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When Genius Failed: The Rise and Fall of Long-Term Capital Management

4.14  ·  Rating Details  ·  13,828 Ratings  ·  392 Reviews

With a new Afterword addressing today’s financial crisis


In this business classic—now with a new Afterword in which the author draws parallels to the recent financial crisis—Roger Lowenstein captures the gripping roller-coaster ride of Long-Term Capital Management. Drawing on confidential internal memos and interviews with dozens of key pl

Hardcover, 288 pages
Published January 18th 2001 by Random House (first published January 1st 2000)
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Duffy Pratt
Feb 13, 2011 Duffy Pratt rated it really liked it  ·  review of another edition
Shelves: journalism, trading
Long Term Capital Management was a hedge fund made up of a group of former hotshot bond traders from Solomon Bros., together with some high powered financial academics (including two Nobel prize winners), and one former central banker. They were the biggest stars in the business, and they had all the arrogance and greed that you could possibly imagine. They also seemed to be as good as they thought themselves. In five years, they turned a billion dollars into 4.5 billion dollars. Then they lost ...more
Apr 01, 2014 Robert rated it it was amazing  ·  review of another edition
As a student of the efficient market idea I has always wondered what these guys were up to in more detail even after seeing the Nova program about the meltdown of Long Term Capital Management in 1998. This is an excellent book that explains as well as can be in a general work of literature less than 300 pages.

There are several lessons here, that apparently will not be learned.

Mathematical models are based on very good math with very many assumptions required to make the computations workable. T
Dec 13, 2008 Kate rated it it was amazing  ·  review of another edition
I started reading this book in summer of 2007 and then picked it up again this fall. In 1997 I was blithely running around France checking out art while this country's financial system nearly came to a halt, the Fed had to step in and major banks suffered huge losses as a result of hubris and lack of understanding the true risks they were taking. Lowenstein brilliantly takes us behind this scenes to unravel how real geniuses-- Long-Term's marketing strategy was touting the number of Nobel prize- ...more
Nov 24, 2015 Brian rated it liked it
(3.5) Eerily similar to a crisis almost exactly 10 years later

An interesting, well-told if brief account of the rise and fall of Long-Term Capital Management (you remember that one, don't you?). When things get heated it was along the lines of Sorkin's Too Big to Fail, but otherwise a decent treatment of the significant events in the life and death of LTCM.

Don't have too much more to share other than how prescient the following quotation (the book was written in 2000) was (or, perhaps how Wall S
Sagar Jethani
Feb 22, 2011 Sagar Jethani rated it really liked it  ·  review of another edition
Shelves: finance
Lowenstein crafts a superb narrative around the failure of the immense hedge fund, Long Term Capital Management. The details of the failure are complex, but I found myself returning to the fact that so many factors cited as contributing to the near-collapse of the financial system in 2008 were evident ten years earlier with the demise of LTMC:

* Unregulated shadow banks
* Spiraling complexity of derivatives which few understood
* Over-reliance upon computer models which failed to account for the fa
Jul 15, 2012 Sunil rated it it was amazing  ·  review of another edition
Too big to fail.... LTCM might have not been the first to be bailed out. It wasn't the last. However, it might have the dubious distinction of being possibly the only firm who had a lion’s share to play in what eventually turned into a global contagion. Read and re-read. Save for posterity.
The fund boys: Meriwether, the leader, Victor Haghani & Larry Hilibrand, the overbearing maverick traders, Profs Merton and Scholes, the Nobel laureates and tutors to the rest of the street and many other
Книга Ловенстайна «Когда гений терпит поражение» стала для меня отличным продолжением после книги «Покер лжецов» Майкла Льюиса (

В книге описывается история создания, анализ деятельности и громкое падение столь «звёздной» компании известной на Уолл-Стрит как LTCM (Long-Term Capital Management).

В книге переплетаются профессиональный и глубоко научный подход вместе с человеческими страстями к наживе к большим и сверхприбылям. Рекомендую прочитать и посмотр
Brian G. Murphy
Nov 03, 2012 Brian G. Murphy rated it really liked it  ·  review of another edition
Shelves: finance
It works until it doesn't. Hard to believe that after LTCM's fall John Meriwether went on to found a new firm, JWM Partners, which, not surprisingly, blew up in the 2008-2009 downturn. What is surprising? In 2010, he founded a third firm, JM Advisors Management; so much for high-water marks.
Apr 03, 2016 James rated it really liked it  ·  review of another edition
Shelves: non-fiction, business
They thought their model solved it all, it did not, money evaporated and no one learnt anything at all. Is the glib but concise summary which sells this book short.

