Against the Gods: The Remarkable Story of Risk

by Peter L. Bernstein, Mike Fraser (Narrator)

A Business Week, New York Times Business, and USA Today Best Seller

In this unique exploration of the role of risk in our society, Peter Bernstein argues that the notion of bringing risk under control is one of the central ideas that distinguishes modern times from the distant past. Against the Gods chronicles the remarkable intellectual adventure that liberated humanity from oracles and soothsayers by means of the powerful tools of risk management that are available to us today. This brand new audio edition of Bernstein's classic work is masterfully narrated by Mike Fraser.

Produced and published by Echo Point Books & Media, an independent bookseller in Brattleboro, Vermont.

1996 Peter L. Bernstein (P)2021 Echo Point Books & Media, LLC

PLEASE When you purchase this title, the accompanying PDF will be available in your Audible Library along with the audio.

Genres: Finance, History, Business, Economics, Nonfiction, Science, Mathematics

Audible Audio

First published August 24, 1996

About the author

Founder and President of Peter L. Bernstein, Inc., which he established in 1973 as economic consultants to institutional investors and corporations around the world.

In 1951, after teaching economics at Williams College and a five-year stint in commercial banking, Peter became Chief Executive of a nationally–known investment counsel firm, where he personally managed billions of dollars of individual and institutional portfolios. The assets under management at the firm had grown more than tenfold by the time he resigned in 1973 to launch Peter L. Bernstein, Inc.

Peter was the first Editor of The Journal of Portfolio Management in 1974, a widely-read scholarly journal for investment managers and academics in the field of finance and investments. He is now Consulting Editor of the Journal.

He served for many years on the Visiting Committee to the Economics Department at Harvard University, as a Trustee and member of the Finance Committee of the College Retirement Equities Fund (CREF), and as a Trustee of the Investment Management Workshop sponsored by the Association for Investment Management & Research’(AIMR).

He is the author of nine books in economics and finance plus countless articles in professional journals such as The Harvard Business Review and the Financial Analysts Journal, and in the popular press, including The New York Times, The Wall Street Journal, Worth Magazine, and Bloomberg publications. He has contributed to collections of articles published by Perseus and FT Mastering, among others

He lectures widely throughout the United States and abroad on risk management, asset allocation, portfolio strategy, and market history.

Peter graduated from Harvard College with a degree in economics, magna cum laude. He was also elected to Phi Beta Kappa.

After serving as a member of the research staff at the Federal Reserve Bank of New York and in a civilian capacity at the Office of Strategic Services in Washington, he joined the armed services and rose to the rank of captain in the Air Force in World War II, assigned to the Office of Strategic Services in the European theater.

He taught economics for many years as an adjunct professor on the Graduate Faculty of the New School for Social Research in New York.

Peter has received three major awards from the Association for Investment Management & Research (AIMR), the key organization for investment managers and analysts:

The Award for Professional Excellence, AIMR's highest award,

The Graham & Dodd Award, given annually for the outstanding article in the Financial Analysts Journal for the previous year, and

The James R. Vertin Award, recognizing individuals who have produced a body of research notable for its relevance and enduring value to investment professionals.

Reviews

[Tim O'Hearn · Rating 5 out of 5]

Books published at the end of the 20th century have a certain purity to them. Free from the banalities of the information age yet aware of the implications of the technological revolution, the best among them are wonderfully endearing. Against the Gods is a classic, a 1996 tour de force by the late Peter Bernstein.

This book is about how our perception of risk, especially with respect to decisions with financial outcomes, advanced (rather slowly) from ancient times to the present. A generation after publication, Bernstein's charm can never be replicated, even as swaths of information are reprinted (Fortune's Formula) or selectively expanded into standalone works (Thinking, Fast and Slow).

To me, this is the original compilation--the progenitor, if you will--of the discoveries leading to our modern understanding of numbers, probability and, by extension, more concrete applications like pricing theories, risk management, and behavioral finance. The book being published in 1996 is significant because the author does adorable things like use quotes when he introduces the term "data mining" but also understands the future well enough to briefly introduce concepts such as genetic algorithms.

