The Remarkable Story of Risk (Hardcover)--by Peter L. Bernstein [1996 Edition] ISBN

but it took me over three months to do it. Normally I'll finish a book in under a month.
The beginning was interesting, about ancient civilizations using symbols to mean amounts or numbers of things. The book progressed nicely to early mathematicians and games of chance, which then got extended (finally!) to probability. But then I hit a wall as one after another of the admittedly giants of mathematics were introduced. Their backstories were interesting for a while, but there were way too many. The end was also interesting, as the author discussed behavioral economics and invariance and then derivatives.
I'm a retired actuary, so this book should have entertained and intrigued me. Some books you just can't put down; this one I just couldn't pick up.

Some interesting stuff in here on the history of risk management, but overall this is an exceptionally dry book, and this coming from someone who reads a ton of non-fiction. Took me several months to read, and only really made progress first on a plane back from Europe when I had finished everything else and then when I made myself finish books I'd started before buying new ones.

A fascinating topic, but the text has too many ambiguities (misunderstanding geodesy and the expression "as the crow flies") and simple misstatements (Jacob Bernoulli's age at death, for example) to make really enjoyable reading.

I ordered two copies of this book and they arrived separately. When each one arrived it had not been very well padded when packed and had quite a few dents in the cover. In fact it looked second-hand on arrival. Not happy when it is a gift for someone.

A little to simplified on the mathematical explanations. Misleading in the explanation in economics. He is a big fan of Keynes and I would agree that Keynes wrote a great book on probability but his economic theories have been shown not to be sound. He runs into some wrong conclusions based on his understanding of "animal spirits" and the crowed mentality. A better historical and fun book on probability and randomness is Taleb's ]"Fooled by Randomness".

Not exactly a page turner, but I didn't really expect it to be. The writing was okay, but if I hadn't been required to read it for a class, I would have stopped after only a few pages. The title was more bold than the content delivered.

An remarkably boring book that talks about everything but risk. The author spend 3/4 of the book describing historical formulation of strategic models that derived to become the modern risk management concepts. The rest 1/4 are scientifically inaccurate references to the stock market. The writing is conceded, historical facts were blurry, and none of the models were throughrally explained.

This book is rather a historical cliff notes of who invented what mathematical theory.

This is a delightful romp (for one trained in math), or for me, a bracing hike, through the history of applied math. The particular path is that of risk management traced from the Renaissance to the close of the 20th Century. Stories of various thinkers- Pascal, Fermat, the Bernoulli's, Bayes, Quetelet, Galton, Jevons, Keyenes, Markovitz and a host of 20th-Century financial analysts make the bulk of the book, giving a broad survey of many of the concepts- probability, normal distribution, regression to the mean, Galbraith's "Conventional wisdom," derivatives, value theory, game theory, chaos theory, all this and so much more!
Bernstein's style is clear, and often entertaining, made interesting by his selection of what to share, which is what you want from a non-fiction prose writer. There were sections explaining mathematical concepts where I had to go slow because I was encountering concepts for the first time, or ones I hadn't quite mastered, but all the more rewarding for all that.
"Risk" is a word like "seat" which can have entirely different, though related, meanings. "That seat might be dangerous" refers to the chair, while "I got a splinter in my seat," refers to human anatomy. So "risk" can refer to what is "out there" (objective risk), or to the subjective experience of daring, or uncertainty. How people deal with the latter on the battlefield or the stock market may determine the objective outcome. Therefore risk analysis may be confined to an objective science (where all the progress is) but cannot ignore the latter. Bernstein makes this point but but does not always take it into account, particularly in the opening of the book which seeks to describe risk management as that which separates rational man from superstitious man. He states that ancient man resigned himself to fate, having no concept of risk, a statement that is patently false in that every farmer planted seed corn instead of eating it, and then worked hard 8 months in hopes of harvesting enough crop to sustain him throughout the winter. Later ages could quantify and develop concepts for what was experienced intuitively, and this latter is what the author so rewardingly recounts. Ignore the first few pages and enjoy the rest!
The succession of topics goes from superstition (ancient/medieval), to games of chance (Renaissance), to probability & statistics (17th/18th Centuries), to economics (19th Century), to the stock market (20th Century); this leads us from existential to mathematical to economic, and finally to some behavioral studies. One of the interesting aspects of the book is that the scenery changes (unlike a study of statistics through the ages). Bernstein confesses that yesterday's knowledge, for example, the expectation that the market will regress to the mean, may become today's superstition, blinding us to actual changes in the mean. Furthermore, the market is driven by the difference in opinion as to what a given item is worth. A chair may be worth $5 to you because you need a chair, and less to me because I have too many; in the stock market, you may believe other people will need $5 chairs and so buy the stock in the chair company, and I may feel that other people have enough chairs and so will sell you my stock in the chair company. This difference in opinion depends on other people's opinions and actions, which are volatile. So, although we have learned so much and understand parts of the market, yet there is uncertainty that remains, suggesting that risk management is perhaps as much of an art as a science.

As we all know there are many kinds of risks. In this book, the author focuses mainly on risks associated with the world of finances, mainly the stock market and economics.

After an interesting overview of the history of risk and its measurement, particularly regarding gambling, the author gradually steers his efforts towards analyzing human behaviour in the face of the risks involved in investing. There is much in this regard predominantly concerning the later quarter of the twentieth century (the book was published in 1996). From my limited perspective, he seems very thorough in this analysis by including the often (seemingly) contradictory psychological aspects of gains and losses involved in investing mainly in the stock market. Stock market tools, products and behaviour are extensively discussed.

Overall, I found the historical parts of this book to be quite interesting, particularly the mini-biographies of the pioneers and the development of probability and statistics. However, I was much less engrossed by the detailed stock market discussions which dominate in roughly the second half of the book. The prose is clear, lively and authoritative, but, in my view, overly detailed on investing-related matters. Readers with a passion for investing and the associated risk (and its history) would likely be those who would enjoy this book the most.

The book doesn't cover the main topic adequately. Instead, it tries to entertain by narrating history of mathematical concepts and the lives of mathematicians. The mathematical concepts are not built up to any advanced theory of risk, but die a natural death at the halfway stage.

The book spends a lot of pages on decision making in the face of uncertainty. There is no coverage on risk assessment, measurement and mitigation - topics a Project Manager might be interested in.

The book also makes multiple mentions of an Arab invasion of India that led to the dissemination of India numerals into the Arab world. The Arab invasion was limited to current day Sindh and short lived. The dissemination happened in a more orderly fashion with Indian astronomers and mathematicians visiting Baghdad ( to The House of Wisdom founded by Al Mamun in the 8th century)

Fantastic. I could not tell you where I stumbled on the title but it was a while ago and I am so glad I finally made the time to read this. It really starts as far back in recorded history as possible and tells what I think is an amazing story. Huge believer in books who share information that remains valuable regardless of when published and this book does both. The format and collection are as valid today as when it was written and it is mostly made up of theories, tests, and ideas that remain valid centuries after they were invented. Yes, if the thought of this as a story, this book is fascinating. It also could(should) be considered required reading for anyone in the field of #insurance and #insurtech

When “Against the Gods” was published in 1996, it was taken seriously. Parts of it still can be, but subsequent events have turned Peter Bernstein’s thesis into a bad joke.

His idea is that over a period of around 800 years, men (no women) thinking about mathematical descriptions of events figured out how to manage risk for the good of all of us.

Only in the past generation, though, did they really nail it. Prior to that time, humans considered themselves at the mercy of fate or capricious deities — hence the title. These mathematicians showed how there are regularities and constraints that we can use to guide our planning. Good for them.

It began with gamblers trying to understand their chances. These chances are now very well understood, at least by those who understand them. The casinos are full of people who do not.

In the 19th century, the mathematicians began to try to understand far more complex systems, including those in which humans can make choices. The villain here was Francis Galton, who wildly overinterpreted some apparent regularities that appear across unrelated systems.

This is the reversion to the mean, and here is where Bernstein starts becoming ridiculous. Especially as it is applied to markets, which was Bernstein’s job. He had a company that advised fund managers.

If you think about it, it is really hard to find examples of any system that reverts to its mean. Physical systems have to come to equilibrium, and the example of a balloon obeying the ideal gas laws is probably the favorite example.

But it is hard to find an example of a real physical system reverting to a mean; or even to define such a mean. Did the atmospheres of the Moon and Venus revert to a mean? Is a black hole a reversion to a mean?

The temperature of the Earth, which has not varied too much from its current value for nearly 4 billion years, is the only example I can think of.

Anyway, when it comes to stocks and other investments, Bernstein is downright comical. The price of tulip bulbs, for example. They went way up in the 17th century and then came down, which Bernstein says should not have surprised investors who got in late. But today I can buy a tulip bulb for a fraction of a fraction of a fraction of a penny of the 17th century price; the price is so low that it cannot be computed in terms that would mean anything to a resident of Amsterdam 400 years ago.

So what mean was that reverting to?

As Bernstein finished “Against the Gods,” two of the book’s heroes, Merton and Scholes, were advising a hedge fund, Long Term Capital Management, how to manage risk. By the time the paperback edition came out, LTCM was broke and, far from reducing overall risk, it was so big that it had manufactured global systemic risk that had not existed before.

In his summation, Bernstein does recognize the joker in the deck, although he fails to assign it its proper weight.

By the ‘90s, the people who thought they understood how to manage risk — and were paid immense amounts to do so — were in love with derivatives. Handicapping the first wave of disastrous derivatives in the early ‘90s, Bernstein opined:

“There is no inherent reason why a hedging instrument should wreak havoc on its owner. . . . These disasters in derivative deals among big-name companies occurred for the simple reason that corporate executives ended up adding to their exposure to volatility rather than limiting it. They turned the company’s treasury into a profit center (once they noticed that hedges, which are a zero-sum game, sometimes yielded big gains).”

But nothing is more predictable than that managers in a free market system will do so. They have to, and everything in their ideology tells them they are right to do so.

Bernstein’s final pages are odd. After spending 300 pages telling us that risk has become scientifically manageable, for the benefit of all of us, he then describes how it hasn’t.

Long before the Bush Crash, the mortgage crisis in derivatives was brewing — it had nothing whatever to do with the Community Reinvestment Act — and here Bernstein did almost anticipate risk correctly. Though only in a footnote, he warned: “these mortgage-backed securities are complex, volatile, and much too risky for amateur investors to play around with.”

Too risky for the pros, too. I wonder what Peter L. Bernstein Inc. was advising its clients about mortgage-backed securities in 2006-7 or thereabouts.

(I just realized that this Bernstein is the same idiot who wrote “Wedding of the Waters,” a ridiculous book about the Erie Canal. I wish I had connected the names sooner and not wasted my time on this silly book. On the other hand, Bernstein was in his time an influential popularizer of theories of investment, so it was useful to learn what doofus ideas Wall Street will buy.)

This isn't a book; it's an education. And I can guarantee that if you're a serious, committed, thoughtful reader the purchase price is but a tiny fraction of the value that Bernstein will deliver to you with "Against the Gods." The following review may seem overly detailed and specific, wordy beyond measure, but that's mainly because I learned so much and wanted to capture all that I could while it was still fresh.

In the first section, "To 1200: The Beginnings" Bernstein explains why modern understandings of probability and risk were so slow to develop. The Greeks were brilliant mathematicians and even more brilliant philosophers, but several handicaps prevented them from discovering risk, according to the author. First, their number system was klugey and ill-adapted for even the most rudimentary calculation (you just try multiplying XVII by XIV!). Second, the great Greek thinkers were forever in single-minded search of truth, not "the likeness of truth," which is the rough translation of probability in Greek. Finally, life and times in the ancient world moved slowly. Livelihoods and prices and ways of working changed hardly at all from one generation to the next. Moreover, whatever the future might hold was resigned to the will of the gods or, later on, to God. Thus, the tools and motivation to better understand odds and risk we face every day were lacking for centuries. And then along came the Renaissance and Reformation.

In section two, "1200-1700: A Thousand Outstanding Facts," Bernstein plots the slow but steady discovery of basic probability theory. Two changes were fundamental to success. First, the Hindu/Arabic numeral system made its way West and slowly went mainstream (first recorded use in Europe was only in 1134), especially after the introduction of the printing press overcame one of its chief weaknesses - the relative ease of doctoring numbers (i.e. changing 1 into 7 or a 0 into 9). Suddenly there was a readily understandable system of digits that could be calculated with relative ease (the typical third grade memorization of "times tables" was unknown to even the most accomplished mathematicians in ancient times). Indeed, the invention of "zero" may be as remarkable and influential as that of fire. Second, for the first time learned men began to ponder what their futures held, untethered from an all knowing or at least highly influential supernatural being. God or fate no longer dictated whether or not you gained or lost money, but proper planning and consideration of probabilities based on past events might.

The wheel of modern risk theory began to turn because of a brainteaser centered on gambling, a vice that dates back at least as far as the so-called oldest profession. In 1202, a 27-year-old Italian named Fabonacci published a handwritten book called "Liber Abaci" that demonstrated in a very practical sense how Arabic numerals could help people solve important practical questions, such as profit margin, interest rates, etc. Fabonacci in turn influenced another Italian centuries later, Paccioli, who in 1494 published a book on mathematics and accounting ("Summa de Artithmetic...") that, among other things, posed a problem that was the touchstone for modern risk theory: "A and B are playing a fair game of balla. They agree to continue until one has won six rounds. The game actually stops when A has won five and B three. How should the stakes be divided?" (To put it in more comprehensible terms for modern Americans, Bernstein writes that this question is like asking: Imagine that the Giants and the Red Sox are in the World Series and are perfectly matched, but the Giants won game one. What are the odds that the Red Sox will win the Series?). Nearly a century-and-a-half later this challenge was picked up by the brilliant and eccentric Frenchman Blaise Pascal in 1650 at the behest of an amateur mathematician and wealthy gambler, Chevalier de Mere. In October 1654, Pascal had a religious revelation and consequently swore off mathematics forever, but not before bequeathing his mechanism for solving the Paccioli puzzle, his famous "Pascal's Triangle" that showed that future outcomes were reliant on the results of those that preceded them. (It was the Triangle that would inspire Francis Galton's "quincunx" machine in 1874 that demonstrated the tendency toward normal distribution - or the Bell Curve.)

