Marc's Reviews > When Genius Failed: The Rise and Fall of Long-Term Capital Management

When Genius Failed by Roger Lowenstein
Rate this book
Clear rating

M 50x66
's review
Sep 05, 07

Read in August, 2007

This is a great book. It explains, in accessible language, one of the biggest financial crises ever to hit world markets. It is extremely well-researched and well-written. (I'm comparing it here to other financial-disaster books. I'm currently working on The Smartest Guys in the Room, which is not nearly as well-crafted.) "Genius" shows the progression of random and intentional events that led to the rise and eventual collapse of Long-Term Capital Management, which was an enormous hedge fund managed by a group who actually *were* the smartest guys in the room, including two Nobel laureates.

You might think "A book about a hedge fund? Boooring!" But you'd be wrong. This book is utterly fascinating, and even quite dramatic as it relates the events. Further, it is a very important book to have read, since the people and ideas involved in it are still relatively current today. Witness the present crisis in the high-risk mortgage industry, or the outrageously leveraged private equity deals of the past few years. While these may be different mechanisms than bond spread swaps, the kernel of the idea -- that you can eliminate risk by spreading it around and hedging it through complex derivatives and still get a good return -- still applies. The opacity of these instruments, and the inherent unpredictability and emergent characteristics of what turns out to be a complex system (see my current reads) work against best intentions and even the smartest of the smartest guys in the room.

Highly recommended.

Sign into Goodreads to see if any of your friends have read When Genius Failed.
Sign In »

No comments have been added yet.