In his analysis of the collapse of Long-Term Capital Management, Roger Lowenstein illustrates how the assumptions of the efficient market hypothesis contributed to the financial disaster. This theory posits that asset prices reflect all available information, leading to the belief that markets are inherently stable and rational. However, the failure of the hedge fund revealed vulnerabilities in this theory, highlighting the inadequacies of relying solely on theoretical models in predicting actual market behavior.

Lawrence Summers, the U.S. Treasury Secretary at the time, criticized the efficient market hypothesis by labeling it a significant error in economic thought. His comments underscore the growing skepticism among economists regarding the validity of this hypothesis, particularly following events that defied its principles. Lowenstein's book serves as a cautionary tale about the pitfalls of overconfidence in market efficiency and the need for a more nuanced understanding of financial markets.