The “Semmelweis Reflex” is a metaphor for our reflex-like tendency to reject new evidence or new knowledge because it contradicts our established norms, beliefs or paradigms. It is named for Ignaz Semmelweis, a Hungarian obstetrician who found lasting scientific fame, but only posthumously.
Semmelweis discovered that the often-fatal puerperal fever (“childbed fever”), common among new mothers in hospitals, could essentially be eliminated if doctors simply washed their hands before assisting with childbirth. After observing that a particular obstetrical ward suffered unusually high instances of the disease and that doctors there often worked in the morgue right before aiding in childbirth but had not washed their hands in between, Semmelweis speculated that “cadaverous material” could be passed from doctors’ hands to patients, causing the disease. He thereupon initiated a strict regimen at his hospital whereby all who would assist in a birthing must first wash their hands with a chlorinated solution. As a consequence, death rates plummeted.
Semmelweis expected a revolution in hospital hygiene as a consequence of his findings. But it didn’t come.
His hypothesis, that there was only one cause of the disease and that it could be prevented simply through cleanliness was extreme at the time and ran counter to the prevailing medical ideology, which insisted that diseases had multiple causes. Despite the practical demonstration of its effectiveness, his approach was largely ignored, rejected or even ridiculed. In other words, ideology trumped facts. Things got so bad that Semmelweis was ultimately dismissed from his hospital post and harassed by the medical community in Vienna, forcing him to move to Budapest.
The story gets even stranger from this point. In Budapest, Semmelweis grew increasingly outspoken and hostile towards physicians who refused to acknowledge his discovery and implement his protocols. Vitriolic exchanges ensued, in medical literature and in letters, and Semmelweis was eventually lured to an asylum where his opponents had arranged for his incarceration. He was beaten severely and put in a straitjacket. He died within two weeks.
The Semmelweis approach only earned widespread acceptance many years after his death, when Louis Pasteur developed the germ theory of disease – which offered a theoretical explanation for the Semmelweis findings – and Joseph Lister, acting on the French microbiologist’s research, practiced and operated using hygienic methods to great success. As a consequence, Semmelweis is today considered a pioneer of antiseptic procedures and something of a martyr.
“[I]t can be dangerous to be wrong, but, to be right, when society regards the majority’s falsehood as truth, could be fatal. This principle is especially true with respect to false truths that form an important part of an entire society’s belief system. In the past, such basic false truths were religious in nature. In the modern world, they are medical and political in nature.”
We have ideologies in the investment world, of course. The most prominent ideological divide probably relates to one’s view of the efficient market hypothesis and the extent to which one accepts or rejects active investment management. But the Semmelweis Reflex can be seen elsewhere and in more everyday investment matters too.
Being involved in investment management demands that one have a view and take a stand. The process of getting to that point all but guarantees that these positions will be strongly held. As such, we tend to hang onto them too strongly and too long. We can see it today with respect to (for example), gold, commodities, bonds, China and Apple, to name but a few.
As I mentioned earlier today, Barry Ritholtz has a typically outstanding piece up providing some good, practical advice for avoiding the Semmelweis Reflex and the investment blunders that ensue therefrom. It begins with the (readily demonstrable) premise that we’re going to be wrong a lot. Accordingly, we can’t hold onto our ideas or our positions (pun intended) too tightly. Instead, we need to be on a constant hunt for error. When we find it, we need to admit it and fix it, rinse and repeat. We even need to circle back and examine why and how the error came about. Our process might need fixing too.
Regular readers will have quickly recognized that this post reiterates some important themes for me: evidence over ideology; focusing on what works; and the perils posed by our behavioral biases. The key here is that Semmelweis developed a hypothesis, tested that hypothesis and, only after the hypothesis was borne out by facts did he act upon it. This full progression is imperative. Otherwise, every crackpot with some half-baked scheme could claim to be a victim of the Semmelweis Reflex. The proper distinction should be clear – Is the approach backed up by the data or not? If it isn’t, move along elsewhere. But if it is, be prepared to stand and fight.