The next book in our Dave Reads series is another in the business book category, When Genius Failed by Roger Lowenstein.
I believe this book is on the reading list for numerous people studying business and stock market investing. It should be, since it won the Businessweek magazine “Best Book of the year” award when it came out in 2011. The book details the ups and downs of Long-Term Capital Management from their founding in 1993 utilizing PhD-level mathematicians and computer models in an attempt to beat the market. They didn’t beat the market. Their early success caused too much wide-spread faith in their abilities ultimately causing a major market melt-down.
The interesting thing here is many of the traders at Long-Term Capital did not trust the mathematical models, but they invested their client’s money in what the models predicted anyway. The markets are inherently uncertain and no one can predict when the crashes occur.
Stay tuned for the next Dave Reads post where I will be putting down my thoughts on a business book I found interesting and hopefully doesn’t ignite a political war; Elon Musk by Walter Isaacson.