Then, in 1662, a 42-year-old British button merchant, John Graunt, began to digging into the birth and death records of the City of London and became the first person to use statistical sampling to estimate the expected age of death by probability, an approach further refined by a young Edmund Halley (of Halley's comet fame) in the late 1690s. This innovation in statistical analysis found its way to Lloyd's coffee house on the wharves in London where denizens began to offer insurance for the various ships that sailed from London...and Lloyd's of London was born.

The third section is the most dense, "1700-1900: Measurement Unlimited," a remarkable family of Swiss mathematicians looms large, the Bernoullis. In 1705, Jacob Bernoulli observed that under similar conditions the occurrence of an event in the future will assume the pattern of the observation in the past and then, in 1731, his nephew Daniel Bernoulli published a paper at the St Petersburg Academy of Sciences that introduced the economic concept of utility, that people behave differently depending on the utility that they derive from the decision and consequence, or "to each is own."

But for all that Bernstein makes of the Bernoullis (and he constantly refers back to them), it was the discovery of normal distribution and the associated instruments of standard deviation and regression to the mean that were the most profound. First recognized by a French mathematician Abraham de Moivre in 1730 and then further refined by the legendary German mathematician Carl Gauss in the early 19th century, the power of normal distribution was powerful. But the discovery of regression to the mean by Englishman Francis Galton, privileged cousin of Charles Darwin and modern founder of eugenics, was pure "dynamite" according to Bernstein. No longer was probability a static concept of randomness and large numbers, but rather a dynamic process of outliers predestined to join the crowd at the middle. The driving force of the world would always be toward the mean, the average, the mediocre. His experiments with pea pods and then a height study in London demonstrated precisely the opposite of what he was hoping for: eminence does NOT beget even greater eminence; it begets something less brilliant, more normal. Large peas or human couples beget offspring slightly smaller and vice versa.

The fourth section, "1900-1960: Clouds of Vagueness and Demands for Precision" deals with the disillusionment of the Victorian Age, those who believed that the world was steadily getting better and that the answers to life's mysteries could be discovered if we could just measure more. The First World War destroyed all of this, Bernstein writes. Two interwar period economist represent this counter trend well, the American University of Chicago economist Frank Knight, who first fully distinguished between risk (I know my odds and I'm taking a chance) and uncertainty (I have no idea what my true odds are), and the legendary British economist John Maynard Keynes, who argued the future was inherently unknown and always subject to human caprice (or "animal spirits" as he called them). The common theme, as Knight evidently hated Keynes, is the basic question: why should past performance dictate our view on future performance?

Bernstein uses this section, building on Knight and Keynes' disbelief in rationality, to introduce two final critical contributions to risk theory in the pre-1960 period. First, "game theory," as developed by John von Neumann and Oskar Morgenstern, which demonstrated that the true source of our uncertainty in life lay not in the odds of some static probability model, but rather the likely reaction of others. Second, Harry Markowitz showed in 1952 that the safest way to maximize reward (i.e. profit) and minimize loss was to diversify our portfolios and thus minimizing volatility, an idea that was radical at the time when inflation, exchange rates, commodity prices, and the bond and stock market were largely predictable. But, beginning in the early 1970s, when everyone's view of normal was changing rapidly, the brilliance of Markowitz's formulae was finally discovered.

Finally, Bernstein ends with "Degrees of Belief: Exploring Uncertainty," that essentially ends in the mid-1990s. With the benefit of a decade (a very short time frame considering the sweep of this book), it seems that Bernstein just missed the next great wave of discovery in probability - behavioral economics, which has become something of a cottage industry recently, with notable (and highly recommended) books like Dan Ariely's "Predictably Irrational" (or even "Freakonomics") that demonstrate in fuller relief the hunches of Knight and Keynes and others.

In closing, this is one of the best, more influential books that I've read. I found it at a church rummage sale and bought it for $0.50. I can't even begin to compute the return on investment from that purchase. If you like books like Heilbruner's "The Worldly Philosophers" and/or if you're a practitioner in today's world of hedging and calling, this masterpiece absolutely cannot be missed.

A must read for anyone just starting to grasp the essence of greed and risk; the proverbial tradeoff between, "I want what I want, when I want it", and the consequences of poor judgement regarding risk. Don't take my word for it, it being foolish choices, just read Bernstein. His pages are packed with examples of foolish choices from the 'laws of probability', to 'decision theory', to 'risk management', the risk taker, and the gambling spirit, all combine to make 'Against the Gods', not only entertaining but quite informative, as well. 'Uncertainty means unknown probabilities', and misleading information will increase your chances for failure. It all makes sense, both dollars and sense, so to speak. The important concept of diversification, is that it minimizes risk. The importance of risk, is that it increases wealth. In the end, volatility and risk are to be minimized, and secretive opponents always hide their true intentions. Most important to our understanding of risk is the role emotion plays when determining risk or rewards. As Bernstein so clearly tells us, "Emotion destroys the self control that is essential to rational decision making. People are unable to understand fully what they are dealing with. They experience what psychologists call cognitive difficulties"(p.271). Subjectivity and erroneous perception go hand in hand like the hand and the glove, analogy. No one sees beyond the structure of their personality no matter how much confidence he projects. In the end, luck, chance, risk, and reward, are the ingredients for a terrific read.

Against the gods is an impressive walkthrough via the development of the concept of risk. The book spans the early history of the Greeks, and Romans and through the age of renaissance, early math of probability theory all the way down to today's economy.

The first two third of the book was very interesting as we see how the different way of looking at risk changed with time, and how the math was developed. However, the last third of the book, which deals with today's financial economy with respect to risk, stock market, derivative, etc... felt too technical and will not appeal to anyone who is not involved in the stock market. That felt somewhat disappointing as risk has impact on other aspects of our lives beside the stock market, and are not given the same consideration, if any (examples include insurance policies, business decisions, sports).

In summary the book is deep, interesting and very well written. The only concern is the overuse of the stock-market domain in the last part of the book which will probably cause some readers to lose interest. Also, it would be very interesting to add another chapter about the economic meltdown in the U.S. due to the burst of the housing bubble and the risky mortgages, and analyze what went wrong there.

This readable book is a mostly a history of probability and statistics. Bernstein talks about two sides of risk management: figuring out what events are likely (or unlikely but serious), and preparing to have the best outcome possible in case these events occur. The thesis of the book on p. 1 is that, "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." The story is told by explaining the work of thinkers in probability, statistics, and later finance.

Why didn't the ancient Greeks invent probability? Bernstein agrees with the scholar Shmuel Sambursky that the Greeks didn't invent probability because they thought the world was too messy to be subject to predictions; it looked too irregular to be studied compared to their standards of geometry and astronomy. The first quantitative study of probability that Bernstein mentions is by Cardano in the Renaissance, and then it was only later with Pascal and Fermat that probability became a serious scholarly question. We make most decisions without knowing precise probabilities, and to determine these probabilities we need statistics. The heroes of statistics in Bernstein's book are John Graunt and Edmond Halley.

Most of the book is a history of probability and statistics, about which the author is not an expert and for which he relies heavily on Newman and Hogben's books. There are better books to use for the history of mathematics. In some places Bernstein writes confusedly about the large Bernoulli family, mixing up the standard numbering of Nicolaus I and Nicolaus II by calling them Nicolaus II and Nicolaus III, and saying that Jacob Bernoulli lived to nearly 80 (the brother Johann Bernoulli lived to nearly 80, while Jacob died at 50). Bernstein makes the easy mistake of writing Edmond Halley's first name as "Edmund". As a history book this work is not solid, but as a story of our civilization becoming comfortable quantifying what we previously didn't quantify, intrepeting statistics, calculating probabilitities, and making decisions based on this, it's a fine book.

As the title indicates this book narrates the history of Risk and its role in human advancement.

Peter best summarizes the content of the book in his introduction: "this book tells the story of a group of thinkers whose remarkable vision revealed ow to put the future at the service of the present. By showing the world how to understand risk, measure it, and weight its consequences, they converted risk-taking into one of the prime catalysts that drives modern Western society."

The book presents the history of Risk in a chronological sequence, and outlines its understanding in the respective timeframe and through the lenses of the people advancing the field. It also reflects on how that understanding affected the advancement in the various aspects of their lives.

A great educational and informative book. Peter manages to present the content in a very fluid manner, without getting caught up in the technicalities and the jargon - making this book accessible to all readers. A recommended read!

Below are excerpts from the book that I found particularly insightful:

1- "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 oracles and soothsayers who held a monopoly over knowledge of anticipated events."

2- "The word "risk" derives from the early Italian risicare, which means "to dare." In this sense, risk is a choice rather than a date. The action we dare to take, which depend on how free we are to make choices, are what the story of risk is all about. And that story helps define what it means to be a human being."

3- "Risk and time are opposite sides of the same coin, for if there were no tomorrow there would be no risk. Time transforms risk, and the nature of risk is shaped by the time horizon: the future is the playing field."

4- "The trick is to be flexible enough to recognize that the regression to the mean is only a tool; it is not a religion with immutable dogma and ceremonies. "

5- "The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us."

6- "Knight builds his analysis on the distinction between risk and uncertaintly: Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated...It will appear that a measurable uncertainty, or "risk" proper...is so far different from an unmeasurable one that it is not in effect an uncertainty at all."

7- "Once we understand that we are not obliged to accept the spin of the roulette wheel or the cards we are dealt, we are free souls. Our decisions matter. We can change the world. Keynes's economic prescriptions reveal that as we make decisions we do change the world. Whether that change turns out to be for better or for worse is up to us. The spin of the roulette wheel has nothing to do with it."

8- "Game theory brings a new meaning to uncertainty. Earlier theories accepted uncertainty as a fact of life and did little to identify its source. Game theory says that the true source of uncertainty lies in the intentions of others."

9- "Tversky offers an interesting speculation on this curious behavior: Probably the most significant and pervasive characteristic of the human pleasure machine is that people are much more sensitive to negative than to positive stimuli....[T]hink about how you feel today, and then try to imagine how much better you could feel....[T]here are a few things that would make you feel better, but the number of things that would make you feel worse in unbounded."

10- "Occasional large gains seem to sustain the interest of investors and gamblers for longer periods of time than consistent small winnings. That response is typical of investors who look on investing as a game and who fail to diversify; diversification is boring. Well-informed investors diversify because they do not believe that investing is a form of entertainment."

11- "Derivatives are not transactions in shares of stock or interest rates, in human lives, in houses vulnerable to fire, or in home mortgages. The product in derivative transactions is uncertainty itself."

12- "But there is only a fine line between guaranteeing absolute safety and stifling the development of financial innovations that, properly handled, could reduce the volatility of corporate cash flows. Corporations that shelter their cash flows from volatility can afford to take greater internal risks in the form of higher levels of investment or expenditures on research and development. Financial institutions themselves are vulnerable to volatility in interest rates and exchange rates; to the extent that they can hedge that volatility, they can extend more credit to a wider universe of deserving borrowers."

4/5 Recommended:
The book brings you on a journey through the history of mankind as it learns to understand the concepts that form the basement of modern risk assessment and risk management. As the author repeats multiple times throughout the book, the mere revelation that the likelihood of an event can be calculated to a certain degree - not just seen as an "act of god" - did directly contribute to the enormous increase of our wealth and the development of science.
Where it gets tricky is that assessing a risk is not just a matter of using the right techniques and identifying the logical fallacies that cloud your vision: your data, knowledge and experience in the specific field are crucial to even understand what risks you want to manage.
In the last chapters, the author concentrates more on risk in the field of economics and I found this part the most interesting. Partly because the author explains many important aspects of modern economics, but also because it introduces you to new theories that aim to explain - why there is still so much uncertainty despite our best efforts.
The book made me think that the limited predictability of human actions and the universe is actually a bliss, not a curse. The life would be dull without illogicalities and the unexpected.

I think my subtitle is more accurate, but probably not as marketable.

This book traces the evolution of how people have learned to record information and use math to process it, leading to modern day probability and financial risk management.

It's not a story of "risk" itself, which simply means danger. In a sense, all human history and prehistory is the story of how we've dealt with danger, and learned to overcome many of them. Few people today die from being eaten by cave bears, for example.

Yet relatively few people truly understand how to think in terms of probability. The weather forecast says there's a 90% chance of sunshine. When it rains, people say the weather forecasts are no good, not that today was the one in 10 it rains under current conditions.

Many online marketers and copywriters know they should split test their advertising, but often they terminate the test and declare a winner long before they have a large enough sample to be statistically valid even to the 90% level -- and even that means they're wrong one out of ten times.

This book winds up praising modern financial risk management. The financial crisis of 2008 makes us ask a question this book doesn't answer. Since Bernstein is dead, someone else will have to. When subsets of a system "manage" their risk by transferring it to the system, how can the system cope? Many financial institutions managed their mortgage bond risk by, in effect, transferring it to the tax payers, who had no say about it.

From the most ancient times human beings have sought glimpses of the future through oracles, divinations and signs in the natural world. Such practices are still widely followed today in many parts of the world.

But there has also been a search for more rational ways to understand the future and to predict the outcomes of uncertain events.

Against the Gods covers the major milestones in humanity's understanding of risk and probability. Bernstein covers the impact of Arabic numerals and the "discovery" of zero in mathematics. Without these two intellectual advances any quantitative examination of risk would have been impossible. Gambling provided an early impetus to the study of probability, as players sought to gain an edge over their opponents.

All the key player are described - Pascal, the remarkable Bernoulli family, Leibnitz, Bayes, Keynes, Markowitz, Arrow, Gauss, Galton, von Neumann, Black, Scholes to name just some of the people who appear in this book.

Subjects include probability, sampling, regression to the mean, the law of large numbers, game theory and the new field of behavioural economics.

