Lessons For Investors From Napoleon
John D. Rockefeller, the emperor of oil, once said that Napoleon would have been a great investor had he put his mind to it.
David Hawke recorded Rockefeller’s words in John D. The Founding Father of the Rockefellers (quoted via David Senra):
It is hard to imagine Napoleon as a businessman but I have thought that if he'd applied himself to commerce, he would have been the greatest businessman the world has ever known. My, what a genius for organization.
He also had what I've always regarded as the prime necessity for large success in any enterprise, that is a thorough understanding of men and ability to inspire in them, confidence in him and confidence in themselves.
See the men he picked as marshals and the heights to which they rose under his inspiration and leadership, it is by such traits as these, that men get the work of the world done.
Field Marshal Arthur Wellesley, 1st Duke of Wellington, the man who put an end to the Napoleonic era at Waterloo, admired Napoleon too. Andrew Roberts wrote:
When asked who was the greatest captain of the age, the Duke of Wellington replied: ‘In this age, in past ages, in any age, Napoleon.’
Given these great men’s admiration for Napoleon, he bears studying. Below are some lesson’s I’ve gleaned from Napoleon, both what to do and what not to do.
Do you have a “stranded” 401k from a past job that is neglected and unmanaged? Eagle Point manages separately manage accounts for retail investors and these accounts are often an excellent fit for our long-term investment approach. If you would like to invest with Eagle Point Capital or connect with us, please email info@eaglepointcap.com.
Be Opportunistic
Indeed, if there was one characteristics that epitomized Bonaparte through his rise and grandeur, it was opportunism. He was the opportunist incarnate.
Napoleon’s battles were surprisingly simple and straightforward affairs. Napoleon didn’t win because of fancy maneuvers. He won because he was quick to exploit a gap in the enemy’s lines.
What made Bonaparte such a dangerous opponent was his ability to seize upon a gap in his enemy’s defenses with extraordinary alertness, and respond to it with an aggressive move at high speed.
Napoleon could pivot his strategy at a moments notice when he saw an opportunity. Paul Johnson writes about Austerlitz:
Their cavalry repeatedly attacked and dispersed superior numbers of Allied cavalry, and the artillery were persistently resourceful: informed that the Russians were trying to escape over frozen ponds, they quickly prepared red-hot shot and fired them into the ice, breaking it and causing 2,000 Russians to be drowned. The infantry of the lines were so effective that Bonaparte did not have to call on the Guard at all.
Capital allocation is all about opportunism. Sam Zell called himself a “professional opportunist.”
Henry Singleton’s Teledyne is the ultimate example. Between 1965 and 1970 Teledyne traded between 40-70x earnings and Singleton bought 130 companies.
The 1970 bear market took Teledyne down to 10x earnings. Between 1972 and 1984 Singleton did eight tender offers and all but one were fully subscribed. Buybacks propelled shares to a 3,000% return between 1972 and 1983.
Make The Most Of Volatility
Napoleon was born during the volatile times of the French Revolution. The tumult created opportunities for rapid social mobility, and Napoleon seized his chance. After winning the battle of Toulon he was immediately promoted to brigadier, skipping the ranks of major and colonel. He was only 24.
Buffett and Munger often say they were lucky to be born when and where they were — a time of rising markets and inefficient securities prices. They both worked hard to make the most of their luck.
Avoid Ideology
Napoleon saw the political winds shift almost daily during the French Revolution. To survive, you had to shift with them. Napoleon’s chief aim was power which he got by being flexible in other areas he didn’t care as much about.
Few successful men have ever carried a lighter burden of ideology.
Andrew Roberts quotes Napoleon:
‘As for me, I always adopt the religion of the country I am in.’
Change Your Mind When The Facts Change
In one debate this man [Napoleon], who is so often portrayed as a raging egomaniac, admitted to the aged and respected jurist François Tronchet ‘Sometimes in these discussions I have said things which a quarter of an hour later I have found were all wrong. I have no wish to pass for being worth more than I really am.’
John Maynard Keynes said, “When the facts change, I change my mind. What do you do sir?”
Know The Numbers
Shane Parish teaches that “the map is not the territory.” It means that maps must be interpreted because they are not perfect 1:1 reflections of reality. Napoleon was a better map reader than anyone else.