If this book was written five years later, there would have had to have been so much additional explanation--so many attempts to fit square pegs into round holes--that it would have taken away from the poignancy of the subject matter. Having to talk about the dot-com bubble? Eh. Having to mention that the Black-Scholes guys formed LTCM and blew up? Impossible to avoid but since this would have been my fifth time reading about it, eh. 1996 was a phenomenal stopping point and this work will endure long after my own life ends.

The implications of this book go far beyond the realm of finance. Frankly, there is very little finance (as far as dry financial topics go) until the more structured academic studies are brought in near the end. Throughout, the reader can grasp the applications of discoveries to "finance" (from personal- to high-) but, in totality, this is much more about science, discovery, history, and human nature. And for these reasons, it can be counted as among the most accessible, informative, and important books of the 20th century.

[Michael Quinn · Rating 2 out of 5]

Unfortunately, Bernstein just isn't a very strong writer. This is visible from the very beginning in his word choice and his many slips into generalization. He is very prone to hyperbole and "dressing up" relatively meaningless statements with strained poetic language. For readers, it can often be groan-inducing.

Take Bernstein's introduction, for example:

"The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature. Until human beings discovered a way across that boundary, the future was a mirror of the past or the murky domain of the oracles and soothsayers who held a monopoly over knowledge of anticipated events."

There are obvious ways of simplifying that statement: understanding risk allowed men and women to make projections of the future instead of relying on superstitious practices. Everything else in that paragraph is essentially junk. Bernstein continues in a similarly hyperbolic tone:

"This book tells the story of a group of thinkers whose remarkable vision revealed how to put the future at the service of the present. By showing the world how to understand risk, measure it, and weigh its consequences, they converted risk-taking into one of the prime catalysts that drives modern Western society. Like Prometheus, they defied the gods and probed the darkness in search of the light that converted the future from an enemy into an opportunity.The transformation in attitudes towards risk management unleashed by their achievements has channeled the human passion for games and wagering into economic growth, improved quality of life, and technological progress."

Bernstein's weak word choice and puffed up sentences become reflected on a much larger level in the book: he ends up spending very little time defining and discussing modern risk management. There is some approach to diversification as it applies to portfolio theory in finance, and there is a short discussion of options, but both subjects are tucked into the last chapters of the book. Especially with the final discussion of behavioral finance, which only serves as a bit of criticism of Markowitz, it becomes obvious that Bernstein is very uncomfortable discussing risk in any other format.

The book isn't a complete disaster. It has some interesting stories of early mathematicians, and the lack of focus on a primary thesis is common in most books on social sciences/ history of ideas. People interested in finance or mathematics in general will likely be entertained. But this is ultimately a very small achievement for a book that claims to tackle so much more.

[Supratim · Rating 3 out of 5]

I had started the book with very high expectations but unfortunately, I am disappointed for the most part.

I have to say that the title of the book is not totally compatible with the content. “Against The Gods” gives the impression that the book would illustrate how human beings overcame their superstitions and prejudices, and opposed blind faith. The book talks about how the development of mathematics and statistics provided human beings with ways of quantifying risks but it does not talk about conflicts between science and orthodoxy.

The book mentions the two events which ultimately led to the development of mathematics in the West. One is the introduction of the Hindu number system to the West by the Arabs and other is the Renaissance in Europe which paved the way for scientific thinking.

Then we are introduced to various mathematicians, philosophers, economists who developed various theories on probability, uncertainty etc. The author mostly discusses how these theories had a profound impact on business and sectors like finance, insurance and the stock market. Some of the anecdotes were really interesting but since a lot many of these people and their theories have been presented, at times I found it difficult to remember who had proposed what.


I liked certain anecdotes especially those which talked about how the theory of probability was developed based on games of chance, certain fun mathematics facts, eccentricity of certain people, use of financial instruments in the olden days. As a person who loved Algebra during his school days and still loves it, I liked the riddle regarding the age of Diophantus.

Bernstein has also talked about psychological experiments conducted to gauge human decision making and the theories thus developed. Towards the end, we also learn about risk hedging instruments such as derivatives – futures and options.

No doubt, Peter Bernstein has done extensive research for this book. Writing a book like this is by no means an easy task. I do appreciate how complex it is, but I did feel it could have been much better. So many theories were discussed but it was not clear exactly how they were applied.