Not all of the concepts are easy or intuitive to follow, but Bernstein does an excellent job of making them as accessible as possible without dumbing down the text.

The book does not cover the impact of uncertainty in physics, where it is an integral part of quantum mechanics, for example. Bernstein's book is purely about finance and investment decision making.

In Greek mythology, the Gods often rebuked uppity humans who became too full of hubris. In a similar way, our search to understand and reduce investment risk has also involved some humbling stumbles.

Portfolio insurance was found to be wanting in the market crash of 1987. CDOs and other derivatives to re-package risk failed spectacularly in the current global financial crisis.

Risk management tools only work in orderly, smoothly trending markets where there are always buyers and sellers. But it is precisely in disorderly markets where we most want such tools to work.

These failures will not stop the search for better ways to understand and control risk.

In "Against the Gods", Peter Bernstein proposes that the capacity to manage risk sets modern civilization apart from all that came before it. It allows us to take risks and make decisions crucial to any kind of progress. This book tells the story of how and why our understanding of risk came to be what it is now, from the absence of mathematical probability in the ancient world, through its emergence in the Renaissance, to the evolution of our modern theories of risk management in finance. Though he concludes that "the goal of wresting society from the mercy of the laws of chance continues to elude us", Bernstein paints an exciting picture of how the ideas behind risk management develop and become increasingly sophisticated as technologies and economics demand greater mastery of risk.

"Against the Gods" has five sections, corresponding to historical periods in the understanding of probability and risk. "To 1200: Beginnings" is the weakest section, because it attempts to explain why probability did not emerge before the Renaissance, even though many civilizations possessed the mathematical sophistication to take it on. The hypotheses just aren't convincing, and I don't think I'd call the Greeks "the most civilized of all the ancients" either. But the Arabic numeral system with its concept of "zero" was the critical development during this time, as the author points out. "1200-1700: A Thousand Outstanding Facts" covers the invention of basic probability theory, statistics, and the beginnings of business forecasting in Renaissance Europe.

Bernstein provides mini biographies of the many mathematicians, gamblers, and others who made significant contributions to our understanding of probability and risk, making this story one of human endeavor. "1700-1900: Measurement Unlimited" tells the story of risk in the Enlightenment, which introduced the concepts of utility, standard deviation, and regression to the mean as tools in measuring uncertainty. Bernstein begins using the stock market to illustrate problems of risk, a theme which will continue for much of the rest of the book. I was puzzled by the story of Francis Galton who discovered regression to the mean, much to his own chagrin, while researching eugenics. Genes don't slavishly regress to the mean. If they did, there wouldn't be over 400 breeds of dog in the world, most of which were created by 19th century selective breeding.

"1900-1960: Clouds of Vagueness and the Demand for Precision" brings us into the 20th century with the development of modern theories of risk management, the influence of game theory, and the role of diversification. One chapter is dedicated entirely to measuring risks on the stock market. The last chapter, "Degrees of Belief: Exploring Uncertainty", takes a look at new ways of viewing human behavior toward risk that gave birth to the study of "behavioral finance". While many financial risk management models were built on Efficient Market Hypothesis, which assumes human choices are independent and collectively rational, Prospect Theory has shown that "human choices are orderly, although not always rational". In other words, people are predictably irrational, opening up a whole new way of analyzing risk where human behavior is involved.

Book is a long dry series of history interjection separated by basic probabilities and a few algorithms. Simplistic math if you've taken college classes, or even AP stuff in High School.

It goes over the history of risk from ancient Greece up to 1950. Book isn't helpful in your own business dealings. The concept of punctuated equilibrium bursting artificial market bubbles and rewriting the rules of risk isn't even mentioned. Chaos theory gets one paragraph at the end of the novel. This made the book useless in terms of contemporary math actually used to judge risk in stock markets.

The only good about the book (to me) was chapter 16, titled 'The Failure of Invariance' (inconsistent choices for the same problem framed in different ways) which explains Prospect Theory. Distilled it means emotions destroy rational decision making, and people often don't understand what they are dealing with. Basically 'we use shortcuts that lead us to erroneous perceptions, or we interpret small samples as representative of what larger samples would show' (overgeneralization, p271). We interpret gains and losses (chance of losing means we gamble more) differently, and overvalue dramatic components, ignoring the data from other sources. It means we misjudge risk because we don't understand the situation well enough. It is applied fuzzy thinking strained through ego. This chapter made me investigate the research of Kahneman and Tversky, and I found it the [only] worthwhile portion of this book.

Overall, I'd read a book on Prospect Theory for a better understanding of risk, rather than this volume. Three stars -- meh, but Chapter 16 still taught me something.

The author has done extensive research and provided a historical account of the academic study of quantifying financial risk. It starts at the beginning of the Arabic numeral system all the way to the Black-Scholes options formula. The book is generally interesting from the historical perspective. Yet it suffers from a few flaws: (a) the grandiose claim that modernity depends on this quantification is grossly exaggerated and not justified in the text(seems like a common suffering of tunnel vision shaped by the narrowness of your own field), (b) certain account of the theory is not quite right, although the general gist is correct, (c) narrowly focused on financial risk, (d) generally missing the issues about non quantifiable risk, feedback mechanisms in the markets, and the variety of cognitive failures not captured by a nice Gaussian distribution, (e) only celebrates successes of the theories while ignoring its often monumental failures. That said, if you take it for what it is (i.e., ignoring the Grandiose Title of "Against the Gods" and know it is a narrowly focused discussion of a branch of math/finance theories), then it is probably worth a read. I would recommend continuing with Taleb's Black Swan to see a completely different perspective after you finish with this one.

"Against the Gods" is a book outlining the history of risk. The book provides an outline of all the key players and their contribution to risk theory and management. Chronologically, the book begins in ancient times and stretches all the way to the present, where Bernstein delves into the works of modern day risk luminaries. The book is well written and the style is engaging, with the author always managing to find a way to keep the reader entertained as well as informed.
The book does not pretend to be a "how to" guide for risk management, nor should readers treat it as such. Although the book does discuss modern risk management tools such as derivatives, it is devoid of complex technical analysis and its treatment of such devices is limited to outlining their place in the history of risk. Those looking for technical trading analysis should seek elsewhere.
One of the key questions a potential reader of this book should be asking is "Does this book have any practical applications with regards to modern day risk management?" Whilst as mentioned above the book is not a step by step guide, I firmly believe the book is useful insofar as it enables the reader to avoid the pitfalls of the past. For example, capital markets are continually surprising those who hold an unwavering belief in "regression to the mean". The books provides an explanation of what this theory states, how it has been applied and where overzealous disciples have misused this principle in the past. Overall I would recommend this book as an informative and enjoyable read.

i'm very much a novice in the study of risk and probabilities; however, I've been lucky enough to come across some excellent business oriented books - but in actuality and thankfully far more philosophical than financial - (Fooled by Randomness for instance) lately that have done a masterful job of presenting this seemingly dry subject in a very fascinating way. Bernstein has probably written the quintessential historical study on Risk and Probability with this volume. It is filled with interesting details of the human qualities and quirks of the mathematicians and philosophers that investigated the problems of probablity and explains the mathematics involved with lucidity and wit. The book follows a chronological approach; however, it's also thematic to show the evolution of the subject of risk management and the influence of other sciences on it - such as evolution. Those that refuse to accept the idea that markets remain unpredictable despite the development of modern risk control mechanisms like derivatives, computer modelling, and modern financial instruments will find this book frustrating. Those who want a wquick fix investment solutions guide will be even angrier and will nort find anything useful here. This book belongs in the philosophy of science and History of Ideas sections far more than the business dept. Nonetheless, the serious and thoughtful investor is advised to read this book carefully. as someone who's lost in the stock markets himself the Bernstein's book can reduce the sting of the loss and impart some well needed wisdom. I no longer invest but I loved this book all the same.

Peter Bernstein helped kick off a trend in modern publishing by writing this best seller. By taking a humble idea and showing how it changed society, we've since seen books likes Guns Germs & Steel which turn seemingly prosaic items into historic driving forces. The idea here is a good one though: that the moment mankind started calculating risk, we could begin to take control of our destiny - beating the odds in our human endeavours of exploration or enterprise.

This book makes a mentally exhilarating read, and turns mathematicians into heroes (rightly so!) as the story of probability unfolds. Bernstein has an actuarial background so his story, a large cargo-ship of information and anecdotes, tends to slew around at the end to take a very financial tilt, but I think this is a minor criticism. It launched this reader off into several related explorations - most recently into decision theory, heuristics and the experiments of Kahneman and Tversky who help explain why markets and individuals are less rational than people like Bernstein generally assume.

This book is exhilarating, both for those who work with probablility and statistics (we come from a proud lineage) and for those who love history. Well recommended.

This book tackles what would seem to be a pretty bland topic, the history and evolution of risk management and the tools that make it possible, statistics and probability. But the book is not written in a mathematical way. Rather it relates the issues people were dealing with and the personalities that moved the science forward. This contrast between scientific necessity, discovery, and profiles of the people playing major roles can be used very effectively when done right. See "The Discoverers" by Daniel Boorstin for perhaps the best example of this. But while "Discoverers" covered the evolution of all of human scentific knowledge, necessarily painting in broad strokes, Bernstein narrows his focus to a single field. This provides some depth that Boorstin lacked, but overall perhaps even this accessible approach isnt enough to make probability and statistics truly engaging. The book is often quite enjoyable and gives one a nice appreciation for why the science of risk management came about over hundreds of years into the form we know it as today, and leaves one with a sense of the fluidity of something like mathematics, which is typically presented to students as ageless truth. Recommended for those with an interest in how and why math and science rose as they did, and willing to ride out the occasionally dry passages.

Huge enterprises and vast industries now depend on complex risk management techniques. Against the Gods explains the origins of those techniques. The text starts with Renaissance gamblers, moves through the Victorians with their fascination with measurement, and into our age of precision.

For the most part this is a history of the people who made those techniques, more than an examination of the techniques themselves. The actual math is superficially described in the early stages when things were still relatively simple. The later more complicated techniques are not described in any detail.

Bernstein also discusses the fascinating question of why these ideas were not discovered earlier. Many of our most modern risk management techniques require computers. However most of the things covered in this book do not. Why did were these ideas not discovered and used before the Renaissance? Against the Gods has answers.

Against the Gods is very well written, the author has an engaging style and explains the concepts clearly. The story of how we learned to manage risks is an interesting one.

+++++

This book, by Peter Bernstein, author and president of an economic consultant firm, is about those thinkers whose vision showed how to put the future at the service of the present. What exactly was this vision or idea? Answer: The calculation and subsequent quantification of risk. That is, they attempted to manage risk. "The capacity to manage risk, and with it the appetite to take risk and make forward-looking choices, are key elements...that drive the economic system forward."

"[T]he stock market and the bond market are natural laboratories for the study of risk because they lend themselves so readily to quantification." Thus there will be some discussion of stocks and bonds.

This easy-to-read book has five parts--

Part 1, two chapters (up to the year 1200):

Tells us how the modern conception of risk is rooted in the Hindu-Arabic numbering system that reached the West seven to eight hundred years ago.

Part 2, three chapters (between the years 1200 and 1700):

Describes how a serious study of risk began during the Renaissance period, "when people broke loose from the constraints of the past and subjected long-held beliefs to open challenge." By the mid-1600s, the "theory of probability" was discovered, a theory which is "the mathematical heart of the concept of risk."

Part 3, six chapters (between the years 1700 and 1900):

By this time, mathematicians transformed probability theory from a "gambler's toy" into a major instrument for organizing, interpreting, and applying information. Quantitative techniques of risk management gradually emerged that "have helped trigger the tempo of modern times." During this time you get the development of such things as:

Life expectancy tables; life annuities; the Law of Large Numbers; statistical sampling; the normal or "bell" curve; standard deviation; the Law of Averages; the groundwork for modern principles of investment management; and regression to the mean.

Part 4, four chapters (between the years 1900 and 1960):

At this point "uncertainty, and its handmaiden luck" are discussed. The concepts encountered in this part never occurred to the mathematicians and philosophers of the past since they were too busy establishing the laws of probability to "tackle the mysteries of uncertainty." Included in this part is a good discussion of game theory and how to measure risk when investing in securities. All theories discussed in this part are called "models of rationality."

Part 5, four chapters:

This part continues discussing the concept of uncertainty. Here there are examples of how the results of the models of rationality depart from what actually occurs in reality. Included is more discussion of securities such as stocks and bonds, and new discussions of derivatives (such as stock options) and volatility.

At the end of this book, Bernstein sums up his entire book:

"The central theme of this whole story is that the quantitative achievements of the [historical figures] we have met [in this book] shaped the trajectory of progress over the past [centuries]. In engineering, medicine, science, finance, business, and even in government, decisions that touch everyone's life are made in accordance with disciplined procedures that far outperform the seat-of-the-pants methods of the past. Many catastrophic errors of judgment are thus either avoided, or else their consequences are muted."

Along the way, Bernstein passes along little tidbits of wisdom. For example, "you cannot expect to make large profits without taking the risk of large losses."

One of my favorite sections in this book is when the author does an in-depth statistical analysis of the stock market by using the results of five hundred stocks from January 1926 through to December 1995. His analysis leads to a conclusion that most rational people are intuitively aware of: "The stock market is a risky place!"

Be aware that this book is not an investment cookbook that gives the reader step-by-step instructions of how to invest in the stock market. Also, this book is not exclusively about investment risk. As well, this book is not a textbook.

Throughout the book are pictures, tables, charts, and graphs to aid in the discussion. I found these helpful.

The only weakness I found was that some explanations especially numerical explanations were not clear and were too wordy. At these points, diagrams would have benefited the explanations, making them less wordy, and easier to follow.

In conclusion, this book details the fascinating story of risk. You'll find "that [this] story helps define what it means to be a human being!!"

**** 1/2

(first published 1996; acknowledgements; introduction; 19 chapters; main narrative of 330 pages; (foot)notes; bibliography, name and subject index)

+++++

For people who are interested in the economic side of risk (mainly stock), rather than the probabilities and risks of every day things.

