On November 5, 2020, the Wall Street Journal published a story entitled Josh Allen Improves His Accuracy. As I read through the piece, it occurred to me that the Bills approach to “investing” in Allen was a textbook example of the contrarian approach to investing money.
The author, Andrew Beaton, writes “there is a camp of football traditionalists who stand by one of the game’s oldest axioms: Nothing is more important than a quarterback’s accuracy, and accuracy can’t be taught.” NFL coaches and executives looked at Allen’s 56% completion rate at Wyoming and “shook their heads at the notion that he could do any better against far superior competition.”
“The Buffalo Bills disagreed and made him the No. 7 pick in the 2018 draft. Three seasons later, Allen is offering a crash course in how that old wisdom is more outmoded than telex machines. He’s growing into one of the NFL’s best quarterbacks.” His 67% completion rate in 2020 had Hall of Fame quarterback Troy Aikman claiming “I’ve never believed you could coach accuracy…Josh has proven me wrong.”
A basic tenet of the contrarian investment philosophy is that you can’t make money by following the crowd. It can be lonely being a contrarian investor because you are typically looking at positions that are currently out of favor, as was Josh Allen when two quarterbacks with better college pedigrees were taken ahead of him in the draft.
The contrarian investment approach not only requires thinking that is independent of the crowd, but sees possibilities that the crowd is missing. For example, Allen’s offensive coordinator at Reedley College saw that he was a very quick study and had room to bulk up. Obviously the Browns and the Jets, who took quarterbacks ahead of the Bills in the draft, were looking for other traits.
This brings us to our final point. It takes courage to go against the consensus when placing investment bets for clients, or for that matter, selecting a franchise quarterback. There is warmth in the herd. Most investors are afraid to go against the consensus out of fear of embarrassment or getting fired. That is why independent thought is so rare; and actually acting on it is rarer still.