The millionaire next door is still next door

Oliver Bullough


A decade and a half ago, my friend Simon told me about this amazing bank that he’d moved all his savings into. It was called Icesave, was from Iceland and was paying an interest rate way higher than anything he’d been able to get in the U.K. I should look into it, he said. I didn’t look into it, purely because my philosophy is: if someone’s offering a deal that sounds really good, it’s because you haven’t worked out how they’re ripping you off yet.

The joke was on Simon, because the bank collapsed, and all his money evaporated. Sucks to be you, I said, when I next saw him. It turned out that banks having assets worth more than 10 times a country’s economy on their balance sheets was a bad idea.

Except actually, the joke wasn’t on Simon at all because, after public outcry, the British government promised to extend its deposit guarantee scheme to deposits in the Icelandic banks, even though they hadn’t been insured, and taxpayers ended up 4.5 billion pounds in the hole, propping up people who’d rushed to grab that interest rate. So, Simon got the great interest rate, and he got all his money back, all at the cost of those of us who were stupid enough to be suspicious of a deal that was too good to be true. I was the one being ripped off all along, and the joke was actually on me.

Why is this relevant? Because of this article about the wobbly crypto-firm Celsius.

  • “Celsius is one of the biggest players in the market for digital yield products, providing users with the ability to lend out their tokens as collateral for other crypto projects. In return for lending their tokens, traders were able to earn annual yields of as much as 17%.”

¿¡¿17 percent?!? It’s not quite the ¡¡¡20 percent!!! that was offered by Luna/Terra, but it’s a rate that makes those offered by the Icelandic banks on the eve of the 2007-8 financial crisis look positively conservative.

So what happens now? Was suspicious Oliver (I’ve always thought crypto was a giant pyramid scheme, with gains propped up by investments of new investors) right not to have anything to do with this? Or were the many crypto-Simons right to pile in, secure in the knowledge that, when push comes to shove, the government will bail them out, to prevent complete collapse of the financial system? If it looks too good to be true, it’s probably a dream investment opportunity. (Regulators are also looking into whether laws were broken, which is great, but also perhaps a bit late.)

I’ve been developing a theory that almost all forms of financial innovation are simply elaborate ways to avoid buying insurance. Take U.K. energy company Bulb, which marketed itself as impossibly innovative (“officially Europe’s fastest growing startup”), offering low retail prices to attract customers while failing to hedge against the wholesale price going up (this was Iceland’s business model too, 15 years ago). Unsurprisingly, it went pop when the gas price spiked.

  •  “Bulb, which never made a profit, owed 254 million pounds to customers who had paid for their electricity and gas in advance when it collapsed last November… Hayden Wood, Bulb’s co-founder and chief executive who had been working on a government advisory board before its collapse, continues to be paid a 250,000 pound salary, while staff have been handed retention bonuses. Wood and his co-founder Amit Gudka both earned more than 8 million pounds from a share sale in 2018.”

It may not be very funny anymore, but the joke continues to be on those of us stupid enough to believe our instincts that its prices were too good to be true, since the government has set aside more than two billion pounds to keep it going, which the rest of us will have to pay, and everyone responsible is still in a job. You could take the message from this that we should all be more Simon, though I prefer to think that we should instead demand that regulators, investigators and legislators do their jobs and stop this happening in the first place.

On that note, I need your help. I am increasingly obsessed by the way that governments have essentially legalized bad behavior by under-resourcing the enforcement agencies tasked with cracking down (see the gutting of the Internal Revenue Service, for example), but I don’t have a name for the concept. Now that I’ve started thinking about it, I am seeing it everywhere.

Please make snappy suggestions: what should we call this phenomenon of legalization-by-under-resourcing which gets far too little attention?


Have you noticed that your neighborhood has a sudden lack of people worth more than a million dollars, as if a strangely selective plague has affected only people with High Net Worth?

This may be because you live in Britain, Mexico, Saudi Arabia or Indonesia. Henley and Partners, the much-written-about vendor of citizenship and residency, has commissioned a survey of rich people’s movements, and produced a useful map, where those countries facing a drain in their populations of rich people are colored red. It’s good news for the United Arab Emirates (up 4,000 millionaires), and bad news for Russia (down 15,000 millionaires).

I am, however, a little bit suspicious of these findings. Partly, that’s because this is a publication from a company that makes money when rich people move between countries, so I’m not sure if I trust data used to argue for countries to encourage more rich people to move.

  • “Resourceful countries should focus on futureproofing their economies by attracting and welcoming the upcoming generation. Some advanced nations should consider revising their current somewhat exclusive approach to the rest of the world, and reform and adapt to overcome the competition and not miss out on the opportunity,” notes Henley’s CEO Juerg Steffen, in a somewhat self-serving policy suggestion.

Mainly, however, I’m suspicious because I think the figures are wrong. It seems unlikely, for example, that there are only five and a half million millionaires in the United States, considering house prices have been soaring for years; or indeed, that there are only 260,000 dollar millionaires in France. The rival Credit Suisse wealth report, for example, recorded 22 million Americans worth more than a million dollars last year, and 2.5 million French millionaires, and I’m sure we’d have noticed a financial crisis so severe that it had wiped out the assets of that many wealthy and well-connected people. If you can’t trust the gross figures, it’s pretty hard to trust the calculations of year-by-year changes.

Anyone who has read this newsletter before will know I have a weakness for publications that track the movements of very rich people, as if they’re quadrupeds roaming across the Serengeti, but I think I’ll stick to relying on my old favorite: Wealth-X, which produced Crypto-Investment and the Wealthy back in March. That will be an interesting one to see updated.

  • “Worth as much as $145 billion on Nov. 9, when Bitcoin reached a record high of almost $69,000, seven billionaires with fortunes tied to crypto have since lost a combined $114 billion, according to the Bloomberg Billionaires Index,” notes Bloomberg.

Faith, that’s a lot of moolah to lose, even if it was only ever theoretical.


I have just spent a very pleasant weekend at the Borris House Festival in the Republic of Ireland, where I got to catch up with old friends and make some new ones. It was particularly fun to be on stage with Patrick Radden Keefe, who was talking about Empire of Pain (read it if you haven’t already), and I enjoyed meeting Fintan O’Toole, the eloquent and incisive columnist.

I bought a copy of his We Don’t Know Ourselves, which will be next on my reading list. There never seems to be much optimism in conversations about countries’ futures at the moment, whether they’re France, Britain, the United States or wherever, and it was lovely hearing someone being straightforwardly positive.