Bonaparte began to pay constant attention to the role of calculation in war: distances to be covered; speed and route of march; quantities of supplies and animals, and the vehicles required for their transport; rates at which ammunition was used in varying engagements; replacement rates of men and animals; wastage figures from disease, battle, and desertion—all the elements of eighteenth-century military logistics.
He made a habit of working these things out in his head, so that they could easily be dictated for orders.
He also became a master map reader, with a gift amounting almost to genius for visualizing terrain from a two-dimensional, often fallible piece of engraved paper.
Few young officers of his day had this skill, or bothered to acquire it.
Asked how long it would take to get a siege train from the French fortress of Verdun to the outskirts of Vienna, most officers of the day would shrug bewildered shoulders or make a wild guess.
Bonaparte would consult a map and give the answer in exact days and hours.
Napoleon read geographical maps to plan his battles, campaigns, and supply lines. Investors may read accounting statements but the same principle applies. The ability to translate a map into reality is a superpower.
Listen to enough Q&A’s with Buffett and you’ll quickly realize he knows his numbers. Not just Berkshire’s, but the numbers on virtually every business. And he doesn’t just know the numbers, he knows the accounting assumptions belying those numbers.
Be An Expert
Napoleon was a student of warfare and knew everything about it, from the grand strategy of a campaign to the tactics of battle, all the way down to the nuts and bolts of building a cannon. His men admired Napoleon’s knowledge and his competence inspired loyalty.
There is nothing relating to warfare that I cannot make myself. If nobody knows how to make gunpowder, I do. I can construct gun-carriages. If cannons must be cast, I will see that it is done properly. If tactical details must be taught, I will teach them.
Napoleon asked for every book, map and atlas on Italy that the war ministry could provide. He read biographies of commanders who had fought there and had the courage to admit his ignorance when he didn’t know something.
Access to information is better than ever. There’s no excuse for failing to become an expert in your chosen circle of competence. Few will do this, so there’s a material advantage to be gained.
Know Your Circle Of Competence
Napoleon wasn’t afraid to ask dumb questions.
I was myself struck by the number of his questions, their order and their rapidity, no less than the way by which the answers were caught up, and often found to resolve into other questions which he deduced in consequence from them.
But what struck me still more was the sight of a commander-in-chief perfectly indifferent about showing his subordinates how completely ignorant he was of various points of a business which the youngest of them was supposed to know perfectly, and this raised him a thousand cubits in my opinion.
Napoleon knew everything about war, but knew his was ignorant beyond that.
He was not at all embarrassed by the little knowledge he had about the details of general administration. He asked many questions, asked for the definition and meaning of the most common words; he provoked discussion and kept it going until his opinion was formed.
Most analysts on earnings calls ask long convoluted questions designed to show how smart they are rather than attain real insight. Napoleon asked simple, dumb questions so that he could actually learn.
Know How To Motivate And Incentivize People
Napoleon was a master motivator.
He convinced his followers they were taking part in an adventure, a pageant, an experiment and a story whose sheer splendor would draw the attention of posterity for centuries. He was able to impart to ordinary people the sense that their lives—and, if necessary, their deaths in battle—mattered in the context of great events.
He had formulated a number of ways to raise and maintain morale, some taken from his reading of ancient history, others specific to his own leadership style and developed on campaign. One was to foster a soldier’s strong sense of identification with his regiment.
His constant references to the ancient world had the intended effect of giving ordinary soldiers a sense that their lives – and, should it come to that, their deaths in battle – mattered, that they were an integral part of a larger whole that would resonate through French history.
When Napoleon invaded Italy in 1796 he told his men:
Soldiers, you are naked, ill-fed. . . . But rich provinces and great towns will soon be in your power, and in them you will find honor, glory, and wealth. Soldiers of Italy! Will you be wanting in courage and steadfastness [to obtain these things]?
His proclamation to his troops set the tone for their relationship: follow him and they’d get rich.
Good food (where possible), high rates of pay, and loot—these were the material inducements Bonaparte offered. He also fraternized with the men.
Napoleon’s troops adored him. Their loyalty and motivation produced a tangible benefit in battle.
Wellington often observed that Bonaparte’s presence on the field was worth 40,000 men in the balance.
Incentives are key to investing and to leadership. Securities investors can learn a lot about a company by reading its proxy to see what the board rewards. Managers need to know how to set incentives to maintain motivation and achieve meaningful goals.
