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.
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