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

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