Communicate Clearly
Napoleon could only communicate with his Marshalls using written notes. And his notes often took several days to reach their recipient. Messages had to be both simple and crystal clear to be effective.
Napoleon’s rule was that every order leaving his headquarters had to first be read to a junior officer. If the junior officer could repeat back the correct orders, the message was deemed clear enough for the front lines.
Napoleon favored simple plans and direct language without an flourish. The was a advantage because during the fog of war issuing fresh orders is not easy.
Napoleon’s speech was simple even in everyday life. He prioritized clarity over fancy rhetorical techniques.
His public addresses were short and simple: “Soldiers, I expect you to fight hard today.” “Soldiers, be brave, be resolute!” “Soldiers, make me proud of you!”
He quickly taught himself to ask short questions that demanded direct answers.
One under-appreciated aspect of Buffett’s success is his ability to communicate complex ideas in simple, clear terms to his investors. Why has no one but the Waltons held Walmart stock since the IPO, while several people have held Berkshire since Buffett took over? Buffett took care to explain his strategy and intent which inspired confidence and engendered loyalty.
Decentralize (Avoid Excessive Detail)
As a ruler, Napoleon favored simplicity and avoided excessive detail.
One should not overburden oneself with over-detailed laws,’ Napoleon told the Conseil. ‘Law must do nothing but impose a general principle. It would be vain if one were to try to foresee every possible situation; experience would prove that much has been omitted.’
Napoleon’s laws remind me of the concept of “Commanders Intent.”
If the team knows the intent, the team can make decisions and execute with no further information needed. This is necessary for effective Decentralized Command.
Commanders intent allows subordinates to make decisions on details as they arise. It saves the leader from needing to detail what to do in every possible scenario, which is impossible.
Abide By Your Inner Scorecard
‘Men can be unjust towards me, my dear Junot,’ he wrote to his faithful aide-de-camp, ‘but it suffices to be innocent; my conscience is the tribunal before which I call my conduct.’
Napoleon judged himself by his own conscious and no one else’s. Buffett calls this abiding by your “inner scorecard” as opposed to an “outer scorecard.”
Napoleon did not have high regard for human life, likely the result of the brutal violence he witnessed during the French Revolution. Napoleon’s conscious may not have been well-calibrated, but he did hold true to it.
Move Fast
Napoleon used speed to make up for being outnumbered.
His strategy therefore was not only to strike quickly but to strike between his opponents’ forces, before they could join together. He went for each in turn, hoping he would have numerical superiority and defeat them separately.
Speed was the essence of Bonaparte’s methods. He used speed both to secure the maximum disparity between his own forces and the enemy’s, by attacking the latter before they were fully mobilized and deployed, and also to secure surprise, both strategic and tactical.
He moved armies across Europe faster than any man before him. He was able to do this, first, because of his ability to read both large- and small-scale maps, and plan the fastest and safest routes.
Second, helped by good staff officers, he was able to translate these campaign routes into detailed orders for all arms with a celerity and exactitude that were truly astonishing.
Third, he infused all his commanders with this appetite for speed and fast movement. Indeed, the common soldiers learned to move fast, taking long marches for granted in the knowledge that, whenever possible, Bonaparte tried to ensure they got lifts on baggage carts in rotation
…Bonaparte himself set an example of speed. He was often seen flogging not only his own horse but that of his aide riding alongside him.
Speed to market can decide an industry’s winners and losers as much as anything. A first-mover advantage can result in superior scale, locations, and brand awareness. But speed at all costs is a recipe for disaster. Napoleon’s army was built for speed. His supply lines and communications could handle it without devolving into chaos.
Match Your Strategy With Your Temperament
Napoleon was impatient, so his strategy relied on speed.
Bonaparte’s battle tactics were usually simple. Of course he knew of all the classic dodges—encirclement, attack from the rear, ambush—and used them when opportunity presented. His understanding and exploitation of terrain was comprehensive. Whenever possible, he deliberately chose his battlefields. But once his army was deployed on ground of his choosing, he simply attacked.
His aim throughout his career was to move swiftly to a position where he obliged the enemy to fight a major battle, destroy the enemy’s forces, and then occupy his capital and dictate peace terms. That is what he invariably did when he had any choice in the matter. He was absolutely consistent in his grand strategy, and on the whole it served him well.
