How an Economy Grows and Why It Crashes

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C H A P T E R
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A
s the islander’s fi sh-savings increased, storage 
became an issue. People traditionally kept fi sh in 
their huts, but that proved too ineffi cient and even 
dangerous. Fish fi lchers became a big problem. 
And while the islanders would have liked to use their 
excess savings to grow through loans and investments, 
most individual savers had neither the time nor the 
training to judge the merits of business propositions 
offered to them.  
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H O W   A N   E C O N O M Y   G R O W S   A N D   W H Y   I T   C R A S H E S
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Sensing a solid business opportunity, an islander 
named Max Goodbank decided to launch a 
revolutionary service.
After guarding his own fi sh for years, Max 
knew there had to be a better way to 
store his savings. And after seeing so 
many of his neighbors get hoodwinked 
by slick fi sh borrowers, he also knew that 
most people needed help in deciding 
how their savings should be lent. With 
these thoughts in mind, he built a large, 
climate-controlled facility staffed by the toughest galoots on 
the island. The new “bank” would safely store the island’s 
collective fi sh savings and consequently solve the theft 
problem. But this was just the beginning.… 
Being a true entrepreneur, Max knew that if all he did was 
charge a storage fee, his profi t potential would be limited. 

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