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on April 26, 1999
Against the Gods is an outstanding book about the evolution of risk and man's attempt to understand it. Bernstein begins with ancient times and traces the history of numbers and probability leading eventually to today's seemingly complex financial world of portfolio theory, derivatives, and risk management techniques. Readers will learn about revolutionary thinkers including John von Neumann (inventor of game theory), Isaac Newton, Harry Markowitz (grandfather of portfolio theory), and the late Fischer Black (Black Scholes option formula) among others. Readers will also find enlightening stories about game theory, fibonacci numbers, chaos theory, the bell curve, regression to the mean, and more. Yet despite all the intelligence, computer power, and sophisticated techniques, Bernstein presents us with the growing body of evidence discovered by researchers including the late Amos Tversky and others that "reveals repeated patterns of irrationality, inconsistency, and incompetence in the ways human beings arrive at decisions and choices when faced with uncertainty." Against the Gods was chosen as one of Business Week's top 10 books of the year for 1996.
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on January 9, 2004
Any reader who picks up "Against the Gods" for mathematical amusement will be surprised to find out that "the revolutionary idea that defines the boundary between modern times and the past is the mastery of risk." This claim, in the introduction, should be evidence enough that this book is no brainteaser, but rather the chronicle of a concept that has transformed how society thinks about the future.
Peter Bernstein, author and consultant, begins with the ancient civilizations that came close but never actually thought specifically about risk. The reasons are many-for one, absent Arabic numerals, computational mathematics were impossible. More importantly, conceiving of risk required a profound metamorphosis of the way people thought about the future: mathematicians and philosophers could only develop risk mathematics once people were convinced that the future was unpredictable and depended on their choices more so than the whims of any particular deity.
Most of the advances in the field came from the seventeenth to the nineteenth century. Often, the impetus was gambling; in fact, most of the puzzles that mathematicians tried to solve by developing probability mathematics were related to card games or craps. After that came the actuarial science, with mathematicians gripping with questions of life expectancies and illnesses.
Only in the second half of the twentieth century does risk become highly mathematical, as it enters into economics and finance, where precision and quantitative data overtake rough estimations and qualitative analysis. But with the emergence of precision have also come severe criticisms-on one end from psychologists who have cast doubt on the robustness of the rational behavior hypothesis, and on the other, from chaos mathematicians who prefer non-linear and complex explanations that go against the intellectual tradition of statisticians.
The history of risk, readers will find out, is more interesting than expected. It is a story of gamblers, philosophers, mathematicians, economists, psychologists and many others. Most of all, it is a chronicle of an ever ending dream: to anticipate or even predict the future. Whether people will ever be able to do that is doubtful; but there is no better account of that quest than Mr. Bernstein's "Against the Gods."
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on September 21, 2002
Peter Bernstein's AGAINST THE GODS is an extremely informative and entertaining telling of the story of risk. Through the course of the book, he elucidates the basic concepts of risk in an informal yet highly effective manner. He delves into the human aspect quite a bit; we are privy to the trials and tribulations of those ingenious men who first pioneered the ideas behind chance and risk.
The primary purpose of AGAINST THE GODS is not as an introduction to risk management. For those who buy this book expecting such, you will be heavily disappointed. Instead, this is a terrific primer about risk and its history that will pique the interest of any person who has had little formal background in the science of risk management. The main strength of AGAINST THE GODS lies in its astounding clarity which does not come at the expense of comprehensiveness. Bernstein assumes no prior experience with mathematics or risk management. It is this accessibility which makes this the first book on risk you should buy.
In summary, I highly recommend this to anyone who has at least a passing interest in chance or risk. For those with experience in risk management, the history of risk presented in AGAINST THE GODS will still be very interesting. However, do not expect any of the ideas to be new.
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VINE VOICEon May 2, 2007
The origins, historical progression, and modern concept of risk is

presented in "Against the Gods." From the abacus to rolling dice,

annuities, insurance industry origins, explorations, gambling,

military tactics, scientific research, to investing, and more. In

most things in life big and small, there is some element of risk is

involved. This book presents Risk, and how our civilization has

utilized it - and needed it - to evolve to where it is today.

Individuals and groups don't take a risk with the expectation that it

will fail (although there's awareness that failure is a possibility).

The *expectation* is not of failure.

Peter Bernstein made this topic fun and informative for those of us

that are 'non-numerically oriented.' Actually, the concept of risk

involves a lot of non-mathematical and statistical concepts.