So the longer version is that star traders united with star economists unshaken in their belief in supremely rational and efficient markets to set up a fund. This fund made a lot of money investing in bets that any discrepancies in risk spreads would return to the norm. Over the course of 18 months they made their clients but above al
Kara Lane
Aug 20, 2014 Kara Lane rated it really liked it  ·  review of another edition
Roger Lowenstein's book is a captivating look at what happens when even brilliant people rely on models and ignore the human element in investing. Their models did not take into consideration that when people are motivated by fear and greed, they are capable of extreme behavior. And as John Maynard Keynes is quoted as saying in the book, "Markets can remain irrational longer than you can remain solvent." LTCM discovered the truth of that statement too late.

LTCM earned great returns in the early
Matthew Richman
May 02, 2014 Matthew Richman rated it really liked it  ·  review of another edition
Shelves: finance
It's easy to see why this book is a finance classic. Lowenstein does a great job, both on the technical and narrative sides. He explains LTCM's complicated trade structures and academic ideas which backed them up. He also is a great writer, and tells a readable and engaging story - even though most readers will know how the book ends, Lowensteins grip on the narrative makes you believe briefly that it could turn out differently.

Another piece of interest in this book is Lowenstein's meditation LT
Apr 25, 2011 Lobstergirl rated it really liked it  ·  review of another edition
Shelves: business-finance
Grrrrrr. The details almost don't matter. The outlines of the story will almost always be the same. Greed and hubris. Alan Greenspan bemoaning excess regulation, even as, and after, things go very wrong because there was little regulation. People paying lip service to ideas of risk. In this particular case, abnormal levels of secrecy because these fellows thought they were extra smart (they were - two of them won the Nobel prize shortly before the fund imploded) and their secret formulas and por ...more
Aaron Arnold
Jun 09, 2013 Aaron Arnold rated it really liked it
There's a graph at the very beginning of this book that's got to be one of the funniest displays of financial information I've seen in a while. It's very simple - a line showing the notional value of a dollar invested in Long-Term Capital Management over the firm's all-too-brief lifespan. The line climbs slowly from its beginning in March 1994, picks up speed through the intervening years, peaks at a bit over $4 in April 1998, and then drops off a cliff Wile E. Coyote-style to about 25 cents ove ...more
Rishi Prakash
Apr 11, 2012 Rishi Prakash rated it it was amazing  ·  review of another edition
There are lot of incidents which happen on Wall Street which are no less than the best Hollywood's thrillers. This story of "Long Term Capital Management" must be right up there among all time greatest folklore of Wall Street. The rise of this Arbitrage Company did surprise few people initially in 1994 when it managed to raise $1.25 billion(largest start-up ever)but its fall ended up flabbergasting many if not all on the Wall Street. This was a group which broke away from one of the Wall Street' ...more
Mirek Kukla
May 01, 2012 Mirek Kukla rated it really liked it  ·  review of another edition
Shelves: business
NOTE: this "review" is less about what I thought of the book, and more about what the book itself is about. So - spoiler alert?

It's All About the Fund
As the title suggests, "When Genius Fails" is about the "Rise and Fall of Long-Term Capital Management." Don't expect to learn why the economy itself went to shit, causing LTCM to lose ungodly sums of money. The main character of this tale is the fund itself, and Lowenstein does a fine job of documenting its meteoric rise and catastrophic fall.

Mar 03, 2010 Sheil rated it it was amazing  ·  review of another edition
Recommends it for: Those interested in business and finance
This book was rated a four... and then came the epilogue. Roger Lowenstein did a great job summarizing what was a monumental collapse by Long Term Capital Management, and the epilogue really drove the point home. It makes me wonder why, having graduated college just last May, we finance majors are taught the efficient market theory over and over again, but we never hear about behavioral finance until we read books like this. How many times do we need to be shown that markets simply are not ratio ...more
This is a good account of the crisis that hit Long Term Capital Management (LTCM) in 1998. It's also really interesting reading this book when the last crisis (the subprime mortgage crash) is still in the recovery stage. There are a lot of analagies to draw between the two.

It's essentially an example story of what can happen when some very smart economists model what they expect to be a very lucrative business, but fail to take into account the human factor and how in times of crisis everyone he
May 08, 2016 C rated it really liked it  ·  review of another edition
I read to understand how they lost half of my money. A terrific read for your inner finance nerd.
Julia Matoshchuk
Must read it one more time. I am finding it absolutely brilliant and I am in total love with this book. But "technical part" was a real challenge. I should definitely go thoroughly over financial theory of derivatives and arbitrage before returning to this book one more time.
Bui Ha
Jan 20, 2016 Bui Ha rated it it was amazing  ·  review of another edition
“When Genius Failed” first came to my attention when I looked for good books in analytics. I hadn’t thought that the story of the rise and fall of a hedge fund would be related to analytics, though I knew of the use of quantitative methods in modern finance. However, after finishing the book, I knew in certain that “When Genius Failed” was one of the best book I had read.

