Machiavelli on Preparing for the Storm

Last week, My Daily Oracle featured Ben Graham, an undisputed oracle of finance. Today and tomorrow, we will go even further back in time to Niccolò Machiavelli, whom you might call an oracle of realism.

Machiavelli lived in Florence during the rise of ruthless dynasties like the Borgias and the Medici. The Medici tortured him brutally, hanging him from behind by his bound wrists until his shoulders dislocated.

He survived, and then wrote The Prince, his clear-eyed manual on power, stripped of idealism (and of morals, some would say).

Machiavelli never became rich, and he never gave investment advice. But the ideas he laid down do speak to investors. Like every experienced investor, he knew fortune turns. And when it does, those who are prepared, survive.

It could be true that fortune is the arbiter of half of our actions, but she still leaves the other half to be governed by us. It is a common defect in man not to make any provision in the calm against the tempest.
— Niccolò Machiavelli

His warning is blunt: don’t blame bad luck. Blame poor preparation. In quiet times, strengthen your position. Because when the storm hits, it’s too late.

Machiavelli’s lesson is this: Take nothing for granted when investing. Expect reversals. Don’t invest based on dreams, but based on how things really are. Fortune favors the prepared, not the hopeful.

Warren Buffett echoes Machiavelli with his rule: “The three most important words in investing are ‘margin of safety.’” He prepares for misfortune by buying when he has a buffer against potential losses.

I hope you enjoyed today's My Daily Oracle. Tomorrow, we will look at more investing advice from Niccolò Machiavelli. Then, we will move on to other oracles during the rest of the week. Stay tuned!

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