The Legend of the Fox and the Hedgehog
In a now famous 1953 essay on Russian author Leo Tolstoy, Isaiah
Berlin resurrected the idea of dividing the world into people who
were more like foxes, and those who thought like hedgehogs.
Originally found in Greek poetry, the hedgehog “concept” essentially
said that the wily fox knows many things; the lowly hedgehog “knows
one big thing.” 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.
Berlin expanded on this concept to figuratively include the world
of writers (his main topic) and maybe humans in general. There
exists a great chasm, he wrote “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” and others
on the other side, those who pursue many ends, often unrelated and
even contradictory.” The first view of the world is that of the
hedgehog; the second, in all its complexity and confusion,
represents the world of the fox.
Wall Street’s Foxes
The myriad economists and analysts that inhabit Wall Street are a lot like
foxes. They pore over reams of data that that pour in from
government and private agencies. They analyze, they slice, they
dice, and they correlate. They play an endless game of connect the
dots in order to relate the past to the present, and weave the
complex elements of the modern economy into a single forecast. Worst
of all, they try to make predictions.
Unsurprisingly, they are often wrong. A correct prediction is
often hailed as a rare event by the Wall Street Journal, and the
lucky economist gets to wear the mantle of “guru of the day” until
his or her next prediction (which is now required) comes to naught,
and a new guru is crowned.
How many headlines are written featuring the bold predictions of
a famous Wall Street guru, only to relegated to the "dustbins of history"
by their failure to come true. It is an open secret that their
predictive powers are marginal, at best, and the explanations often
obtuse. No wonder Laurence Peter said "An economist is an
expert who will know tomorrow why the things he predicted yesterday
didn't happen today."
Well, foxes will be foxes no matter how many times their
predictions go awry. The important question for investors is this:
“So what?”
The One Big Thing
The one big idea is this: It’s What You Own That Counts. Good
stocks (and mutual funds) will always help you, good market or bad.
Poor stocks, on the other hand, will always hurt you, no matter what
the market, economic, or political environment. Many will say this
is simple to the point of being overly simplistic, but the truth
remains. Predicting the market is not nearly as important as
participating in the market.
Like the fox (and the economist) we can expend a great deal of
energy, time and worry analyzing an endless stream of
always–changing (and often contradictory) data while trying to form
a prediction of the future. Or, we can be more hedgehog-like and
take comfort in a single simple concept that has stood the test of
time: It’s What You Own That Counts.