F.I.A.S.C.O.: Blood in the Water on Wall Street

Former Morgan Stanley derivatives salesman Frank Partnoy's insider account of how Wall Street structured-products desks systematically blew up their own clients in the early 1990s. Long before the 2008 collapse, Partnoy documented the moral hazards and perverse incentives that made disaster inevitable.

Munger's quote on this book is visceral: 'I remember reading this shocking book and thinking, holy crap. This book will make you sick.' Fiasco is a masterclass in Munger's inversion-and-risk framework — it shows what happens when incentives are completely misaligned, complexity hides risk, and nobody is asking 'what could go wrong?' The derivatives described here are the purest example of the Lollapalooza effect in finance: moral hazard, asymmetric information, and compensation structures all firing in the same destructive direction. For founders building financial products or any complex transaction structure, this is the definitive cautionary tale of confusing complexity with sophistication.