The Thucydides Trope: Part II
What The History of the Peloponnesian War can teach us about risk: Fate of Insurance; FOQNEs; Broadband Gap; Tech and Support
My apologies for sending this letter out a day late. I moved this week and forgot that moving always takes twice as long and costs twice as much as you expect! Thank you for your patience.
I have written my work, not as an essay which is to win the applause of the moment, but as a possession for all time.
- Thucydides
Risk Developments this letter:
Fate of Insurance
FOQNEs
Broadband Gap
Tech and Support
Mythos of the Peloponnesian War
Last week I ended Part I of “The Thucydides Trope” before sharing the two biggest risk lessons about decentralization and insider threats. To understand these lessons, I claimed, we had to first answer the questions, “why read Thucydides” and “what happened in ‘The History of the Peloponnesian War’?” Now we will turn our attention to the lessons, which must be situated in the context of ancient Greek thought.
In ancient Greek education, rhetoric was highly prized and debated. It is in this context that Thucydides was writing, and the type of rhetoric he uses in “The History of the Peloponnesian War” combines narrative (diēgēma), description (ekphrasis) and fable (mythos). In his introduction he alludes to other histories (Herodotus) as including hearsay and superstition, positioning his work, by contrast, as purely descriptive, and while there are certain dry recountings of battles and statistics, it is narrative, and particularly the four speeches, that compels the reader. The last and most important context clue about “The History of the Peloponnesian War” is that it ends abruptly just after Thucydides describes (2,000 year old spoiler alert!) the demise of the Athenian empire.
This is an important signal that it is more than a simple description or narrative, but a story with a moral. The victors (Sparta, Thebes and Corinth) must have approved of the text, which presented a convenient explanation of the war that blamed Athenian political duplicity, democratic avarice and above all imperial hubris. It is with this in mind that we should read “The History of the Peloponnesian War” as a more than just description or narrative, but as a fable.
The two lessons to be learned from this fable are about decentralization and insider threats. Much of the work focuses on the issue of governance, both the political processes within Athens and the attempts at managing external relations, either between hostile city-states or with allies and tributaries. These governance issues relate to the second point about insider threats since the insider threat is often what exposes weaknesses in internal governance to external relations and vice versa. Before diving into the comparisons between systems of governance, here’s a brief refresher on the most important characters and speeches:
Pericles (popular and restrained Athenian politician/general)
Cleon and Nicias (Athenian politicians/generals, hawk and dove respectively)
Brasides (Sparta’s greatest general)
Gylippus (Spartan general in Sicily)
Alcibiades (Athenian politician/general and traitor)
Speeches:
Congress of the Peloponnesian League
Funeral Oration of Pericles
The Melian Dialogue
Speeches of Nicias and Alcibiades
When we left off last week, in book six, Athens had elected the reluctant Nicias and the hawkish Alcibiades (after speaking their cases) to lead a 100 ship invasion of the island of Sicily, in order to break their stalemate with the Peloponnesian League. The reasoning, the hawks claimed, was in part defensive, since Syracuse, the largest city-state on the island of Sicily, was related to the people of the Peloponnese. Furthermore, Syracuse was the second largest democracy, behind Athens. From a modern perspective we might find it odd that democracies did not see themselves as natural allies, but the Hellenistic view of democracy was as a fickle and rapacious form of government. It was thought that eventually the expanding spheres of both democracies would collide, and that Athens should strike while they still had the upper hand.
It is important to remember that Athens inherited much of its empire as a direct result of defeating the Persians in the naval battle of Salamis. They earned their reputation by fleeing the safety of their city and taking to ships that routed the Persian navy, saving the Peloponnese from invasion. This honor, cunning and naval superiority earned them both respect and justification for their imperial claims. In the first major speech of the History, The Congress of the Peloponnesian Confederacy, the Corinthians plead with Spartans to defend their allies and make war on Athens, while the Athenians invoke Salamis and attempt to justify their empire as a defensive necessity.
The irony is that the democractic, urban and educated Athenians, who allowed their imperial subjects to bring lawsuits and treated their subjects as peers, must act more tyrannically to ensure their colonies, tributaries and trade routes remained intact. As a democracy, they wielded reputation, narrative and rhetoric to keep together their empire. The oligarchy of Sparta, by contrast, ruled a largely agrarian and static society based on a system of caste slavery. The Helots, a serf-like class, provided labor to the Spartiates who, as a small ruling minority on the Peloponnese, had to maintain a constant war footing due to potential revolts. This kept their allies from harboring any suspicions that Sparta aspired to an empire and made dealing with the Spartan kings easier, as they had a reputation for deliberation and consistency.
