False Consensus

Universal agreement should make you nervous.

When everyone in the room thinks the same thing, one of two conditions holds. Either you’ve genuinely found the obvious right answer — in which case, there’s no advantage to be had, because everyone else sees it too. Or you’ve found a collective blind spot — and no one in the room is positioned to notice.

The contrarian trap

Howard Marks makes the distinction clearly. You can’t beat the market by agreeing with consensus. Consensus is already priced in. The only way to outperform is to be right when most people are wrong.

But being different isn’t enough. Contrarian and wrong just loses money faster. The edge comes from being contrarian and right — which requires understanding something the consensus has missed.

This is harder than it sounds. When everyone agrees, the social pressure toward agreement is enormous. And most of the time, consensus exists because it’s correct. The trick is distinguishing the cases where it isn’t.

What creates false consensus

Some patterns recur.

Recent experience overgeneralised. The last cycle shapes expectations for the next one. After a long bull market, risk feels tolerable; after a crash, it feels everywhere. Neither captures the actual probability distribution.

Narrative coherence. Stories that explain everything feel more trustworthy than messy reality. When a narrative becomes universal — “tech companies always grow,” “property only goes up,” “this management team is exceptional” — it’s worth asking what gets left out of the story.

Social proof cascades. Each person’s agreement increases the next person’s confidence. By the time everyone agrees, the reasoning has become circular — I believe it because everyone believes it, and everyone believes it because everyone believes it.

Complexity collapse. Nuance gets flattened in transmission. A view that started as “we’re cautiously optimistic about X, but Y and Z could still derail it” becomes “we’re bullish on X” by the third retelling. The caveats evaporate; the confidence calcifies.

Marks on timing

Being too early is indistinguishable from being wrong. You can be contrarian and correct on direction but still lose if your timing is off.

This is the hardest part. You see something the consensus doesn’t. You’re confident in your analysis. But the market can stay irrational longer than you can stay solvent — and the same is true of organisations.

Patient conviction and stubborn denial look similar from the outside. The difference is in the reasoning: are you holding because you’ve reconfirmed your analysis, or because you can’t accept being wrong?

The practical check

When you find yourself agreeing with everyone around you, try these questions:

What would make this wrong? If no one can articulate a realistic failure mode, you’ve found a blind spot. Every forecast has conditions that would falsify it. If you can’t name them, you haven’t thought hard enough.

Who disagrees, and why? Somewhere, someone holds the opposite view. What’s their argument? If you can’t articulate it, you don’t understand your own position well enough.

What’s already priced in? If everyone believes X, the benefits of X are already captured in current valuations, plans, and expectations. What upside remains? What downside is being ignored?

What’s the base rate? How often have similar consensuses been wrong? Most predictions are too confident. Most forecasts of continuation are too optimistic. Most “this time is different” arguments are wrong.

The asymmetry

Consensus carries a strange asymmetry. When it’s right, you get average returns — you believed what everyone believed, and you were right along with everyone else. When it’s wrong, you lose along with everyone else, and you have no excuse.

Contrarianism flips this. When you’re wrong, you’re embarrassingly, visibly, alone-in-the-wilderness wrong. But when you’re right, you’re right while everyone else is wrong — and that’s where outsized returns live.

The question isn’t whether to be contrarian. It’s whether you have genuine insight that the consensus lacks, or just a preference for feeling clever. Be honest about which one you’re doing.

Related: Real Choices · Hidden Priors

Connects to Library: Base Rates · Loss Aversion