This book is not for everybody. Only those people who have some idea or interest in the stock market and historical trivia might be interested in it. There might be other books on the same theme but which are far better.

[Joseph Devon · Rating 5 out of 5]

Thoroughly enjoyed this. It examines the study and the notion of risk throughout...well throughout forever. A lot of the reviews make this out to be chock full of math, but speaking as a very non-math person I found it perfectly accessible.
The author has a nice way of mixing background color and the personalities of the various people he discusses in with the overall examination of risk. I enjoyed thinking along with notions like why the number zero didn't exist until society had moved forward to a certain point; or why almost every work of ancient Greek storytelling has some mention of dice games in it but at no point did anyone in ancient Greece ever seem to stop and calculate the odds of these games.
Interesting stuff told with patient pleasantness.

[Craig · Rating 3 out of 5]

This was a pretty good book, and it made a valiant attempt to thread the needle between being a book for math/ stats geeks and normal humans, but I am not sure it made it. I suspect the non-geeks would give up before making it through, and the geeks would make it through, but be disappointed by the lack of depth. As one of the geeks, I did enjoy it. It provided great back story on the development of statistics and the people that did the work. But I found myself wanting more depth. It was a classic example of covering too much ground, but none of it well enough. But I am glad I read it.

[Lobstergirl · Rating 2 out of 5]

Disappointing; Bernstein is not a great writer and it was not really what I was expecting. Most of the book covers the time period before the 20th century and concerns mathematicians' and others' discoveries about probability. My interest in risk is in the areas of insurance - actuarial science - and corporate risk assessments/risk management. The only example of actuarial science Bernstein used was from the 18 century. I began to get slightly interested when he brought up Procter & Gamble and Gibson's Greetings as examples of companies which had used derivatives not to properly hedge their risks but to amplify them, but that only lasted a few pages and then the book was over.

[Siby · Rating 3 out of 5]

Risk is inherent to any activity and uncertainty is all prevalent. Today, we have comlpex mathematical and statistical models to help us quantify and assess risk, but this was not always the case. This book tells the story of how modern Risk Management evolved with contribution from eminent scientists, statisticians, mathematicians and later, economists. What I really liked about this book is the fact that I was able to place the various names like Bernoulli, Pascal, Fermat, Fibonacci, Da Vinci, Euler, Leibniz, de Moivre and many others in the chronological order of scientific development and the glimpses into their work and lives. We all know these names and generally associate them with one or the other mathematical/scientific development, but this book helped me realize the vast scope of their work and the extent of their brilliance.
Also, Bernstien walks us through the the various milestones in mathematical history, like the adoption of the Hindu-Arabic numbering system, the impact of Zero; the significance of which most of us are still not able to understand, the development of statistics; average, mean, median, standard deviation, regression, correlation etc and how one led to the other over a course of decades (We study them all in one chapter today), how statistics led to the development of probability theorem and then to the study of human nature pertaining to choices and decision making, which is the crux of risk management today!
The initial half of the book reads like the history of statistics and probability theory and would be extremely interesting to most of us who have some background in mathematics. The latter half of the book focuses more on human behaviour, philosophy behind choice and decision making and its measurement using the mathematical and probabilistic models and modern risk management, particularly in the insurance industry and stock trading.

[Paaras · Rating 1 out of 5]

There's a lot of information, and it's not very clear how it's related to the subject matter. I started the book expecting to hear a story of risk management based on the sub-title, but it turns out to be a history of the theory of risk.

The book could've been better edited. A number of stories are not required or could be told succinctly.

While it may interest some people, I was unable to get past a third of the book.

[Cyrin · Rating 4 out of 5]

Against the Gods is a perfect title for this book. It was thought during the Roman era only Gods could predict out comes however, with the development of probability theory even mortals are starting to predict future events. This book is packed with information from the origin of money to the origin of probability. Bernsteine has a very unique way of conveying information that not many other authors do, he talks about the discovery as much as he talks about the discoverer for example, on the topic of standard distribution of a bell curve he doesn’t just say what it does, he talks about how it came to be discovered by a French mathematician De Moivre who was a close friend of Isaac Newton, well and truly delving deep into the topic. The audience is not left scratching their heads as a strong foundation is built which Bernstein builds on.

