Four years ago, the German auction for mobile phone licences closed.  Telecoms operators in Europe paid around €100 billion for licences to offer third generation services which are probably worth nothing at all.  The corporate value destruction is almost without precedent in business history.

It was in 2007, I think, that the rumour the moon was made of blue cheese began to circulate.  Most people were initially sceptical.  It was not, however, the sceptics who started buying the cheese distribution sector, which strongly outperformed the market.  When the CEO of a cheese business said he would wait before investing in rocket technology, his company’s market capitalisation fell 10% in a week.  The call to spend more time with his family came soon afterwards, fortunately cushioned by a well-padded golden parachute.  The lesson was not lost on other executives. Only the crotchety boss and dominant shareholder of Bouygues Cheese continued to say it was all nonsense.

Major consulting firms established practices to advise food companies on the challenges of change.  There were few fees to be earned from telling clients not to be stupid, and growing volumes of business at stake.   Conferences entitled ‘Space – the New Frontier for Food’ – were held almost every week.  They were addressed by consultants, and ambitious corporation men and women, early believers,  who had earned promotion through their prescience. Investment banks urged the inevitable logic of restructuring.  If the merger of New Zealand Dairies with Glasgow Buses looked far fetched to some, the beaming architects of the deal pointed out that there were few major transport companies left to buy.

Journalists applauded these visionaries.  They understood that ‘moon made of cheese’ was a front page story:  moon not made of cheese was usually spiked.   Grocer’s Weekly even adopted the subtitle ‘the magazine of the space age’.  Only crusty columnists dared demur from the developing consensus.

Investment managers were reluctant supporters.   They had seen bubbles before.  But they were obliged to report to clients that underweight positions in cheese had led to underperformance.  Views shifted.  Perhaps funds should be entrusted to younger managers, their minds unclouded by experience.   As fund managers scrambled to increase their market exposure, shares in cheese rose towards the moon and the sky.

Excitement mounted as the day for the launch of the first exploratory rocket approached.   The space agency was auctioning the five seats on board, and competition was intense.  None of the four established cheese companies could be left out, and many other businesses were clamouring to be there.

The auction raised far more than anyone had imagined.  Its sophisticated designers made only one mistake.   They assumed participants had some faint understanding of what they were doing.  Manchego, the Spanish cheese maker was a particularly aggressive bidder.   As one of its executives explained, it was essential to be a lunar player.   If you weren’t aboard, your stock would fall by more than the cost of the seat.   Even if you were yourself thinking rationally – and mostly you were not – you were in the hands of people who were not thinking rationally, or could not act on rational beliefs.  What else could we do? said the chief executive of Lodacheese, whose successful career was based on the insight that you won auctions by paying more than anyone else.

A multi-national crew climbed aboard the rocket to general applause.  What happened next is shrouded in mystery.  Perhaps it blew up soon after take-off, perhaps it missed the moon and is on its way to distant space.  At any rate, the astronauts were never heard of again.  And nor was the myth that the moon is made of blue cheese.

It was only half way through this fairy tale that I realised it had already been written.  By Hans Christian Andersen, whose story of the emperor’s new clothes explained how vanity and greed together can promote a large scale self-delusion. Andersen’s only error was to exaggerate the effect of one small boy’s voice amongst the brayings of the self-important, the self-opinionated, and the self-interested.  His emperor continued to wave to the crowds even after he realised they all knew he was naked.  Great men, surrounded by adulation, are rarely wrong, do not often learn from any experience other than their own,  and never listen to small boys.  That is why history so often repeats itself.