The writing style and chapter titles are hip: "The Winds of the

Greeks and the Roll of the Dice, The Renaissance Gambler, The Measure

of Our Ignorance, The Man Who Counted Everything Except Calories, The

Failure of Invariance," and "Awaiting the Wildness," for example.

The modern and Western concept of risk began with the Hindu-Arabic

numbering system that arrived in the West about 700 years ago. The

more in-depth examination of risk truly began during the Renaissance,

resulting in exploration an the exploitation of resources.

In Chapter 10, "Pea pods and Perils," Bernstein emphasizes the

rock-solid concept of "Regression to the Mean" (RoM). This is true

especially concerning the historical trends and patterns of the

financial markets. Yet, he notes how difficult the Predictable

Regression of the Mean is for humans to plan with RoM, and around it.

There are three reasons why humans have trouble using the RoM in

decision-making: 1) It proceeds so slow that a 'shock' will disrupt

the process, 2) When the RoM is reached, as it is periodically

people don't recognize it and hover on either side of the mean, and

3) The old mean may be unsustainable, meaning the old Mean is being

replaced by a new Mean. But....there still is....a Mean.

Bernstein states on page 173:

"If you bet that today's normality will extend indefinitely into the

future, you will get rich sooner and face a smaller risk of going

broke than if you run with the crowd."

This strategy seems oriented for the long-term growth oriented crowd.

We witnessed the sheep and lemmings in the late 1990s that

jumped onto the Tech Bubble Wagon, only to get burned badly by not

getting off in time. (Or perhaps, the sheep got out in time, but the

lemmings didn't.) Some similarities In 2007 with the Real Estate SFH

housing and condo speculation, flipping, and sub-prime mortgage and

ARM market, currently.

A certain percentage of the human population are basically, lemmings.

Bernstein spent some time on Jacob Bernoulli. Bernoulli's notion of

"satisfaction resulting from any small increase in wealth will be

inversely proportionate to the quantity of good previously

possessed." And perhaps this is why King Midus was an unhappy man.

What are the consequences of excluding, avoiding, or making risk

illegal? In modern times, when the Soviets tried to administer

uncertainty out of existence through the government fiat and

planning, they choked off social and economic progress. Communism is

contrary to human nature. But much of it was that communism took

away the concept of risk.

Risky Businesses, or business involving risk: the insurance industry

actually goes back to the Code of Hammurabi in 1800 BC. Called

"Bottomry," the owner of the ship would take out a loan to finance a

ship's voyage. No premiums were every paid but if the ship was lost,

the loan didn't have to be repaid.

The concept of life insurance basically began in Greece and Rome. In

the Middle Ages, the growth in trade spurred the insurance and

finance industries in Western Europe.

Tons of info. on common things we usually don't think of know much

about, that you can further delve into: The American game of "craps"

came to Europe via the Crusades. The mathematical invention of the

"0" and the abacus which still is in our roots. The Abacus is the

oldest counting instrument in our history. The word "Abacus" comes

from the Greek word for "sand" and "calculate" comes from the Latin

word for pebble, "calculus."

John Von Neumann invented Game Theory. Defeat is highly likely of

you play to win rather than avoid losing. True in everyday business.

There are benefits to cooperation, that produces two winners or

semi-winners rather than on loser and one winner.

A great book. If you read it, I think the odds are that that you'll

like it. :)
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on June 24, 2006
Must confess my bias on this. I like games, gambling and investing. This book covers the gamut and does it brilliantly. What I found especially enjoyable was Bernstein's literate background. He spun a fascinating tale of 'The remarkable story of risk' (from the front cover) in a totally engaging way.

Following comes from the introduction, "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."

John Kenneth Galbraith put it succinctly in his review, " 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 ...."

Clearly, this book covers important ground. Fortunately for us, it does so in a way that leaves no one behind.

As a student of business I found this to be totally absorbing.

Because I like to gamble, it was wonderful to learn that questions posed by gamblers in the Renaissance resulted in the groundwork in our modern understanding of risk management.

Because Bernstein writes this as a history the reader can enjoy it as such without struggling through a textbook-like treatment of this material.

I have read and enjoyed it several times.
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on October 28, 2002
I never enjoyed any of my stat. or quant. classes in graduate school, I wish I had read this book first. Bernstein is a good story teller who adeptly blends human faces and quantitative theories to tell the history of man's understanding of risk. The book drags a little in some spots and wanders in others, but is still worth the read. Against The Gods is user friendly enough for the everyday reader who might have trouble calculating sales tax, while offering the more studied students a refreshing dose of perspective to accompany their book smarts.
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on July 22, 2005
This is a history of the notion of risk, which is written to please both math jocks (gearheads) and poets (their opposites). As a financial advisor, Bernstein knows all about the former, which he can explain in layman terms to the latter. The result is a truly brilliant book.

