What would Kermit do? – Why some human decisions are no different from a frog eating a fly


Andrew Lyddon

Andrew Lyddon

Fund Manager, Equity Value

What is it with scientists and frogs? From default dissection candidate in the classroom to unfortunate participant in experiments into the dubious premise of whether it really will sit obliviously in a pan of slowly-heated water until it is cooked to death, the poor amphibian’s relationship with scientific research seems especially fraught. 

It even turns out that investigations into how a frog’s brain processes what it sees have an element of bizarre cruelty about them. The frog may not be the most sophisticated of creatures but it has hopped it way through 265 million-odd years of evolutionary history with great success – only to find itself part of yet another strange experiment. 

This curious story reaches The Value Perspective by way of I is an other – The secret life of metaphor and how it shapes the way we see the world, by James Geary, which also inspired our piece Metaphorically speaking. And if you do not believe we can move from frogs’ eyes to value investing in the space of half a dozen or so paragraphs, you must be new to this site. If so, welcome. 

When a frog spots something small moving quickly in a jagged and unpredictable way, with occasional pauses, it will immediately stick out its tongue and try and catch it. That is because those 265 million years of evolutionary history have taught it that things which move in that way are likely to flies and therefore edible – at least that was until some scientists entered the picture. 

What they did was to move all sorts of objects – from pictures of other frogs and pictures of animals that eat frogs to random items of office equipment – in that fly-like manner in front of a frog. Each time, the frog would try and catch and eat these objects. After – almost inevitably – placing electrodes on the frog’s brain, the scientists found that, the moment a frog sees something moving in this way its response is essentially pre-programmed. 

By the time the signal “small thing, moving jaggedly” has been picked up by the frog’s eye, the frog’s brain is already telling its tongue to shoot out and catch whatever that thing may be. That may sound primitive but, to be fair, it is a process that has served the frog well for millions of years – right up to the point some bright sparks took it to a lab and started waving pencil-sharpeners and erasers at it. 

In its natural environment the frog’s system works perfectly well. Rather than having to think about how to catch what can be a very fast-moving food source, over time it became more efficient for the frog not to think but instead, as Nike urges, to just do it. In the wild the hit-rate of successes must have been high enough that it did not really matter if the frog made the odd mistake. 

As well as being a good piece of trivia, this unusual quirk of our amphibian friends also offers a neat insight into the subject of heuristics, which we touch upon regularly on The Value Perspective. Heuristics are essentially shortcuts the human brain uses when trying to process information because, at some point in our evolution, it has generally been beneficial to sacrifice full intellectual rigour for a quicker response. 

This has allowed us to overcome the kinds of challenges we would have faced through our history – concluding, for example, “I’m not certain that’s a sabre-toothed tiger, but I’ll start running anyway”. Although human heuristics don’t involve flies and tongues, their effect is still to make us act instinctively without questioning what we’re doing. Just as with the frogs, when you expose these human behavioural shortcuts to new situations they have not evolved to deal with, it can lead to some not very intelligent outcomes – and not least in the context of investment.               

Since heuristics are, in effect, hardwired into the human brain, investors can find it hard to appreciate there is even an issue here and so they do not face up to the reality that. As we put it Natural order, if we cannot change human nature; we must learn to work with it. If not, it may lead to decisions that turn out to be the investment equivalent of trying to eat a pencil-sharpener.


Andrew Lyddon

Andrew Lyddon

Fund Manager, Equity Value

I joined Schroders as a graduate in 2005 and have spent most of my time in the business as part of the UK equities team. Between 2006 and 2010 I was a research analyst responsible for producing investment research on companies in the UK construction, business services and telecoms sectors. In mid 2010 I joined Kevin Murphy and Nick Kirrage on the UK value team.

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