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Haven’t you seen this concept comprised of three overlapping circles somewhere? What do you think this concept implies? What do you learn and where do you think you can apply this model?

There is an interesting yet fundamentally critical concept elaborated in Good to Great by Jim Collins. Called ‘The Hedgehog Concept,’ it is one of several key characteristics that defined the good-to-great companies and separated them from comparison companies that ended up as mediocrity. Then why a hedgehog, you might ask?

This time in Weaving Webs, I would like to weave three discussions by three different authors who shared insights from this famous archetypal episode, which I enjoyed greatly.

Below are the list of books I used for references and the order of my writing.

1. Good to Great (Jim Collins, 2001), Corporate Strategy
2. More Than You Know (Michael J. Mauboussin, 2008 expanded version), Finance and Investment Strategy
3. The Fourth Industrial Revolution, (Klaus Schwab, 2016) Economics, Strategy and Leadership

Contents

• In Praise of Hedgehogs
• In Praise of Foxes
• Closing

In Praise of Hedgehogs

Are you a hedgehog or a fox?, asks Collins when he opens Chapter 5. The Hedgehog Concept (Simplicity within the Three Circles). He then introduces Isaiah Berlin‘s famous essay “The Hedgehog and the Fox,” where Berlin divided the world into hedgehogs and foxes, based upon an ancient Greek parable: “The fox knows many things, but the hedgehog knows one big thing.”

The characteristics are further explored by Collins:

Berlin extrapolated from this little parable to divide people into two basic groups: foxes and hedgehogs. Foxes pursue many ends at the same time and see the world in all its complexity. They are “scattered or diffused, moving on many levels,” says Berlin, never integrating their thinking into one overall concept or unifying vision. Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It doesn’t matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple – indeed almost simplistic – hedgehog ideas. For a hedgehog, anything that does not somehow relate to the hedgehog idea holds no relevance. – Good to Great, p91

To add further insight, Collins introduces a conversation he had with Princeton professor Marvin Bressler, who pointed out the power of the hedgehog. “You want to know what separates those who make the biggest impact from all the others who are just as smart? They are hedgehogs.” Freud and the unconscious , Darwin and natural selection, Marx and class struggle, Einstein and relativity, Adam Smith and division of labor-they were all hedgehogs. They took a complex world and simplified it.

By now, I assume you caught a glimpse of what Collins tries to convey by this hedgehog symbolism: a strategic refining by clearly seeing and deciding what to pursue and what not to in their business going forward. A hedgehog reduces all challenges and dilemmas to simple – indeed almost simplistic – hedgehog ideas. Collins nicely sums up the virtue of hedgehogs as below:

To be clear, hedgehogs are not stupid. Quite contrary. They understand that the essence of profound insight is simplicity. What could be more than e = mc²? What could be simpler than the idea of the unconscious, organized into an id, ego and superego? What could be more elegant than Adam Smith’s pin factory and “invisible hand”? No, the hedgehogs aren’t simpletons; they have a piercing insight that allows them to see through complexity and discern underlying patterns. Hedgehogs see what is essential, and ignore the rest. – Good to Great, p91

So now let’s get back to the model with three circles, what is called ‘The Hedgehog Concept,’ I showed you initially. Collins argues that the good-to-great companies, to one degree or another, used their hedgehog nature to drive toward the Hedgehog Concept for them, whereas the comparison companies tended to be foxes, never gaining the clarifying advantage of a Hedgehog Concept, being instead scattered, diffused, and inconsistent.

The good-to-great companies, by asking the right questions prompted by the three circles, achieved a clear understanding of 1) what their passion is, 2) what their potential is to be the best in the world at and equally what they cannot be the best at, and finally 3) what single economic metric to use to stick to and to track their progress. Also, they arrived at this Hedgehog Concept by developing piercing insight and egoless clarity, the qualities hedgehogs can only achieve. Here Collins reiterates its importance.

Despite its vital importance, (or, rather, because of its vital importance), it would be a terrible mistake to thoughtlessly attempt to jump right to a Hedgehog Concept. … Insight just doesn’t happen that way. It took Einstein ten years of groping through the fog to get the theory of special relativity, and he was a bright guy. It took about four years on average for the good-to-great companies to clarify their Hedgehog Concepts. Like scientific insight, a Hedgehog Concept simplifies a complex world and makes decisions much easier. But while it has crystalline clarity and elegant simplicity once you have it, getting the concept can be a devilishly difficult and take time. – Good to Great, p114

Observing the good-to-great companies making a tremendous leap from a long-term mediocrity or from almost a bankruptcy in some cases enables us to recognize that, when companies are in the middle of a life-or-death situation, building and having a clear map such as a Hedgehog Concept that unmistakably guides the company’s purpose and strategy are most critical.

In Praise of Foxes

The time has passed since Good to Great. The good-to-great companies studied in the book embarked on their transition from mediocrity to great in 1970s reaching their height in around 2000. If we compare the Fortune 500 ranks in 2018 from in 2001, we more or less can notice old industrial businesses are fading and new digital platform-based businesses are emerging. We are in the Digital Economy Age experiencing the 4th Industrial Revolution. Is the same virtue still applicable? The answer seems not.

