Premium Value Investing NewsletterDownload Free Issue

Latticework Of Mental Models: Hedgehog Vs Fox

On June 16, 2015, Donald Trump announced his candidacy for President of the United States. Most political forecasters and pundits brushed this news as Trump’s another gimmick for seeking attention and creating sensational news.

Sixteen months later, as November 2016 approached, it became frighteningly clear that Trump was very close to winning the elections.

However, when the experts were shaking their heads in disbelief and talking about all the things that were wrong with Trump, there was a cartoonist in San Francisco who had been writing blogs all through 2015 and 2016, claiming that Trump will win the elections in landslide. He received a lot of flak (even threats) but on November 8, 2016, Scott Adams, the creator of Dilbert was proved right.

Not entirely right because Trump’s victory wasn’t exactly a landslide but he did win the elections. But Adams was way ahead than the experts who were sweating over predicting precise numbers by which Trump will lose.

Charlie Munger likes to say, “It’s better to be approximately right than precisely wrong.”

Adams was approximately right and the experts were precisely wrong.

Surprisingly, Adams didn’t crunch any numbers neither did he rely on complicated models that most political forecasters swear by. He looked at the Presidential elections from the lens of a different mental model – Psychology of Persuasion.

The intellectuals and the experts squirmed every time Trump quoted a wrong fact (which he did quite often) or used a bad vocabulary. But Adams noticed that Trump was doing those things deliberately to manipulate people’s attention.

Watch this interview where Scott Adams explains how Trump had odds stacked in his favour right from the day he filed his nomination.

The political experts thought like hedgehogs whereas Adams thought like a fox.

The Two Animals

Hedgehog is an interesting creature because of its unique design. It’s very small and easily fits in the palm of a human hand. It has a very prickly body design which provides protection from various predators. But what’s strange about the hedgehog is its self defence mechanism. Sensing a threat it simply curls up in a ball to confuse its predators.

So hedgehogs survive by just performing one trick (rolling up in a ball), but doing it very, very well. However, it’s the only defence mechanism the hedgehog has, unlike fox. A fox has a number of survival tricks that allows it to evade predators.

Inspired by this observation, the Oxford philosopher Isaiah Berlin, in his essay titled “The Hedgehog and the Fox,” wrote –

The fox knows many things, but the hedgehog knows one big thing.

In his essay, Berlin argues that writers and thinkers can be divided into two categories –

  1. Hedgehogs, who view the world through the lens of a single defining idea, and
  2. Foxes, who draw on a wide variety of experiences and for whom the world cannot be boiled down to a single idea.

Although you can interpret Berlin’s words in many different ways, one of the best insights you can draw from this idea is to answer the question – which experts should be trusted with their forecasts and which shouldn’t be?

A general physician is like a fox who knows little bit about all the disciplines of medical science. A specialist, e.g., an orthopaedic surgeon, is a hedgehog. If you’ve got a broken bone, by all means, consult the orthopaedic surgeon. In other words, being a hedgehog is useful in certain context but when it comes to dealing with the uncertainties under which we make decisions, especially about money and investing, it’s better to take the ‘foxy’ approach.

Philip Tetlock, a political psychology professor, is an expert on experts. In his book, Expert Political Judgment, he writes about his research in which he tracked some 82,000 predictions by hundreds of experts in different specialties over past few decades. Tetlock found that the predictions of experts were, on average, only a tiny bit better than random guesses — the equivalent of a monkey throwing darts at a board. The reason for this was that the experts were often blinded by their preconceptions, essentially led astray by how they think rather than what they think. He wrote –

The most important factor was not how much education or experience the experts had but how they thought…The better forecasters were like Berlin’s foxes: self-critical, eclectic thinkers who were willing to update their beliefs when faced with contrary evidence, were doubtful of grand schemes and were rather modest about their predictive ability.

The less successful forecasters were like hedgehogs: They tended to have one big, beautiful idea that they loved to stretch, sometimes to the breaking point. They tended to be articulate and very persuasive as to why their idea explained everything. The media often love hedgehogs.

Famous French philosopher Emile Chartier once said –

Nothing is more dangerous than an idea, when it’s the only one we have.

Hedgehogs have a tendency that they torture the reality so that it fits their worldview. They are like the proverbial man with hammer who sees every problem like a nail. Nassim Nicholas Taleb, in his book The Bed of Procrustes, writes –

Procrustes, in Greek mythology, was the cruel owner of a small estate in Corydalus in Attica. He had a peculiar sense of hospitality: he abducted travellers, provided them with a generous dinner, then invited them to spend the night in a rather special bed. He wanted the bed to fit the traveler to perfection. Those who were too tall had their legs chopped off with a sharp hatchet; those who were too short were stretched…we humans, facing limits of knowledge, and things we do not observe, the unseen and the unknown, resolve the tension by squeezing life and the world into crisp commoditized ideas, reductive categories, specific vocabularies, and prepackaged narratives, which, on occasion, has explosive consequences.

