Michael Steinhardt, in his book No Bull: My Life In and Out of Markets, defines “variant perception”:

I defined variant perception as holding a well-founded view that was meaningfully different from the market consensus

Understanding market expectation was at least as important as, and often different from, the fundamental knowledge.

Having a variant perception, a well founded one, is likely to lead to returns in excess of the market. It’s a view that is counter or at least partially counter to the market consensus. This implies a dislocation in the market between expectations and reality.

A couple famous examples:

  • Investment grade AAA-rated Mortgage-Backed Securities were much riskier than their AAA-rating implied.
  • A small computer company’s music player would be successful.

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