해주는 것과는 사뭇 비교된다.

[Kathleen D'urso · Rating 5 out of 5]

Surprisingly applicable to almost every aspect of your life--both personal, career, and in school.

[Captain Curmudgeon]

"“Goethe, the great poet-philosopher, once wrote: “I find more and more that it is well to be on the side of the minority, since it is always the more intelligent.”