Contrarian Investing

Biological Parallel

When bluefin tuna follow baitfish, the school moves as one—information cascades create synchronized behavior. But individual tuna that break from the school sometimes discover isolated bait balls the herd missed. This contrarian foraging has asymmetric payoffs: follow the crowd and split diminishing returns; defect and potentially find untapped resources. Dreman's contrarian investing mirrors this: when markets herd into consensus trades, the mispriced opportunities exist where the crowd isn't looking—independent assessment finds what synchronized behavior misses.