It fitted his temperament, which was audacious, hyperactive, aggressive, and impatient of results. Indeed, impatience was his salient characteristic, serving him for both good and ill.
Napoleon’s personality would not have lent itself to being a passive, long-only, minority investor in public securities (like EPC). More likely, he would have adopted Zuckerberg’s “move fast and break things” ethos and gone to Silicon Valley.
Press Your Advantage
Napoleon always concentrated his forces where they could make the biggest effect. He read maps to chose an optimal place for battle and used his speed to get there first. Napoleon used simple battle tactics but concentrated his forces based on the best opportunity he saw.
‘During the Revolutionary wars the plan was to stretch out, to send columns to the right and left,’ Napoleon said years later, ‘which did no good. To tell you the truth, the thing that made me gain so many battles was that the evening before a fight, instead of giving orders to extend our lines, I tried to converge all our forces on the point I wanted to attack. I massed them there.’
This is exactly how the best managers and capital allocators operate. They focus their capital and their attention on the places they can get the highest return.
Control Your Own Destiney
Napoleon was emperor and head of the army. He answered to no one, which gave him the opportunity to use tactics others, like Wellington, could never get away with.
Wellington said:
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. This freedom to take risks, which Bonaparte enjoyed except at the outset of his career, was not enjoyed by any of his opponents.
Founders who retain voting control of their companies are in a position similar to Napoleon. They are not subject to the whims of investors and can pursue the strategy they deem best for the long run, regardless of short term pain.
Have A “Unity Of Action”
Bonaparte had a clear goal — the domination of Europe — and threw everything in France behind it. This “unity of action” was an advantage against the less cohesive coalitions he faced.
He had complete unity of command. The senior Allied commander, M. I. Kutuzov, had in practice no chance to adopt and carry out a unified tactical plan, and authority was hopelessly divided between sovereigns and individual commanders, some of whom acted on their own initiative.
Wellington added that all the resources of the French state were directed to the particular operation Bonaparte commanded to give it the maximum chance of success. He enjoyed direct, not delegated power like most commanders in chief, and to a degree, Wellington said, never before exercised by a sovereign in the field.
He made all his subordinate appointments according to his own notions, without the need to consult anyone. (Wellington, by contrast, often had generals foisted upon him by the Horse Guards and sometimes could not even choose his own staff officers.)
Finally, Wellington thought, Bonaparte’s sovereignty stilled disputes among his marshals and thus gave the French army “a unity of action.”
Many large companies function, at best, like loose coalitions, and at worst, like warring factions who compete as much with themselves as outsiders.
Focus
Napoleon had a relentless work ethic and could focus for long stretches of time.
What characterized him most of all was the force, flexibility and constancy of his attention. He can work eighteen hours at a stretch on one or on several subjects. I never saw him tired. I never found him lacking in inspiration, even when weary in body, nor when violently exercised, nor when angry.
Roederer wrote that this superman presided at meetings from 9 A.M. till 5 P.M. with a fifteen-minute break “and seems no more fatigued at the close of the session than when it began.”
Roederer quotes Bonaparte as saying:
If I seem always equal to the occasion, ready to face what comes, it is because I have thought the matter over a long time before undertaking it.
Neil deGrasse Tyson said something similar.
I once asked Neil deGrasse Tyson how he speaks so eloquently, and he told that 95% of what he says in public is something he’s written down before.
Don’t Avoid Technology
Napoleon was not interested in technology or anything he did not grow up with. He didn’t build a Navy and was susceptible to the British blockade.
Bonaparte never set up a department to study and make use of scientific warfare or new technology
He tended to be conservative in particular, especially on matters he thought he knew a lot about. Battle wounds were one of these subjects. Another was cannon and ammunition.
On these matters he thought the improvements introduced in his youth were quite enough, and though he fiddled with the standard equipment, he never changed it substantially.
Pontoons, mobile metal bridging materials, siege howitzers, anything involving naval technology including barges and troopships—he was not interested.
He made little use of observation balloons; indeed he took no notice of airpower, though it was then much discussed.
He ignored steam power, though the traction engine and the railroad were just over the horizon, and rail was to transform grand strategy in the decades to come.
One might have said that the military rail was made for Bonaparte’s geo-strategy of swift transfer of armies. But he preferred merely to improve the old military road system, mostly laid down in the days of Louis XIV.
