Our brains don’t really work so well with very small or very large numbers. If I ask you to imagine the distance from earth to the sun, from earth to the nearest star, or earth to the nearest galaxy, it’s tempting to just think very, very far in all three cases, even though each one is millions of times more than the previous one.
Similarly, if you try to imagine the size of a bacterium, a virus, or an atom, you’re probably just thinking very small, even though each of those is millions of times smaller than the previous one. For that reason it’s hard to get our heads around some of the statistics that are important for the way the world works. It’s hard even to imagine the difference between a million and a billion, there are a few illustrations out there, but I like this one. Imagine you won a million dollars in the lottery, and you decided to go on a shopping spree. You spend $1,000 per day – how long will your money last? Answer: less than three years. Obviously I’m ignoring interest and inflation here.
This podcast is coming out on Monday, September 23, 2019. If you had won that million and started your $1,000-a-day shopping spree on Christmas day 2016, you would have run out of money last Saturday.
But what if you had won a billion dollars? If you were spending it at the same rate, $1000 a day, to run out of money about now, you would need to start spending, not years ago, not decades ago, not centuries ago but thousands of years ago. About 718 BC, to be exact. To finish spending a billion dollars, at the rate of $1000 a day you would have to have started while the Pharaohs ruled Egypt, before ancient Rome was even founded.
That gives you a just an idea of the difference in scale between a million dollars and a billion dollars.
And I think that the reason that many people don’t react proportionately sometimes is because our brains can’t really process information at a very high or very low scale, but try to keep that comparison between a million and a billion in mind when I tell you about a criminal trial that’s going on at the moment.
Keep it in mind because the amount stolen was not one billion, it was theft from tax authorities across Europe, of about €32B in Germany, at least €17B in France, €4.5B in Italy, and €1.7B in Denmark. That’s a total of over €55B, well over $60B in US dollars. Remember that example of spending since the time of the Pharaohs is only one billion dollars, this is vastly more.
The trial is still ongoing, but given the vast sums involved it’s astonishing that it has barely registered in the media in the UK, from where the crimes, it is alleged, were committed, or in the other European countries where taxpayers were ripped off, or anywhere else.
It doesn’t help that the crimes were very complicated – intentionally so. They involved what’s called high frequency trading, where computerized systems automatically buy and sell vast amounts of shares. They were programmed to produce a vastly complex trail of records that could be represented to the tax authorities to show ownership of very few shares when it came to paying tax on them, or very many shares when it claiming tax refunds. Because generating these records with misleading transactions was all automated, the amount that could be stolen was essentially only limited by the amount that the people involved typed into their computers.
But the people on trial are not Russian mobsters aided by computer hackers from Macedonia, they are the graduates of Oxford University, former employees of Merrill Lynch and HypoVereinsbank, one of the largest banks in Germany, and it’s obvious that this scandal touches many other big European financial institutions – many of them have legal teams in court observing the trial.
There’s a lot to be said about the involvement of big banks in financial crime, but the point that I’m trying to make here is that, because of the difficulty that humans have in processing large numbers, we react in irrational ways. Think of the resources put into retail bank branches around the country, around the world. Many thousands spent in every branch making them secure, alerting the police if they are robbed, armed guards, sometimes with police escorts to drive money shipments around the country.
And if they do get robbed, think of the resources put into hunting down, arresting, convicting and imprisoning the criminals. It wouldn’t be uncommon to get 10 or 15 years for a major robbery, say where $100,000 was stolen. But that sort of money wouldn’t even count as a rounding error for major white-collar crime. Yet, vastly more attention goes to those crimes than to white-collar crime, and certainly they get vastly more effort at both prevention and prosecution than white-collar crime.
There’s a lot to be said about the fact that the justice system is way more lenient on white-collar criminals, that the public might have a different mental image of criminals if shows like Cops had guys in sharp suits being tazed, instead of meth addicts, but I think that a lot of the problem is that they are exploiting the fact that the are stealing so much money that we just don’t have the mental facility to understand numbers that large.