In the early years of the Medici banking empire, which established commerce throughout Europe and later funded the greatest art of the Italian Renaissance, its founders had to set some ground rules.
Giovanni di Bicci, the first of five generations of Medici bankers in Florence, revealed what was to become the genius of the Medici family: its orchestration of people—at first financial, but later social and political, too.
The banker’s rules:
1. Each branch was to be a separate company, so as not to take down the whole enterprise if things went south.
2. To motivate him, a branch director was to receive much more compensation than his investment would appear to warrant, in exchange for living in the branch city and enforcing the rules.
3. Bankers were not to lend more than 300 florins to cardinals; to courtiers no more than 200; no credit to any Roman merchant or feudal baron, as both were unreliable; and never, never lend money to Germans, because their courts won’t respect your claim.
Still, it became clear immediately that however terrific the rules, staffing is always most important. Then as now, you need honest and astute managers.
No sooner did Neri di Cipriano become the Medici’s first bank director in Venice, in 1402, than he broke the rules by lending money to Germans. Even Poles!
He never recovered the money and fell so deeply in debt trying to cover his losses that by the time word got back to the Medici in Florence, he’d fled to Poland.
Years later, when di Bicci learned that his wayward ex-employee was living in poverty in Krakow, he sent enough money for the fellow to live on for a year.
Lesson: You can’t be too careful in hiring.
— Adapted from Medici Money, Tim Parks.