Published in 2001, When Genius Failed provides a historical look into the rise and fall of Long-Term Capital Management (LTCM). Roger Lowenstein uses confidential material such as office memos and interviews with key players to tell an interesting tale that showcases the highs and gets to the core of the eventual collapse of LTCM. The firm’s catastrophic losses jeopardized not only the biggest banks, but the stability of the financial system itself as things began to tumble down. Lowenstein discusses this in detail, enabling readers to understand the repercussions of their collapse in a whole new light:
"The source of the trouble seemed so small, so laughably remote, as to be insignificant. But isn't it always that way? A load of tea is dumped into a harbor, an archduke is shot, and suddenly a tinderbox is lit, a crisis erupts, and the world is different. In this case, the shot was Long-Term Capital Management, a private investment partnership with its headquarters in Greenwich, Connecticut, a posh suburb some forty miles from Wall Street. LTCM managed money for only one hundred investors, it employed not quite two hundred people, and surely not one American in a hundred had ever heard of it. Indeed, five years earlier, LTCM had not even existed."
When Genius Failed shows us how quickly things can change in the financial industry. Lowenstein states that the threat of Long-Term’s collapse seemed so incredibly small that it was unthinkable; however, he describes the events that led to its demise and outlines how the vast majority underestimated the eventual outcome. This book is perfect for all investors and anyone who is interested in learning about how one of the most influential partnerships on Wall Street almost caused a global financial meltdown.