It is this tension between internal decentralization and external centralization on the one hand, and internal centralization and external decentralization on that other, that underpins the whole conflict. As Thucydides points out, alliances are based on both trust and fear. Trust that your allies will keep their word and fear of what they or their enemies are capable of. Decentralized systems make it difficult to anticipate how promises will be kept, but centralized systems are more susceptible to concentrated risks. Historical analogies are always flawed and sometimes dangerous, but the importance of reputation and perception is ever present. For comparing systems today, the timeless truths about reputation and the perceptions of your counterparties is far more useful than trying to determine direct equivalents, whether looking at cryptocurrencies, Sino-American relations or remote work.
Getting back to book six, we must address the most pivotal event and most pivotal character of the whole History. The night before the Athenian fleet launches, bound for Sicily with great fanfare and investment of wealth, manpower and political capital, a number of herma (sacred statues) are desecrated. Alcibiades is sent off with the fleet and tried in absentia by his accusers for defiling the statues and other sacrilegious acts. While sailing to Sicily, the generals debate between strategies. Nicias’ plan, in keeping with his reticence, was to come to the aid of their allies, broker peace and make a show of force. Alcibiades wanted to make permanent encampment on the island, employ diplomacy to win more allies and then attack Syracuse by land and sea. It was his plan that was chosen, but it would proceed without him as news of his arrest reached the fleet just as they arrived in Catania (see map below) and he defected to Sparta, slipping away on his return journey to Greece.
It is from this point onward that the History takes its tragic turn. With Alicibiades providing important intelligence to Sparta, Gyllipus is dispatched to rescue Syracuse and the fate of Athens is sealed. After winning some minor victories, the Athenians are unable to gather significant allied support and make their assault on Syracuse, which nearly succeeds, but the Syracusians hold out for Spartan support. Hearing of the Spartan expedition, Athens sends yet more ships with their greatest general, Demosthenes, who has a short lived victory followed by a resounding route, which forces the Athenian army back into a marsh and bottles their navy up in a harbor. At this point it becomes clear that the greatest fighting force Athens ever fielded will be annihilated, along with their best generals.
News soon reaches Athens where the people go into a state of shock and despair. Alcibiades further twists the knife by inciting revolt among the Delian League as he travels from city to city sharing the news. Ultimately, he defects again to the Persian side (he may have seduced a Spartan king’s wife) under satrap Tissaphernes. The Persians, who had been funding the Spartan navy to combat the Athenians, began to withdraw their support. In advising Tissaphernes, Alcibiades plots his return to Athens by attempting to get the Persians to switch sides. He is not successful in gaining Persian support, but he manages to take power on the island of Samos and incite a coup in Athens, where an oligarchy of 400 takes power and reinstates him as an Athenian general. Eventually the oligarchy collapsed and was replaced by a government Thucydides calls “the 5000” a broad oligarchy of propertied Athenians. Alcibiades plays a key role in multiple naval victories and takes the fight to the Hellespont (modern day Turkey near Istanbul). Alcibiades then makes a victorious return to Athens, and the charges of blasphemy are dropped. The History then abruptly ends, before one last Athenian defeat followed by a peace settlement with Sparta two years later.
The character of Alcibiades is one of the most polarizing in ancient history. Ambitious, cunning, treacherous and shrewd, he is the kind of person you want on your side, not because he is loyal, but because of the damage he could do as an enemy. He was the only general capable of pulling off the invasion of Sicily, but his private interests prevented him from winning necessary political alliances. The ambitious insider echos the themes from the Melian Dialogue, the conflict between liberal ideals of justice, honor and moderation on the one hand and realist ideals of force, self interest and appetite on the other. Alcibiades is clearly a representative of the realist school. Organizations that ignore realism are doomed to become prey, but those that ignore liberalism will become victims of their own ideology, when realism metastasizes as insider threat. This excellent essay by Emil Kleinhaus on Leo Strauss’ reading of Thucydides explains:
Athenian general Nicias virtually repeating the Melian view, is clearly deliberate.49 Strauss insists that the connection between the dialogue and the expedition must be seen in light of Thucydides’ explicit explanation of the expedition’s failure—“the emancipation of private interest in post-Periclean Athens.”50 Yet the dialogue is about public interest of the most extreme kind, namely the desire for empire. In fact, it mirrors Pericles’ last speech, in which he admits that “the empire is a tyranny” while defending the empire on the basis of “the glory of the future.”51Strauss must somehow link Thucydides’ judgment about private interest ruining the Sicilian Expedition with the fiercely public-minded strain of thought that runs through Pericles’ last speech and the dialogue. He argues:
Those who contend that there is a connection between the Melian Dialogue and the Sicilian disaster must have in mind a connection between the two events which Thucydides intimates rather than sets forth explicitly by speaking of the emancipation of private interest in post-Periclean Athens. The Melian Dialogue shows nothing of such an emancipation. But it contains the most unabashed denial occurring in Thucydides’ work of a divine law which must be respected by the city or which moderates the city’s desire for “having more.” The Athenians on Melos, in contradistinction to Callicles or Thrasymachus, limit themselves indeed to asserting the natural right of the stronger with regard to the cities; but are Callicles and Thrasymachus not more consistent than they? Can one encourage, as even Pericles and precisely Pericles does, the city’s desire for “having more” than other cities without in the long run encouraging the individual’s desire for “having more” than his fellow citizens?52
Strauss has thus established a direct relationship between the arguments presented by the envoys to Melos and the Athenian failure at Sicily and even the eventual civil war. As Clifford Orwin puts it, “the introduction of the ‘Athenian thesis’ into domestic affairs proves disastrous.”53 The justification for tyranny cannot be bracketed and applied only in the public sphere, according to Strauss, and the Athenians at Melos defend tyranny in strong language. During the Archidamian War, Pericles was able to subvert Athenian democracy and maintain order, but after Pericles’ death, the position articulated in the dialogue leads inevitably to the domestic strife that undermines the expedition. The “Athenian thesis” as expressed at Melos is self-mutilating.