The book goes through a tour all the thinkers and mathematicians who contributed to the field of probability and risk, such figures include Gauss, Bernoulli, and Von Neumann, describing the evolution of the field of probability from simple dice games, to the probability of today. Similarly the book describes the different factors that stimulated the maturity of probability, from the introduction of Arabic numerals to the west, to the hundreds of computers number crunching figures for chaos theory.

There is not one mathematical formula presented in the book. While this might be a good thing if you have a phobia against numbers, it limits the general practical knowledge gained from the book. The book does, however, discuss how to read graphs and statistics, or more precisely how prominent figures in the fields of risk arrived at important conclusions and properties from given data.

This work is a minor classic of financial literature. Business historian Peter L. Bernstein wrote it during the early 1990s, when faith in the power of quantitative models and financial engineering was at its apex, and he tells a heroic story. Beginning with Greek mythology, Bernstein shows how cultural ideas about risk and probability evolved through Arab mathematics, the European Enlightenment and Chicago School economics. He writes in a spare, straightforward style, and manages to convey the essentials of financial theory and the essences of great economists without losing the reader in a maze of equations. Of course, the 2008 financial crisis cast probabilistic models and financial engineering as global market villains. In retrospect, that makes Bernstein's evident admiration for those models seem rather touchingly ingenuous. Nonetheless, getAbstract finds that this is still one of the best popular introductions to the development of financial science.

Dear the store.com 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,
[email protected]

Against the Gods was written with a public in mind. It is mainly intended for the professional investor, who deals with notions of risk and uncertainty on a daily basis, and for MBA students who wish to complement their courses in probability theory and financial analysis with a learned companion volume. It will provide such readers with a cultural perspective on the history and cultural significance of risk. According to Peter Bernstein, the taming of risk and its breakdown into something quantifiable and manageable defines the boundary between modern times and the past.

Why did humanity wait the many thousands of years leading up to the Renaissance before breaking down the barriers that stood in the way of measuring and controlling risk? The idea of risk management emerges only when people believe they are to some degree free agents. The notion of risk implies that the future is more than a whim of the gods and that men and women are not passive before nature. For all their wisdom and skills as mathematicians, the Greeks turned to the oracles instead of consulting their wisest philosophers when it came to predicting the future. The Arabs used the numbering system developed by the Hindus, but they too believed that men's worldly destiny is always determined by God.

The Renaissance and the Protestant Reformation would set the scene for the mastery of risk. It put human beings squarely in control of their own destiny, and enjoined them not to remain passive in the face of an unknown future. Like Prometheus, the Renaissance Man defied the gods and probed the darkness in search of the light that converted the future from an enemy into an opportunity.

But to put the future at the service of the present, people needed more than a free-thinking spirit, a passion for experimentation and a willingness to take risks. For most of the Middle Ages, scholars had to depend on a clumsy numbering system based on the Roman alphabet. Fibonacci's Liber Abaci, published in 1202, was a spectacular first step in making measurement the key factor in the taming of risk. Cardano's obsession with gambling led to the first exploration of probability in 1565, but his Liber de Ludo Aleae wasn't published until 1663.

It took a French Connection to lay the foundation of probability theory. The first French Quants appeared in 1654 when the Chevalier de Mere, a nobleman with a taste for gambling and mathematics, challenged the famed mathematician Blaise Pascal to solve a puzzle. The question was how to divide the stakes of an unfinished game of chance between two players when one of them is ahead. Pascal turned for help to Pierre de Fermat, a lawyer who was also a brilliant mathematician. The outcome of their collaboration led to an explosion of mathematical innovation.

Probability theory owes much to games of chance because gambling provides an ideal laboratory in which to perform experiments on the quantification of risk. But God was never far from Pascal's thoughts. In his Pensees, he frames the question of whether to believe in God in terms of a wager or a bet which reason cannot answer. Ian Hacking, the Canadian philosopher, asserts that Pascal's line of analysis to answer the question of belief is the beginning of the theory of decision-making. Pascal's fellow Jansenistes from Port Royal were also well-versed in decision theory and their Logic, published in 1662, was a reference throughout Europe up to the nineteenth century.

Whether motivated by God, or by gaming, or by commerce, or by the law, the same kind of ideas emerged simultaneously in many minds. This spurt of mathematical innovation was to last about a century, and all the tools that are now used in risk management and in the analysis of decision and choice stem from the developments that took place during that period. In England, John Graunt and William Petty were compiling numbers of births and deaths in London, laying the ground of statistical analysis. Edmund Halley carried the analysis further by breaking down the population into an age distribution and calculating life expectancies. Later in the eighteenth century, Jacob Bernouilly, Abraham de Moivre, and Thomas Bayes showed how to infer previously unknown probabilities from the empirical facts of reality, and invented thenormal distribution, the standard deviation, and the modern method of statistical inference.

That's where the author kind of lost me. The rest of the story includes memorable characters: Carl Friedrich Gauss, who was saluted by Napoleon as "the greatest mathematician of all times" ; Francis Galton, whose obsession with measurement led him to envision a science of eugenics ; Frank Knight, the Chicago economist who never forgave Keynes for having relegated him in a footnote of his Treatise on Probability ; and many others. But Bernsten often interrupts his narrative with practical advise for investors that could have been better addressed in a separate volume, and he loses focus with digressions on behavioral finance or neural networks. The commonly practical takes over the highly speculative, and the big questions that the pioneers of risk measurement grappled with, the "gods" of the title, have been driven out of the picture.

The author concludes by quoting the great statistician Maurice Kendall, who once wrote: "Humanity did not take control of society out of the realm of Divine Providence to put it at the mercy of the laws of chance." Well, mankind did not conquer risk against the gods of chance to put it at the mercy of bean counters and stock traders.

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.

What a fine well researched and accurate book on risk taking, oddsmaking and gambling. A must for people interested in exploring the history of gambling, gaming and risk taking.

It is a chronicle that delivers a novel sounding book with the Greek truth-seekers to today's supercomputer creation developing various means of judging, learning, and controlling risk.

The author grasps and then shares with us a complete, sophisticated and methodically pleasant tour through history by outlining specific philosophies and histories of the worlds' greatest math pioneers, philosophers and scientists.

This is not what you expect but you will find it far more enjoyable, interesting and a blessing to learn about the various ways of gaming, risk and oddsmaking developed from theories to testing, to practice, to analysis, to today's methods of measuring risk and gaming.

Mr. Bernstein is one great writer, author and researcher to our benefit if you read his book. One of the best books ever written.

Also recommended: History of Gambling

Not what I expected at all. Very much an accompaniment to Fermat's Last Theorem rather than the analysis of risk I was expecting. Risk from risi care meaning to dare: i.e. risk is a choice not a fate. Mathematically blending new information into old to help make better decisions. Probability: ratio of favourable outcomes to total opportunities. Odds: ratio of favourable outcomes to unfavourable outcomes. A F M Smith "Any approach to scientific inference which seeks to legitimises an answer in response to complex uncertainty is for me a totalitarian parody of a rational learning process". Order is impossible to find unless disorder is there first. Changes in stock prices - normal distribution but based on unpredictable information so stock prices move in unpredictable ways. Reality contains sets of circumstances that people had never contemplated before. Reality violated the symmetry of the bell curve regressing to means that were unstable. Consequences of decisions rather than just inputs to decisions need to be evaluated. Patterns of the past do not always reveal the path to the future. Any given instance is so unique that there are no others similar in sufficient numbers to tabulate to draw any inferences of probability of results. Whatever had a measurable probability yesterday has an unknown probability tomorrow. We are not prisoners of an inevitable future, uncertainty makes us free. As we make decisions we change the world. Whether those decisions, make things better or worse depends on us. Game theory: true source of uncertainty lies in the intentions of others.

The title of my review is aimed at warning those expecting to find a risk management manual in this book that they will be disappointed. So will those who expect to find the links between the evolution modern statistics and acturial science to the rise of insurance markets and risk management instruments which have proliferated in this century. Many other books quite ably cover these interesting topics.
Instead, the author provides a broad sweeping history of how modern statistics evolved and which answers some questions of why it took so long for modern risk management institutions to emerge. Ancient Greeks, among others, who appeared to be within easy reach of developing statisical theory, nonetheless relegated their fate to the whims of gods, rather than making them amenable to analysis with probabilities and actuarial tables. Tracing modern risk management from the time of Jacob Bernoulli's attempt to develop probabilities from sample data, the author also shows how a knowledge of probabilities can ultimately generate value. QUOTE Reality is a series of conneceted events, each dependent on another, radically diffeent form games of chance in which the outcome of any single throw has zero influence on the outcome of the next throw UNQUOTE The book closes with risk management innovations that followed the emergence of financial volatlity in the 1970s.
Ultimately, this book may be of less interest to statisticians and investment professionals, other than those who have a curious interest in how today's highly developed set of instruments, institutions, and policies around risk came about from the foundations provided in statistical theory.

My friends and colleagues have a hard time believing that one of the most entertaining books I have ever read is about risk management and probability. Yet, Peter Bernstein's masterpiece bestseller is just that. By tracing the development of risk through the ages, he sets the personalities of the key innovators against the background of the times, and shows the practicality of what they did and how it changed the way we look at the world.

Most of my favorite mathematicians are profiled here, in witty and digestible bites of prose that often read more like a novel than a business book. The chapter titles themselves bear witness to the delightful style of the author: The Man with the Sprained Brain, The Measure of Our Ignorance and The Fantastic System of Side Bets are just a few examples. The segues between chapters and sections are also very well-done - creating a bit of suspense and making this quite a page-turner.

With apologies for seeming trite, there is a high probability, at little risk, of reaping a great reward from the story told by Mr. Berstein.

Bernstein does a good job overall in discussing the history of decision theory,its interaction with developments in probability and statistics,and the resulting use in portfolio-risk management of the mean-variance-standard deviation model,the capital asset pricing model(CAPM),and the pricing of options(puts and calls)by use of the Black-Scholes model.All three of these models are totally dependent,in terms of the accuracy and reliability of their forecasts, on the underlying probability distribution being normally distributed.Benoit Mandelbrot has,over a fifty year period,presented a massive amount of empirical evidence that calls into question the reliance of the above mentioned models on the normal probability distribution.Bernstein commits a shocking error of both omission and commission in failing to discuss or even mention Mandelbrot or his work a single time.This omission costs Bernstein one star.Bernstein loses a second star for his highly inaccurate assessment of the work of John Maynard Keynes in his A Treatise on Probability(1921;TP).Bernstein claims that"Unlike Knight,Keynes does not distinguish categorically between risk and uncertainty;in less precise fashion,he contrasts what is definable from what is undefinable when we contemplate the future".(Bernstein,1996,225).Bernstein appears not to have read beyond chapter 3 of the TP.In chapter 26 of the TP, after having laid the groundwork in chapter 6,Keynes defines uncertainty in relation to his index w(0<=w<=1), which measures the completeness of the potential relevant available evidence upon which a decision maker is going to base his estimates of probabilities.These probability estimates are primarily interval estimates for Keynes.Bernstein fails to inform the reader of this important fact.Keynes identifies the case of ignorance(complete or total uncertainty)with a w equal to 0.In this case no probability of any kind can be estimated.Keynes identifies a w equal to 1 as specifying a complete information set.If w equals 1 a single unique probability distribution can be used to deal with risk.Keynes deals with the case of partial knowledge(incomplete evidence)by specifying a value for w that lies somewhere between 0 and 1.Keynes was not scornful of the law of large numbers,as claimed by Bernstein(p.226).Keynes regarded the frequency interpretation of probability as a valid and sound theory with limited applicability.It was not general because it required that all the relevant evidence had to be composed of statistical evidence alone.Keynes did not heap scorn on the arithmetical mean,as claimed by Bernstein(p.226).Again,there are other measures of central tendency besides the mean,such as the mode,median,and geometrical mean.What Keynes did object to was the use of the arithmetical mean and the normal probability distribution without any empirical support.Yes,Keynes would object to the overuse and misuse of the normal probability distribution in financial and portfolio analysis precisely because of the vast amount of empirical evidence arrayed against its use.One need only read any book or paper written by Mandelbrot,as well as the work of an ever increasing number of researchers who have followed in his path.Finally,nowhere in the TP did Keynes declare that"Perception of probability,weight,and risk are all highly dependent on judgment" and"the basis of our degrees of belief is part of our human outfit".(Bernstein,p.227).Bernstein claims that Keynes made these statements on page 5 of the TP(See his footnote 29 to chapter 13 of his book).This is simply incorrect.There are a number of other errors relating to Keynes's 1937 Quarterly Journal of Economics(QJE) article and the General Theory(1936) with respect to Keynes's use of the word uncertainty.The quotation taken from the QJE article and cited on page 229 by Bernstein specifies that uncertainty is a range.This range goes from little or no uncertainty to mild or moderate uncertainty to complete or total uncertainty("We simply do not know!")Perhaps Bernstein could correct the above mentioned errors and omissions in a second edition.

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.

I was hoping to get better understanding of the Risk models and their evolution, short comings etc. But instead I got more of a history and biographies of all the mathematicians, their families and friends probably starting from Aristotle. Embedded between those pages are some interesting origins of probablity and statistics.(some of them are boring too,like some 16th century English
dude keeping track the birth and death records of the civilians).

I barely made it to page#100 and gave up. So may be my review is not 100% accurate. Things could always get better after page 101 but I couldn't take my chances.

A fascinating wealth in and of itself, this book is your PhD in financial physics. Bernstein takes us back to the great harbingers in the calculation of all forms of risk. Many of these are characters worthy of volumes themselves.

The amazing, often unexpected sources of discovery of the most important mathematical laws of nature come to light in act after act of the Author's pen. Surprisingly captivating, the content is more story telling with technical support, rather than technical writing with a story to back it up. It is no wonder this work is a global best seller.

