On October 6, 2008, the nation of Iceland officially went broke. They had $100 billion in banking losses that year…roughly $330,000 for every Icelandic person.
Their national debt reached 850% of their national GDP. For comparison, the debt in the US was 73% of the GDP in 2013.
Now in the years leading up to the bust, Iceland experienced a huge boom. And most of this new wealth was tied to the banking industry. A nation that used to make money by fishing now made lots of money through banking. In Boomerang, by Michael Lewis, one person explained the it like this:
You have a dog. I have a cat. We agree hat each is worth a billion dollars. You sell me the dog for $1 billion. I sell you the cat for $1 billion. Now we are no longer pet owners but Icelandic banks, with a billion dollars in new assets.
Fake capital. Fake investments. Fake value. It all sounded good on paper, but in 2008, it all came crashing down.I’m telling you a banking story from Iceland because I think it illustrates something that’s really important to us today. Bankers in Iceland had fake wealth…wealth on paper. But it wasn’t real. It came and it went…just like that.
Many times, what looks real on paper isn’t real in life.
- We install systems of fake accountability. It’s pretty simple to maintain the appearance of accountability while missing the point entirely.
- We have fake relationships. Colleagues are great, but swapping work stories with someone isn’t an indicator of an authentic friendship.
- We live with a false identity. You might be praised for being a great leader, speaker or thinker, but if your identity is built on what you do, it will all come crumbling down.
Maybe we can all learn something from the banking industry of Iceland.