Investing in the Classics

Machiavelli’s The Prince: On History and Fame

Please note that for the purposes of this analysis, I use the Harvey C. Mansfield, Second Edition translation of Machiavelli’s The Prince.

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History is the foundation of Niccolò Machiavelli’s political thought; it was not an object of study, but rather a study itself. Dismissing the celebratory tradition of idealizing past idols, Machiavelli sought out the effectual truth; he sought the causes of success and failure, so as to do away with the pervading seductive fictions and fashionable philosophies of the times. In this way, history was not a scholarly leisure, but a means of extracting lessons of contemporary utility. Machiavelli put forth a critical history that rejected the generally accepted antiquity principles. His cunning critique of the writers, especially as it pertained to the allocation fame, still yields tremendous insight today as a method of interpretation worth emulation. In particular, Machiavelli’s insights incite investors today to question the foundations of popular judgments and seeks the causes of success and failure, both in people and in past investments.

 

The brilliance and originality of Machiavelli consisted in his new modes and orders – namely, his candid and penetrating insight into the reality of human affairs and action. Machiavelli himself states that he looks for the effectual truth of things, that is, not a philosophical or other idealized ‘truth’ – such as the cults of personality built by the writers to certain historical figures. Machiavelli writes:

“And because I know that many have written of this, I may be held presumptuous, especially since I depart from the orders of others. But since my intent is to write something useful to whoever understands it, it has appeared to me more fitting to go directly to the effectual truth of the thing rather than to the imagination of it. And many have imagined republics and principates that have never been seen or known to exist; for it is so far from how one lives to how one should live that he who lets go of what is done for what should be done learns his ruin rather than his preservation” (Ch. XV).

Machiavelli charges the writers and philosophers for ignoring the effectual truth of matters, thereby leading many to their ruin. Machiavelli targets idealists, namely Plato and his Republic first and foremost (although his criticism may be extended to Augustine, Zeno, among others). To the contrary, Machiavelli intends to write useful advice for those who understand the nature of reality and the necessity it imposes on human action. For contemporary utility, at the most basic level, investors ought to avoid overly theoretical or idealized descriptions of investing or financial markets, as are most commonly found in academia and business schools. But at a deeper level, Machiavelli tells us to question the foundations of popular judgments of our idols, that is, to question the near-mythological status of figures such as Buffett, Lynch, and Gabelli, among others. These figures, I argue, though better than speculators, are not worthy of emulation contrary to popular sentiment as imitation is more likely to lead to your ruin than preservation.

 

As far as The Prince is concerned, Scipio Africanus exemplifies how conventional history can be more pernicious than advantageous. Scipio Africanus, conventionally renowned as one of the greatest generals, not just of Rome, but of all-time for defeating Hannibal during the Second Punic War, was one of the idols of the emerging humanist tradition in Machiavelli’s time. In considering the glory of Scipio, Machiavelli attributes it to how Scipio imitated Cyrus, one of Machiavelli’s most excellent men. Machiavelli writes: “how much glory that imitation brought him [Scipio], how much chastity, affability, humanity, and liberality Scipio conformed to what had been written of Cyrus by Xenophon” (Ch. XIV). Scipio was praised by the writers for essentially displaying these ‘moral’ virtues (as opposed to ancient virtue of spirit and body) and making him an idol for future captains to emulate. However, the effectual truth of Scipio is far more complicated. Machiavelli writes:

“one can consider Scipio… whose armies in Spain rebelled against him. This arose from nothing but his excessive mercy, which had allowed his soldiers more license than is fitting for military discipline. Scipio’s mercy was reproved in the Senate by Fabius Maximus, who called him the corruptor of the Roman military… Such a nature would in time have sullied Scipio’s fame and glory if he had continued with it in the empire; but while he lived under the government of the Senate, this damaging quality of his was not only hidden, but made for his glory” (Ch. XVII).

Scipio, Machiavelli argues, exemplified exactly what a prince or captain ought not to be, that is, too merciful and effeminate. Scipio’s excessive mercy towards his soldiers allowed them to carry out some of the most atrocious raping, pillaging, and plunders – so much so that Rome’s leading citizen and greatest general, Fabius Maximus, called him the corruptor of the Roman military. Scipio was thus deprived of his commanding role. Therefore, it is plain and obvious that Scipio was not a figure worth emulation, for what makes any prince or captain “contemptible is to be held variable, light, effeminate, pusillanimous, irresolute” (Ch. XIX). But yet, Scipio won glory. This is because, as Machiavelli points out, the Senate bestowed it on him. Why? Because he obeyed the Senate’s command to relieve him of his command, instead of seizing power as Julius Caesar would do under the same circumstances sometime later. Thus, the Senate, so as to promote such future obedience, not only hid Scipio’s deficiencies, but made them to his glory by outwardly praising him (despite internally criticizing him) and giving him titles. For the Senate was comprised of nobles, and the nobles comprise the writers, and it is the writers who color the lens of history.