An excellent read which takes us through financial risk laws of nature and concepts from Fibonacci to the Fed, Against the Gods is required reading for all who roll any form of dice-and those who seek to understand them.

I found this book very enjoyable. The author writes about the origins, and, most importantly, the evolution of risk. It starts with ancient times and takes us to today's financial world. I really like how he explained the evolution of risk management from primitive ways to more complex and sophisticated methods. It also features certain individuals who contributed to the development of theories about risk and probabilities. I think that readers who are interested in learning more about risk will find this book valuable.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

"Against the gods" is, on the whole, a fun read, but comes across as a little dry at times, especially when the author seeks to explain the nitty gritty on the more obscure stuff, such as the probability of obtaining a particular number in the throw of die when n die are thrown, or the number of throws required to optimise the probability of obtaining a desired number, etc.....you get the picture. I particularly liked the insightful little bits on history, such as the Renaissance Movement, and those on history's equally famous but obscure mathematicians such as Girolamo Cardano, and the intriguing puzzles such as the one on Diophante's age. A light academic exercise that will shed light on the mysteries of risk management and the mathematics of probability.

As a person who works in accounting area, I am always amazed by the genius of the double-entry method of book keeping. Hence when I read a review that the book includes this as one of the attempts to contain risk, I decided to buy it hoping to hear more about the making of the method. Unfortunately, there is only one paragraph mentioned. The rest of the book is dedicated mostly to the story about probability and a few other chapters on something else.
If you regard "Gods" as the ones who throw dice and you want to know the story of people who wanted to predict the outcome of the throw and how much to bet on it, you should read the book. Otherwise, there is nothing much regarding the attempts to overcome other kinds of risks, which are no less important than probability. Hence, the naming of the book is somewhat misleading. Instead, it should merely read " History of Probability" which may shy some readers like myself away.

it must be taken with large sums of salt. Basically the book is based upon and it is about math and history, or it is a history of applied mathmatical probability. Fine and good. But Bernstein is niether a mathmatician nor a historian. Perhaps this is why it is so accessible to most--as most are neither anyway. (In some ways, the blind can lead the blind very well, but not to good effect.)
The first obvious error occurs on page 31, where an ancient algebra problem is solved with the wrong answer. Perhaps a typo, but such typos continue. More egregious is Berstein's proof through assertion or simple dismissal. Eg., "Without the concept of zero...a negative number is a logical impossiblity." Perhaps true, but I guess we must take your word for it...
The book is really at its best when it is at its worst; or you will learn from this book when someone who really 'knows' tears it apart. As it is, it provokes thought, and although much of it is erroneous, even a fallacious thought is more than most books stir.
It is a fun and provacative book, but like most maverick things, it is in itself a big risk. Some of his gambles pay off, others don't. This book needs an expert to tidy it up (and he might just throw it out the window).
But in the final analysis, more academics should take risks like PB and risk making mistakes--over-professionalization so favored and demanded by most is making academia a most stale and dessicated place: all know more and more about less and less. PB is not academic (he seems to know a little about a lot) and ironically this gives him the oportunity to experiment and fail, at least with books and ideas, with relative impunity. Or to put it another far more blunt way, a historian or a mathmatician could lose his tenure over authoring this book. I recommend this book.

Bernstein has put together an interesting treatment of some rather dry materials. He traces the history of mankind's dealing with risk from the basics of probability (mostly based on renaissance gambling) through the 19th century development of statistics (means, bell curves, etc) to modern risk management (the stock market, options, and derivatives). Although all of these topics would be covered in more detail in mathematics, statistics, or finance courses, Bernstein weaves them together in a compelling way.

Full of interesting stories, it starts to get more technical and difficult to read at the end. An eye-opener on how helpless we would be without statistics and mathematical thinking that we now take for granted.

Against The Gods is a popular account of the history of financial risk management. The author takes us through a journey of discovery spanning almost a thousand years, from the introduction of Arabic numerals and the concept of zero, to the most sophisticated derivative instruments of modern finance. At each point in history when a great leap forward was made, the personalities involved are introduced, and the advances they are credited with are explained. All throughout, mankind's age-old struggle to measure and control uncertainty is seen to stumble time and again against the same, seemingly insurmountable problem: There is no guarantee that what happened in the past will continue to happen in the future.

The book is highly recommended for anyone seeking to understand the origins of modern risk management and what the concept of risk really means.

In "Against the Gods" Bernstein mainly discusses the evolution and history of risk from ancient times to recent times. Bernstein explores risk through the great thinkers who contributed to the advances made mostly in the field of statistics. "Against the Gods" was rather interesting, well-written, and quite suitable for the layman. However, I felt that a broader discussion of the effects of the improved "risk understanding" had on commerce, businesses, and on society in general was missing.

I thoroughly enjoyed reading this book. In it, Bernstein "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 categories that drives Western society." Bernstein organizes his material within an historical framework:
To 1200: Beginnings
1200-1700: A Thousand Outstanding Facts
1700-1900: Measurement Unlimited
1900-1960: Clouds of Vagueness and the Demand for Precision
Degrees of Belief: Exploring Uncertainty
Bernstein examines hundreds of situations throughout history in which human beings found themselves against the gods and against the odds...some "winning" and others "losing" but all somehow contributing to an understanding of what risk is, of how it can be accurately measured, and of what the consequences of a given risk could be. As Bernstein suggests, many of the most heroic acts in history were undertaken without such understanding.
In the final chapter, Bernstein reiterates his central theme: "the quantitative achievements of the heroes we have met shaped trajectory of progress over the past 450 years. In the beginning, medicine, science, finance, business, and even in government, decisions that touch everyone's life are now made in accordance with disciplined procedures that far outperform the seat-of-the-pants methods of the past. Many catastrophic errors of judgment are thus either avoided, or else their consequences are muted." All of us are the beneficiaries of those "quantitative achievements" and of this book in which they are discussed with compelling eloquence.

P. Bernstein's book encompasses many aspects of the vast realm of risk and probability. Most remarkable is the completeness of this historical encyclopedia centering around the evolution of statistics and probabilities. Bernstein went to great length to include a plethora of events each of which was instrumental to the progression of mathmetical forecasting. Famous mathematicians mentioned include Gausse, Bernuli, Newton, Galton... the list goes on and on. The complexity of the calculations dramatically increases along the time line. From simple card games to tabulating mortality rates for insurance purposes, to eventually the application of mathematical finance in forecasting and pricing the derivatives market.
The book is well focused for the first half of the book, however, due to the vastness of the information presented, it will probably prove to be an unsuccessful candidate for one sitting.

The sweeping story of probability and the related concept of risk. Interestingly, the modern notion of probablity was really not "invented" until the Renaissance. This fact hints at the fact that the concept is not intuitively obvious, and explains why people often behave in ways that are not consistent with basic probability theory itself. Bernstein covers how the modern notion evolved, and how it grew to be such an integral part of modern financial theory, including concepts such as diversification, portfolio insurance, and the advent of derivatives. Also covered are aspects of behavioral finance -- driven by the sometimes peculiar decisioning approaches of the human mind. This is an excellent book for any executive who is interested in decision making in general, as well as financially-related decisions.

This book does much to highlight, underscore and re-affirm the important and pivotal role of critical thinking in the measurement, analysis and interpretation of risk. Mr. Bernstein has put together a very readable text that simultaneously is part history, part tutorial, and part meditation on diverse and often inter-related topics of probability, descriptive and inferential statistics, economics and finance. He skillfully shows how a blind reliance on numbers and quantitation, especially as they apply to business, economics and finance can equally inform or mislead, and goes further to demonstrate that the tug of war between gut (our best guesses) and measurement has not been resolved with the introduction of theoretical treatments of individuals and groups, complex mathematical formulae, innovative management products and computers; it has only been taken to a new and higher level of complexity.

Mr. Bernstein's thesis was a simple one: people had to first make an intellectual leap- they had to believe that outcomes could be influenced by their actions and not merely in the 'hands of the Gods' a matter of fickle 'Fate', before they could even begin to think about taming risk, let alone measuring it. From the author's standpoint, risk management demands the uncommon ability to think with numbers. It also requires the ability to live with varying degrees of uncertainty. While people throughout history had the ability to do the latter, they had not, as a group, the ability to do the former until very recently in recorded human history.

Bernstein takes this as a jumping-off point for his exposition. He first details the origin of numbers, something so banal to us today. He then takes the reader to the gaming tables of Europe, and introduces us to the figures who would lay down the tenets of Standard Mathematical Probability. From there, Bernstein introduces us to various historical contributors to the allied fields of probability and statistics- from Fermat and Pascal through a host of Bernoullis (the archetypal Renaissance men) to such enigmatic figures as de Moivre and Gauss, pious men like Bayes, and right up to privileged and misguided social reformers like Galton and Quetelet. Each in turn contributed a crucial piece of the portraits comprising Standard Mathematical Probability and modern day statistics such as the concepts of mathematical expectation, conditional probabilities, sampling and measurement error, the law of large numbers and regression to the mean. Once these elements were in place, the stage was set for the formal development of risk management as a science and a practice, and at this point, Mr. Bernstein introduces us to the economists, who then as today couldn't agree on anything, could always be counted on to provide 'correct' answers for what has happened, and the wrong answer as to what will happen.

After setting the stage by presenting the tools of modern risk management, Mr. Bernstein then turns his attention in the last third of the book to those who have righfully challenged the assumptions underpinning neo-classical economics, modern finance, and Standard Mathematical Probability. This is perhaps the most interesting part of the book, because it is here that the author introduces the human factor in risk, and calls into question the use of mathematical techniques, largely developed over the course of studying a variety of regularly occuring and repeating natural phenomena, to the actions and behavior of that mass of capricious and unpredictable creatures, The Human Ape. His take on this subject has some very interesting implications in the world of finance, given that the Human Ape is, to paraphrase, smarter than the average monkey, and has the capacity to learn from his or her mistakes (which most unfortunately do not), and as a consequence, adapt to changing conditions.

I found the last half of the book to be the most interesting, because here is where the author fully lays out the limitations of the disparate mathematical techniques, especially as they apply to the Great Upright Walking Ape. Throughout the book, all probabilistic and statistical concepts are explained in plain English, and there are absolutely no equations in the text (a definite plus, as this often gets in the way of critical thinking and true understanding). Mr. Bernstein took great care to fully explain the key concepts in precise detail, and offers the reader many accessible sources for further enlightenment throughout the text.

Perhaps the most important messages of the book can be briefly summarized in the following way. We define risk as the chance of loss, uncertainty as something we don't know, and in this day and age, we often behave as if we know all of the risks and there is nothing that can happen that has not happened before. For us, the past is the best indication of the future course of events. Standard Mathematical Probability was developed under the assumptions of total information, independence of outcomes (past and present moves do not affect future moves), and the ability to reduce everything that matters (and many that don't) to a number. In essence, it looks at the same thing done in the same way repeatedly, and as such, takes the characteristics of any situation to be stable and immutable.

Standard Mathematical Probability forms the core foundation of risk management, and while it is a fine tool for the gambling tables, it falls apart when applied to the real world, where for a variety of reasons the assumptions are simply untenable. In fact, in the real world, they are ridiculous, bordering on insane. And this is before we even begin to contemplate the human factor....

In sum, while I do not agree with Mr. Bernstein's assessment of the failure to develop the tools of Standard Mathematical Probability before the time of the Renaissance (which I found puzzling, given the ample evidence of very sophisticated mathematical capability among such diverse ancient societies as the Aztecs, Egyptians, Olmec, Maya and Inca), I wholeheartedly agree with his assessment of these tools as they apply to the human element. I thank Mr. Bernstein for making clear all of those concepts that too many Professors in Statistics 101 (intentionally) obfuscate, and I highly recommend this book, as well as Benjamin Graham's The Intelligent Investor, to anyone wishing to invest with both safety and success.

As a mathematician I found the first half of this book fascinating. During this portion the author speaks about the mathematical history probability and risk. He traces a nice path through famous historical mathematicians and what inspired them to research the fields of probability, statistics and game theory. Most of the examples focus on games of chances.
Then second half of the book, as the author pulls into the current centuries focuses hard on the economy and the stock market. The reader will need to have some knowledge of economics to appreciate this portion of the book. With little experience and knowledge about stocks, bonds, options, etc., I found most of his examples difficult to follow and did my best to trudge through for the interesting mathematical tidbits I found interesting.
If you're not a mathematician the first half might be a little confusing. If you're not an investor the second half might be a little confusing. Still, it's a good look at risk from many different angles.

An important and needed work.
One that helpfully and carefully illuminates the evolution of risk and offers a well argued framework for a perspective from which readers can on the place asn understanding of the notion of risk in their own lives..... Infact, Bernstein does well to subtly encourage a reader to re-evalute his/her acknowledgement of risk and remain alerted to the importnace of its' purposeful handling.
A much needed work equal in to other more scientific traces of related work in mathematics and such like.
Well worth having thjis book for a host of reason, if not at least for reference after initial reading.

"Against the Gods" retraces the historical journey of men and their battle in subduing the Gods. From the Oracle at Delphi to modern Chaos theory and Neural networks, Peter Bernstein weaves an enthralling story of the evolution of risk and how it has led to the development of modern financial economics, peppered with brief but colourful tales of the men who have contributed to this edifice.
The book could not have found a better author. Bernstein has enough credentials up his sleeves for the task. A professional investor who is no stranger to risk management, he is also a scholar and historian in the area of financial economics. Without being pedantic and too technical, Bernstein did a wonderful task of compressing 300 years of risk-related literature into an entertaining book that can be enjoyed by even a layperson.
Against the Gods increases our understanding of the evolution of risk, which is not as quite straight forward as we think. Though we have come a long way since Pascal and Fermat, the story of risk is not over. The book points out some of problems especially in the area of forecasting where a new way of interpreting and measuring risk may be needed.
This is a brilliant book which I strongly recommend as an introductory text for anyone interested in risk management. The same goes to professionals and academics, for the historical treatment of the subject matter in the book can offer a new perspective on risk.

