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.