The Fox and the Hedgehog

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

Photo: Jeremy P. Gray

The Greek poet Archilocus noticed this almost 3000 years ago. We often see two different types of people. Some people go everywhere, and study everything—pursuing contradictory ideas. They’re eclectic, diffused, and omnivorous. On the other side are souls who pursue a singular, unitary vision, an all-embracing organizing principle that gives the world coherence.

We see this all around us. In literature, Dante was a hedgehog: he wanted to give the world a great poem about heaven and hell. Shakespeare, on the other hand, was a fox. He wrote plays about everything and everybody. In history, George Washington was a hedgehog—with the simple idea of American greatness—while Thomas Jefferson was a fox. And in modern life, outstanding business leaders are hedgehogs: think of Steve Jobs with his focus on design and functionality. And superior investors are often foxes: Warren Buffett, Peter Lynch, John Templeton.

Both approaches are necessary. In business, a company needs a singular vision to cut through the clutter and make 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 crucial. Hedgehogs get things done and keep their teams focused.

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. And they have to be interested in everything, from genomic sequencing to quantum computing to chain-store sales to bitcoins and block chains. Investors should leave no stone unturned when searching for value.

Foxes and hedgehogs each have an important role to play. A lot of times, they end up married to each other. Which one are you?

Douglas R. Tengdin, CFA

Chief Investment Officer

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