As I’ve highlighted its importance in my in-depth book review on The Fourth Industrial Revolution, our digital age requires agility for both businesses and leaders. Our revolutionary age is defined by three key distinct characteristics (let’s call this ‘3S’): speed, scale, and scope. It requires agility by our side to cope with fast changing business and social environment triggered by those three aspects. Let’s look into again the descriptions of hedgehogs and foxes I early quoted.

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

 Foxes pursue many ends at the same time and see the world in all its (             ). They are “scattered or diffused, moving on many levels,” says Berlin, never integrating their thinking into one overall concept or unifying vision. Hedgehogs, on the other hand, simplify a (            ) world into a single organizing idea, a basic principle or concept that unifies and guides everything. It doesn’t matter how (             ) the world, a hedgehog reduces all challenges and dilemmas to simple – indeed almost simplistic – hedgehog ideas. For a hedgehog, anything that does not somehow relate to the hedgehog idea holds no relevance. – Good to Great, p91

I assume you can easily fill in the right words in three brackets. I strongly believe these words rightly characterize the quality of our time. So it appears, in our fast changing reality, having and pursuing a simple and single idea may have limitations than merits. Klaus Schwab argues as below:

Leaders must also prove capable of changing their mental and conceptual frameworks and their organizing principles. In today’s disruptive, fast-changing world, thinking in silos and having a fixed view of the future is fossilizing, which is why it is better, in the dichotomy presented by the philosopher Isaiah Berlin in his 1953 essay about writers and thinkers, to be a fox than a hedgehog. Operating in an increasingly complex and disruptive environment requires the intellectual and social agility of the fox rather than the fixed and narrow focus of the hedgehog. In practical terms, this means that leaders cannot afford to think in silos. Their approach to problems, issues and challenges must be holistic, flexible and adaptive, continuously integrating many diverse interests and opinions. – The Fourth Industrial Revolution, p108

What I perceive from Schwab’s statement here is the importance of problem solving skills and agility to navigate and adapt in our fast changing and uncertain world. Remember the three words: speed, scale, and scope. As he said, we cannot afford old ways in a world where the outcome of the combination of three factors can be complex, unpredictable and uncertain.

In my in-depth book review of The Seventh Sense by Joshua Cooper Ramo (2016), I have elaborated on the concept of the Complex Adaptive System that aptly explains the dynamics of our digital environment represented by the Internet. A complex world we are in. Complexity is the new reality!

As such, it appears the changed world rather requires the virtues of foxes. And there’s another typical complex world – the stock market. Let’s see how the quality of foxes can play a role.

“We often rely on experts. But how good are their predictions, really?” asks Michael J. Mauboussin, a prominent investor and author of  More Than You Know. In chapter 6. Are You an Expert? (Experts and Markets), he studies on how and where experts are good at in their predictions.

According to Mauboussin, in some domains, experts clearly and consistently outperform the average person. Yet, in other domains experts add very little value, and their opinions are routinely inferior to collective judgments. Further, experts in some fields tend to agree most of the time (e.g. weather forecasts), while in other fields they often stand at complete odds with one another. (p41)

But how good are their predictions, really? To address this question, Mauboussin introduces psychologist Phil Tetlock‘s one experiment in which he asked three hundred experts to make tens of thousands of predictions(difficult ones related to political and economic outcomes) over nearly two decades and from which he found that while expert predictions were poor overall, some were better than others.

Here using a metaphor from Archilochus (via Isaiah Berlin), Tetlock segregated the experts into hedgehogs and foxes. Hedgehogs know one big thing and extend the explanatory reach of that thing to everything they encounter. Foxes, in contrast, tend to know a little about a lot and are not wedded to a single explanation for complex problems. Ultimately, he found foxes tend to be better at predictions than hedgehogs displaying below characteristics:

High scores look like foxes: thinkers who know many small things (tricks of their trade), are skeptical of grand schemes, see explanation and prediction not as deductive exercises but rather exercises in flexible “ad hocery” that require stitching together diverse sources of information, and are rather diffident about their own forecasting prowess. – More Than You Know, p45

Mauboussin concludes that hedgehogs have one power tool while foxes have many tools in their toolbox. Hedgehogs solve problems brilliantly – they certainly get their fifteen minutes of fame – but don’t predict as well over time as the foxes do, especially as conditions change. He considers that Tetlock’s research is a good example that provides scholarly evidence of diversity’s power.

Closing

Now, it becomes evident that complex problems require foxes’ virtues to solve – having many tools in their toolbox with ability to adjust their tactics as conditions change over time. I consider these as apt descriptions of agility and flexibility which Schwab indicated.

“So, are you a hedgehog or a fox?“, I want to ask you. Often we tend to focus on our goals single-mindedly without knowing how times are changing, how our world is changing and how people’s perceptions are changing. So it’s about time to look around us and adopt a proper quality required as our own accordingly. But, does it mean we all have to become foxes? I don’t’ believe it’s a matter of choosing to be foxes over hedgehogs. What’s important is we discern which situations require which virtues and use them wisely. And I believe that’s agility, isn’t it? Also, it’s helpful to note hedgehogs in Collins’s terms in describing the good-to-great companies is more than simple singleton hedgehogs.

Have you also read somewhere about the insight of ‘hedgehog versus foxes’ allegory by any other authors? Can you share with me which situations required foxes or hedgehogs’ virtues? I am anxious to know and learn from you!

Jay