When Genius Failed Book Summary - When Genius Failed Book explained in key points
Listen to the Intro

When Genius Failed summary

Roger Lowenstein

The Rise and Fall of Long-Term Capital Management

4.2 (76 ratings)
19 mins

Brief summary

When Genius Failed by Roger Lowenstein is a non-fiction book that tells the story of the rise and fall of the hedge fund, Long-Term Capital Management. It examines the impact of hubris, greed, and flawed investment strategies on the financial markets.

Table of Contents

    When Genius Failed
    Summary of 8 key ideas

    Audio & text in the Blinkist app
    Key idea 1 of 8

    Long-Term Capital Management was an enormous hedge fund that made its money through arbitrage.

    It’s a fair bet that you’ve probably never heard of Long-Term Capital Management (LTCM), a long defunct fund management company. The 1997 Asian financial crisis or the 1998 Russian default, however, are two events that are probably much more familiar to you, as they brought the financial world to the brink of collapse. LTCM had an important role to play in both.

    LTCM was a hedge fund founded in 1994 by trader John Meriwether. Hedge funds manage the pooled investments of small groups of mostly wealthy investors. Unlike their cousins, mutual funds, which manage the investments of a larger, more economically diverse group of investors, hedge funds are subject to very little regulation, meaning that there are virtually no limits to the size of the fund or where it can be invested.

    This lack of regulation makes hedge funds a ripe environment for investment in riskier financial products, such as derivatives.

    Like all other hedge funds, LTCM managed their investments with a strategy called arbitrage, whereby hedge fund managers purchase or sell financial products in the hope or knowledge that their price will change in their favor in the near future.

    To demonstrate this, imagine that one company sells different stock in two markets. As both stocks represent the same company, you’d expect them to be the same price. However, sometimes the price of the stock in one market may dip below the other. When this occurs, you have an opportunity to quickly buy this stock before the prices reach equilibrium again, after which you can sell that stock at a profit.

    In reality, the dynamics of the market don’t create these clear-cut scenarios. In fact, most arbitrage strategies rely on tiny, rapidly disappearing discrepancies in the price of financial products.

    This gave LTCM an advantage. They used academic calculations and predictions as well as the latest computer software to recognize the opportunities and exploit them quickly. Using this strategy, LTCM became the largest hedge fund ever. So what happened?

    Want to see all full key ideas from When Genius Failed?

    Key ideas in When Genius Failed

    More knowledge in less time
    Read or listen
    Read or listen
    Get the key ideas from nonfiction bestsellers in minutes, not hours.
    Find your next read
    Find your next read
    Get book lists curated by experts and personalized recommendations.
    Shortcasts New
    We’ve teamed up with podcast creators to bring you key insights from podcasts.

    What is When Genius Failed about?

    When Genius Failed (2001) follows the rise and fall of Long-Term Capital Management, the world’s largest ever investment fund. The book reveals uncomfortable truths about the nature of investment and the fragility of the models we use to assess risk.

    When Genius Failed Review

    When Genius Failed (2000) offers a captivating account of the rise and fall of the hedge fund Long-Term Capital Management. Here's why this book is worth reading:

    • It provides a gripping narrative that details the hubris and folly that led to the fund's ultimate demise.
    • Through meticulous research and analysis, the book reveals the complexities of the financial world, giving readers a deeper understanding of the risks involved.
    • The author's unbiased perspective allows readers to draw their own conclusions and reflect on the lessons learned from this cautionary tale.

    Best quote from When Genius Failed

    Now that they had the scale to operate worldwide, they had no interest in managing money for others and largely froze them out.

    —Roger Lowenstein
    example alt text

    Who should read When Genius Failed?

    • Anyone interested or working in investment banking
    • Anyone interested in risk calculation
    • Anyone thinking about investing in a hedge fund

    About the Author

    Roger Lowenstein is an American financial journalist and contributor to the Wall Street Journal. In addition to his many articles and book reviews, he has also written five best-selling books, including The End of Wall Street and While America Aged.

    Categories with When Genius Failed

    Book summaries like When Genius Failed

    People ❤️ Blinkist 
    Sven O.

    It's highly addictive to get core insights on personally relevant topics without repetition or triviality. Added to that the apps ability to suggest kindred interests opens up a foundation of knowledge.

    Thi Viet Quynh N.

    Great app. Good selection of book summaries you can read or listen to while commuting. Instead of scrolling through your social media news feed, this is a much better way to spend your spare time in my opinion.

    Jonathan A.

    Life changing. The concept of being able to grasp a book's main point in such a short time truly opens multiple opportunities to grow every area of your life at a faster rate.

    Renee D.

    Great app. Addicting. Perfect for wait times, morning coffee, evening before bed. Extremely well written, thorough, easy to use.

    People also liked these summaries

    4.7 Stars
    Average ratings on iOS and Google Play
    31 Million
    Downloads on all platforms
    10+ years
    Experience igniting personal growth
    Powerful ideas from top nonfiction

    Try Blinkist to get the key ideas from 7,000+ bestselling nonfiction titles and podcasts. Listen or read in just 15 minutes.

    Start your free trial

    When Genius Failed FAQs 

    What is the main message of When Genius Failed?

    The main message of When Genius Failed is a cautionary tale about the dangers of unchecked hubris in the financial world.

    How long does it take to read When Genius Failed?

    The reading time for When Genius Failed varies depending on the reader's pace, but it typically takes several hours. The Blinkist summary can be read in approximately 15 minutes.

    Is When Genius Failed a good book? Is it worth reading?

    When Genius Failed is a compelling book that offers fascinating insights into the events leading up to the collapse of Long-Term Capital Management. It's definitely worth a read.

    Who is the author of When Genius Failed?

    The author of When Genius Failed is Roger Lowenstein.

    What to read after When Genius Failed?

    If you're wondering what to read next after When Genius Failed, here are some recommendations we suggest:
    • The Self-Made Billionaire Effect by John Sviokla and Mitch Cohen
    • Mastering Leadership by Robert J. Anderson and William A. Adams
    • Think Remarkable by Guy Kawasaki & Madisun Nuismer
    • Stem Cells by Jonathan Slack
    • Discipline Is Destiny by Ryan Holiday
    • The 15 Commitments of Conscious Leadership by Jim Dethmer
    • See You at the Top by Zig Ziglar
    • Smarter Faster Better by Charles Duhigg
    • Agile Selling by Jill Konrath
    • The Anxious Generation by Jonathan Haidt