show how quickly the doubling strategy can result in catastrophe. It goes
like this:
A lily pad is placed in a pond. Each day thereafter the number of
lily pads doubles (i.e., two lily pads on the second day, four on
the third day, eight on the fourth, etc.). On the thirtieth day, the
pond is covered completely by lily pads, and all life is choked off.
A warning bell sounds when the pond is half full. On what day
will the warning bell ring? (See footnote for the answer.) 12
Had Leeson’s activities been identified and stopped just one month prior
to the Barings collapse (i.e., in January 1995 rather than in February 1995),
total losses would have been approximately one quarter as large and the
bank would have survived.
Leeson used his doubling strategy several times to recoup significant
losses in the 88888 Account. Meanwhile, he continued to report profits in
his regular trading account. After one brush with disaster in 1993, when the
88888 Account was £6 million in the red, Leeson managed to bring it back