Hedgehog or Fox?

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

Sculpture: “The Hedgehog and the Fox.” Photo: Peter Briggs. Source: Wiki

A Greek poet coined this phrase almost 3000 years ago. 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 their world purpose and coherence.

We see this in all walks of life. In literature: Dante was a hedgehog. He put politics and art and literature and philosophy and music and the military and theology into his great poem. Shakespeare was a fox, focusing his plays on the great question of life. In philosophy: Plato was a hedgehog, his pupil Aristotle a fox. In government, George Washington was a hedgehog, and it’s a good thing for us. His singular focus on leadership kept the Continental Army alive, and got our Government off the ground. Jefferson was a fox – you can see it in all his inventions and investigations and discoveries. In modern life, great business leaders are hedgehogs – think of Steve Jobs with his focus on design and functionality, or Richard Branson with his cool Virgin brands. Great investors are foxes: Warren Buffett, Peter Lynch, John Templeton and have curious, insatiable minds.

Hedgehog. Photo: Igel. Source: Wiki

Both approaches are needed. In business, companies need a singular vision to cut through the clutter and keep the main thing the main thing. It’s all-too-easy to be distracted by the crisis of the day and never spend enough time and energy on what’s truly important. Hedgehogs get the job done.

But with investing, foxes are the 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 new ideas. You never know where the next disruptive development will come from. Investors need to be fox-like and flexible.

European Red Fox. Photo: Airwolfhoud. Source: British Wildlife Center

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

Douglas R. Tengdin, CFA

By |2018-03-13T07:14:36-04:00March 13th, 2018|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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