In a unique style, Lowenstein manifested the history of the rise and fall of LTCM, a Wall-Street Hedge Fund. Lead by a charism
Ravi Warrier
When Genius Failed is another brilliant (though, at times a little boring) book on the financial crisis that was averted in the last couple of years in the 1990s. The book, just like most chronicles, sheds light on the personalities involved, the mindset, the actions and the causes of failure. It is interesting to note how some of the world's best financial and economic geniuses were not in a position to even anticipate the storm on the horizon, when every common man knows when things are too go ...more
Mark Ruzomberka
Nov 15, 2015 Mark Ruzomberka rated it it was amazing  ·  review of another edition
"Those who cannot remember the past are condemned to repeat it" - George Santayana The Life of Reason, 1905

I'm quite surprised this story does not come up more frequently. Yet, another too big to fail story, but this time from a decade prior to our more recent economic crisis in 2008. The fact the company was founded by Nobel prize winners and actually named "Long Term Capital Management" compounds the unlikelihood of them going bust. However, they managed to lose $4.6 Billion dollars. Most of
Nov 10, 2015 John-Paul rated it liked it
Shelves: history-american
I think that if I didn't work in the financial sector and didn't already find it rather fascinating, I would have rated this book a bit lower. Lowenstein shows a command of the subject (which is no small feat for someone not in the industry) but the writing itself was just a bit too cold and clinical to consistently hold my attention. The figures mentioned in the book are staggering (trillions and billions are thrown around freely) as are the number of players involved in the rise and fall of LT ...more
Jonathan Perez
May 16, 2016 Jonathan Perez rated it really liked it  ·  review of another edition
I had this book on my reading list for a while. I wished I had read it earlier. To me this is a book about the dangerous seductive effects of excessive confidence. When you see it, learn to be sceptical. LTCM was a debutant on prom night and all the banks and wallstreet wanted to dance. I didnt know Seth Klarman had refused to take a stake in LTCM. He looks even greater now in my eyes. Investing is about being able to stand past the 100 year storm. At LTCM 2 simple small mistakes could wipe you ...more
Preston Kutney
Sep 23, 2015 Preston Kutney rated it really liked it  ·  review of another edition
Shelves: business
Great finance book - definitely on par with "The Big Short" and "Liar's Poker". Obviously very satisfying to read about brash Wall Street "geniuses" whose overconfidence precipitated their spectacular crash.

There were a lot of very fascinating takeaways about markets:

- "Markets conspire against the weak". Once the fund started to lose money, a number of fatal processes were kickstarted that accelerated the fall. First, LTCM was so massive in its positions that any move it made would move the ma
Mark Geise
May 25, 2015 Mark Geise rated it really liked it  ·  review of another edition
This is a great account of the meteoric rise and fall of Long-Term Capital Management, a highly leveraged hedge fund run by several huge names in finance including John Meriweather, Robert Merton, Myron Scholes, and David Mullins. LTCM specialized in arbitrage trades; it generally bet that spreads on riskier assets and less-risky assets would narrow. They were able to capitalize while others fled to safety due to liquidity issues and were able to capitalize on developing, less efficient derivati ...more
Mar 19, 2015 Mac rated it really liked it  ·  review of another edition
Lowenstein does a workmanlike job of crafting a clear narrative and spelling out the technical details of the financial markets. The rise and then fall of Long Term Capital Management is clearly presented from beginning to end. Though the story never soars, it never lags or gets lost in the weeds so overall I enjoyed the book and learned something as well. As an outsider to the hedge fund world, I appreciated Lowenstein's frequent stops to explain a particular trade or strategy, and I liked his ...more
Jul 28, 2014 Ying rated it it was amazing  ·  review of another edition
This review has been hidden because it contains spoilers. To view it, click here.
A concise summary of the problem that we see played out over and over (and over). Apt alternative titles would include: "When Genius Failed, Again" "When Genius Drank its Own Kool-Aid" "Genius Failed Again, Duh" "When Ego Kicked Genius' Ass" "Hey, Genius!" and "Rich Dad, Shithead."

One could say it was Goldman, and other traders sensing blood in the water, who took them down, and it was not merely their own egos. This blends into the chicken versus egg question. The writer offers some observation
Dan Ragsdale
Mar 01, 2010 Dan Ragsdale rated it really liked it  ·  review of another edition
Recommends it for: roy ragsdale
This review has been hidden because it contains spoilers. To view it, click here.
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Roger Lowenstein has reported for the Wall Street Journal for more than a decade and is a frequent contributor to The New York Times and The New Republic. He is the author of Buffet: the Making of an American Capitalist

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