[Sandeep · Rating 5 out of 5]

My physics teacher in high school loved to say - "Before you use any formula, you should know when the formula won't be applicable". In statistics, we might be tempted to use specific formulas without thinking about the implicit assumptions. The consequences can be disastrous. I like how the concept of quantifying risk has been dealt with in this book. You are given the historical context of how thought leaders in this field incrementally added to the work done earlier. The context helps us understand what was problem being solved, and how the thinking about the subject evolved. There are also brief episodes about the personalities of the people involved - with their philosophical and sometimes theological leanings. I found the discussion thought provoking and interesting.

[Jason ("jcreed") · Rating 1 out of 5]

A puerile abuse of mathematics, statistics, biography, and history, badly paced and full of pointless and likely apocryphal anecdotes. Religious awe for Gaussian distributions appearing in nature makes me wonder if the author has ever heard of the fucking central limit theorem. Something like a version of "how to win friends and influence people" for economists or day traders or something, except it won't even make you feel good about humanity.

[Jessica · Rating 2 out of 5]

I will readily admit that part of my dissatisfaction with this book comes from it being so different than what I thought it was going to be; that is, a story of risk management throughout history. Although, to be fair, I got that idea from the subtitle of the book, so it's not that far-fetched.

No, instead this is a book the first two-thirds of which are a history of probability and forecasting, which, though related to risk, are not the same thing as risk, as evidenced by the author awkwardly shoving in references to risk throughout as if to pretend that the book was really about risk. Once we finally get through this whole long history and actually enter into a discussion of risk management, it is very narrowly defined as risk management related to finances and more specifically to investment. (Not surprising, given the author's credentials, but still disappointing when I thought the scope of the book would be broader.)

Putting aside all that, this could still be a good book if Bernstein had had a better editor. (Which I feel is my critique of many books based on my own bias as an editor... but it's still true.) Besides his writing generally being more verbose and circuitous than necessary, with tangents that were clearly put in just because he came across an interesting story in his research, there were some glaring errors throughout, such as a person whose birth and death years are given as 50 years apart who is then said to have lived to be 80, and an individual's name spelled two different ways in two consecutive paragraphs, just to name a few. Anything that blatant automatically drops a book in my estimation.

Being a stats nerd I was engaged enough with the whole history of probability not to abandon it early on, but I really can't think of a reason I would recommend this book to anyone.

[Vincent Li · Rating 2 out of 5]

The book leaves a bit to be desired.

It's a general mathematical history of risk management, but most of the material is rudimentary. The material itself is probably just a basic statistics and finance course stripped of actual formulas. For people really into mathematical history and etymology this book might be more interesting than it was for me. The book starts with the adoption of arabic numerals goes through the basic history of probability and statistics before concluding with finance and economics (topics include game theory, behavioral finance, portfolio theory, derivatives and Knight/Keynes). It might be a good introduction for someone who's interested in the subject but has not had exposure to any of the topics. The only really surprising part of the book is behavioral finance was already starting to gain prominence in the 90s. The tone of the book reminds me of Worldly Philosophers, which was a book that I did not care too much for either. The book was published in 1998, so some of the data is probably stale as well. Recommend for someone without too much time but wants an introductory exposure to risk and finance. Would not recommend for anyone who has had formal education in finance or risk management.

For a similar but better book, I would recommend Drunkard's Walk instead. It's written in a more approachable style and the material is less dry.

[Kristina · Rating 4 out of 5]

Read this instead of Sapiens.

[William Schram · Rating 4 out of 5]

Against the Gods: The Remarkable Story of Risk discusses the history of Risk Management. The book goes through the early years of Probability and comes full circle to the present day. It talks about the development of Statistical Sampling and other various techniques used to quantify events.

The book is really interesting in how it discusses its subject. Peter L Bernstein has done a great deal of work in researching the history of Probability and the history of Statistics. It also goes into how people understood annuities and other methods of insurance.