 

The lessons for today are all too similar. The writers of our time – both in books and in the news – praise the light, effeminate, and jolly investors. Idols such as Buffett, Gabelli, and Lynch come into mind. All three of them purport investing to be merely a rather simple endeavor, that even a layman can do if he follows a few trite adages, such as ‘its far better to buy a wonderful business at a fair price than a fair business at a wonderful price’ and ‘look for a business that even an idiot could run’. In the case of the latter two, their success was more so due to the fact that the times were in accord for their risk-on investment strategies that gained them such success in the prolonged bull-market of the late-1970s and 1980s (a theme analyzed in a previous analysis: Machiavelli’s The Prince: On Virtue vs. Fortune – Part I). In the case of Buffett, the writers have entirely missed that he cannot be emulated by most, if any. For David, Machiavelli asserts, fought Goliath “with his sling and knife” (Ch. XIII). Machiavelli’s point is that one should not emulate David in thinking that one can defeat a goliath with sling alone, for the writers have mythologized David, thereby leaving out that he probably needed to have more than a sling to defeat such an adversary. Similarly, there is more to meets the eye with Buffett, which is why he cannot be emulated. For Buffett’s success post-partnership stemmed not from his ‘value investing’ philosophy, but rather from his rare and extraordinary insight into assessing the quality of businesses and managers. Thus, whoever seeks to emulate the pithy wisdom of Buffett ought to have his superior business acumen less they wish to avoid ruin.

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The natural counterpart to Scipio is, of course, Hannibal, both for historical relationship and for their antithetic personalities. Contra Scipio, Hannibal was notorious for his cruelty as well as his military prowess. Thus, the writers praise Hannibal for his military virtue but condemn him for his harshness. This is another error, Machiavelli asserts. Of Hannibal, Machiavelli writes:

“Among the admirable actions of Hannibal is numbered this one: that when he had a very large army, mixed with infinite kinds of men, and had led it to fight in alien lands, no dissension ever arose in it, neither among themselves nor against the prince, in bad as well as in his good fortune. This could not have arisen from anything other than his inhuman cruelty which, together with his infinite virtue, always made him venerable and terrible in the sight of his soldiers; and without it, his other virtues would not have sufficed to bring about this effect. And the writers, having considered little in this, on the one hand admire this action of his but on the other condemn the principal cause of it” (Ch. XVII).

The writers, having their own ideals, praise the empirical truth of the matter – Hannibal’s military virtue – but condemn his infinite crimes for they are not in accord with their effeminate values. However, as Machiavelli points out the writers do not realize that Hannibal could not have achieved the amazing feats that he did without the severity of his command. Thus, the praise the result but condemn the cause of it. Today, the writers of today cannot but praise the risk-adjusted returns of investors like Ben Graham and Walter Schloss, yet they nonetheless condemn their approach to investing (i.e., their proper understanding of margin of safety as the discrepancy between price and value, as opposed to economic moats – which is just a euphemism for growth) as too narrow-minded and archaic. All too similarly, they praise the result while condemning the cause of it.

 

The theme of history and fame, as seen already by the contrast of Scipio and Hannibal, is most clearly seen through the example of Agathocles, who is Machiavelli’s ‘criminal prince’ par excellence. Contrary to the conventional reading on Machiavelli’s The Prince, it is not Cesare Borgia who the ‘hero’ of this work nor is he the exemplar of Machiavellian virtue; rather, a close reading of the text reveals that it, beyond doubt, Agathocles who is the most virtuous prince capable of being emulated (thereby excluding the ‘most excellent men’ of Ch. VI as they are mythological and are incapable of being emulated, as Machiavelli subtly implies). However, most scholars and readers have a hard time digesting this truth as Agathocles is supposed to be a ‘criminal’ as he acquired his principality by killing the Senate. Nevertheless, a close reading of Agathocles’ actions in comparison with the rest of Machiavelli’s advice reveals that Agathocles is the only example that does all that Machiavelli recommends that a virtuous prince should do, hence Agathocles is the only example in The Prince who acquires and maintains a kingdom – contra Borgia. Machiavelli questions the writers on Agathocles. For when one looks past the mere appearances, one sees that he liberated his fatherland from oppression by Carthage, was revered by his citizens, and instituted good government – none of which could have been accomplished if he had not killed the corrupt Syracusan Senate. Yet, of Agathocles’ legacy, Machiavelli writes:

“Thus, whoever might consider the actions and virtue of this man will see nothing or little that can be attributed to fortune. For as was aid above, not through anyone’s support but through the ranks of the military, which he had gained for himself with a thousand hardships and dangers, he came to the principate and afterwards maintained it with many spirited and dangerous policies. Yet one cannot call it virtue to kill one’s citizens, betray one’s friends, to be without faith, without mercy, without religion; these modes can enable one to acquire empire, but not glory. For, if one considers the virtue of Agathocles in entering into and escaping from dangers, and the greatness of his spirit in enduring and overcoming adversities, one does not see why he has to be judged inferior to any most excellent captain. Nonetheless, his savage cruelty and inhumanity, together with his infinite crimes, do not permit him to be celebrated among the most excellent men. Thus, one cannot attribute to fortune or to virtue what he achieved without either” (Ch. VIII).

