Investing in the Classics

Machiavelli’s Discourses on Livy: On Adversaries

Please note that for the purposes of this analysis, I use the Harvey C. Mansfield and Nathan Tarcov translation of Machiavelli’s Discourses on Livy.

Machiavelli, having discoursed about the foundations and modes of reordering a republics, turned his attention to how a republic or a prince ought to manage adversaries. As Machiavelli wrote elsewhere, “war may not be avoided but is deferred to the advantage of others” (The Prince, Ch. III). Similarly, adversaries, both extrinsic and intrinsic to the polity, are inevitable. For Machiavelli, managing adversaries is as much a reflection on men’s credulous and precipitous nature. Ruminating on the examples of history, Machiavelli offers cogent advice on how one should manage one’s adversaries, depending on one’s situation. I argue that Machiavelli’s analysis is still of great utility today, especially in the realm of competitive strategy, but also more generally.


The first type of adversaries that Machiavelli addresses are intrinsic ones. In particular, adversaries that may arise from the polity itself from the mismanagement of rewards and punishments. Machiavelli asserts that no well-ordered republic or principality ever cancels demerits with merits, and vice versa. For good deeds are rewarded as such and bad deeds are punished as such. If this mode is not observed, then it gives opportunity to one to turn a good deed into mode for a bad one. As Machiavelli states:

“no well ordered republic ever cancels the demerits with the merits of its citizens; but, having ordered rewards for good work and punishments for a bad one, and having rewarded one for having worked well, if that same one later works badly, it punishes him without any regard for his good works. When these orders are well observed, a city lives free for a long time; otherwise it will always come to ruin. For if a citizen has done some outstanding work for a city, and on top of the reputation that this thing brings him, he has an audacity and confidence that he can do some work that is not good without fearing punishment, in a short time he will become so insolent that any civility will be dissolved” (Book I.24).

Machiavelli illustrates this argument with the example of Manlius Capitolinus. Despite having saved Rome from the French, for which he was rewarded, his envy and ambition led him to conspire to reduce Rome to a principality for himself, for which he was thrown headlong from the Capitol that before, with so much glory, he had saved. Similarly, portfolio managers ought to reward analysts for their merits and punish for their demerits. For if one allows merit to excuse a demerit, it removes the necessity and prudence that was the cause of the merit, while providing license for imprudent action. In the absence of personal risk, the analyst is more prone to speculate about the possibilities rather than reason about the consequences.


On the other hand, the allocation of rewards and punishments is not absolute. Citing the example of the Romans, Machiavelli shows how the careful consideration of incentives caused by such modes can have pernicious effects if not formulated prudently. The Romans, realizing that in the context of war, given the multiplicity of Rome’s formidable extrinsic adversaries, concluded it was much more prudent to be merciful and lenient towards their generals so as to be harsh and unrelenting toward their enemies. As Machiavelli writes:

“The Romans… not only were less ungrateful than other republics but also were more merciful and more hesitant in the punishment of the captains of their armies than any other. For if he error had been made through malice, they punished him humanely; if it was through ignorance, not only did they not punish him, they rewarded and honored him. This mode of proceeding was well considered by them; for they judged that it was of such importance to those who governed their armies that they have a free and ready spirit, without other extrinsic hesitations in making policies, that they did not wish to add new difficulties and dangers to a thing in itself difficult and dangerous, since they thought that if they added them, no one could ever work virtuously” (Book I.31).

Machiavelli cites the example of the Roman armies sent to fight formidable opponents of Philip of Macedon and Hannibal of Carthage. Had the Roman generals worried that they might be crucified or otherwise killed for failure, as was custom in Carthage, it would have been impossible for the captains to be able to wage war virtuously. For if the punishments for a general for losing a battle were too severe, this would deter them from the boldness that made Rome’s armies virtuous. Since the consequences of these outcomes were very great for the republic, “they judged that for such ones the ignominy of having lost was penalty enough, they did not wish to terrify them with another, greater penalty” (Book I.31). Therefore, it is important to balance the threat of potential intrinsic adversaries with that of existent extrinsic enemies. The virtue of the Romans was in recognizing that fortune is involved in the outcome, thus they judged what was under their captains’ control, that of the process, to see if it was done without prudence or virtue. Thus one could conjecture, in emulation of the Roman model, that punishment is observed only in cases of malice or neglect, instead of the mere outcome, which is more or less subject to fortune.


