Jerome Kerviel's recently announced trading losses for Societe Generale are astronomical by any stretch of the imagination. Over a period of roughly nine months he managed to rack up losses of $7.2B for his employer through a series of huge, unauthorized trades.
Sneaky Business was impressed by the sheer audacity of this illicit activity, but it got the team wondering just how quickly losses can be generated. Is there a natural limit to the rate that value can be destroyed? Or at some point will the God's of finance step in to smooth out the wrinkles in the space / time value of money continuum?
An analysis of recent catastrophic losses reveals some interesting statistics. Kerviel's loss of $7.2B amounts to a burn rate of $18,500 per minute. Pretty impressive considering the best Nick Leeson managed back in 1995 was a mere $5,400 per minute.
However, at an individual level, this is eclipsed by the infamous antics of the K Foundation - the successful UK pop group of the early 1990's. The group's decision to incinerate one million pounds in cash on the Scottish Island of Jura in 1994 has never been fully explained. In November 1995 the duo pledged to dissolve the K foundation and refrain from discussing the burning for 23 years. What is certain is that the event, which lasted approximately 67 minutes, represents a burn rate of almost $30,000 per minute. This makes it the fastest self-imposed destruction of personal wealth in history (representing, as it did, the vast majority of the group's profits).
Of course all of this pales into insignificance compared to the largest corporate losses of all time. While GM did pretty well last year (losing around $75,000 per minute), the clear "winner" remains AOL Time Warner - whose tear jerking loss of $98.7B in 2002 amounted to a staggering rate of $190,000 per minute. Even Jimmy Cauty of the K Foundation would be hard pressed to keep up with that pace.