Don’t Overstretch Your Resources
Napoleon’s ambitions grew faster than his resources. After a disaster in Russia and bogged down in Spain, he no longer had the resources to win the type of battle he was famous for. This, however, never seemed to occur to him.
Growth is good, but getting over your skis is disastrous. Its is better to grow well within your capacity than to probe for its limits.
Costco could probably open stores at double or triple the pace they do. Yet operating well within their limits with some space capacity provides a buffer that allows them to consistently execute at the highest level.
Don’t Be A Forced Seller
After Napoleon overstretched his resources, he became a forced (or at least motivated) seller. He sold Louisiana to American “for what even at the time seemed a paltry sum of money.”
It was a great coup for America. James Monroe sized the opportunity before him and sealed the deal without explicit Congressional or Presidential approval because it would take too long to get.
Not only was the price attractive, so was the financing.
The financing was arranged via the Anglo-Dutch merchant banks Barings Brothers and Hopes, which in effect bought Louisiana from France and sold it on to the United States for $11.25 million of 6 per cent American bonds, meaning that the American government did not have to provide the capital immediately.
Don’t Reinforce Failure
Napoleon’s Marshalls could win battles in Spain but could not win the war. Napoleon cycled through virtually all of his Marshalls and continued to send resources to the war, but never went to Spain himself. A prolonged war with little to show for it exhausted the army’s resources and morale.
Bonaparte was committing the elementary error that young cadets are taught at training school to avoid: “Never reinforce failure.” The occupation of Spain was a failure. It either had to be replaced by an entirely different concept or abandoned. Instead, Bonaparte continued to send in reinforcements, small and large but never of a scale likely to make a dramatic difference. It became, for him, like Vietnam for the Americans or Afghanistan for Soviet Russia.
There’s a saying “losers average losers.” Doubling down on a loser can be catastrophic, particularly when there’s leverage involved. Just ask Bill Miller.
Don’t Be A One Trick Pony
Jocko’s dictum “default aggressive” means action should be a default consideration. It doesn’t mean that aggression is always the correct action. Napoleon didn’t understand this.
As Wellington later observed, Bonaparte lacked the temperament to fight a defensive battle, let alone a defensive campaign. Had he been able to do so, he might well have fought the Sixth Coalition to a peace of exhaustion, without a single one of its soldiers setting foot on French soil proper. As it was, he was still determined to follow his instincts and bring the entire war to colossal battle, ignoring the fact that his own losses could not be replaced, while the Allies were increasing their numerical strength all the time.
Being an opportunist is the opposite of being a one trick pony.
When Covid hit and Davita’s stock de-rated, the company began an aggressive buyback program. When it became clear that COVID’s effects were going to linger longer than expected, Davita pivoted from repurchases to deleveraging. Because Davita pivoted quickly, no lasting damage was done. It is an example of opportunism and flexibility.
Bed Bath And Beyond never stopped repurchasing shares until it was too late.
Don’t Underestimate Your Competition
Success can breed egotism, and egotism breeds contempt. After several victories Napoleon began to think he was invincible and stopped taking his enemies seriously.
The delay suggests that Bonaparte was overconfident about the British. He ignored the advice of his marshals, who had had the experience of facing British infantry, that they were extraordinarily obstinate in holding a defensive position. He also underrated Wellington as a tactical commander in battle. When Soult praised the duke, Bonaparte replied: “That’s because he has beaten you.”
Wellington did not make a comparable mistake in underrating Bonaparte. He thought him worth an extra 40,000 men, which almost doubled the numerical odds against the Allies.
Bonaparte believed that his foreign subjects would never rise against him, for he was the victim of his own propaganda.
In Thinking Fast And Slow Daniel Kahneman called overconfidence “the most significant of the cognitive biases.”
Do you have a “stranded” 401k from a past job that is neglected and unmanaged? Eagle Point manages separately manage accounts for retail investors and these accounts are often an excellent fit for our long-term investment approach. If you would like to invest with Eagle Point Capital or connect with us, please email info@eaglepointcap.com.
Disclosure: The author, Eagle Point Capital, or their affiliates may own the securities discussed. This blog is for informational purposes only. Nothing should be construed as investment advice. Please read our Terms and Conditions for further details.