Bernstein has done a great deal of thought on how the Ancient Greeks didn’t develop this sort of idea as well. They knew of many things but never made that leap to think of Risk Assessment or Probabilities. With the Ancient Greeks, the main problem was not only their number system, but it was also their belief in a capricious pantheon of deities. The author argues that if you don’t believe yourself to be a free agent with some control over your own fate, you wouldn’t go and try to change your own position in society. Finally, the Ancient Greeks didn’t really have a mindset of making practical applications for things. They were more purists than anything with that. The theoretical was more important than the practical for them.

So this paradigm continued throughout the so-called Dark Ages. As I said, a great deal of the shift in thinking occurred due to the spread of Hindu-Arabic Numerals and other Arabic ideas. It covers the development of the Double-Entry Bookkeeping System, and how people didn’t trust the Hindu-Arabic Numerals at first. Basically, the argument was that it was too easy to commit fraud. Once Movable Type became more available the numerals were accepted easily. This was also prompted by the rise of Banking and other businesses that made dozens of transactions per day.

By following the development of Probability Theory, we look at the lives of many mathematical luminaries of the Seventeenth Century and beyond. We certainly know the lives of some of these men and women, but most of them started popping up in the Seventeenth Century as I mentioned. All of them were known to Marin Mersenne, the French Priest that made some advancements in Acoustics and ran correspondence with people all over Europe. The other thing of note was the rise of Lloyd’s, the famed Insurance Company that I never really knew much about. With Merchant Shipping came the rise of Underwriters and other different services.

Once we get into the Eighteenth Century we meet up with some of the Bernoulli Family and the Prince of Mathematicians Carl Friedrich Gauss. The book states that Daniel Bernoulli was the first to ascribe a value to something that could not be counted. Bernoulli argued that motivations count toward the end result as well. To illustrate this, Bernoulli presents the Petersburg Paradox. The Paradox goes like this; Peter and Paul play a coin flip game. If tails come up the winnings you get are doubled, but if heads come up, you get the amount that you won. What would you pay to enter such a game? Bernoulli tells us that although the game can enable you to earn an infinite amount of money, a reasonable person would only pay about 20 Ducats. We can’t have risk without uncertainty, and in that vein, we meet Thomas Bayes and the Bayes Theorem. It discusses the ideas behind that and how it benefited the field. Then we meet with Gauss. He developed a lot of different things, among them is the Normal Distribution or Bell Curve.

Finally, once we reach the modern era it talks about the theories and ideas of Keynes, von Neumann, Knight, and Morgenstern. It talks about when the United States Government auctioned off its Wireless Zone rights and how different companies had to use Game Theory to figure out what to do, and the best way to outbid the other companies.

All in all, this book was pretty good. It was very interesting and enjoyable. I did not realize that it was over twenty years old as of this review on May 23, 2019. That isn’t really all that important though.

[Todd Martin · Rating 2 out of 5]

You know the phrase “you can’t judge a book by its cover”? Well … who ever came up with that one never read Against the Gods: The Remarkable Story of Risk, because this book features a thrilling, storm-tossed boat on a raging sea … and the text features a thrilling, storm-tossed story about ……… !!!

Hold on, my heart is absolutely pounding.
{sits down, head between knees breathing into a paper bag}

Ok … here we go … it’s about the mathematicians who developed the mathematical probability theories in use today to manage risk.

I know … right!?!?
First there’s: Pascal, Fermat, Fibonacci, Cardano, Halley, Bernoulli and Gauss.
Then there’s: regression to the mean, variance and the normal distribution.
All leading to up to a system of derivatives and other risk management contracts that make the global financial system the incredibly safe and stable institution that exists today (except for that little blip known as the global financial crisis of 2007-2008).

To be serious for a minute – risk management is incredibly important. It’s why the insurance industry exists and why investors hold diversified portfolios.

But it’s pretty dry stuff and Bernstein’s prose doesn’t exactly leap off the page.

[Truls Ljungström · Rating 4 out of 5]

En rolig och lärorik bok, som förklarar både statistiska och ekonomiska problem på ett flärdfullt sätt.

Nu har detta varit en ovanligt läsrik sommar, med många upplevelser av den karaktären, men min mentala bild är ändå att denna bok i ren och skär vitterhet är något utöver det vanliga. Jag upplever den som en föregångare till Taleb vad gäller både attityd och stilistik, och det är en stor komplimang.