If you are a statistician or a mathematician you will find this book a little slow at times. The first half is about the history of Probability and Statistics, the second half deals more with Economics (some applications of Game Thoery) and Finance. If you are new to the filed of Risk manegment and decision making when faced with uncertainty this is a good introduction. If you have been in the field of speculation for a while; this would be a good review of the history of Risk and Probability.
The book does a much better job with introducing the History of Probability and Statistics than it does with Game Thoery and Economics.

Who dares wins. Bernstein puts the emphasis on winning: "higher risk should in time produce more wealth, but only for investors who can stand the heat."

The title of this book promises the story of risk. The story he tells, he tells very well, but it should be called a story of risk with significant omissions. The missing parts can best be described in terms of three categories of risk:
* directly perceived risk - climbing a tree, riding a bike, or driving a car to the channel tunnel,
* quantified risk - probabilistic estimates of failure, such as those made for new vaccines, bridges, or the reinforced concrete in the tunnel, and
* virtual risk - the scientists and statisticians don't know or cannot agree: the likelihood of a terrorist planting a bomb in the tunnel that will kill hundreds of people.

The management of the first category of risks has probably changed little since our ancestors climbed down from the trees. The particular dangers that we have to cope with are different - fierce animals have been replaced by cars. But we still respond to them intuitively in ways that have been programmed into us by evolution - we all duck if we see something about to hit us. The fact that, for this category, we are all risk managers, makes the official risk manager's job frustrating. If officaldom requires cars to be fitted with better brakes, we do not drive the same way as before and enjoy an extra margin of safety; we drive faster or start braking later. The potential safety benefit tends to get consumed as a performance benefit.

The management of virtual risks is guided by belief, conviction and superstition. These risks remain the realm of the gods. Like the computer programmer's virtual reality, they can be real - like those built into a simulator for training pilots - or completely imaginary - like space invaders. Virtual risks are products of the imagination that work upon the imagination. In the risk literature, such risks are usually labelled uncertainties. But we do not respond blankly to uncertainty; we impose meaning upon it - meaning that has no firm basis in science. And our responses continually change the world to which we are responding.

Whether associated with the stock market, global warming, mad cow disease, or the channel tunnel, virtual risks cannot be determined actuarially. They are inherently unknowable because they are the product of an infinitely reflexive regress. Investors, polluters, beef eaters, travellers, terrorists, and those responsible for security are all guessing about the responses of others, to their responses, to the responses of others ... At the time of writing it is not clear whether the recent fire in the channel tunnel was a result of accident or sabotage. But it is clear that Eurotunnel's estimate that a fire that will kill 50 or more people will occur only once in 600,000 years is fatuous . When fully operational, on a busy weekend the tunnel could have more than 10,000 people in it at any one time; and what will happen in the tunnel will be a result of people - employees, ordinary travellers, and terrorists - behaving in unpredictable ways in response to the behaviour of the tunnel operators who are, in turn, trying to guess what they will do.

Against the Gods does not address the first category of risk and, a more important weakness, blurs the boundary between quantified and virtual risks. It is essentially the story of the achievements of the risk quantifiers and their success in displacing the gods. In chapter 1 Bernstein elevates these achievements to a defining role in history:

"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 the whim of the gods and that men and women are not passive before nature."

In his conclusion this mastery becomes the shaper of progress:

"The central theme of this whole story is that the quantitative achievements of the heroes we have met shaped the trajectory of progress over the past 450 years - [these heroes] have transformed the perception of risk from chance of loss into opportunity for gain, from FATE and ORIGINAL DESIGN to sophisticated probability-based forecasts of the future, from helplessness to choice."

Bernstein devotes considerable space to an inconclusive discussion of uncertainty. For coping with it he recommends the methods of his heroes: "under conditions of uncertainty, both rationality and measurement are essential to decision making." But it is advice without practical content. If we don't know, we don't know. Sophisticated probability-based forecasts of the future are only as reliable as the assumptions upon which they are based. They are useful only to the extent that the past is a reliable guide to future. Bernstein argues that his heroes - Pascal, Gauss, Galton and Arrow to name but a few - have enlarged the domain of risk under scientific management, and reduced the domain of the gods. But the uncertainty within which we all live our lives remains boundless. The heroes appear merely to have shrunk infinity.

Or perhaps enlarged it? Might the increased command of science and technology over nature be illusory? Might pharmacologists and genetic engineers be creating new problems faster than they are solving old ones? Might the development of new financial instruments like derivatives - that appear to be beyond the comprehension of most of those dealing in them - be turning up the heat in the investors' kitchen? Such questions have no agreed answers. They lie in the realm of virtual risk.
The fire in the channel tunnel that closed it for 6 months 6 moths after it opened provides a test of the achievements, extolled in Against the Gods, of the risk quantifiers. Eurotunnel's Safety Case is a 295 page testament to the state of the art of quantified risk assessment. It concludes "It has therefore been possible to perform a deterministic safety analysis of the system and to use the potential risks which have been identified as the basis for Quantified Risk Assessment." Although no one died, the physical damage, and the consequent disruption of the service, were not anticipated in this assessment.

All this said, Bernstein has written a fascinating book. Against the Gods is the most comprehensive history I have read of the attempt to bring the science of probability to bear on risk management - I abandoned my usual practice of bending over the corner of a page containing something quotable when I realised that I was about to double the thickness of the book. But, at its centre is an unresolved ambivalence; Bernstein is a risk enthusiast on the verge of losing his nerve. After more than 300 pages devoted to applauding the triumph of probability theory over the gods of ignorance and superstition, he closes with a quotation from Keynes quoting Locke: "God has afforded only the twilight, as I may say, of Probability, suitable, I presume, to that state of Mediocrity and Probationership He has been pleased to place us in here." It is an intriguing note on which to end a book devoted to the defence of hubris (the title of the book is a definition of hubris). Is it offered, one wonders, to propitiate Nemesis, who invariably punishes such presumption?

Against the Gods is a fantastic book for people who love to read the history of risk, dating back as far as to the greeks. Bernstein's passion to the topic makes it a clear 5 star book. And he's passions shows on almost every page. Example: if you are just interested in the Markowitz formula, don't buy this book. But if you wanna read that Markowitz's methodology is a synthesis of the ideas of Pascal, de Moivre, Bayes, Laplace, Guass, Galton, Daniel Bernoulli (especially since he's had the same nationality than me) and von Neumann & Morgenstern. Furthermore, that Markowitz's methodolgy draws on probability theory, on sampling, on the bell curve and dispersion around the mean, on regression to the mean, and on utility theory. If this history is what interests you, this book is for you (if not only for the great title & book cover) !

This book immediately grabbed me - I have a passion for learning about risk management strategies from options and futures to other instruments. What I loved about this book was the historical understanding of how the mathematical foundations were layed for the evolution of probability theory and risk management, and how that backdrop pervades modern life from portfolio theory, to odds-making, to how insurance companies set premiums, to how unbelievable it was for the Red Sox to come back from four games down last year vs. the Yankees.

I've recently finished this book in concert with two others - The (Mis)Behavior of Markets by Benoit Mandelbrot and Hot Commodities by Jim Rogers. As a group, they are an interesting pairing. What's interesting is how the Misbehavior of markets de-constructs and points out the problems with a lot of the fundamental notions laid out in Against the Gods, with the thesis that many aspects of modern finance theory are wrong (under-stating volatility and mis-applying probability and normal distributions) to financial markets. It's a good counter-balance.

While I found this book really engaging and interesting, I can't give it five stars because I felt a little let down at the end. I was hoping for a little more info about current ground-breakers in risk management, but it ended a little bit abruptly for me. But overall, I think this is a really excellent book worth reading if you have these interest areas.

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.

The positive: if you've taken various statistics classes through college and know a little to a lot about risk management, you'll probably feel enlightened by the end of the book about the progression of knowledge that has led to current risk management standards and theory. It's generally an entertaining read.

The negative: At least one illustration (game theory, p 241, 1998 (2nd) edition) in the book is wrong; if you know theory (and in some cases, application -- as with various points on investing), you'll laugh (or cringe) at some of the examples as abbreviations of knowledge. On the other hand if you don't know theory/application, you may end up being perplexed if you stop to think about some of the examples and a few terse statements of alleged fact made by the author. But most readers won't notice most of this.

Overall: I feel enlightened for having read of the origin of much of risk management in one story. It was a quick read. Yet I wouldn't recommend it to non-statisticians (excepting math buffs), and my recommendation would be muted to statisticians and (less so) risk managers, unless they enjoy history.

As I went through the book, one thing I realized was that we seem to attribute pathbreaking ideas to people without realizing the history behind it all. For instance, it was amazing to learn that Louis Bachelier had derived an option pricing formula (albeit not very robust) before Einstein could discover the properties of Brownian Motion and well before Norbert Wiener's discovery of the Wiener Process! The insight of Daniel Bernoulli on the logarithmic nature of the utility of wealth is in some ways the foundation for Marshallian Utility Theory which in turn, I would argue, is the basis for Lord Keynes' Consumption Theory. This is not to say that we should not give credit to M/s. Black, Scholes & Merton or Lord Keynes but that we should understand that discovery of something entirely new happens very very rarely like Sir Isaac Newton's discovery of Gravity.
All in all, a wonderful book. The chapters on Game Theory and Behavioral Finance deserve multiple reads.

This is a pleasant and instructive book. It tells very human stories to show how people learned to think about risk. Bernstein also shows considerable understanding of the human nature.

This book may be enough for someone who is only curious about risk management, but it is also a very useful complement for someone who studies it seriously. Although it addresses risk management in investment decisions, its approach is also useful for understanding uncertainty in process management, which was pioneered by Walter Shewhart and widely taught by W. E. Deming.

If you are in the financial markets, I bet that something, somewhere in this book will provide you with a hint of an idea to be more successful. Be it
gambling,
statistics,
history,
derivatives
or even prospect theory,
this book talks about it all. I was particularly fascinated by the extent of Peter's knowledge of history, going back to Al-Khowrizmi (after which the word algorithm came into being) and coming all the way to the use of derivatives.
For knowledge that *will* fill you up and never let you down, go "Against the Gods"!

Bernstein's book effectively reviews the history of numerical measurement and probability theory, then veers into a history of financial instruments up to the mid-90s (when the book was released). He has an excellent touch for presenting complex philosophical and financial concepts in easy-to-understand terms, although I must admit to a bit of confusion in the sections covering modern markets, including derivatives. My interest was in the first two thirds of the book which anyone who teaches courses in statistics should read, if only for a little background. A rather esoteric topic, to be sure, but if you are already intrigued by such things, you will not be disappointed.

I considered its historical and war-story approach a great tool for anyone designing a strategy.

FYI - from statistical physics the Roulette equation can get you very far P,survive = ( 1 - P,event)^n,event

The cover of course begs John 14...do you have "enough"?

This book was recommended to me by my otolaryngologist, why I do not know, unless it was prefatory to our discussion of the risks of neck surgery. I found it primarily helpful to realize the amazing precocity of the mathematicians at very tender ages. I in turn recommended the book and gave it to my good friend, an actuary, for his library (not for mine)! He commented that he was aware of all the material, but would peruse it anyway, just because I recommended it! Since I am a retired Judge, I have no knowledge of risk(!!!)

As a historical reference, this book is a rich and entertaining story, but the greater value is in the understanding of risk it imparts to the reader. While requiring very little business background (other than a natural curiousity in its subject), it succeeds in promoting an awareness about the nature of risk management and lends insight regarding the operation of economic systems. The book explains much about the analytic backbone of capitalism, and how the core of our financial markets have grown alongside our understanding of risk. At the same time, the author always maintains an even keel regarding the use of statistics and their value as a guide. A great work for the non-professional.

The author's (Bernstein) handling of history and the role that risk has played beginning with ancient times and continuing through to today's theories underlying investments such as derivatives (options, etc.) is superb! Beginning with the significance of numbers (which leads to such important developments as probability theory)and running through to modern day risk management techniques, the author develops his points in intriguing style reminiscent of the "James Burke" Connections series. He adequately covers the development of game theory via ancient games and original problems, all the way to modern portfolio theory. Along the way, he helps accountants appreciate the history of their groundbreaking forefathers such as Luca Paccioli, the inventor of double-entry bookkeeping (with extremely interesting insights into his student, Leonardo da Vinci !) and Leonardo Pisano Fibonacci (fibonacci numbers, etc.)while introducing actuaries and other dull souls to the bell curve, regression to the mean, life insurance tables and much, much more. It is exciting reading indeed for us "stereotypical" math and accounting majors! I can't reccommend the book more than to say it is definitely a permanent addition to my library as a CPA, and that I have returned to read it several times since its publication in 1996. It is well written and a "must read" for anyone interested in why history is dependent upon accountants, numbers, and such theory in arriving at today's standard of living.

Though I'm no investor of bonds and stocks, I happened to pick up Against the Gods in a need to read and learnt of the game of risk that's been so wonderfully played out in this book.
There's little technical jargon and what's technical is made very comprehensive, interesting and (when it starts to tickle your mind whilst bringing in insights) entertaining.
As if a ballet about Wall St, Against the Gods will offer anyone something for the long or short term, intangible or otherwise.

I didn't like this book. I read through the reviews and took a chance on it, but after reading a few chapters it was a struggle just to keep reading on. I still have not finished it but am about half way through it. It's just a struggle continuing to read.

This book is a nice historical book about how humankind tamed risk in the statistical sense of it. Unfortunately it does not really tackle the most recent issued associated with risk like black swans (see The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: "On Robustness and Fragility", the fact that normal statistical distributions are not sufficient to describe the world, and how to deal with risks from a practical perspective.
I was expecting a more comprehensive treatment of risk management through the ages, and although interesting and written by a very well read author, I did not really find what I was expecting.

There are two things that I really liked about this book, and one thing that I didn't. The good things:

1) The author's vast knowledge of the financial markets, from most of a century of experience.
2) His extensive and entertaining history of risk analysis.

The bad thing:

His attempts to explain math concepts that he apparently doesn't understand very well.

