The meaning and origin of "hedge your bets"

To "hedge your bets" means to reduce or mitigate your risk. According to Etymology Online, this usage of hedge has been around since the 1600s.

From this page, the origin of the phrase comes from an actual hedge or plantings that act as a fence to enclose a piece of land. A hedge delimits an area, so the idea of a limited risk arose from that concept. An older expression, "to hedge in a debt," supports this origin.

'Hedge your bets' - meaning and origin.

What's the origin of the phrase 'Hedge your bets'?

Hedge has been used as a verb in English since at least the 16th century, with the meaning of 'equivocate; avoid commitment'. An example of this comes in Shakespeare's Merry Wives of Windsor, 1600:

I, I, I myself sometimes, leaving the fear of God on the left hand and hiding mine honour in my necessity, am fain to shuffle, to hedge and to lurch.

It began to be used in relation to financial transactions, in which a loan was secured by including it in a larger loan, in the early 17th century. Initially, the phrase associated with this form of hedging was 'hedging one's debts', for example, John Donne's Letters to Sir Henry Goodyere, circa 1620:

"You think that you have Hedged in that Debt by a greater, by your Letter in Verse."

'Hedging one's bets' was coined later in that century. It referred to the laying off of a bet by taking out smaller bets with other lenders. The purpose of this was to avoid being unable to pay out on the original larger bet. The phrase was first used by George Villiers, the 2nd Duke of Buckingham, in his satirical play The Rehearsal, 1672:

"Now, Criticks, do your worst, that here are met; For, like a Rook, I have hedg'd in my Bet."

The verb 'to hedge' derives from the noun hedge, that is, a fence made from a row of bushes or trees. These hedges were normally made from the spiny Hawthorn, which makes an impenetrable hedge when laid. To hedge a piece of land was to limit it in terms of size and that this gave rise to the 'secure, limited risk' meaning. Hedge funds, much in the news nowadays, take their name from their method of limiting, that is, hedging, their risk.

Curiously, the original examples of another financial device currently newsworthy that is, stocks, were literally made from material that was taken from hedges. In the 17th century, the tally that recorded a payment to the English Exchequer was a rough stick of about an inch in diameter, split along its length. One half, the stock, was given as a receipt to the person making the payment; the other half, the counterfoil, was kept by the Exchequer. Ownership of payments that were made jointly by a group were shared among the members of so-called joint stock companies, hence stocks and shares.

Inky Fool: How John Donne Invented the Hedge Fund

Quoting from Mark’s interesting article “From that sense of making your debts safe, came the idea of hedging in your bets...” I recall being told by a “betting man” that the original ‘hedges’ were planted at racecourses as a border between the Grandstand & the public area.

Bookies in the Grandstand were dressed like the rest of the ‘toffs’ and took bets very discreetly (no ‘Odds Board’ or Gladstone Bag for them!)

Because ‘toffs’ usually placed large bets, the Grandstand Bookies went to the hedge to ‘lay off’ some of their commitments with the bookies in the public area on the other side of the hedge.

The figure of speech “to hedge one’s bets”, whether it be in relation to a market investment or a wagering game “bet investment”, derives—albeit sometimes loosely speaking—as an allusion to “fencing in” so as to prevent loss by escape (a form of guarding or protection), as if with hedgerows or similar planting arrangements. The chief characteristic of a “hedged” bet/investment is that it requires a (generally profit reducing) counter-endeavor—a likely-to-be countervailing bet, investment, operation—so that the net gain expectation, if any, is knowingly lowered in order to avoid or minimize net loss. To say that one’s bets are hedged (in the sense of a generally low-growing planted barrier) as opposed, for instance, to saying that they are walled in, is to say that a hedged investment remains, to some degree, exposed to adverse influences, even loss, from within or without the partial, protective “hedge” screen.

I can't back this up with reference but, from experience, when planting a hedge, it wise to plant some "spare" plants elsewhere. A common rule of thumb is one spare for every twenty plants in the hedge. This 5% of spares are there to replace any failures in the hedge plantings as, obviously, the occasional failed plant is going to seriously detract from the value of the hedge. I've often wondered if this is the origin of the expression? You are making a small investment in potentially unwanted plants to protect your larger investment in the hedge.