Kg rekommenderar boken till både historienördar och hobbyekonomer; yrkesekonomer tror jag kommer uppleva delar av förklaringarna som triviala, även om det charmerande språket och de tänkvärda exemplen nog kan tilltala även dem.

[Albert Makambi · Rating 5 out of 5]

While it might seem that Peter Bernstein used plenty more words than he should have, the story was one of the most amazing I have come across. The book is well researched and gives a thoughtful examination of Risk from different perspectives and locations as it evolved and how it affects our daily lives today.

I wouldn't be quick to pick it up any time soon, but any history or numbers enthusiast will love this.

[Vijay Chengappa · Rating 5 out of 5]

One of those 'Must-read' books, covers a very wide gamut of topics across time periods. An absolute encyclopedia.
For folks who often complain about global inequality or question why certain asset classes deliver superior returns, this book will serve as a foundation to how capitalism operates and why certain classes have it better than others

[Tom · Rating 4 out of 5]

I have no idea if someone with the slightest notion of economics would find this book interesting or thought provoking. All I can say is that I, as a complete ignoramus on the subject, found Against the Gods informative and educational.

Bernstein gradually guides the reader through the concepts of probability, uncertainty, regression to the mean, etc., before describing how they have impacted the current understanding of risk, particularly in relation to the stock market. This book covers quite a lot of ground, beginning in Ancient Greece, journeying through Renaissance Europe and ending up in modern-day America, introducing a swathe of important mathematicians and economists along the way.

The chapters ramble with the enthusiasm of a person who is fascinated by eccentric lives and insists on relating them - even if utterly irrelevant to the purpose of the book. There is a certain charm to this that helps offset the sometimes dry reality of mathematics and economics. Bernstein has a real talent for teasing out the witty side of his subject, for example when he quotes a financial commentator writing about derivatives:

"A derivative is like a razor. You can use it to shave yourself... Or you can use it to commit suicide."

Anyone who writes a book is almost certainly enthusiastic about their topic, but it doesn't always come through in nonfiction. It really does here.

[Daniel · Rating 3 out of 5]

A good history on the foundations of Risk Management. It was well written and as entertaining as could be expected for a book on this subject. I dislike economics and yet I keep reading economics books. The definition of insanity.

A good book on a rather boring subject.

[Maarten Smit · Rating 3 out of 5]

Writing a book on such a broad topic as the history of risk is a formidable task. In his journey the author discusses early civilizations’ view of fate, Greek and Roman philosophy, helplessness vs choice, gambling, and modern sophisticated, probability-based forecasts of the future used in applications such as insurance.

Although the author wrote ten books on economics and finance, risk in the context of these topics is only part of the story.

The book is three decades old. If you want to learn more about risk I’d recommend reading Nassim Taleb.

[Josh Friedlander · Rating 3 out of 5]

I once read that a reason Christianity overcame paganism was that ancient Romans practiced haruspicy, and so the Christians had the advantage of basing their tactics on literally anything less insane. (Plus, "There shall not be found among you any one that...useth divination, or an observer of times, or an enchanter...or a consulter with familiar spirits" - Deuteronomy 18:10-11)

It's not crazy. Bernstein, an economic historian and fund manager, begins this enjoyable history of risk with the ancient view of fate as decreed by the gods, moving to monotheism and then rapidly into the 16th century. He outlines the development of probability and statistics, starting with games of chance and gradually moving onto theories of expected utility. After the Great Depression Keynes criticised the idea of markets as completely rational, von Neumann developed Game Theory, and Twersky and Kahneman developed their theories of bounded rationality. Now we have neural networks, which give their own kind of predictions, but still grounded in learning from the past about the future. Ultimately uncertainty will always be a part of life: we can model it and try to mitigate it, but but we will still always feel a little precarious.

[Julius · Rating 2 out of 5]

Peter Bernstein plantea una obra sobre el desarrollo matemático científico y económico del riesgo financiero. Cómo calcularlo, cómo plantear la suerte y las probabilidades, los juegos de azar, etc. Aunque honestamente, a mí me parece que le ha salido otra cosa.

