Finance Theory

Foxy Investing

By, 03/23/2007

Many centuries ago, the Greek poet Archilochus wrote: "The fox knows many things, but the hedgehog knows one big thing."

Mere decades ago, noted essayist Isaiah Berlin used this famous quote to write "The Hedgehog and the Fox." We quote from the essay:

"Scholars have differed about the correct interpretation of these dark words, which may mean no more than that the fox, for all his cunning, is defeated by the hedgehog's one defense. But, taken figuratively, the words can be made to yield a sense in which they mark one of the deepest differences which divide writers and thinkers, and, it may be, human beings in general. For there exists a great chasm between those, on one side, who relate everything to a single central vision, one system less or more coherent or articulate, in terms of which they understand, think and feel-a single, universal, organizing principle in terms of which alone all that they are and say has significance-and, on the other side, those who pursue many ends, often unrelated and even contradictory, connected, if at all, only in some de facto way, for some psychological or physiological cause, related by no moral or aesthetic principle; these last lead lives, perform acts, and entertain ideas that are centrifugal rather than centripetal, their thought is scattered or diffused, moving on many levels, seizing upon the essence of a vast variety of experiences and objects for what they are in themselves, without consciously or unconsciously, seeking to fit them into, or exclude them from, any one unchanging, all-embracing, sometimes self-contradictory and incomplete, at times fanatical, unitary inner vision."

Or, in plainer words, there are two kinds of thinkers. A fox likes to learn about all sorts of subjects and attain general knowledge about many things. A hedgehog prefers to focus on one narrow subject and become an expert in it. Leonardo Da Vinci was a fox; Einstein was a hedgehog.

Today, we live in the golden age of hedgehogs. Most industries are moving further and further toward increased specialization. Computer programming, carpentry, medicine, literary studies, etc., are all becoming more and more demanding of a narrow, expert focus.

But that is not the way a stock investor must think; investors must be foxes, roaming the world freely, agnostic to styles, sizes, regions, sectors…open to all of it.

We've argued many times in this space that investing is not a craft. You cannot choose a single type of stock, such as value stocks, and hope to be successful for all time. No one type of stock outperforms others all the time. Sometimes value leads; others times growth. Sometimes US stocks outpace foreign; but for this most recent bull market it's been the other way around. And so on. It takes a fox to navigate—swiftly—the forest of market action.

To manage a properly diversified portfolio requires a great deal of knowing and perspective on a wide array of topics. Having a single, narrow focus (preferring one sort of stock over another for all time) only yields underperformance in the end.

"Contrary to popular belief, you can major in chemistry and be a fox. Scientists are not all hedgehogs, not even close. Or, you can major in English and be a hedgehog. Being a hedgehog or being a fox is more about attitude and perspective than what academic subjects one pursues. Are you passionate to know? Do you love to learn? Do you see the world from multiple perspectives? Do you want to develop all of your abilities? If your answer is yes, you are probably more like the fox than the hedgehog."
- Hobart and William Smith Colleges

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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