Home Anty-Climax What your business should learn from Iceland’s collapse

What your business should learn from Iceland’s collapse


Every entrepreneur needs to have a degree of self-assurance, a belief that he knows something others don’t. That’s the genius of capitalism – you can leverage your insights to create something of value to others.

Usually, that confidence is based on knowledge, tempered by experience and honed by dissenting points of view. Sometimes, though, it seems that everyone can become equally willing to shut up and go along for the ride, and “drink the Kool-Aid”, especially if everyone has the same experiences to draw on.

That’s kind of what happened in Iceland, the world’s craziest Ponzi scheme. Michael Lewis is probably the best and most readable chronicler of the current financial crisis. In this fascinating piece, he investigates the collapse of Iceland and finds that mass delusion and lack of dissenting voices, products of Iceland’s provincial and isolated culture, were keys to this “perfect bubble” and ensuing disaster.

In Iceland, what it came down to was culture, or mono-culture. For 1,000 years, Iceland had one industry, fishing. The industry developed into one where toughness and risk-taking were the only way to succeed. This approach permeated the culture of Iceland, much like rice paddies apparently taught the Chinese mathematics and the virtue of diligence and patience. When fishing made Iceland wealthy and secure, many Icelanders moved away from the unpleasant work on the boats to a more sophisticated and glitzier line of work, investment banking.

Many thought their success was an illustration of their natural superiority, of an innate “gift for finance”. Iceland was also a small, superstitious community, where a study was required to assure the locals that an aluminum smelter would not harm the elves thought to live there! The hyper-masculine risk-taking culture of the fishing trawlers, combined with the provincial outlook of the isolated country led to hubris. External criticism of the Icelandic model was brushed off as envy. Without moderating influences or dissenting voices, the distinctive business culture of Iceland led to disaster.

Your business needs your leadership and vision. But leaders need people with different worldviews to challenge their assumptions, and vision is only effective if the blinkers are removed.

Your company’s culture will determine whether you listen to informed staff and advisers, or whether the elves run the show!

Photo: ccgd (Flickr)