La primera mitad del libro es una descripción de la historia matemática que dio lugar al planteamiento de las teorías probabilísticas, la teoría del juego, el azar, etc. Hay pasajes muy interesantes sobre cómo estos científicos comenzaron a romper moldes y a crear un pensamiento en unos marcos totalmente diferentes a los que se concebían para la época.

Ante nosotros, en los diferentes capítulos tenemos la historia y aportaciones a diferentes disciplinas relacionadas con la estadística a genios como Francis Galton, Quetelet, Gauss, De Moivre, Bernouilli, Canopius, y otros muchos.

El espíritu de juego de aquella época de prosperidad fomentaría una rápida innovación en la industria de seguros de Londres. Los aseguradores estaban dispuestos a suscribir pólizas de seguro contra casi cualquier tipo de riesgo, incluidos, según una historia, allanamiento de morada, robot de carreteras, muerte de caballos y "seguro de castidad femenina"

De hecho, los seguros es uno de los ejemplos que más me han gustado de la aplicación de la incertidumbre, incluyendo el cálculo de las tablas de esperanza de vida de los ciudadanos de una región, o de un sexo, o de una profesión, que desarrolló un famoso matemático. O qué posibilidades había de que un cierto barco volviese de su travesía, donde nos encontramos la célebre historia de la taza de café de Canopius y el Lloyds de Londres.

Pero la segunda parte del libro me ha parecido aburrida y pesada, e intenta enfocarse en la aplicación práctica a la economía de estos principios de la incertidumbre: es mejor diversificar los activos, la teoría de la regresión a la media en la cotización de una serie de acciones bur´satiles, las teorías de Keynes y Jevons, y la teoría de juegos de John von Neumann.

En definitiva, el libro tiene pasajes interesantes, pero no están nada bien hilados entre ellos. No logro ver un hilo narrativo de un contador de historias, sino de nuevo, como en otros muchos ensayos leídos, parece una colección de apuntes a los que le falta mucha paja por retirar y otra por añadir para tener un argumento redondo. Además, cada una de las historias podría estar mucho mejor tratada, y quedarse con algunas pocas grandes historias matemáticas.

En cuanto al papel de las finanzas, a pesar de ser autodeclarado como un libro de este ámbito, me ha parecido muy decepcionante.

[Steele Dimmock · Rating 2 out of 5]

The Remarkable Story of Risk? More like the history of statistics.
I recommend you have at least univeristy level understanding of stats before you undertake this read.

Some of the book was good, like when the author briefly touched on the golden ratio, insurance through Lloyds of London and derivatives. I felt like the he could have gone deeper in to some of the sections or extrapolate more applications of the newly discovered statistical calculations - ie through analysis of the bell curve and regression to mean machine manufacturers were able to predict the average school leavers understanding of engineering and no longer needed to train their own technicians to go onsite to replace machinery, as a the average school leaver was capable, reducing the service cost and bolstering the industrial revolution.

But mostly this is a very dry tome with few redeeming qualities.

[Lucas Yang · Rating 4 out of 5]

This book is for anyone interested in learning about the history of probability and risks. It also touches more on finance an risk management by the end of the book.

Bernstein has a witty writing style and a great sense of humor. While I took away many philosophical lessons from this book, i often found myself struggling with the more technical passages. This, however, I attribute solely to my ignorance on the matter. If you are keen with numbers and statistics, and enjoys history, this should be a great book to read.

[Δx Δp ≥ ½ ħ · Rating 4 out of 5]

A page turner that you can take to the beach. Very enjoyable.

[Mike · Rating 4 out of 5]

For someone who avoids topics like risk and finance, this was a well-written and relatively clear introduction. The history and development of probability and statistics wasn't handled as well as in some other popular books I've read about the history of mathematics (most notably Dunham's Journey through Genius: The Great Theorems of Mathematics and Hawking's God Created The Integers), and had a couple of mistakes, but it was fundamentally solid.

Where it gets interesting is when it goes beyond Gauss. The world of economics isn't the world of rational actors; it's a world of people who are hungry to make a killing and afraid to lose their shirts. When I was in grad school in English Lit, I said "If I wanted to make serious money, I'd get a PhD in psych, hire a bunch of psychologists, and start an investment firm." It turns out that's what happened--or at least, I wasn't the only one with the idea. (I don't know if fortunes were made.) The history of the integration of irrational behavior was fascinating; the discussion of derivatives and their abuse (together with a hand-waving explanation of Black-Scholes, which was enough for me) was, well, enlightening. Derivatives have a long, long history, and were invented as a means to hedge against risk; but all too often, they're used to increase leverage. And when you're using derivatives to increase leverage, and it backfires, all hell breaks loose.

