When Genius Failed

Key takeaways:

Of course, we have the benefit of hindsight now, but it's difficult to imagine making some of these mistakes, especially given these were supposed to be geniuses.

- Profit needs to be balanced with risk management and stability.

The message behind this book - that money managers need to be mindful that investments can't be boiled down to a simple model or equation and that the fallacy that one can truly predict markets can be financially devastating - is definitely an important one. The book itself isn't much of a page-turner and took me a while to slog through. There's a chance someone better versed in finance and asset management could have an easier time with this, but I didn't find it very accessible. Still worth reading.

An excellent pre-Black Swan discussion that focuses on the incredible hubris that was behind the rise and fall of the notorious hedge fund, Long Term Capital Management, back I the late 90s. It is clear that the large banks and the Fed did not heed the authors warnings.
We all got to re-live the downside of Under-regulated and highly leveraged derivatives investments. Even worse, investors in the present day still seem to be placing too much faith in econometric models that assume that market event are random and independent events (that are normally distributed).

The author, a financial journalist by trade, brings the sad true story to life with his engaging writing style and his ability to express complex economic concepts in laymen's terms.

My only complaint is that a cursory reading might lead one to believe that the inherent shortcomings of all quantitative models makes them of limited value and that all hedge funds are, by there very nature, dangerous - two simplistic conclusions that, I believe, are not correct.