Billions to Bust and Back: How I made, lost and rebuilt a fortune, and what I learned on the way by Thor Bjorgolfsson

Author:Thor Bjorgolfsson [Bjorgolfsson, Thor]
Language: eng
Format: azw3
Publisher: Profile Books
Published: 2014-11-27T05:00:00+00:00

Bagus and Howden may be exaggerating when they add that young men on the streets of Reykjavik were as likely to know the Black–Scholes derivative formula as the yields of the day’s salmon catch, but they reflect the mood of the boom. Everyone seemed to be buying shares, leveraging up and not giving much thought to the potential consequences. The few prophets of doom who existed were shot down or marginalised. In the post-traumatic shock that followed the crash the focus changed, and there was a witch hunt for crooks and villains. During the boom time, however, people were trading in the markets with their eyes open, so I contend that they should be accountable for their actions and face up to the consequences. As the biggest individual financial loser from Iceland’s meltdown I have done so, and I believe that all those who let themselves get carried away must accept responsibility for their actions too. They seemed to that the boom would last for ever. But who can blame them? There was this enormous bubble based on escalating asset prices and leveraged funding. It was unsustainable and it is about time that Icelanders admitted it, rather than continually looking for others to blame. Of course, I was in that same bubble myself. Hulda Thorisdottir, a psychologist, and Karen Erla Karolinudottir of the University of Iceland published a paper in February 2014 examining the phenomena of motivated reasoning and confirmation bias in the years before the crisis. They explained:

The Icelandic people [have] had to grapple with the realisation that in many ways the prosperity of years past had been an illusion based on the banks’ non-viable business model of relying on the continuous flow of inexpensive credit and very risky investments.

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