Hedgehogs approach history and the current events with a deductive frame of mind. They have a certain framework and they try to absorb all the facts into that framework. Their modus operandi is to extend their favourite theory to as many different domains possible. They exude supreme confidence, a typical characteristic of all the experts.

Foxes acknowledge the fact that the universe is complicated and inherently unpredictable. They’re unsure about future because inside their head, they have myriad of contradicting insights coming from different disciplines. Doubting everything and thinking in terms of odds and probabilities is how they operate. They hold their beliefs loosely and change their mind as soon as the facts change.

Richard Feynman, the famous scientist and a nobel laureate, said –

I can live with doubt and uncertainty. It’s much more interesting to live not knowing than to have answers which might be wrong. I have approximate answers, possible beliefs, different degrees of certainty about different things but I am not absolutely sure of anything. There are many things I don’t know anything about. I don’t feel frightened by not knowing anything.

Feynman was a teacher, scientist, musician (he played drums in carnival), master locksmith, polyglot (fluent in Japanese and Portuguese) and knew hundreds of other things from diverse disciplines. He was an unusual academician and a true fox.

Do yourself a favour – read Surely, You’re Joking Mr. Feynman. It chronicles the adventures that Feynman pursued to satisfy his unparalleled curiosity and how it led him to discover many important truths about the workings of this world. It’s a mind blowing book.

Being A Fox is Hard

Being a fox is easier said than done.

Nate Silver, who had successfully called the outcomes in 49 of the 50 states in the 2008 U.S. Presidential election, in his book The Signal and the Noise, writes –

Hedgehogs are type A personalities who believe in Big Ideas – in governing principles about the world that behave as though they were physical laws and undergird virtually every interaction in society. Foxes, on the other hand, are scrappy creatures who believe in a plethora of little ideas and in taking a multitude of approaches toward a problem. They tend to be more tolerant of nuance, uncertainty, complexity, and dissenting opinion. If hedgehogs are hunters, always looking out for the big kill, then foxes are gatherers.

For his website, Silver adopted the fox as the logo. He believes in collecting information from many different sources, integrating those facts into sophisticated analytical and mathematical techniques to come up with best predictions. Ironically, all his ideas boil down to one single thing – use statistical methods to make predictions. No wonder he failed to predict Trump’s win. He failed to update his mental models. He probably assumed that the ideas that helped him in predicting 2008 election results will hold true even in 2016.

It’s even more difficult to identify foxes. Foxes are usually not very articulate unlike hedgehogs who are not only eloquent but very convincing. A hedgehog’s theory has one unifying theme and all the examples, evidences and arguments support that one theory. It’s easier to listen to this kind of argument because human mind finds it easy to digest conflict-free information. A fox on the other hands sounds confused and seems to contradict his own ideas. It’s very difficult to differentiate between a fox and a hypocrite. To identify a fox, you have to think like a fox.

In Investing

A hedgehog investor is pre-occupied with grand theories about what the world will look like in future. He thinks and talks about the macro events like demonetisation, elections, Brexit, national budget, oil prices, market crash, interest rates, GDP rates, currency fluctuations, terrorism, social unrest, etc. He believes it’s possible to predict the outcome of these events and their effect on stock market prices.

An investor who thinks like a fox doesn’t have all these delusions. He knows that it’s extremely difficult to predict the future of a company even few years out, let alone predicting the future of broader stock market. Looking for business with strong fundamentals and honest and competent management at the helm is what keeps the fox busy.

While hedgehogs wait for market crashes and try to time the market, foxes let their SIPs continue and keep their search for good companies on. While hedgehogs dig their nose in the excel models, foxes study the annual reports and try to understand what creates a competitive advantage for a company. Hedgehogs are looking for information that confirms their beliefs, foxes actively seek evidence that can prove them wrong.

Conclusion

The whole discussion here on hedgehog and fox underscores the need to be a multi-disciplinary thinker. However, I want to make sure that I haven’t given you a lopsided view and made the poor hedgehog into a villain of some kind. Thinking like a fox is important but hedgehog has its own strengths.

For most people, especially the part time investors like us, who need to devote a majority of our waking hours to our full time job or profession, having characteristics of hedgehog is beneficial. We need to make sure that we continue to refine our skills in our primary area of work. Being very good (not necessarily world class) in at least one thing is very important to be useful to the world.

In other words, if you’re a doctor, be a good doctor. If you’re a software programmer, write good code and keep your skills updated. If you’re a writer, strive to improve your writing.

