Unbounded irrationality: Risk and organizational narcissism at Long Term Capital Management. (2003)
“..focuses on the near collapse of the highly prestigious hedge-fund Long Term Capital Management (LTCM) in September 1998, causing widespread fears (of a) global financial meltdown.
Prof Mark Stein, Chair in Leadership and Management, School of Management, University of Leicester
Human Relations May 2003 vol. 56 no. 5 523-540
“This article focuses on the near collapse of the highly prestigious hedge-fund Long Term Capital Management (LTCM) in September 1998, causing widespread fears that its demise may lead to global financial meltdown.
“Explanations pivoting on the idea of bounded rationality – that rationally functioning organizations may collapse because of a lack of information or the capacity to process such information – are found not to apply.
“The article postulates the irrational functioning of LTCM, and proposes a psychoanalytic theory of organizational narcissism as a means of explanation. This theory comprises well-explored themes of organizational narcissism such as hubris, omnipotence and omniscience, as well as newer themes of contempt, triumph, and the embeddedness of narcissism in the organization’s socio-technical system.
“The article concludes by examining these ideas in relation to other theories of risk as well as the implications for practice.”
Access the full paper here: Unbounded irrationality