The Irrational Investor asks for more analogies, beyond jaywalking and refactoring legacy code:

Hedge funds have a real problem these days acting on arbitrage opportunities because their marketing department’s requirement that they be open ended (for competitive reasons, customers can withdraw their money whenever they want). This is referred to in the literature as limits to arbitrage. It’s basically a trust problem. Hedge funds may identify an arbitrage (mispricing of equivalent assets), but these have a tendency to become more mispriced after the hedge fund takes a position as more noise traders enter the market. The hedge fund customer gets a performance statement in the mail (you lost money this month) and decides that the fund manager is incompetent and withdraws their funds to place them with a manager that has postive returns during each and every month. The hedge fund manager has to unwind their arbitrage position at a loss in order to redeem the customer’s capital investment. This is basically the story of the 1998 meltdown in Long Term Capital Management.