His history of risk analysis was a pleasure to read -- from Fibonacci and Cardano, to Markowitz and Sharpe. My favorite, was his coverage of Francis Galton, the man who measured everything.

Above all, the greatest value in this book is that it's packed with the author's knowledge of finance, from 63 years of experience. He's 89 years old now, and appears to still be going strong.

This book is well worth reading.

My favorite quote from the book:
Today's hero is often tomorrow's blockhead.(pg 297)

If you are a trader and you are shopping around for literature that you think will help you to better grasp the concept of risk, this book is not for you. I'm not sure if that literature exists at all, if you find it, let me know. This book, along with "Capital Ideas" was recommended reading at the Chicago University's Financial Mathematics program. It is a good book for someone who is just getting into trading/risk management or is simply interested in some history of probability theory. It is very easy to read and promises to be informative of nothing more than what is said in the title. As "Capital Ideas" focuses on the recent history of economic thought, this book focuses on the history of probability theory. I would not recommend reading "Capital Ideas" if you read this one, some things are repetitive.

A couple of years before he died in the summer of 2009, Mr. Bernstein was interviewed by Vanguard for the cover of the Summer 2007 issue of its "In the Vanguard" investor newsletter. Bernstein's message: stay away from all this crazy derivatives crap. Of course, he didn't say that in so many words, but that's what he meant.

There's a more specific footnote along the same lines on page 309 of the book, as well: "Most individual home mortgages are packaged with other mortgages and sold off in the open market to a wide variety of investors...these mortgage-backed secruities are complex, volatile, and much too risky for amateur investors to play around with." Remember, this book was published in 1996. I'm so glad Mr. Bernstein lived long enough to see the great 2008 crash.

The overall impression I'm left with is that Mr. Bernstein thought most of the market was (and is) essentially random. Most people are totally irrational, and the market does crazy things when a lot of big egos and crazy quant models of big institutional holders are the primary factors driving the whole mess. Consequently, Bernstein's main piece of advice (whether he makes it explicit or not) is to diversify. For the vast majority of individual investors, this is the single best piece of advice anyone can give. Bravo, sir.

This is a remarkable book. Quoting from the introduction, "This book tells the story of a group of thinkers whose remarkable vision revealed how to put the future at the servic of the present." It pulls together descriptions of the ideas of several major thinkers, most of whom I had encontered in various stops in my education. These include Fibonacci, Pascal, Halley (of the comet), several Bernoulli's, Newton, Leiniz, DeMoivre, Bayes, Gauss, Laplace, Cournot, and more modern writers like Baumol, Keynes, Bachelier, Arrow, and Markowitz. If these names are familiar to you, but you are not sure why, the book tells us why.
Iit appeals more to academics who are interested in the development of ideas, rather than practioners who are interested in using the ideas. I would have preferred "Against the Odds" as a title.

This book is in every way the best book that I have read on the history of probability, or better to say history and evolution of risk management. Starting from the very early ages of probability, game logic and thinking to the most current theories and obstacles that we face today in the area of risk management, this book truly explains the initial concepts of risk management.
The book is very readable, and it will probably take you couple of hours to read it. It is indeed addictive. Definitely the best book written on such topic.

I happen to enjoy both history and math, so this book about the history of statistics was right up my alley. That sentence alone probably dooms me to perpetual nerd-dom, but that's ok because Bernstein has done a strong job of taking a subject that could be dull and really bringing it to life and infusing it with color.

If the topic of the history and evolution of statistics sounds interesting to you than I believe you've found a winner.

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.

It is true what they say... you do have to like the subject to like this book. But, if that be the case, you will love this book. Bernstein weaves such a tale of ancient exploration into the unknown of the time, that it is hard to put down the book.
Although I am a risk practitioner, the rich history contained in the book has added significant depth to my understanding of risk management.

I wasn't sure what this book would be about when I flipped through the pages at some airport (even with the subtitle, it still wasn' clear what the book would address). I made the right decision to buy it.
For all of us who have had a course in statistics and who trade in the stock market, this book provides a history which otherwise may be difficult to come by as in this book. The book is also well-written and fun to read.

Against the Gods for mathematical amusement will be surprised to find out that as stated within the introduction, "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 account of a concept that has transformed of how society thinks about the future based off of the past. Against the Gods blends history and science to show how famous thinkers like familiar in my class such as Pascal and Bernoulli lined the path from superstition to the super computer. Bernstein also discusses of others as well including men who were less known including a few inveterate gamblers, two ministers, an anonymous group of monks, a doctor, a button salesman, and a composer of operas. The book explains such concepts as probability, uncertainty, the distinction between chance and skill, and the interactions between gambling and investing, and rational versus irrational decision-making. The author's basic argument is that in The Olden Days, when we were unable to accurately measure risk, people cheerfully put their faith in the lap of the gods, blindly setting to sea during storms, building their houses next to flood-prone rivers, all the while serenely unaware of how the odds stacked up against them. Then, as we became increasingly aware of meaning of numbers, we were increasingly able to measure what was going on and therefore having the ability to control it. I liked this book because it allowed me to better understand risk and how it relates to the everyday lives pertaining to money.

Risk is a topic central to many facets of everyday life. Peter Bernstein offers a compelling and readable historical overview of the evolving role of risk in everyday life combined with thoughts on the future of risk in our changing world.

Well-documented and interesting, this is a key book for those who are interested in contextualizing risk. After reading this book, you may well see risk in a new and different way.

Against the Gods draws you through a vast time span. Peter Bernstein begins with the conception of the Arabic numbeting system, up through present time super speed computers. Although, the history found in this book is interesting, the title leads you to believe it is all about investment risks, however it is more of a history text book than a manual. This book is a story of theories and how they developed. You will learn quite a bit about ancient times and how things evolved into the way that they are now, but do not expect any great help or advice on how to deal with risks in the investment world. Once you get into this book, Bernstein's writing sytle draws you in. The book is interesting enough, Bernstein's knowledge of hisotry is astounding. History Buffs: here ya go!

Against The Gods, by Peter L. Bernstain, demonstrates to the reader how human beings have made decisions over the course of time. In the beggining, people believed that the gods determined the course of events and human beings had no concept of risk management. With the dawn of the age of reason, however, human beings began to realize that they can quantify the likelihood of certain occurances and make decisions in accordance to these probabilities. This book is strongly reccomended for any strategist, whether he be a bussiness man, a mathematician, a politician, an economist, a demographer, or an investor. This book really gets to the core of how to make decisions.

Bernstein is an interesting writer since he is the consummate finance insider- a practioner, regulator and academic. This range helps and harms the book - in his efforts to render the history of risk, he delves into anecdotal caricatures while amusing definitely smack of basis risk with the underlying ideas that are provocative enough! I found the behavioural finance and derivatives section to be rather basic but then realised the book was written in 1996. It's a pleasant read but a more pragmatic introduction to probability is the infinitely witty Cartoon Guide to Statistics.

This is an entertaining account of the most memorable market crashes in recent history replete with anecdotes from the life of a high-profile quant. If history can teach us anything about the current market conundrum, it could be learned from this book

Against the Gods for mathematical amusement will be surprised to find out that as stated within the introduction, "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 account of a concept that has transformed of how society thinks about the future based off of the past. Against the Gods blends history and science to show how famous thinkers like familiar in my class such as Pascal and Bernoulli lined the path from superstition to the super computer. Bernstein also discusses of others as well including men who were less known including a few inveterate gamblers, two ministers, an anonymous group of monks, a doctor, a button salesman, and a composer of operas. The book explains such concepts as probability, uncertainty, the distinction between chance and skill, and the interactions between gambling and investing, and rational versus irrational decision-making. The author's basic argument is that in The Olden Days, when we were unable to accurately measure risk, people cheerfully put their faith in the lap of the gods, blindly setting to sea during storms, building their houses next to flood-prone rivers, all the while serenely unaware of how the odds stacked up against them. Then, as we became increasingly aware of meaning of numbers, we were increasingly able to measure what was going on and therefore having the ability to control it. I liked this book because it allowed me to better understand risk and how it relates to the everyday lives pertaining to money.

Risk is a topic central to many facets of everyday life. Peter Bernstein offers a compelling and readable historical overview of the evolving role of risk in everyday life combined with thoughts on the future of risk in our changing world.

Well-documented and interesting, this is a key book for those who are interested in contextualizing risk. After reading this book, you may well see risk in a new and different way.

Against the Gods draws you through a vast time span. Peter Bernstein begins with the conception of the Arabic numbeting system, up through present time super speed computers. Although, the history found in this book is interesting, the title leads you to believe it is all about investment risks, however it is more of a history text book than a manual. This book is a story of theories and how they developed. You will learn quite a bit about ancient times and how things evolved into the way that they are now, but do not expect any great help or advice on how to deal with risks in the investment world. Once you get into this book, Bernstein's writing sytle draws you in. The book is interesting enough, Bernstein's knowledge of hisotry is astounding. History Buffs: here ya go!

Against The Gods, by Peter L. Bernstain, demonstrates to the reader how human beings have made decisions over the course of time. In the beggining, people believed that the gods determined the course of events and human beings had no concept of risk management. With the dawn of the age of reason, however, human beings began to realize that they can quantify the likelihood of certain occurances and make decisions in accordance to these probabilities. This book is strongly reccomended for any strategist, whether he be a bussiness man, a mathematician, a politician, an economist, a demographer, or an investor. This book really gets to the core of how to make decisions.

Bernstein is an interesting writer since he is the consummate finance insider- a practioner, regulator and academic. This range helps and harms the book - in his efforts to render the history of risk, he delves into anecdotal caricatures while amusing definitely smack of basis risk with the underlying ideas that are provocative enough! I found the behavioural finance and derivatives section to be rather basic but then realised the book was written in 1996. It's a pleasant read but a more pragmatic introduction to probability is the infinitely witty Cartoon Guide to Statistics.

This is an entertaining account of the most memorable market crashes in recent history replete with anecdotes from the life of a high-profile quant. If history can teach us anything about the current market conundrum, it could be learned from this book

Risk Management has always been interesting to me, and learning about the history of it through this book has increased my understanding tremendously. The book is written very well, and it reads very easily for the material being discussed. I was pleasantly surprised as I delved further and further into the book.

2 crucial ponits in this book:

1.Sociological: Bernstein describes how risk was first imagined as an essentially modern cultural form and significantly operationalized in early mercantile capitalist shipping, where individual losses in rapidly expanding global trade become large enough to encourage their socialization in insurance arranegemnts. This book implies some viable if crude forms measurement and scaling of risk. In his narrative, risk was there waiting to be discovered, carrying its own intrinsic meaning, which the visionaries, through their heroic powers of access to msteries of Nature, were able to reveal to men of commerce and others who could then drive the economic, cultural and technological revolution of modernity. We can note from this account of risk how an implicit normative framework`and a claim of control are advanced as defining features of this new state`of enlightenment. It is this scientific risk discourse which gives total control`of `the future at the service of the present', the implication being that risk`analysis identifies and domesticates all significant future consequences of the`relevant actions. In this way ignorance and unanticipated consequences - lack`of control - lying beyond the reach of existing scientific knowledge, thus`potentially embarrassing in future to risk assessment, are seamlessly deleted.`Risk is thus assumed to define the full sphere of conceivable meaning for considering`new technologies and their implications, and science reveals this`independent meaning. (Reference, Wynne:Reflexivity inside out?)

2. Historical: While it is apparent to historians that both Khayyam and Kharazmi were Persian thinkers, the author in keen to be selective inattentive to this fact such that he argues the system of numbers were imported from Arab world to West whereas it was firstly introduced to Arabs at the time Persia was invaded by them. Hence the author's historic mind-set starts from 12th Century while long before which is 500 B.C. risk used to be engineered among Persians. (Reference, Channel History-Engineering an Empire: Persia)

The book was interesting in several ways. The author's central idea, that having a mature concept of risk management is a prerequisite for modern civilization, is intriguing, yet not fully substantiated by his book. Having studied Finance in business school, it was interesting for me to learn a bit of the history behind contemporary thinking on financial risk management (in other words, he explains who figured out & popularized the alpha/beta thing).
Towards the end of the book, he just began to touch on some of the non-rational behavioral aspects of humans, and I wish he had gone deeper. Some of the most interesting work in economics is being done today with the radical assumption that human behavior is driven more by emotion than by reason. Why do people make ill-conceived decisions about risk? Not really answered in this book.
The book is almost totally oriented towards financial risk, and doesn't really look at other forms of risk management. Although the writing style is engaging--this is NOT dry--there are some structural problems. The author wanders around a bit, and sometimes introduces ideas or personalities without ever explaining why.
It is important to mention that this is treated as a 'story', from the historian's point of view, and not as a text book. In this way, it is true to its title. The book cover makes no claims for this as an intellectual or academic treatment of the subject, which makes this a very accessible book. It isn't profound, and it is only mildly informative, but outside of the minor annoyances of some outline weakness, I enjoyed reading it.

The author seems to cover every aspect of risk. The book is so broad in scope that everything in it may not be of interest to every reader, but it is hard to imagine that every reader will not finding something of interest that is applicable to their lives -- be it insurance, investment (if you don't like derivatives, Peter Bernstein indicates that index funds might be just the thing for you) or the effect of seat belts on risky behavior.

Except for the last three chapters, this book provided an easy to read, yet complete history of the math of risk. Assessing risk is something everybody does every day. Reading this book will give you pause next time you assess a risk, even a small one like "should I get up this morning?"

As much as I enjoy making money in sales, I never quite like the downside risk..but it's the name of the game. This book shed a very interesting light on risk ..especially when you realize even Laplace and Gauss had difficulties with it ! Excellent examples, insights and depths. Recommended.

I found the first half of this book quite well written and packed with interesting anecdotes about almost-famous historical characters. The second half seemed to be mostly of interest to those in financial services rather than a general readership.
The book does contain one great annoyance though; a lot of the math is just plain wrong. My own math not being fully up to scratch it took me a while to figure out that I wasn't going crazy, there really were serious errors in Mr. Bernstein's calculations of probability.
A version of this book with corrected math and a more general focus would be a very good read.