In conclusion, let us dispel the common tropes associated with Thucydides. You have probably heard of the Thucydides trap, a phrase coined by Graham Allison and picked up by Chinese propagandists. It alludes to the famous explanation Thucydides ascribes to the war, “the growth of the power of Athens, and the alarm which this inspired in Sparta, made war inevitable.” This line of reasoning draws a historical analogy; the United States is to Athens as China is to Sparta. Historical analogies are usually wrong, but this one is wrong and unoriginal. It is a rehash of the Cold War analogy that came about from the anti-war movement during the Vietnam War, which at least had clearer parallels. In that case, Vietnam was represented as the Sicilian Expedition, a foreign folly fated to bring about the fall of a democratic empire. The United States was caste as Athens and the Soviet Union Sparta, but as history has shown, that analogy was also imperfect.
The lessons about decentralized systems tending towards tyranny or the difficulty of balancing defense against invaders while preventing insider threats are Thucydides’ real lessons. As we have done when discussing Machiavelli, let us turn back to Strauss. The paradox of governance, as Strauss points out above, is that realism can only avoid self-mutilation by sacred law, yet sacred law is irrational. The paradox of history, Strauss goes on to explain, is that universal truths cannot be extracted from particular events, yet particulars are subject to universal truths as well as idiosyncrasies. Overdetermination is a difficult problem and historical analogy is a dangerous game. What lessons we can learn from Thucydides are clouded with sentiment of not only Thucydides himself, but also those that preserved, copied and translated his text.
That is why the third lesson we can learn from “The History of the Peloponnesian War” is the power of an early departure. The abrupt ending, while the conflict still raged, is evidence that Thucydides died before completing his work. Byrne Hobart had some illuminating thoughts on departed leaders in a recent issue of The Diff:
At GE, Welch maintained his celebrity status by hitting his numbers. After GE, he could only maintain that status by drawing a sharp delineation between the remaining positive parts of GE (which he took credit for) and the negatives (for which he could blame the EPA, the SEC, and, most inconveniently, his successor). Institutions as diverse as ancient Rome, Christianity, and Bitcoin illustrate the importance of a charismatic founder who departs from the scene as soon as a successor takes over; founders who provide running commentary after they're no longer in charge end up complicating management enormously.
We should trust Thucydides more because of his inability to meddle after he was published. It is an odd advantage to die before being done, but Thucydides had a few odd advantages; he was an ostracized Athenian, a failed general and a writer unable to finish his life’s work. These “advantages” allowed him to violate the paradox of history. Because of this, we should honor his work by refraining from simple syllogisms and instead, closely read his work for universal truths.
Risk Developments
Fate of Insurance
We’ve been following the long awaited Aon WTW megamerger here, and if markets are any kind of truth indicator, it looks like the deal may get the green light. Merger arbitrage hedge funds are taking interest as a few events create opportunity, including the recent European commission hold, Australian regulatory interest and Warren Buffett’s investment in Marsh. One advantage mentioned in the article would be increasing centralization of broker data. Brokers are just one piece of the insurance value chain though and they rely on carriers and reinsurers. With more data and greater market power they may be able to drive a better bargain for their customers or they may just capture the improved pricing for themselves.
