Ventillation

Throughout the '70s, '80s, and '90s there was a pretty clear path to prosperity for someone who had had the benefit of a great education.  If you started working at a big bank after college and put in a couple decades, you had a good chance of amassing enough money by your mid forties that your family would never have to worry about money again.  I don’t think that money is the most important thing in life and I don’t think that most people think money is the most important thing in life but it’s legitimately a priority for lots of people.  For such people, in my admittedly oversimplified depiction, banking was a high-probability route to amass somewhere between ten to one hundred million dollars (in today's dollars) before the age of fifty.

One of the most game changing things about the Internet is that its so easy to put up a website.  Moreover, in the early days of online, enterprising people could get prime real estate on the Web (i.e., one word domain names for less than the cost of dinner) and get eyeballs.  The fact that one didn’t need to raise financing or manage staff or even get out of one's pajamas to have a successful Internet venture in 1998 meant that kids could do it.  In fact, computers favored a younger generation.  Also, the pace of progress became incredibly accelerated by the late '90s.  It would be shocking to make an offline business that became frequented by millions of users in less than a decade.  Online, where marginal costs were negligible and everything was a few keystrokes away, websites routinely got to millions of users in a matter of months.

While a banker might accumulate ten million dollars of wealth with a reasonable success rate over a thirty-year slog in banking, it is incredibly unlikely that the same banker could make a billion dollars of wealth in ten to twenty years.  To even have a chance, that individual would have to ratchet up the risks they took.  But in chasing that much richer payout, the associated probability of massive losses (not just for the individual but for the firm) went way up.  And when the first big risky bet went sour, the only choices available were to shamefully bow out of the race or to double down or to attempt a fraudulent cover up.  Given the personalities involved it’s not surprising that many chose the latter option.  Given the example of the Internet, it's not surprising that people had an easier time believing that involving computers completely changed what was possible or sane.

Greed, suboptimal regulation, and lack of internal controls at big financial institutions certainly played big parts in the global financial collapse that started in late 2007.  But if the individuals involved in finance had had more reasonable ambitions they wouldn't have been driven to act so irrationally.  The risks they took in retrospect don't seem to make sense because the additional happiness one gets from getting more wealth than you can spend is pretty small for most people.  That additional pleasure pales in comparison to the pain of personal or vocational failure resulting when a big risky bet goes horribly wrong.  But, when one is chasing something hugely challenging, it's often difficult to asses the accurate probabilities of success and failure.  A healthy disregard for the impossible underpins most great human acts.  But more of a spotlight on the thousands of entrepreneurs that stumbled for every dot com billionaire that emerged in the late nineties would have gone far to prevent a generation from thinking that it was realistic to go so impossibly far in so little time.