Lack of money and management talent are two main reasons
start-ups fail. But what if you start with $1.25 billion and your
staff includes two future Nobel Prize-winning economists? Could you
be bankrupt in five years?
It happened to Long-Term Capital, a Connecticut investment fund
started by former bond trader John Meriwether. Author Roger
Lowenstein tells the fascinating tale in his latest book.
Meriwether's geniuses got Long-Term Capital off to a great
start, with returns of 40 percent per year for several years. But
they needed lots of leverage to do it.
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Everything came to earth in 1998, when the financial winds
turned against Long-Term and its 100-to-1 leverage turned golden
profits into leaden losses. In September of that year, the Federal
Reserve arranged a $3.6 billion bail-out of the insolvent firm.
This compelling tale offers entrepreneurs two lessons: Leverage
can kill, and you're never too smart to fail.
When Genius Failed is available at Amazon.com.
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