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April - May 2009

Business Forum

Anyone can lose 24 billion or can they?

by Martin Ison

My teenage son reminded me of Alan Bleasdale’s anti-hero Yoser Hughes in the recession-torn 1980’s drama, ‘Boys of the Black Stuff’. ‘Gizz-a-job’ is his plaintive refrain as he ponders cash-flow needs. He remarked that he wouldn’t mind being CEO of the Royal Bank of Scotland, working on the basis that if all you needed to be set up for life would be to run a bank into the ground to the tune of £24 billion; then anyone could do it – even a reasonably intelligent teenager...

I thought, yeah – nice work if you can get it. But that set me to thinking ... is it really that easy to lose £24 billion? After careful consideration I realised that, no it’s not that easy. It takes a special kind of person.

In my daydreams, I sometimes play highly detailed imaginary games like ‘what I would do if I won the lottery’. Something that takes quite a feat of mental gymnastics; as I never actually play it. But it passes the time whilst waiting for the lights to change – after all, can’t make a quick call on the mobile any more. But what would I really do with the money? Let’s say a cool couple of million – no, call it three million. Three and a half. No, make it three-point-four million for the sake of realism. (This is typical of my daydreams: can’t even decide on the ground rules and it’s time to wake up and think of something serious).

So, how exactly would I spend the lovely lolly? Well, when you think about it, most of our aspirations are surprisingly similar: something housey, like paying off the mortgage or buying a bigger house or both; then there’s a nice car (or two); a holiday of a lifetime; something for the missus; and aunty Doris; a bit to charity; maybe a party for all my friends (and the new ones I’ve just bought); something aside for a rainy day; and then what? Well, life as usual I guess, happy in the knowledge that I wouldn’t have to work on stuff I didn’t like and that I could blow some cash if I wanted to.

Now consider the RBS case ... consider what you would do with £24 billion. Say it fast and it doesn’t seem all that much: the billion has become the new million – millionaires are sooo passé, don’t you think? But let’s look at the size of this shopping task – the task that Sir Fred Goodwin and a few others seemed to have achieved with such aplomb.

To blow £24 billion, you would need to spend one million pounds every day for the next sixty-five years. I’ll just run that past you again: you would have to spend £1,000,000 every day for sixty-five years to blow £24 billion.

Easy, I hear you say: all you have to do is buy a villa every day; and some cars; buy some Picassos and a Renoir or two; perhaps buy up a few companies; maybe a race horse; you’d find a way. Job done, money out the bank (to phrase a coin). But no ... job not done. Job not done at all ... Buying a villa, some posh art and a few supercars every day simply converts the money into something else of value ... all you would have done is acquired some assets. And to cap off your complete failure to rid yourself of £24 billion, those assets will probably actually increase in value (at least in the longer term) so your paltry amateur efforts will have completely back-fired. Money of this kind of magnitude tends to take on a regenerative life of its own.

Now you can see the sheer enormity of the task at hand. Now you can start to grasp the sheer invention and calculative creativity needed to turn £24 billion into a complete loss; a vacuum where the £24 billion once was. No assets. No nothing. Now you see it, now you don’t. This takes a special kind of ingenuity that is beyond the average person on the street – or quick-witted teenager. It is in this very special way that Sir Fred Goodwin has been able to show his sheer mastery of achieving the near impossible and, in so doing, demonstrate to the rest of us that he has truly earned his £600,000 a-year pension, laughing all the way from the bank.

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