This passage is among the most ambiguous and rich passages in all of Machiavelli’s works. First, Machiavelli lauds Agathocles for his virtue, stating that he owed nothing to fortune. Then, he states that ‘one cannot call it virtue’ to do what he did – but anyone who has read The Prince knows that Machiavelli cares not for any of those the ‘crimes’ levied against Agathocles here. In fact, the only people who care about such crimes are the writers who similarly condemned Hannibal for his ‘infinite cruelties’. Thus, a subtle reader realizes that it is not Machiavelli who is saying that Agathocles is not virtuous, but that virtue cannot be defined as such. Hence the phrase, ‘one cannot say’ – if Machiavelli wanted condemn Agathocles as he did Scipio, he would have had no qualms about being more forthcoming about it. If this is not clear already, notice how Machiavelli then explicitly praises Agathocles for his virtue in the very next sentence; indeed, his virtue was so great that Machiavelli asserts that he could not be judged inferior to any other captain – that means Scipio, Hannibal, Caesar, and many more. Yet, Machiavelli concedes that his ‘crimes’ do not permit him to be celebrated like the most excellent men of Ch. VI – Moses, Cyrus, Romulus, Theseus – as they are the mythologized products of the writers. What Machiavelli is trying to show here is not that Agathocles is not worthy of such distinction – he clearly is according to what Machiavelli attributes to him – but that the writers, who bestow glory and titles, would never give it to Agathocles. This is because the writers are of the nobles, who comprise the Senate. Scipio won glory, despite his deficiencies, for his obedience to the Senate, while Agathocles and Caesar obtained the title of tyrant for usurping the Senate. This is made all the more ironic when one realizes that Scipio Africanus won the title of ‘Africanus’ for emulating exactly what Agathocles pioneered. Thus, Machiavelli reveals that one can acquire empire, but not glory. If it is not clear by now, it is worth mentioning that the entire point of The Prince is how to acquire and maintain empire, not glory, which is superfluous. For a virtuous prince focuses only on what he can control, namely his actions. Glory, on the other hand, is outside your control because it relies on others to ascribe it to you – those others being the writers, first and foremost. As Machiavelli writers later one, “in the actions of all men, and especially of princes, where there is no court to appeal to, one looks to the end. So let a prince win and maintain his state” (Ch. XVIII).

 

Similar to the case of Agathocles, many prudent investors are oft vilified as vultures. In achieving and maintaining superior risk-adjusted returns, these astute individuals find the most compelling opportunities in distressed situations. However, the writers of our time, while praising their returns, condemn many of them for making the difficult decisions that are nevertheless necessary, such as the realigning of the cost structure to the profitability of a business in a bankruptcy and reorganization scenario (i.e., the ‘destructive’ but no less necessary side of capitalism). Why do the writers of our time praise such effeminate types? I believe it stems from our ever degenerating, pathologically soft society. These layman-types want the creativity of capitalism without the consequences. These writers are no different than the writers of antiquity, who Machiavelli chides for praising outcomes but condemning the very necessary causes of them.

 

Machiavelli writes something useful for those higher individuals who understand the effectual truth of matters. Investors ought to emulate Machiavelli and his method of interpreting history to move beyond the writers and their colored lens of history. Ultimately, a prudent investor ought not care for a name for infamy among the small folk if he or she knows that it produces a necessary and beneficial end. As Machiavelli writes:

“A prince, therefore, so as to keep his subjects united and faithful, should not care about the infamy of cruelty, because with very few examples he will be more merciful than those who for the sake of too much mercy allow disorders to continue, from which killings or robberies” (Ch. XVII).

This is one of the most essential lessons of The Prince, and a point where he establishes his new modes and orders. Machiavelli asserts that it is better to be an Agathocles or Hannibal than a Scipio for the former two were more merciful than the latter, because his excessive mercy allowed for the greatest atrocities to occur. Machiavelli rebukes the philosophers and writers who claim that a ruler ought to be all-good. Instead, being all-good not only causes the ruin of a prince, but it creates more bad. Machiavelli affirms that in order to achieve greater goods, one needs to be severe, not always, but at the right times, in the right places. Thus, one cannot emulate the gosh-golly nature of Buffett and others unless they have his extraordinary talent, less they accelerate their ruin. Ultimately, a prudent investor will ignore the noise, not only that of the market, but also the noise of accolades (i.e., fame), for they are merely the affects of special interest and the summation of the sentiments of the speculative herd morality.

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