All of this is happening amid a continued difficult year for the insurance industry, as Europe’s four biggest reinsurers fail to earn their cost of capital. Low rates, lots of competition and an uptick in losses has made the environment favourable for reinsurers and carriers, but brokers have had less exposure to all three of these issues. In fact, as premiums rise and capital markets are awash in quantitative easing, fresh money is pouring into insurance despite the difficult environment.
Whether Aon is merging or not, they are seeking to take advantage of the demand for insurance assets with a new offering aimed at named perils in new and emerging technologies. The combination of accessing the capital markets directly through sales of insurance linked securities and more tightly prescribing the specific peril being covered may be an attractive proposition for the insured and investors, but Aon may face challenges building an ILS empire if it’s centralized model gets pushback from its traditional allies.
FOQNEs
A couple weeks ago, I wrote about Neal Stephenson’s Snow Crash, a cyberpunk dystopian novel in which Franchise Owned Quasi-National Entities (FOQNEs) have replaced the nation-state as provider of public goods. Now Microsoft is open sourcing its SolarWinds hunt tool for anybody to use. I applaud Microsoft and am grateful for their efforts, but isn’t it odd to rely on monopolies instead of governments?
The CodeQL project, owned by Microsoft, is part of their Github acquisition. Github itself is adjacent to a public good. A code versioning and repository business’ compliment is code, so it’s not very surprising that they want to commoditize code. An operating system’s compliment are applications, which is why Microsoft loves “developers, developers, developers.” Still, open source cybersecurity tools are a classic example of a nonrival, nonexcludable good, so why is the government failing to provide this public good?
In other FOQNEs news, the bitcoin barge was scrapped. After libertarian cryptocurrency enthusiast purchased a cruise ship, during the cruise industry’s nadir last spring, they found out that owning the boat was not enough to make it the fiat free utopia they had hoped. It turns out the insurance industry requires payment in legal tender and the owners could not get the policy required under maritime law. If bitcoin keeps going up and rates keep going down, insurers are going to feel pretty silly for not taking premium that invests itself, but as it turns out, insurance companies still have to pay investors, employees and taxes in government money.
Broadband Gap
The ability for governments to provide public goods depends on both the good and the government. As discussed, the U.S. government is not particularly good at provisioning code, but it has historically been pretty good at building out telecommunications infrastructure. Still, in much of rural America broadband internet access is still expensive or impossible to get. This long form piece from cnet does a great job of discussing part of the issue.
Now with work and study from home being accelerated, the FCC is approving a $50M subsidy for high speed internet. Still, this won’t do much for people without access to broadband. For all the talk of remote work, little of the wealth is going to be spread to rural America. Concentration of power in a few metropolitan areas may keep the current system from imploding, but it’s not going to do any favors for improving social mobility, defeating stagnation and reigniting innovation.
Tech and Support
One public good that the U.S. government provides in abundance is national defense. The Airforce just awarded a $4.445B contract to defense contractors General Dynamics, ManTech and Northrup Grumman for “Special Access Programs” support. These classified programs require lots of secrecy and information infrastructure to support. Everything from systems integration to classification systems, identity management, authentication, auditing and training has to be done, just to support secrecy, which General Dynamics and ManTech have teamed up to provide before.
Secrecy can be an issue of national security, so it makes sense to protect vital information, but it also is by definition a support task. That is, maintenance, not production. David Graeber has a great line I’ve mentioned before about producing a cup once, but washing it ten thousand times. Most work is not productive, by which I mean capital creation. Creating a cup saves future generations from having to produce drinking vessels or use their hands, but washing a cup does not compound the effort.
Likewise, Internet of Things (IoT) devices, such as cars, appliances, sensors, meters, etc. will provide a boost to efficiency but then require ongoing support and security to maintain. With the number of IoT devices expected to triple by 2025, this could be a major drag on productivity, unless the devices are built with security and maintenance in mind. One particularly scary application of this could be autonomous weapons.
Paul Orlando’s newsletter, Unintended Consequences, touched on that issue last week. He raises moral, democractic and systemic risk issues, all of which are big concerns. In addition there are problems of proliferation and support. Autonomous weapons are a lot easier to build, acquire, steal or modify than say nuclear or biological weapons. MSCHF, the marketing/trolling stunt performance collective, for example attached a paintball gun to a Boston Dynamics robot. Boston Dynamics was none too happy about the association and voided their warranty. It’s easy to imagine a future in which a country buys autonomous weapons from an ally and is then threatened with the national-security-as-a-service being turned off. Alliances are about trust and fear after all.
If you’re interested in further discussion about autonomous weapons, decentralization and risk, check out this terrific interview with former U.S. military member, Radigan Carter,
Gratitude
Big thanks to Radigan Carter, Demetri Kofinas, Paul Orlando, Byrne Hobart and Emil Kleinhaus.