The Prince and the Popular
What The Prince can teach us about risk: Fintech Feared, SonicWas and SolarWasn't, Biden Hires for Cyber and Zero-Day Taxes
It is far safer to be feared than loved if you cannot be both.
- Niccolò Machiavelli
Risk Developments this letter:
Fintech Feared
SonicWas and SolarWasn't
Biden Hires for Cyber
Zero-Day Taxes
Machiavelli’s Mask
Arriving at Firenze Santa Maria Novella railway station, across the Ponte Vecchio passing the Duomo, the House of Dante and numerous palazzos, you are just a 30 minute walk to an incredible view from the Piazzale Michelangelo. Wanting to better understand this enigmatic and beautiful city, I began reading “The Prince.” Over the next three days I explored the architecture, art and food of Florence, followed by a grueling day long motorcycle ride to Rome. In that short time I finished “The Prince”, but it made me so uncomfortable, that the aftertaste remained on my tongue like a wine gone bad. It wasn’t until years later, reading “Discourses on Livy” and subsequent analyses that I began to understand the book, the man and the city of Florence.
Niccolo Machiavelli, the Italian Renaissance diplomat, advisor and writer is best known as a villain of history. His recommendations in “The Prince” are often highly illiberal, deceitful and wicked. It is from him that we derive the word machiavellian and the modern conception of a dastardly politician. Political theorist Isiah Berlin quipped that Machiavelli was, “a man inspired by the Devil to lead good men to their doom, the great subverter, the teacher of evil, le docteur de la scélératesse, the inspirer of St. Bartholomew’s Eve, the original of Iago." Despite this pervasive view, or perhaps because of it, “The Prince” continues to enjoy widespread popularity. Its virtues, however, must be understood in spite of this popularity, not because of it.
There are three things to keep in mind when reading The Prince:
It has a complimentary book, “Discourses on Livy”, which deals primarily with the establishment and rule of republics
It was written in vernacular Italian rather than Latin, an odd choice for a book which appears aimed at an elite audience
It is recursive, and must be read as though Machiavelli himself were taking his own advice
A healthy reading of “The Prince” is to imagine what today’s societal constraints are and how a writer today would approach them. Machiavelli lived in a time of three absolute taboos: questioning the church, questioning the ruler and questioning the social order. Given that he was writing this book directed towards princes in the style of the Mirror for Princes, he wrote a practical and short book (26 chapters). “Discourses on Livy”, however, was long (142 chapters) and required knowledge of antiquity and the Bible. Clearly Machiavelli did not think highly of princes, but he did recognize that their power was above his in the social order. With this in mind, it becomes clearer why he wrote in plain Italian. First, it made his book easier to read for the dimwitted rulers, and second, it would reveal the duplicity and immorality of these rulers as it became more widely spread.
Therefore, we can see that Machiavelli wrote “The Prince” not only as a guide, but also as a poisoned chalice, offered to rulers he did not see as fit to rule. When paired with “Discourses on Livy” the whole picture comes into view. Leo Strauss, the German-American philosopher makes this clear in his “Thoughts on Machiavelli”.
To do justice to Machiavelli requires one to look forward from a pre-modern point of view toward an altogether unexpected and surprising Machiavelli who is new and strange, rather than to look backward from today toward a Machiavelli who has become old and our own, and therewith almost good.
In one of his more daring leaps, Strauss claims that Machiavelli even went so far as to engage in numerology, matching the length of Livy’s “History of Rome” at 142 chapters intentionally, thereby drawing attention to the number of chapters in “The Prince” (26). The 26th chapter of “Discourses on Livy” is the only chapter that deals with the new prince, the main theme of “The Prince.” The main example he uses in this chapter is King David, who he compares to God, intimating that both are tyrants. Keep in mind, the first taboo of his time, questioning the Church, was strictly forbidden.
Hurtling forward 500 years to the present day, the Church is no longer such a powerful force, weakened by schisms, the state and its own failures. New states are now rare, and principalities even rarer. The social order of the Italian Renaissance with rigid class, gender and ethnic roles is a far cry from today’s admittedly imperfect, but much improved, social order. So is “The Prince” simply an anachronism, an interesting step in the evolution of society, that offers advice on par with leeching?
Instead of trying to practice Machiavelli such as Henry Kissinger is purported to have done, or to decipher Machiavelli as Strauss did, we should re-situate Machiavelli in the modern context. As pointed out in this article by Robert P. Harrison, Machiavelli’s main obsession was with virtù as opposed to fortuna. Or in today’s language, efficacy versus risk. His study of politics was one that advocated planning for every eventuality, and as such, had to express his views carefully. To re-situate Machiavelli in the present we should ask what are today’s taboos? Why is the advice given today to founders, technologists and politicians often so bad? What are the compliments that complete the picture?