Perhaps more generally, Machiavelli teaches one to not narrow one’s vision so much that they miss the broader and greater danger. As he writes later on, “For as King Ferdinand used to say, men often act like certain lesser birds of prey, in whom there is such desire to catch their prey, to which nature urges them, that they do not sense another larger bird that is above them so as to kill them” (Book I.40). This lesson is all too apparent in the realm of competitive strategy. For many times company’s focus on their direct and large rivals only to miss the greater threat from the innovative and emerging challengers. Other times, a company will focus too narrowly on their defined industry and miss the threat of substitutes or new entrants. Elsewhere, they focus too much on competitors and not on the competitive pressures placed on them by suppliers and customers. And so on and so forth. There is no definite formula for how to proceed and judge in these affairs for the circumstances are too varied. The important conclusion, Machiavelli reminds us, is that a prudent individual carefully considers and measures all the risks, actual and potential, so as to take “the less bad policy for the better” (Book I.38).


Next, Machiavelli addresses what modes might be taken to prevent such intrinsic adversaries from arising. In the case of principalities, it is rather simple. The prince must himself lead the military and acquire the reputation and loyalty that comes with command. Otherwise, if you let your subordinates conduct your affairs for you, victory gives them reputation and loyalty. Moreover, in order to secure yourself from them, the necessity to eliminate their rivalry is more harmful to your appearance than the benefited of the acquisition. As Machiavelli writes:

“So as to avoid the necessity either of having to live with suspicion, or of being ungrateful, a prince should go personally on expeditions, as the Roman emperors did in the beginning, as the Turk does in our times, and as those who are virtuous have done and do. For if they win, the glory and acquisition are all theirs; and when they are not present, since glory is someone else’s, it does not appear to them that they can make use of the acquisition unless they eliminate in someone else the glory that they have not known how to gain for themselves. They become ungrateful and unjust, and without doubt their loss is greater than the gain” (Book I.30).

A prudent prince never gives opportunity for those who might undermine him, nor does he forgo an opportunity to gain reputation and empire for himself. Indeed, Machiavelli affirms this: “Prudent men gain favor for themselves out of affairs, always and in their every action even though necessity constrains them to do them in any case” (Book I.52). Portfolio managers ought to consider much of the same. For if they do not lead themselves, the virtuous works of their analysts is not their own, but in preparation for their replacement. More importantly, leading the process is necessary if a portfolio manager wants to make sure that the conduct of the analyst was prudent and not out of ambition. Thus prudent managers who wish to sustain themselves ought to lead the investment processes so not to be ruined or replaced by internal adversaries.


Machiavelli then analyzes the case of extrinsic enemies, whether of a republic or principality, and intrinsic adversaries within a republic, both of which are equivalent in structure and implications. In the case of republics, where there are many actors with many roles needing to be played, it is impossible to oversee each endeavor. Thus, the opportunity for ambition is far greater in republics, and the extralegal power afforded to princes to curb internal adversaries is absent in republics. Thus, by acquiring great reputation, wealth, and power for themselves, private individuals can easily corrupt a republic. The problem in curbing these threats is that “It is so much more difficult to recognize these inconveniences when they arise as it appears more natural to men always to favor the beginnings of things” (Book I.33) and that “all bad examples have risen from good beginnings” (Book I.46). That is, it is difficult to discern from the beginning whether a young noble wishes to further his fatherland, as did Scipio, or despoil it, as did Appius, for each give the appearance of goodwill in the beginning in order to acquire reputation and disarm suspicion. Ideally, one would want to curb their influence before it is too late, but the prudence required to obtain this foresight is rarely found in men, Machiavelli asserts. Thus, one must typically deal with such an adversary when it has already become formidable. The choices are to attack too late, or temporize it. As Machiavelli writes:

“when an inconvenience that arises in a republic or against a republic, cause by an intrinsic or extrinsic cause, has become so great that it begins to bring fear to everyone, it is a much more secure policy to temporize with it than to attempt to extinguish it. For almost always those who attempt to ally it make its strength greater and accelerate the evil that they suspected from it for themselves” (Book I.33).