With that in mind, I only wish this book had been written after the crash of 2008, rather than after the crash of 1994. The final (short) chapter feels oddly dated. Finance has indeed gotten mathematical and computational, as Bernstein expects. I don't know if quants are currently interested in chaos theory, and I do know that neural networks now are a lot different than neural networks in 1996. But it's hard to fault the author for writing in the 90s, particularly when he died in 2009.

Definitely worth reading as an introduction to modern risk management.

[Casey · Rating 3 out of 5]

An okay book, combining a mathematical history of probability theory with its use in risk management within modern day financial markets. The author, Peter Bernstein, a prolific financial historian, attempts to present a detailed history of the mathematics of probability and then apply that history to modern finance. In the first he was successful, but an overly detailed attempt to prove his theory of the blissfully ignorant professional investor marred the second. I appreciated the long history of probability as a mathematical philosophy, from the ancient attempts to break from the concept of divine will through to the 17th century’s fascination with the roll of dice. Bernstein also did a good job in explaining the application of these theories as they were developed, presenting many of the more famous enlightenment mathematicians not as theoretical academics but as meaningful contributors to the “industrious revolution” in the early post-modern era. He works this history up to the modern age, through game theory and the post-WWII data revolution. But the narrative slowly transforms from the wider topic of probability and risk across many industries to a very narrow focus of their use in financial markets. Despite hyping risk management across different sectors in the book’s introduction we are only introduced to the fruits of the preceding mathematical history via the business cycle swings of the 1970s and 1990s, amongst other failed attempts to appreciate financial risk. This wasn’t all bad, amongst other great financial education points I have a much better appreciation for derivatives after the fascinating chapter on the subject. But the book does leave the impression that the work of the Bernoullis, Gauss, and others was solely for the purpose of understanding the risk calculations associated with a stock purchase. The reader is left to their own devices in extrapolating these risk concepts to other areas of use. Highly recommended for those wanting to explore in detail the origins of probability theory and its role in financial market decisions.

[André Morais · Rating 5 out of 5]

This was one of the most mind-boggling books I’ve ever read, due to its capacity to make the reader rationalize and question its approach to daily decisions, which he/she usually undertakes without much ado and thought.
This book is also very accessible to someone like me, who doesn’t have a mathematical background. This is so because the book reviews the history of knowledge on probabilities, decision-making, uncertainty, and risk without much analytical or graphical resources, focusing instead on examples and case studies.
It’s also quite entertaining, since it contains many references to petit histoires from the great intelectual characters: Archimedes, Aristotle, Arrow, Bayes, Bentham, the Bernoullis, de Méré, Diderot, Fermat (a lawyer), Gauss, Kahneman, Keynes, Knight, Morgenstern, Nash, Quetelet, Smith, Tversky, or von Neumann are a small part of the larger array of brilliant minds whose work Professor Bernstein quotes to assemble this magnificent history of risk.
In fact, and as it can be seen from the quoted listed, the book covers 450 years on the subject of risk from a wide perspective: it is not restricted to risk management or insurance, but it also includes thoughtful reflections on investment, decision-making, game theory, covariances, biases, regression to the mean, etc.
Another impressive feature of this book is its practical reach: for example, the theory surrounding loss-aversion clearly provides an interesting framework to read the recent Portuguese government’s measure to protect mortgage borrowers, thus avoiding the fire sales that would result from borrowers stress-selling their homes. This protection is provided in sacrifice of first-time buyers, who would benefit from prices falling. However, it’s (politically and behaviorally) rational for the government to prefer avoiding current-owners “loosing” their homes than youngsters not being able to buy their first house. Loss-aversion is powerful.
Finally, the chapter on options (“The fantastic system of side bets”) is also a very scholarly but crystal clear lesson on how derivatives work, are priced and what can they be used for. This chapter alone could well make this book a noteworthy study.
A must-read, for sure.