As an accountant are you a hedgehog or a fox? (part 2 of 2)

Following on from the last post. Here is an alternate perspective on the question is it better to be a hedgehog or a fox?

For the professional accounting adviser – is it better to be a a fox?

Here is an alternate point of view from the prestigious Economist magazine. It says it may be better to be a fox. See: BETTER A FOX THAN A HEDGEHOG

CAN we blame the “experts” for not predicting the financial crisis? I don’t know of any scientific method that could have perfectly called and timed it. Some things were very troubling—global imbalances and the housing bubble—but did it have to get this bad? There were probably a myriad of ways it might have played out, some even worse, some better (remember the IMF  hoping for a happy and gradual unwinding). How can you predict a tepid, inconsistent government reaction (economists suffered a touch of hubris there) and market panic? Human behaviour is tough to predict and when humans try to anticipate what other humans will do—you can get a big mess.

Philip Tetlock, a professor of organisational behaviour at the Haas Business School at the University of California-Berkeley, talks to Money about why humans make poor forecasters and, if you must listen to one, what qualities to look for. He reckons there exists two types of experts:

The most important factor was not how much education or experience the experts had but how they thought. You know the famous line that [philosopher] Isaiah Berlin borrowed from a Greek poet, “The fox knows many things, but the hedgehog knows one big thing”? 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.

According to Mr Tetlock you should listen to humble, self-critical experts who shy away from bold pronouncements. The better ones often use words such as “however” and “perhaps”, instead of “moreover” and “all the more so”. That’s a tough sell to CNBC. He claims these thoughtful types have higher success rates. But I would classify the people who called the crisis as hedgehogs rather than foxes. A foxy economist would probably not incur the moniker Dr Doom. Our now celebrated prophets see no end in sight and think things will get much worse; should we still listen to them?

No. In our research, the hedgehogs who get out front don’t tend to stay out front very long. They often overshoot. For example, among the few who correctly called the fall of the Soviet Union were what I call ethno-nationalist fundamentalists, who believed that multi-ethnic nations were likely to be torn apart. They were spectacularly right with Yugoslavia and the Soviet Union. But they also expected Nigeria, India and Canada to disintegrate. That’s how it is with hedgehogs: You get spectacular hits but lots of false alarms.

Mr Tetlock seems to suggest we should listen (and we might want to listen to someone if only to falsely encouraged that we live in a world where chaos does not reign) to the very people who meekly warned of problems, but never said how bad things might get. Most of the time, they will steer you in the right direction. But they’re not infallible; only a hedgehog would’ve seen this coming.

What do you think?

See you next post,

James E

As an accountant are you a hedgehog or a fox? (part 1 of 2)

The web is an amazing thing – the largest most dynamic library human kind has ever known. I was listening to a podcast recently and came across to a reference I had never heard before – something about a hedgehog and a fox. After a little research I uncovered the piece below thanks to a website called Internet Marketing Secrets – for more info see Internet Marketing Secrets

The hedgehog and the fox, is an ancient axiom made known by Archilochus a Greek author & poet (645 BC) It simply states, “The fox knows many things, but the hedgehog knows one big thing.”

It became popular through an essay by Isaiah Berlin, where he divided the world into two types of thinkers… hedgehogs and foxes, based upon the ancient parable.

The fox is sneaky, and always trying to scheme up new ways. Their world is complex, always on the move, and they never tend to focus on a single unifying theory. The hedgehog is simple. They organize the world into a single unifying concept. The fox, for all his cunning, is defeated by the hedgehog’s one defense.

According to Isaiah Berlin’s essay, “There exists a great chasm between those, on one side, who relate everything to a single central vision… and, on the other side, those who pursue many ends, often unrelated and even contradictory… The first kind of intellectual and artistic personality belongs to the hedgehogs, the second to the foxes.”

In short, hedgehogs set goals, and they have systems by which they accomplish things. Foxes, tend to go off in all directions, without a methodology, goals, or systems to success.

When applied to a business, it means “Know Your Self” and your core competencies. Have a well defined culture. A vision. Know who you are. What you are about. And what you are trying to achieve.

The concept was widely popularized by Jim Collins’ #1 best seller, “Good to Great.” Why some companies make the leap… and others don’t.

According to Jim, “Those who built the good-to-great companies were, to one degree or another, hedgehogs. They used their hedgehog nature, to drive toward what we came to call, a Hedgehog Concept, for their companies. Those who led the comparison companies, tended to be foxes, never gaining the clarifying advantage, of a Hedgehog Concept, being instead, scattered, diffused, and inconsistent.”

As a professional accountant are you a hedgehog or a fox?

See you next post.

All my best,

James E