The Long-Term Capital Management (LTCM) crisis was caused by not just miscalculation but also pride. LTCM was a collection of highly talented, highly skilled, and highly accomplished people. Nevertheless, the firm imploded in financial ruin and almost took the global economy down with it. At its core, LTCM held the mistaken belief that volatility and risk are the same thing. But the LTCM case demonstrates unequivocally that volatility and risk are two different things. LTCM managers took client capital and levered it massively with debt and derivatives, leaving absolutely no room for even the smallest mistake. In fact, the firm’s principals had each put virtually their entire life savings into the funds, demonstrating that they all believed wholeheartedly in their firm. Consequently, LTCM’s failure decimated not only its clients’ wealth but also its principals’ wealth. The actions of LTCM’s managers and principals suggest that they considered themselves impervious to mistakes. All too painfully, they discovered they were wrong.