Full Book Summary of When Genius Failed by Roger Lowenstein

Preview

There are books about money that feel like ledgers, all arithmetic and jargon, and there are books about markets that read like thrillers. This one belongs to the second kind. It tells the story of Long Term Capital Management, a hedge fund built by some of the smartest men on Wall Street and in academia, men who believed they had found a way to turn uncertainty into near certainty. They were brilliant, disciplined, and admired. They had Nobel Prize winners, veteran traders, and a reputation so dazzling that banks practically begged them to borrow more. And yet they came terrifyingly close to blowing up the global financial system. Roger Lowenstein does not present this as a simple tale of crooks, fools, or obvious greed. That is what makes it so compelling. The men at the center were not careless in the usual sense. They were methodical. They studied history. They built models. They understood markets better than almost anyone else. Their failure came from something deeper and more unsettling. They mistook elegance for safety. They trusted patterns that held most of the time and forgot that the world does not always respect a formula. They believed that if prices had always moved back toward normal, they always would. They believed markets could be irrational for a while, but not for long. The trouble is that long enough can kill you. At the heart of the story is John Meriwether, the celebrated bond trader from Salomon Brothers, who had already built one legendary operation before scandal forced him out. Around him gathered an extraordinary cast. There were traders with nerves of steel, mathematicians with enormous confidence in theory, and scholars like Myron Scholes and Robert Merton, whose work had changed modern finance. Their fund was based on a simple but powerful...