Notable Blowups and What They Teach

Brilliant people have lost billions through leverage, concentration and overconfidence. Here are the most instructive blowups, from Long-Term Capital Management to Archegos, and the lessons they share.

Long-Term Capital Management

Founded in 1994 with two future Nobel Prize-winning economists among its partners, LTCM made highly leveraged bets that small price gaps between related bonds would close. When Russia defaulted in 1998, the gaps widened instead. The fund lost about $4.6 billion in months, and 14 banks, organized by the New York Fed, put up $3.6 billion to wind it down safely.

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