Foxes and Hedgehogs

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

The Greek lyric poet Archilocus coined this phrase almost 3000 years ago. Its original context has been lost, but as a principle, it can describe two approaches to life. On the one hand, you have people who pursue many ends—often unrelated and contradictory—eclectic, diffused, omnivorous. On the other are souls who pursue a singular, unitary vision, an all-embracing organizing principle that gives the world coherence.

We see this in many walks of life. In literature, Dante was a hedgehog, Shakespeare a fox. In philosophy, Plato was a hedgehog, his pupil Aristotle a fox. In American history, George Washington was a hedgehog, Jefferson a fox. And in modern life, great business leaders are hedgehogs—think of Steve Jobs with his focus on design and functionality—while great investors are foxes: Warren Buffett, Peter Lynch, John Templeton.

Both approaches are needed. In business, a firm needs a singular vision to cut through the clutter and keep the main thing the main thing. It’s too easy to get distracted by the crisis of the day and never spend time or energy on what’s important. Hedgehogs get things done.

But with investing, foxes rule. A portfolio needs to be diversified, limiting its exposure to any single area–reducing risk—while spreading its assets among an array of industries that generate new products and ideas—improving return. Investors need to be fox-like and flexible.

Foxes and hedgehogs both have their place. Indeed, they often marry each other. Which are you?

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2014-03-19T10:21:28+00:00 March 19th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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