Machiavelli notes that as the Roman republic grew in reputation, strength, and empire, its neighbors, who at first had not thought of how much harm that new republic could bring them, began – but late – to recognize their error. Wishing to remedy what they were late in perceiving, they moved against Rome. However, this only served to strengthen their adversary, for the necessity it caused made the Romans create dictators with finite offices – as was the custom – who could overcome the more cumbersome political process and mobilize against their adversaries with greater vigor and swiftness than could have been done otherwise. It made the Romans more united, more vigorous, made them think about new modes, through which they expanded their power in a briefer time. Thus, these adversaries not only hastened their ruin, but added their domain to that of their adversary. Given the difficulties incurring in attacking an adversary too late, Machiavelli concludes that it is a more prudent strategy to temporize:

“I say, thus, that since it is difficult to recognize these evils when they arise – the difficulty being caused by the fact that things are apt to deceive you in the beginning – it is a wiser policy to temporize with them after they are recognized than oppose them; for if one temporizes with them, either they are eliminated by themselves or at least the evil is deferred for a longer time” (Book I.33).

Machiavelli cites the examples of Cosimo de’ Medici, who came to such reputation and power through patronage that his adversaries began to fear him; by this time, they judged it dangerous to allow him to remain thus and very dangerous to offend him. Chief among Cosimo’s adversaries was Niccolò da Uzzano, a very wise and prudent man, who had made the first error of not recognizing the dangers that could arise from the reputation acquired by Cosimo, did not permit the second error to be made – this is, of attempting to eliminate him. For he correctly judged that such an attempt would be the ruin of his party. Thus, Uzzano died in power, but his successors did not adhere to his prudence and, in moving against Cosimo, were ruined in little time. Machiavelli says the same happened in Rome with Caesar, whose death accelerated the ruin of the republic by giving his name – hence, his cause – immortality. Furthermore, it is no mistake that this chapter – thirty-third in number – so happens to be the age of Jesus of Nazareth when he was immortalized by his adversaries.


Machiavelli’s advice here applies both in the realm of competitive strategy and more generally. In regards to competitive strategy, the case of republics, as opposed to principalities, is more fitting due to the multiplicity of the actors and roles and the inability of one actor to sustain a prince-like dominion in industry. Thus, it would be likewise ideal for a firm to be able to curb new entrants before they become too powerful and intrude on the product or services of the existing firm. But because it is not easy to identify which entrants or innovations are innocuous and which are pernicious, it is often the case that the firm must deal with such adversaries when it is too late. As Machiavelli advises, it is a better choice to temporize and compete spiritedly with the new adversary rather than attack too late. For in attacking too late one inflames the adversary, who may now be superior in technology or otherwise, with the desire and necessity to destroy you. Additionally, because the attack is late and the adversary formidable, the modes of attack that would have worked initially, such as price competition, are now deleterious to you since the adversary has acquired the economies of scale in order to endure your thrust. So in this way, if you do not accelerate your own ruin, you certainly put yourself in a worse position than if one elected to temporize. The same can be applied more generally, such as in the competitive landscape of a distressed debt situation between different creditors. It is better to attack early, but because this often requires superhuman foresight, once it is too late it is better to temporize than attack late and give the weapons of necessity and animosity to one’s adversary.


Nevertheless, if a prince wishes to attack late, Machiavelli offers a word of extra caution. A prince who wishes to do so ought not to deceive themselves into believing they can drown a plant by watering it. A prince must be most prudent in judging these affairs, carefully considering the advantages and disadvantages of the situation, that of the adversary, and that of themselves. If a prince judges that his forces are enough and wishes to attack, then Machiavelli advises that he must do it swiftly and with great fury, for anything less gives your adversary necessity and animosity. He writes:

“princes who plan to cancel them or oppose their strength and thrust should open their eyes, so as not to give them increase instead of decrease, believing that they are pushing a thing back while pulling it along, or indeed that they are drowning a plant by watering it. But they should consider well the strength of the malady, and if you see you have enough to cure it, set yourself at it without hesitation; otherwise let it be and do not attempt it in any mode” (Book I.33).

