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•126 The 100 Greatest Business Ideas of All Time

bonds themselves more risky. There is more risk, so the investors demand higher
return, which makes things a little worse if all goes well, or a lot worse if the compa-
ny’s plans underperform.

‘Junk bonds’ is the term used to describe such bonds. Technically they are not
rated as ‘high quality’ by the US bond rating agencies. A high proportion of bonds
does not meet the stringent conditions demanded by these organisations.

So where there is a risk there is a market. Led by W.Braddock Hickman in the
1950s who showed that low-grade bonds would yield higher overall returns (even
allowing for failures), Michael Milken (known as the Junk Bond King) popularised
the idea and created the junk bond market.

Drexel Burnham Lambert, for whom Milken worked, promoted the idea of
diversifying risk in the form of mutual funds and unit trusts, and for a while these
proved successful in returning higher yield with reduced risk. The edifice went through
a well publicised crisis caused, on the one hand, by allegations of insider dealing –
Milken got ten years – and by a number of the companies so formed floundering. In
the end a series of defaults on junk bonds left a trail of business failures culminating
in the bankruptcy of Drexel itself.

Despite this infamous period, the high yield so-called junk bonds are still a
permanent and important part of the global economy.

Idea 70 – Go on, devolve yourself

Politics is a great driver of business, and never more so than when politicians are,
strictly in the nation’s interest, spending money on, well, politics. The Scottish Par-
liament has announced its new executive of ministers and their juniors. It has a First
Minister and ten other ministers in the executive, which is like saying of cabinet
rank. After them come a further 11 deputies who report to the executive ministers.
They all have salaries and cars. The Scottish Office in London has, in the past,
operated with one cabinet minister and three or four ministers.