According to Bernstein, our notion of risk occured in 3 stages. It began in the 16th C, when Renaissance mathematicians turned their attention to Earth, a major departure from the preoccupations of philosophers since antiquity, who studied the motions of the planetary bodies as the only measurable regularities in nature. The new guys studied dice and other games of chance as well as bookkeeping and the insurance industry (i.e. useful to the rising bourgoisie). This represented a revolution in our notion of fate, he says, as the future was regarded more as something human beings could master and manipulate regardless of their birth station, etc.

FOr the next 200 years, Bernstein reports, mathematicians attempted to measure, with rapidly evolving tools (physical and conceptual), what they believed could be "known" with certainty. Pascal and Fermat formulated the general rules for the calculation of probabilities, which was the first real step in the science of risk management, that is, recognising that math rules could guide decisions about the future. Bernstein argues that this signalled the birth of the modern era, in which rational planning replaced mystics and numerologists.

This was the golden age of classical statistics. First, researchers examined what could be inferred of the whole from a limited number of observations (statistical inference, as in vote sampling today). Then, they turned their gaze to uncertainty, which they might estimate. This resulted in Bayes' theorem, which incorporates intuition into the equasion. THe bell curve was also discovered.

I found Bernstein's third stage the most interesting, i.e. post-WWI. This was a time when the confidence in Western rationalism came into question, not only whether we operate logically but if we even come to the right conclusions when armed with the "required" information. At this time, the science of risk breaks into a number of competing schools, whose arguments are mutually exclusive, including game theory.

FInally, Bernstein offers up some surprisingly skeptical financial advice. Investment professionals, we learn, rarely do consistently better than random choices (!) and if they develop a system that works, it will quickly become obsolete because others will copy it.

This book is an extremely useful review of the complicated, sometimes arcane techniques that many of us sweated through during late nights a grad student toil. I hated every minute of it, but in Bernstein's hands it is indeed facsinating and written with a remarkable clarity. Berstein makes a lively case for the judicious use of this risk-analysis techniques - we should take them into account even if we fail to follow them rationally. His book is a useful primer for investor caution, i.e. quantitative techniques are useful but should be questioned continually. There are also innumerable fascinating asides, in which personal details of the mathematicians are examined with humor and psychological depth.

Warmly recommended.
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on July 24, 2002
Dear Reader,
All I can say for starters is "what an excellent work!". This book is an amazing account of the history of risk and it's role in society from the distant past, through the ages and right up to the present day. It gives a charming and fascinating insight into the world of risk taking and risk management, told with all the ease of a great communicator whose subject fits them like a kid glove. I read this book alongside a heavier tome on Risk Management - Mr Philippe Jorion's excellent "Value at Risk: The New Benchmark for Managing Financial Risk" that is - and I am thankful that I did, because not only did it act as a much welcomed counter-balance to some hefty risk theory but it also introduced me, in a light and accessible manner, to some of the concepts that I had been struggling with - an experience much like as if one could access a trusted source of profound knowledge on a subject, in my case Risk Management, without feeling that your brain has been given the once over with a common kitchen liquidizer.
An excellent, informative and interesting read. I would recommend it to anyone who wants a thorough, intelligent and readable introduction to risk.
However, one word of caution, this book has not been written to spoon-feed the less than enquiring mind, and to get the best out of it one really has to be a little more proactive and participatory. In some places it's like as if there are little puzzles left for the reader to think-out for themselves - which I find really quite engaging, a rare treat, the nearest thing to interaction one could get with the author via their written word.
Best regards,
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on December 19, 2012
Fantastic book. It's one of those "everybody should read it" books. Unfortunately, it was a little bit of work. I don't really know why because the way Bernstein presented the history of risk management through the history of math and, in particular, probability was truly amazing. In fact, I think the way Bernstein develops the topic through people and their discoveries up to modern times was outstanding. I think he organized the story in remarkable way and I found inspiration in just about every chapter. Anybody who thinks that they want to invest money should read this book. However, I also feel that anybody who wants a little better grip on life and how it works should read this book.
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on April 17, 2016
This is one of the best books I have ever read. I work in insurance and have studied math most of my adult life so I am biased but tracing the intellectual history of what I do today was worth every minute I spent reading this book.

I highly recommend to anyone who enjoys math, finance, insurance, or history.
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