Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World [Hardcover]

Without the proper education or pedigree, Leeson somehow managed to be promoted from a settlement clerk to running the Barings Singapore futures operation. Apparently his idea of having fun is to get plastered and moon some flight attendants in a bar, for which he was arrested by the Singapore authorities. Certainly he knew how strict laws are in Singapore, and he could have served a year in jail. It seems back in England, he hung out at pubs with friends who would unzip their pants and place their private members in the hands of unsuspecting females.

The book is of some interest to traders, because Leeson commits every cardinal sin in trading. He had no business ever setting foot near a trading floor. His biggest error was his complete inability to cut his losses, the most fundamental requirement for successful trading. He averages down or "doubles up" his positions when they are moving against him, another critical mistake. He constantly "hopes" the market will move back in his direction, and attempts to move the entire market by taking huge positions. While it is possible to move a market temporarily if one is trading large enough positions, the market will always continue on its established trend. The author continually engages in this futile strategy, at one point losing 60 million dollars in one day trying to change the direction of the market.

Finally, the book is not a terribly interesting read, in that a significant portion of it is repetitious detailing of how he conceals his mounting losses to his superiors through the use of "creative accounting". Perhaps that is why the book is now out of print. The one thing that he does care about is his wife, who at the time of publication of the book was still standing by him. If she has any good sense, she would drop him like a bad habit.

An organization as (historically) successful as Barings had been, particularly in an industry as competitive as merchant banking, will dispense a significant amount of discretion to mid-level managers in-order to facilitate innovation and risk-taking, two activities paramount to success in merchant-banking.

Therefore, Leeson can't possibly have been alone in enjoying his level of localized discretion, at that or any other time in Barings' history, though HE ALONE misused it to such catastrophic results. Perhaps, then, the question is not should we check better on our employees' actions, but should we even hire employees that we aren't 100% sure could effectively utilize our level of discretion?

While Leeson apparently acted in order to retain his leadership position, he effectively revealed his inability to lead by:

1) Creating a culture, within his office, of sloppiness and irresponsibility. (By allowing employees to utilize the 88888 account, rather than condition them, either by reprimand or more aggressive training, against making so many mistakes.)

2) Mistaking his superiors' TRUST of his own abilities for "aloofness," and thereby failing to properly utilize (rather than ABUSE) that trust.

3) Never, ever, ever owning up to his mistakes, or actually devising long-term solutions to his problems (like, say, never using the 88888 account after the first two times he cleared the balances, or simply not putting his OWN trading errors in the account.) ------ All this having been said, however, Leeson's account of his activities, and his flare for storytelling (or his co-author's, duh) make this a sufficiently enjoyable read.

Aspiring traders in particular should probably read this story just in order to get a grasp of some trading concepts, as well as a general account of life as a trader (albeit a dishonest and irrational one such as Leeson).