Saturday, 5 September 2009

Would Napoleon Have Made A Good Hedge Fund or Private Equity Manager?

How often do we hear top business leaders compare themselves, or be compared to, former famous military leaders? How often do we hear that they model themselves or their strategy on such people?

I wonder if such former military leaders like Alexander the Great, Caesar, Bonaparte, Nelson, Wellington, Rommel or Montgomery would have actually made decent business leaders. In most, if not all, cases they made rubbish Politicians - and even today, very often business leaders make poor Politicians too with just one exception I can think of, Michael Bloomberg.

Napoleon was an interesting man and he had perhaps the best make up and strategic mind to become a modern day banking executive, hedge fund manager or private equity leader. Why? Because he had little respect for the resources he consumed - people. He also knew exactly how to fund his campaigns as many of his greatest ones he had to make self-financing. Compare him to someone like Wellington and it is chalk and cheese - he could never have worked in the world of finance and he was an awful politician too. For a start, he had a conscience and that would not work in modern financial leadership.

Napoleon was an incredible man, no doubt. But as Wellington wrote of him:

'I can hardly conceive of anything greater than Napoleon at the head of an army - especially a French army. Then he had one prodigious advantage - he had no responsibility - he could do what he pleased; and no man ever lost more armies than he did. Now with me the loss of every man told. I could not risk so much. I knew that if I ever lost 500 men without the clearest necessity, I should be brought on my knees to the bar of the House of Commons.'
There are real echoes of modern day financial 'war' here - Napoleon had no limits and he cared not a jot for what he was risking while Wellington was constrained both by his own conscience but also he was 'regulated' by his Government. Indeed, one of Wellington's greatest envies was that Napoleon could choose who he liked as his commanders and he often promoted people to be Generals who had risen from the lowest of ranks while Wellington had the majority of his officers foisted upon him from above. But it was Napoleon's complete lack of responsibility that made him 'great' - it was to be his biggest weakness too. How similar is that to modern day financial leadership - he was interested in all the gain and no pain.

Napoleon was an opportunist to the core, which would have been a good grounding for today's markets. He was a man of no origin - born in Corsica of Italian decent as a minor aristocrat, his family were hounded out and he arrived in France penniless and land-less. France was in Revolution and this meant opportunity (could we mean 'Deregulation' here in modern finance terms?). He felt no allegiance to France, it was just the vehicle of his ambition. He rose to fame by mastering artillery - he read about it, understood it to the nth degree and ruthlessly used it with devastating effect (shock and awe, the major tactics , culminating in firing grapeshot into mobs at Tuilieries to bring a swift end to uprisings as well as in battles.

He was no innovator, he used tried and trusted technology and tinkered with methods - while Britain founded research organisations into weaponry and invented one of the most devastating of modern innovations of war, shrapnel, France produced nothing. He inherited a superb communication system and via semaphores he could send messages at 150 mph, which helped him in his greatest of skills, to move vast armies at lightening speed across all terrain. Napoleon was a skilled mathematician himself, he could plan a major campaign right down to speed of travel and the last water canister consumed, while his ability to visualise terrain represented on maps gave him a unique ability to see how his armies could move and at what speed. Today, these skills of reading situations, fast communication, and knowing the market would have been handy as well as his vast network of spies.

He also knew how to woo backers. He chose early on Vicomte Paul de Barras as his target, who had been given unlimited powers by the National Convention. Barras also had a penchant for beautiful women and Napoleon took on one of his discarded mistresses, possibly at de Barras' request, the beautiful Creole descended, Marie-Josephe-Rose Tascher de la Pagerie or Josephine as we know her. This has echoes of modern businessmen buttering up people with power like politicians for their own gain - doing them 'favours' to make sure they are in each others pay, long term. You do not have to stretch your imagination far to think of modern British politicians who have been courted by the fabulously wealthy to the extent that they discard their socialist doctrine to openly say that they don't mind if such people get fabulously wealthy.
Napoleon would have loved Peter Mandelson and Tony Blair for sure.