Save the foxy thinking for those occasions where you have to make decisions under uncertainties. Like investing our money.

Take care and keep learning.

Print Friendly

About the Author

Anshul Khare worked for 12+ years as a Software Architect. He is an avid learner and enjoys reading about human behaviour and multidisciplinary thinking. You can connect with Anshul on Twitter.

Comments

  1. It’s an interesting perspective Anshul. Because in Surely You’re Joking Mr. Feynman, he writes about how he learned a different type of calculus which was not taught well in the university, and learned it damn well. As a result, he developed a reputation of being able to solve complex calculi with different techniques.

    IMHO, a hedgehog focuses on mastery, developing deeper insights about a few things. Foxes, on the other hand, know a lot about many things, but lack of in-depth knowledge might impact their decisions. Of course, I might be totally off here.

    Curious to know your thoughts on whether Warren Buffett would be categorized as a hedgehog or a fox.

    Lovely post as usual 🙂

    • Anshul Khare says:

      Thanks for your comments Vishal.

      I think there’s nothing inherently wrong with being hedgehog. As you said, developing mastery requires one to focus on one thing. Even Charlie Munger in his recent talk at DJCO meet mentioned that for most people, specialization is a sensible thing to do. In fact, he’s the one who said, “Take one idea and take it seriously.” Is he asking us to be hedgehogs? In certain context, yes.

      Is Warren Buffett a hedgehog or a fox? I think he’s both. He’s a hedgehog when it comes to crunching numbers or doing quick maths in his head. But when it comes to thinking about a business qualitatively, he’s a fox.

  2. Thanks Anshul . A small query are we stretching what is Mental Model too far . Are we trying to be Hedgehog here

    My lesson in Life was ” Be a FOX who knows which Hedgehog to contact for any specific Problem ” . As a general Manager often one cannot be specialist in all things so it is key to know who to connect with to execute / solve any issue on hand .

    I feel one should not say FOX or Hedgehog is right . That will be Foolish . Each has a role to play and it is important to know when , what , which and how to play the role demanded by situation .

    • Anshul Khare says:

      Thanks for sharing your thoughts.

      I agree. As I mentioned in the reply to Vishal above, there’s nothing wrong with hedgehog. But as you said, one has to don an appropriate hat, a fox or a hedgehog, based on what the situation demands. However, as the world around us is becoming more complex and unpredictable, a fox’s attitude helps because it saves us from the overconfidence that being hedgehog sometimes brings.

  3. It gets hazy, when you compare disciplined SIP investors to foxes. Multi disciplinary thinking will also make people indecisive, since many theoretical strategies will evolve, leading to indecision. You’ve also tried to fit in investing in the ‘Hedgehog and Fox’ theory. A little bit unconvincing. No offence meant.

    • Anshul Khare says:

      Thanks for your comments.

      My key take away from “being a fox” is to acknowledge the fact that the world around us is complex and the outcomes are largely uncertain. Does this attitude always lead to indecision? Not really. It perhaps tells the decision maker – do take the decision but don’t be over confident about the outcome (i.e. don’t bet the farm).

      In my opinion, SIP is the simplest way for an investor to implement Buffett’s advice, “Predicting the rain doesn’t count, building an arc does.” A hedgehog investor, who believes that with his sophisticated models, markets can be timed is trying to predict the rain.

      As I said, the Berlin’s “hedgehog vs fox” essay has been interpreted in many ways over the decades. This is just one insight that I could draw from it.

  4. Hi Anshul. Thank you for taking the time in writing the blog. How would you compare the wisdom or knowledge or even information one is supposed to collect from this post v/s some of the other posts? Themes overlap consistently.

    • Anshul Khare says:

      I am glad you asked this question.

      If you find that the mental models overlap consistently, then it’s a good sign I guess. The latticework by definition is a scaffolding of connected ideas. Any idea which hangs in space without any connection is soon lost or remains pretty much useless.

      In Poor Charlie’s Almanack, Peter Kauffman writes –

      “You have to realize the truth of biologist Julian Huxley’s idea that, ‘Life is just one damn relatedness after another.’ So you must have the models, and you must see the *relatedness* and the effects from the relatedness.”

      I hope this helps.

  5. In Peter Lynch’s book One up on wall Street he often says he invests like a blood hound. One stock leads him to another and so on.

    He also says his fund was a capital appreciation fund means he could invest in any category of stock, of any size.

    Rather than specialising in any one category of stocks he has knowledge about different types of stocks. And he also kept a huge portfolio of 1000+ stocks.

    I think he was also a fox.

  6. swathisingh says:

    thanks for sharing this blog

Speak Your Mind

*