The allusions of hedgehogs and foxes come from the famous words of ancient Greek poets:

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

In the face of difficulties and challenges, hedgehogs can only take one approach, that is, curling up together, while foxes are much more flexible, and they can think of different and even smarter ways to deal with them one by one.

In his book Hedgehog and the Fox, Isaiah Berlin further gives the classification of "hedgehog thinker" and "fox thinker", which greatly expands the connotation of both.

The discussion scope of this article is limited to single-strategy persistence and multi-strategy camera in investment, trying to avoid celebrating or criticizing specific models with tinted glasses, but to elaborate more on the hidden cost and trade-off balance behind different choices.

The addition of foxes and the subtraction of hedgehogs

First imagine that we become a fox, how will we invest?

The fox's strategy is complex, but the underlying logic is clear:

The market environment is ever-changing, and limiting yourself to a certain style is not the best strategy.

As described in hedge Fund 2, the tragic heroes Joe and Mitch, according to Barton Biggs, their success is due to setting foot on the style cycle of value stocks.

So, implement it in a specific way.Different methods must be used in different stages.This is "additive thinking".

By contrast, the logic of the hedgehog is like the three heckles of the dead wood Zen master in The Demi-Gods & Semi-Devils:

①, which is better or worse than our one Yang finger or the three fingers just now? "(other methods may not be better)

② "what is the level of our Yiyang finger if we practice a product?" "(there is still room for improvement)

③ "let you practice for another hundred years, can you reach the level of a grade?" "(the key lies in the depth of skill.)

The corollary is:You don't even understand your own Yang finger, so you don't have to think about other methods.

The characteristic of hedgehog investors is thatFocus on and dig deeply, hoping to get more knowledge than most people locally, so as to obtain excess income.The essence is "subtraction thinking".

Reflection 1: the restriction of fox "addition"

In hindsight, if the fox "addition" strategy can be perfectly implemented, it will achieve better results in theory. However, from a practical point of view, there are two major constraints:

Objectively, ① should be able to accurately identify the market stage and have corresponding strategic reserves in advance.

② assumes that there is indeed controllability, and people's time and energy are limited, so they are bound to face trade-offs.

For the former, the division of stages is indeed clear in hindsight, but being in it is often confused:

In most cases, style switching depends on the relative strength of the future performance of the corresponding stocks, but it is no easier to study the future performance changes of a sector than to predict individual stocks; historically, the style of incremental capital will determine the market style, such as 17-20 years of foreign investment. but at present it is an uncertain and even counterproductive factor.

At the same time, in terms of research methods, the more low-frequency data is, the more likely it is to fall into data mining, and the more important it is to emphasize causality in advance, and the significance of data orientation and logical echo is very limited.

For the latter, as Sun Tzu's Art of War says:

"before preparing, there are few behind, and after preparing, there are few before …... Those who are few are those who prepare others, and those who are numerous are those who make others ready for themselves. "

The idea that people have nothing and others have their own advantages is too idealized. In reality, time and energy are inevitable constraints.

A lot of work is just a starting point for hedgehogs, but for foxes it is possible to start a new beginning. You can't always think about ingenious angles, you should know that most of the time, you have to rely on "stupid kung fu" to accumulate continuously.

The stock market is a battlefield of the game, too fast switching, tired, and even the lack of redundant time to do valuable thinking, but is likely to be in the weak position of the game, the ideal best imagination is not equal to the best result in practice.

Reflection 2: the blind area of hedgehog "subtraction"

The "subtraction" of hedgehog investors also means rejecting other possibilities, which will inevitably lead to blind spots:

How do you know that what you practice is the real "Yiyang finger"?

How do you know that it does exist in the realm of "the first product"?

How do you know that spending the same time on more other things won't lead to better results?

How do you know that methods that were useful in the past can still work in a given environment?

Do you really have no doubt in your heart? Didn't you really think about even one step?

In the eyes of many people, hedgehog investment is a value investment, buy a good company at a reasonable price, do not participate in the game, make money for the growth of the company, and Buffett is the best example.

Is this really the case?

What kind of company is excellent?You can refer to 35 excellent and 17 far-sighted companies in "pursuit of Excellence" and "Evergreen".

What kind of stock price is reasonable?Fall below net worth? 10x, 20x PE? Or double PEG? Five times PS? This is not an explicit variable either.

Be engaged in foresightThe excellent that cannot be identified + the reasonable that cannot be judged, it is impossible to draw a clear investment conclusion based on evidence.In the stock market, everything is a game, insisting on value is also a strategy, only a type of participating in the game, and excellence and rationality is an ex post evaluation.

And the stock god Ba Lao, from his early experience of managing private equity funds, is not a typical "hedgehog":

In essence, unlike most people who "hold good companies for a long time", Buffett's approach is the "invincible play" of a master of asset restructuring, and most people do not have similar conditions at all.

In addition, the market is game pricing, and even long-term effective strategies that have been tested in the past may not be effective at a certain stage. As Keynes said, "in the long run, we are all dead." the market may deviate from your "adaptation zone" for much longer than your career, and any investment product has its inevitable constraints. What's more, if there is no substitute, how can we compare it? Without comparison, how can we stick to it? Is it just the deviation of "self-reinforcement"?

Summary: the invariance and balance between foxes and hedgehogs

Finally, we ask two questions:

First, what should foxes and hedgehogs abide by? What is the same?

Second, compared with foxes and hedgehogs, how do real investors find their own position?

For the first point, the constant is controllability.

Foxes can travel through different strategies and deal with different styles, but only if you refrain from impetuosity and make sure that the strategy you adopt has its own certainty: both value stocks and growth stocks have their own specific rules. hedgehogs are often ploughing carefully in the corresponding field.

Foxes can trade "breadth" for "depth", but first of all, make sure that there are prey in the area covered by "breadth" that can be caught in a specific way; in each subdivided area, foxes may not be the smartest, but to be consistent with the smartest participants, at least make sure that the opposite does not have a slower level of thinking, and must not take it for granted, but allow themselves to be hunted by others.

As for hedgehogs, it is necessary to have their own independent judgment and benchmark, choosing the wrong direction of deep ploughing will only lead to poles in the opposite direction; to be able to overcome the deviation of self-reinforcing behavior and maintain an open mind. The stock market is not sufficiently informed to be absolutely correct, and even if your current actions are single, at least there must be an alternative strategy or frame of reference that is optional and comparable. The operation of the market is not based on people's will, there is no trouble, there is a comparison can be optimized, so that they will not indulge in their own world.

Make a long story short,Both foxes and hedgehogs are inseparable from meticulous thinking, strict logic, data verification, and the resulting predictable grasp.

When we talk about foxes and hedgehogs, we are actually depicting two extremes: over-flexibility but loss of depth, over-rigidity and loss of breadth. While giving consideration to the two, it is bound to face the constraints of time and energy, and even weigh the trade-off.

In reality, investors have different experiences and beliefs, and there are natural differences in the degree of bias between the two. For the investors who prefer the fox model, they might as well feel the focus and depth of the hedgehog; for the investors who prefer the hedgehog model, they might as well learn more about the flexibility and tolerance of the fox, of which the constant is the pursuit of controllability.