How Michael Burry Bucked the Herd and Made Billions

Burry, a former neurologist with a glass eye and a penchant for heavy metal, spent countless hours poring over mortgage-backed securities in 2005. While everyone else saw a booming housing market, Burry saw a bubble ready to burst. He noticed that the quality of mortgages was deteriorating, with more subprime loans being issued to borrowers who couldn't afford them.

This is where Fisher's quote comes into play. The "almost irresistible urge" at the time was to invest in the housing market. Banks, hedge funds, and individual investors were all piling in, convinced that housing prices could only go up. It was like a giant game of musical chairs, and everyone was dancing.

But Burry resisted this urge. He did what seemed, at the time, to be the wrong thing. He bet against the housing market. Specifically, he persuaded Goldman Sachs and other investment banks to sell him credit default swaps against subprime mortgage bonds that he saw as vulnerable.

Think of Burry as a man buying umbrellas on a sunny day when everyone else was buying sunscreen. People thought he was crazy. His own investors were furious, demanding their money back. For two years, as the housing market continued to rise, Burry looked like a fool.

But Burry understood something fundamental about markets and human nature. He knew that when everyone is thinking the same thing, it's likely that no one is really thinking at all. It's like a herd of wildebeest all running in the same direction - they might be running straight off a cliff.

Burry's contrarian stance paid off spectacularly when the housing market finally collapsed in 2007. His fund made a profit of $700 million for his investors and $100 million for himself. His story, immortalized in Michael Lewis's book "The Big Short" and the subsequent film, became a testament to the power of independent thinking in investing.

The wisdom in Fisher's quote, so brilliantly illustrated by Burry's case, is that true investment opportunities often lie where others aren't looking. It's about having the courage to trust your own analysis, even when - especially when - it goes against popular opinion.

This doesn't mean you should always do the opposite of what everyone else is doing. That's just another form of herd behavior. Instead, it's about doing your own homework, thinking critically, and being willing to stand alone when your research leads you to a different conclusion than the crowd.

Don't let the actions of others dictate your investment decisions. Just because everyone is buying a particular stock or investing in a certain sector doesn't mean it's the right move for you. It's like fashion - just because everyone is wearing neon doesn't mean it looks good on you.

Burry's story reminds us that in investing, as in life, the path to extraordinary results often requires extraordinary courage. It's about being willing to look foolish in the short term for the chance to be right in the long term. And that, my friends, is the kind of investing that can turn a contrarian stance into a very profitable position.