Similarly, in the realm of corporate strategy, if a firm, having identified a threat, finds it for some reason or another necessary to attack late than temporize, the magnitude of their action must be extraordinary. The retaliation of existing competitors must be so vengeful and furious to convince the encroaching adversary that competing is not profitable and will never become so. Indeed, the action must be so robust that the adversary dare not think it a bluff, but fears possible bankruptcy. Thus, Machiavelli concludes: “Therefore, in every policy men should consider its defects and dangers and not adopt it if there is more of the dangerous than the useful in it” (Book I.52).


The best mode of combating adversaries is not to attack early, but to anticipate the modes by which one’s adversary comes to power. Attacking early, if you have the prudence to recognize the threat in its early stages, is a reliable remedy to secure one’s state. Nevertheless, anticipating the modes by which one’s adversary plans to come to power enables one to seize these modes for themselves, thereby not only allowing one to secure their state without the infamy that attacking incurs, but turns a danger into a gain by acquiring those modes for oneself. As Machiavelli writes:

“truly, in a republic, and especially in those that are corrupt, the ambition of a citizen cannot be opposed with a better, less scandalous, and easier mode than to anticipate the ways that he is seen to tread to arrive at the rank he plans” (Book I.52).

Indeed, Machiavelli again recalls the example of Cosimo de’ Medici, stating that if his adversaries had observed this mode instead of attacking too late, they would have come without tumult and without violence to take out of his hands those arms of which he most availed himself. Similarly, in the realm of corporate strategy, if one perceives a threat in its early state, instead of attacking early and forcing the entrant out of business, it is a more prudent and astute strategy to acquire that entrant. In this way, one can gain that disruptive force for themselves before it has become formidable and expensive to acquire.


In dealing with adversaries, which are inevitable, one of Machiavelli’s main maxims is not to wait until it is too late. Dealing with adversaries rarely is dueled in a vacuum, but attracts the interest of others. These others can either come to help or harm you. But because few touch who one really is, the many only see the appearance of a thing. Thus, it is very important to keep a good reputation for oneself so that when an adversary arises, at worst they will not have the help of the people and at best one can gain the allegiance of the people against one’s adversaries. Thus, one should not put off such matters until it is too late. As Machiavelli states:

“no one… should defer winning the people over until times of danger, for what succeeded for the Romans will never succeed for him. For the collectivity will judge that it has that good not from you but from you adversaries; and since it ought to fear that when the necessity has passes, you will take back from them what you had been forced to give them, it will not have any obligation to you” (Book I.32).


“So whoever holds a state, whether republic or prince, should consider beforehand what times can come up against him, and which men he can have need of in adverse times; and then live with them in the mode that he judges necessary to live, should any case whatever come up. The one who governs himself otherwise – whether prince or republic, and especially a prince – and then believes in the fact that, when danger comes up, he can regain men with benefits, deceives himself; for not only does he not secure himself with them but he hastens his own ruin” (Book I.32).

To be able to perceive the possibilities of the future and position themselves accordingly is a hallmark of prudence. If a prince or republic, investor or company, can govern themselves in this way, they will find themselves secure in their state and able to defeat any adversary, should any dare to arise. For few will challenge one who has the backing of the many, for where the many exist there is no place for the few to stand. When one considers the current times, one sees that no one has done a better job of winning the people to their side than Warren Buffett, and to a lesser extent, the activists. Through the cultivation of his cult of personality, Buffett has duped the generality of men into believing that he is a champion of the people. But it is only known to those few who are close enough to touch how similar he is too the rest of his peers, as Daniel Loeb has graciously pointed out. Nevertheless, this is why one sees that no one challenges Buffett, or if they do so it is done sub rosa, for doing so publicly is to make the people an adversary to themselves. Even though they may be no greater hypocrite, in the eyes of the many such accusations is only heresy, which brings only harm to the accused.

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