I’d like to close by returning to the quotation at the top, “it is far safer to be feared than loved if you cannot be both.” This always struck me as a curious quote, even before diving deeper into Machiavelli. It is one of the best known lines in “The Prince”, but one of the least understood. As I read it, Machiavelli is not saying ruling through fear is wise, or good. He is saying it is safe. We like our leaders to be courageous, ethical, powerful even, but safe? I can think of at least one great world leader who chose love and self sacrifice over fear. Maybe Machiavelli was not quite the secular nihilist, society thinks of him as, and maybe, like that self sacrificing leader, he too choose to suffer society’s cruelty.
Risk Developments
Fintech Feared
Last week we spoke about how big deposit taking banks have been hit hard, while the large investment banks have thrived. Despite the good year, banks like Goldman Sachs and JP Morgan are concerned about fintech stealing the march on them. Jamie Dimon made headlines saying that banks should be scared and taking a shot at Plaid, the data sharing startup, for improper data use.
To get Plaid’s take on their transgressive roots, listen to CEO Zach Perret’s interview. After the deal with Visa got nixed, they are back to plan A, world domination. Building out their team in Europe and launching an incubator. Their erstwhile partner, Visa, has also been busy, partnering with Transferwise on a new debit card riding on the VisaNet.
These efforts are not going unnoticed by big banks. JPMorgan is spending $12B annually on technology, and a consortium including Chase, Wells fargo and Bank of America are piloting technology to block screen scraping, e.g. Plaid. Frankly, I’m surprised it took this long, but it is a major sign that banks are finally taking fintech seriously, and as Machiavelli points out, if you must dispose of your enemies, it is best to do so quickly and all at once.
SonicWas and SolarWasn't
A trickle of SolarWinds news continues, but as media moves on the full story comes out. Despite the headline confirming two large targets here, the real story is that, while cybersecurity firm Qualys was targeted, it was not effected because the SolarWinds instance they had was not connected to the corporate network and just resided in a lab. As so often in cybersecurity, the headlines are tell one story, while the body tells another. Thinking of “The Prince” and “Discourses on Livy” it’s important to keep in mind who your audience is.
Another private equity backed (Francisco Partners) cybersecurity company, SonicWall, released a notice warning customers of zero-day flaws found in their products. A second announcement made it clear that firewalls were not affected, just their Secure Mobile Access (SMA) 100 product. It seems possible that it was a supply chain attack, similar to SolarWinds, where a bad actor could sneak in through SMA 100 and obtain credentials that they could use for lateral movement or privilege escalation.
Biden Hires for Cyber
The Biden administration is restaffing and building out more cybersecurity connections between myriad cyber adjacent institutions. This is a much needed effort after Trump decimated Federal government cybersecurity coordination and leadership ranks. Still, there is a lingering question about the U.S.’s policy on cybersecurity. As both the most aggressive and the most vulnerable actor in the cyber theatre, the U.S. is long overdue for a clear policy position.
Obama, ever the law professor, sought a balanced, hands off approach, that mostly maintained the status quo, pretending that the U.S. was neither hugely vulnerable nor incredibly active. Trump, if he can be said to have a consistent policy position, favored aggressive use of cyber capabilities but did little publicly that indicated an effective use of cyber power. Biden, is a hawk, but a multilateral, slow hawk. On the other hand, he’s close with bank and payments companies, who have a heavy presence in Wilmington, DE. Every time another NSA tool escapes the lab, it ends up coming back to hit the U.S. banking sector. Interestingly, it is the private sector that is seeking to drive collective action.
Zero-Day Taxes
Lastly, news about private equity billionaire Leon Black stepping down from Apollo due to his ties to the late Jeffery Epstein made the rounds this week. Among all the conspiracy theories and admittedly pretty bad looking ties, is the story explaining his $150 million dollar fee to Eptstien. Apparently it was for tax advice.
Matt Levine points out that it is peculiar that Epstein, who had no college degree, no accounting background nor any training in tax law would be giving valuable tax advice, and yet… it appears he was? His $150M price tag pales in comparison to the $1B in taxes it saved Black. This phenomenon may be more believable to hackers, who, often without training, find loopholes, vulnerabilities and unintended consequences of the rules software engineers write down.
This raises two interesting points. First, who and what exactly is a hacker? If our tax code isn’t so different from computer code, what of our social, legal and ethical codes? Second, are zero-days in other code bases sparse or dense, as Dan Geer puts it?
Gratitude
Big thanks to Matt Levine, Zach Perret, Patrick O'shaughnessy, Robert P. Harrison, and others for sharing your ideas!