Napoleon, in being an opportunist, was a massive risk taker. He was often very lucky too and throughout his career he managed to avoid his greatest potential protagonist, Admiral Nelson, more by luck than judgement. Napoleon used simple formulae to win - he moved swiftly, engaged the enemy fast and aimed at dividing their forces and annihilating them. Often he would make daring manoeuvres and come up from behind as at Marengo, or sometimes he would disguise his numbers by marching them through forests - stealth in modern day financial workings is critical. He was a master at propaganda using his semaphore (the modern equivalent in business of telecommunications, email and Blackberry?) and post system to get his version of events in first. He was brave and he chose his commanders very well - with some of the cream of French historical leaders at his fingertips like Ney, Massena, Murat, Desaix and his fantastic chief of staff and fixer, Berthier; after all what are good leaders today without a decent PA?

Napoleon cared little for people. Although he fraternised with his troops, he cared not one jot for losses and this was fundamental to his approach and ambition. More than once, he deserted armies in foreign lands to go back to Paris and secure a better future for himself. His ruthless streak was countered only by his intelligence and manipulation. There is a major road in Paris at the Arc de Triomphe called Kleber. This avenue was named after the hapless Jean-Baptiste Kleber, who was left in charge of the army Napoleon deserted in Egypt after he had been utterly defeated, beating a path to save his own neck. As Kleber put it, 'He left us avec ses culottes plein de merde'.

Napoleon's consumption of human and animal resources was part of his eventual downfall. He lost 50,000 men a year in 6 years in Spain alone, when Wellington lost 6,000 a year on the same campaign. He consumed over a million horses in cavalry or mobilisation. The vast scale of new recruits and horses alone diluted the experience of even battle-hardened veterans. Though one of his most revered skills was the use of reserves, his elite Guard of 5 year or more veterans were used so little that they let him down due to lack of experience when the time came at Waterloo. At his fingertips, he had the most forward thinking medical man, Larrey, who invented the concept of the Flying Ambulance to rapidly remove the wounded from the battlefield and get them treated. But Napoleon preferred amputation at the slightest injury favouring speed over medication and care that Larrey expounded. This compounded the terrible loss of resource. For this, Napoleon had no conscience. Just think to how inexperinced but malleable people are best used in finance today and firing is the easiest way of refreshing forces.

As he reached the zenith of his powers and was promoted to Emperor for life with a hereditary path so that 'killing him served no purpose', Napoleon plotted his own downfall because he could not see the folly of his enormous risk-taking. How this echoes modern financial leaders is extraordinary. Recently, Vince Cable described high financial people as thinking of themselves, 'Masters of the Universe'. How such people thrive on risk taking and luck in highly spectacular and risky deals and then self-promote and congratulate the genius only beheld in their own eyes. How they use resources gained from others and equally spectacularly lose them only to persuade the very same people to do it all over again. Lack of conscience is critical to being a successful financial operator.

Napoleon knew the importance of cash and wealth. So many of his campaigns were incredibly profitable and he knew how to keep people sweet who backed him. When invading a country, he would go straight the bank vaults and ship back the reserves of gold, coin and artifacts, taking a considerable slice for himself and his troops, but making sure his Government profited too. The parallels are there to see - share out plenty of the booty with those who help enable it to happen and they won't mind the death toll. In fact, such a massive turnover of forces meant one great thing for any French soldier - promotion and more money, the exact types of character that financial companies need today in terms of ambition and motivation. The flag was merely a convenience, and so it is today as ultra-rich hedge fund and private equity managers will domicile themselves wherever the regime is cheapest in terms of tax.

There are two crucial things that would have made Napoleon successful in today's financial markets. First, he cared not one jot of losses and cost - just about success and wealth. Two, he believed he had the right be re-endorsed if he spectacularly failed, which he did on several occasions. The winning was always more important than the losing, no matter what the cost. The country always re-equipped and re-financed him.

The final crucial part was that Napoleon never realised when he was wrong. Even after his disastrous campaign in Russia where even as he retreated he looked for one quick win to change things, like an addicted gambler putting all on the next throw, he never believed he was wrong or mortal. After his short exile in Elba and France rebuilt him, he met his final and most spectacular of defeats at Trafalgar and Waterloo - arguably where good military skills and conservative approaches beat the life-long gambler.

The parallels on modern financial leaders are all there to see. They are all trumped up Napoleons and that will eventually ruin us.

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