Leonardo da Vinci was a prolific investor in himself and unlike fellow 16th century painter, Filippo Lippi (who despite his artistic brilliance and fantastic name, is little remembered by today’s society), da Vinci continues to be celebrated. Why the disparity in enduring success? Da Vinci demonstrated outstanding commitment to diversification.
Da Vinci was a painter, mathematician, engineer, architect, botanist, sculptor, geologist, anatomist and musician. Inevitably, not all his investments were successful; we speak little of his music career or “walk-on-water shoes”. But these failures did not matter when da Vinci had the Mona Lisa and The Last Supper to fall back on. Today’s investors can learn from da Vinci’s ‘style’: diversify to prepare for multiple potential scenarios.
It is equally important not to over diversify. Had da Vinci attempted to take on the newly established medium of ballet, he might not have had the time or capacity to excel in his painting. In the same way, an investor who dips their toe in every single industry is unlikely to experience significant profit from anywhere.
How to diversify
Da Vinci’s portfolio of skills stretched across a range of geographies. He started life in the humble countryside hamlet Anchiano, then moved to Florence at 14 to become an apprentice painter and sculptor. In want of a bigger city, da Vinci moved to Milan, offering his services as an engineer and artisan, but was forced to flee to Venice after a French invasion. His next stop was Rome, where it is said he created some of his best work (they do say the best investments are made in our 50s). Leonardo’s final destination was the Loire Valley in France, where he became the court painter to King Francis I.
In travelling to a range of cities, da Vinci was able to have an extremely varied and successful career. It is unlikely that he would be remembered today had he stayed in the small hamlet of Anchiano (nor would Anchiano be home to the delightful museum and gift shop that one can visit today).
We should look at da Vinci’s life and feel inspired to stretch our investments across a range of geographies and currencies. For one thing, this avoids a home country bias. Studies in behavioural economics have recognised the tendency to be overweight equities and bonds in one’s own country. But this investment attitude can be extremely limiting. For example, if Italians today decided to confine themselves to the Italian stock market, they would not benefit from trends in technology but would be dangerously dependent on a flailing motor industry.
Another investment lesson we can take from diverse da Vinci is the need to avoid ‘anchoring’ – an investment approach that gives disproportionate weight to pre-existing information. Da Vinci’s creative boldness shunned conventionality, meaning his experiments and inventions were often ahead of his time. For example, his sketches of the ‘aerial screw’, are considered the original blueprints to the modern-day helicopter, which first took flight in 1939. This forward thinking should encourage us to act ahead of our time when investing.
Work with opposites
In da Vinci’s portfolio there are some notably opposing skills. By being both a painter and anatomist he invested in the binary industries of art and science. This type of diversification is extremely relevant to today’s society, as while the arts are crumbling under the pressures of lockdown, science is receiving an influx of investment as the world searches for a Covid-19 vaccine.
It might look tempting to focus investment solely on science and sell shares in all artistic companies. But this would be counterproductive. While the pharmaceutical and technological expertise of some sectors are in increasing every-day demand, many artistic companies have established successful brands that are recognised and trusted across countries and generations, Walt Disney (US: DIS), for example. Ultimately, both sectors can offer good long-term returns, with the arts having the added attraction of strong recovery potential. Like da Vinci, investing in both binaries – art and science – can be beneficial.
Investing in binary industries could also present further opportunity for diversification: size. Buying shares in both small and large cap companies can reduce risk and increase potential. Da Vinci’s Last Supper is 88 times the size of the Mona Lisa, but both play a crucial role in making his artistic portfolio one the most expensive in history.
Da Vinci was one of history’s greatest investors. A diverse portfolio enabled his enduring success and although his binary skillset sounds contradictory, it served to be extremely complimentary in the long run. For this reason, we should seek to be a polymath like da Vinci, because a polymath is a person of wide knowledge or learning and a good investor is always in the pursuit of maximising success.
