Lev Nikolayevich Tolstoy, Financial Planner
Better known in English as Leo Tolstoy, the author of War and Peace is widely considered to have been one of the world’s greatest writers but his potential aptitude for financial planning may be somewhat less well known. Were it not for the publication of Isaiah Berlin’s The Hedgehog and the Fox: An Essay on Tolstoy’s View of History in 1953, those abilities might never have come to light.
Berlin’s essay draws upon the ancient Greek proverb: “The fox knows many things but the hedgehog knows one big thing.” In it, he divides writers and philosophers into those two categories: the hedgehogs who contributed a single significant idea during their lifetimes and the foxes whose world could not be so narrowly confined. According to Berlin, Tolstoy was in a category of his own, combining the approach of a fox with the determination of a hedgehog.
I recently wrote an article about people’s tendency to seek out news sources that generally agree with their own basic assumptions. One disadvantage of the hedgehog theory of news is that, without moderating influences, the pundit often pursues a single line of reasoning further and further, eventually leading to a strongly held conclusion which stands entirely on its own, divorced from all other influences. By denying the possibility of other outcomes and stating opinions briefly and clearly, the author takes on an air of certainty as if actually possessing the ability to see into the future.
Foxes, on the other hand, approach things more obliquely, questing in multiple directions for information as they search for an answer. Although the fox’s approach is generally at least as rigorous as the hedgehog’s, it often results in a range of possible outcomes instead of just one. This seeming lack of conviction can make foxes seem less believable so their predictions are sometimes discounted, especially by those who prefer positivity.
As has been true throughout history, today’s world is full of things to worry about, things which demand investors’ attention: the Super Storm Sandy, the “fiscal cliff” and a do-nothing Congress, a drought in the Midwest, financial problems in Greece, Spain and the rest of Europe, terrorism and much more. It’s easy to imagine that any one of these issues could cause significant economic problems but, despite all of these (and other) apparently negative indicators, stock markets have made steady progress in 2012. That suggests that there’s more to forecasting investment outcomes than one narrow issue, even one as important as the name of the next president.
Why do I say Tolstoy would have made a good financial planner? A thorough planner must review a very wide range of information – different in every situation – then synthesize it and offer specific guidance to the client. Mr. Berlin would consider the review of such a range of possible outcomes to be fox-like. A planner who was able to accomplish that, then focus on an individual plan and act decisively to execute it might even be considered Tolstoy-like.
I’ve always taken the fox’s approach to both investing and financial planning on behalf of my clients. I try to keep an open mind and am always searching for another bit of information with which to flavor my opinion. Although I’ve been quoted several times over the years in local and national publications, I’ve never given a live TV interview. I may not be photogenic enough to merit such attention but I’ll guarantee that I’m not a good source for a quick sound bite delivering an absolute prediction.
15th Century English lawyer and philosopher, Sir Francis Bacon once said: “If a man will begin with certainties, he shall end in doubts: but if he will be content to begin with doubts, he shall end in certainties.” Hopefully, my approach to advising my clients about their lives and finances will result in enough certainty to ease their doubts while their lives, and their plan, progress.