...and this book gives financial risk management that history. It provides a context to where we are now, and allows the reader to glimpse the future through the pathways of the past. An entertaining read, well written and thoughtful. Bernstein has a number of other books but I found this one his best.

Bernstein is one of my favorite author. He has a very good way to combine the subject of his book with history and to make the final result very interesting. This book and ''The power of gold'' are my favorites from him.

A great book if you like Maths, Business and History.

This book gives an excellent perspective on the development of probability theory, and its application to risk management. It is written in a language that is understandable by the average reader. It is also interesting reading for a serious student of risk management

I am amazed by those great contemporary minds of of the Renaissance age. Lest we think that our IT age is the one that has made today's global finanical markets possible, this books shows me that for most parts, the foundation of our current financial world had actually been laid down partly by those seemly out-of-the-world mathematicians. I wonder how they had managed to unravel the Laws of God - Law of Large Numbers and Normal Distibution etc. - and apply them to real life. Their belief in an orderly and predictable God, - as opposed to a chaotic and uncertain God - had certainly motivated them to believe that there exist truths in the Universe that await them to discover!

Bernstein has written a thorough book that traces the linear progression of man's understanding of probability and risk.
This is a journey that begins with the importatioin of the arabic numbering system to the West and ends with super-computer crunched chaos theory. In between lie the fathers (all men) of mathamatical understanding. These individuals are the story of AGAINST THE GODS. Bernstein survey's the intellectual contrubutions of each as man strives to understood basic probability, the law of large numbers, bell curves, regression analysis, uncertainty theory and everything else you dimly remember from college statistics classes. He spends the latter quarter of the book on risk and probability theory in the financial world, where theorists have developed portfolio analysis, volitility studies, hedging and sidebets and other quantatative market plays.
Credit to the author for balancing his story against the very high probability that much of what these thinkers sought may be unattainable. He frequently mentions the humanity that these people try to explain with laws formulated from observations in the natural world. Although rightly impressed with his intellectual frontiersmen, Bernstein has no problem recognizing that the uncertainty that has always eluded explanation is us and that it helps make life worth living and progress possible.
This book is interesting for what it is. A story of the development of theories. I would have enjoyed more of a focus on the applications of this intellectual progression that led to the development of insurance and financial markets. Though these elements are mentioned often, they provide the backdrop for Bernsteins survey of theory. I suspect another book awaits someone who will reverse the order and use theory as a backdrop for the mechanisms that have allowed the modern economy to flourish and develop. The story of insurance, speculation, the beginning of capital markets, a monied economy and the like spring from the intellectual movements so well chronicled by Bernstein. However, they are not the focus, which has the habit of making the reading dry and sometimes uninteresting to those not captivated by the actual numeric analyses and proofs which are amply offerred over the course of the book.
If you like intellectual history and are looking to tie the building blocks of probability and risk analysis together over the last four centuries than this book may well captivate you. If you are seeking an understanding of how these discoveries were applied to forge the modern economy we now take for granted you will find parts interesting but may well feel that the story is incomplete.

I didn't like this book. I read through the reviews and took a chance on it, but after reading a few chapters it was a struggle just to keep reading on. I still have not finished it but am about half way through it. It's just a struggle continuing to read.

This book was an interesting one about risk management. However, I found Bernstein's depiction of the Catholic Church, or any belief in God, to be too simplistic. Perhaps his own bias came out in this book. He fails to mention that for the last 1000 years it was through the support of the Catholic Church that science saw many of its greatest achievements. This isn't a major part of the book, but he does convey overtones of his bias against the Catholic Church. He could have easily edited these parts out, but left them in for the wrong reasons.

A friend lent me his copy, and, after reading it, I bought my own, This is a deep, fascinating book. Bernstein carefully develops the history of his subject, not by going into technical detail but by highlighting the contributions of a few significant characters. He is then later able to weave them into the web of further developments. An absolutely fascinating exposition which I intend to read again. -- Dr. Buck Ware, Professor of Mathematics, Emeritus.

I ran into this book while studying for my Black Belt in Six Sigma. As a professional engineer, in the field of Energy - this kind of book peaks my interest.

I learned much about the long history of Risk, and the now better understand the use of risk in today's business world. Much of the book includes narrative detail, however, I believe much of this material will fade in my memory over time. I found it an interesting read, but not exactly what I was hoping for.

In fairness - the author did an excellent job with a difficult subject.

Bernstein, like Heilbroner, O'Wilson, Adler, et.al., brings such tremendous illumination to complex disciplines. In short, this tremendous work not only makes one smarter, BUT makes them sound smarter too. Thank you Abbe!

A remarkable story of risk, probability, statistics, history, finance, and all that you could think of in between. A great read, and I enjoyed it very much. Peter Bernstein did a remarkable job in putting this all together. Read it, you will be better for it.

A fantastic, well written survey of the history of understanding and mitigating financial and market risks. Should be required ready for every legislator or regulator dealing with financial markets. If you want to put the current financial crisis in perspective, read this now!

This isn't one of those books that the general masses will enjoy but Peter Bernstein does a great job of explaining how statistics evolved throughout history to become much more than just insurance and gambling techniques, but into how our economic systems is the end result of this new risk taking.

I picked this book up based on Mauldin recommedations, and former finance professor considered Bernstein a mentor of sorts. Occassionally I read J. of Port. Mgt and Financial Analyst Journal which he contributes very insightful articles that challenge my understanding of risk as it pertains to asset allocation.

This book is review of how risk that are incorporated in all of our lives (in all decision making capacities) was discovered. It is amazing how young the field really is and fast it has advanced.

Bernstein tells the story of risk and probability in a fascinating way, and within an historical framework. It helped me understand the current ideas of risk management, even without a deep background in math and statistics.

An intertaining and lively introduction into the use of statistics in trying to understand the stock market. The book was well written and the author gave an excellent review of the evolution of mathematical thinking about probability and its relation to investing. I felt my time was well spent reading this book.

The reader would be better served by reading a primer on probability and a short article on the evolution of probability. There is no talk of heavy tailed distributions and the finance stuff has been done in much better ways a thousand times before. Too much of a reading input for too little return.

Firstly , this is an outstanding literature review on the history of risk.

The one central idea of the book is that price movements tend to revert to the mean. In other words if the price is breaking through a band or channel placed around a price. The price is most likely to revert to the mean price rather than continue up (or down) through the band.

Thats it. Simple but very useful piece of knowledge.

I recommend this book for its great amount of culture and the extensive view of the stock market it provides (although its point is sometimes hard to get)
As a value investor, this book has helped me understand why everybody else is not also a value investor (although Warren Buffett sometimes appears in this book, he is rapidly dismissed)
Not only are the main stock market actors stupid, but they are rationalizing it. This means that they are not likely to change soon. For one that intends to profit from that stupidity, this is basically good news.

It was hard to finish this book. I couldn't put it down though, as I kept hoping the author would get to the point. He posed many good questions, but it didn't seem like he answered many. He lost credibility with me because of numerous logical errors.
A technical person should not read this book, maybe it's more for psychiatrists, sociologists, or some other "ists".

Don't be fooled by the title.There is nothing against GOD or any religion.As the title says, this is a remarkable story of Risk. I think this is a must read for every math and science enthusiast out there. You will certainly look the world out there in a different angle..well at least for a few days. In the end you will feel you have gained more knowledge.

The reason that I bought this book was because it was highly recommended by the teachers at my MBA class.

They were not kidding, from head to toe its very good and kept my attention till the end. It has been of great help to me. Aside the history content it helps you to think on how to mitigate risk and how improve the opportunities.

Unfortunately this book ends up reading more like an encyclopedia than a 'remarkable story'. Bernstein's account of risk is painfully dull and poorly related to risk's wide ranging applications. The closing chapters on financial markets and derivatives feel like they were just thrown in, providing an awkward ending to a pointless trip.

According to this book you are both, it only depends on the point of view that is presented. I enjoy the book from the beginning to end, especially the last three chapters. The history and analysis of rational behavior is enlightening, to anyone who has ever thought about the process of decision.

Did you ever wonder about the people whose names are sprinkled in the statistical books used for courses in the universities. Why did they come up with such formulae, what was their motivation, and their objective. Well now Against the Gods attempts to open up secrets about these individuals.

Any insurance executive should read and memorialize this novel. The concepts of risk and risk transfer are becoming more and more important as financial services consolidate and insurance and other risk tranferrence mechanisms blur.

A show how complex problems of probability are, how long it took to understand more, and the way to this goal. However I question some of the conclusions on random walk or the influence of Chaos Theory. Still a very valuable guide, e.g. understanding the difference between the probability of an event and the single (unprobable ) event that can happen too.

From the reviews of this book you would think that all the unknowns of risk would suddenly be revealed. Although quite interesting this book is not all that revealing or suprising. Fun to read - just did not live up to the hype.

Dear Reader:
I've probably read 100 investment books ranging from Reminiscences of a Stock Operator to the Wizards trilogy. Much has been written about "Against the Gods" so I won't repeat all the accolades but this classic must be on your book shelf.

Is a well written summary on the way risk perception has evolved along time. writing is clear and amicable focusing in important topics. the only pitfall is the fact that it was written in 1997, missing the last world 2008 recession.

A stellar reference source and fantastic account of the evolution of risk and the application of treatment solutions.

From the origins of statistical analysis, developing mathematics, prediction of outcomes and the follies of historical risk models this book brings such shadowy concepts and those that practice the dark arts into the sunlight, where many of them fail such public scrutiny. While developed and delivered to address the financial markets it is invaluable for current risk managers and security executives that seek to raise awareness or make comparative innovations around the mitigation of risk to all the other corporate asset classes.

Of particular relevance was the insight and terminology associated with psychological issues when addressing business resilience or risk management. Game Theory concepts, chaos theory and numerous behavioral economics models are presented in real world examples or easily transferable to corporate risk management strategies.

If you only read one technical reference book this year, make this the one.

Did you ever wonder about the people whose names are sprinkled in the statistical books used for courses in the universities. Why did they come up with such formulae, what was their motivation, and their objective. Well now Against the Gods attempts to open up secrets about these individuals.

This isn't one of those books that the general masses will enjoy but Peter Bernstein does a great job of explaining how statistics evolved throughout history to become much more than just insurance and gambling techniques, but into how our economic systems is the end result of this new risk taking.

I am amazed by those great contemporary minds of of the Renaissance age. Lest we think that our IT age is the one that has made today's global finanical markets possible, this books shows me that for most parts, the foundation of our current financial world had actually been laid down partly by those seemly out-of-the-world mathematicians. I wonder how they had managed to unravel the Laws of God - Law of Large Numbers and Normal Distibution etc. - and apply them to real life. Their belief in an orderly and predictable God, - as opposed to a chaotic and uncertain God - had certainly motivated them to believe that there exist truths in the Universe that await them to discover!

The topic is interesting, but the minutiae of the story makes it difficult to stay engaged, and as such, reads more like a very dry thesis. So, the phrase: "Story of Risk" might sell books, but it does not accurately address this book. I did not feel engaged throughout the reading of this work, and this belies the problem with the asymmetry of title and book.

However, for academics and teachers, the book does give detail which may be used to "spice up" lectures. This may prove to be its number one utility.

My own barometer of whether a book is truly five stars is measured by its life on my bookshelf. I have a finite sized bookshelf, and yet the number of books being published is something for which an end of publication is difficult to see. As my attention was drawn to this book again, after seeking out other "Black Swan" books, I can tell you that my hardcover is looking for a different venue for its life time on my bookshelf is now in question.

Against the Gods is a very well written story about understanding of risk and its effect on business in the western world.

Bernstein holds the interest of the reader and weaves a tale both fascinating and informative and leaves his reader with a better understanding how it all happened. He is masterful.

Highly recommended to people in general and especially anyone dealing with risk which, I guess, is all of us.

A good history of the mathematics, economics and psychology that goes into how humans have come to control risk and face down the fear of an uncertain future. I particularly enjoyed the humanizing portrayal of the mathematics involved in risk assessment. The section on financial derivatives I think will help the public at large understand the importance and utility of these instruments, despite their ability to be abused.
One drawback of the book was that the mathematics was not always presented clearly. This is the case with the discussion of regression to the mean, where we are left with an impression that it is easier to get heads after tails is tossed. The representation of Chaos Theory as a belief system and not a science subject is also troubling.
Note: "Mohammedan" is a derogatory term and Omar Khayyam was Persian, not Arab.

When I decided to do this review I realize that reviewing a book is different than reviewing most of the other products you might get on the store. How do you decide what you're actually reviewing.

The Physical quality the of book was very good because it was brand-new. Arrival time was as advertised in a couple of days so all of that was a five star rating for me. Now let's get to the contents.

For the average person who decides to just do a little reading on insurance risk you're probably going to get bogged down in this book in the first three chapters and put it away somewhere. In addition if you are somebody who thought you were picking up some religious treatise or anti-God tome you will be disappointed .However for those of us who enjoy reading about risk and Money this is really remarkable. I deal with insurance every day and deal with actuaries and underwriters and self-insurance. I have always known that insurance is just a contract and the real magic is in understanding distribution of risk and how to fund for it. This book goes into a some detail on money how it works and how it relates to risk But more importantly it provides A historical context Of how The understanding of risk was developed.

As you read this you start out saying "Well of course everybody knows that, don't they?" . But in reading about the history I was surprised to learn how long it took before people actually understood how to forecast for risk and then how to properly look at it. In addition I have always known that actuarial science is fairly exact but when you get to real people and tell them what the risk actually is their assessment of how important that is varies a great deal based on their education, intellect, and their financial ability to accept risk. I was surprised to see all of that addressed in the book.

So if you would like to understand how the science of risk and the coverage for it developed and get a better understanding of the basics of why insurance how and why insurance works, and you're a bit of a numbers geek, I think you'll really enjoy this book

If you give this book to somebody because It made your eyes glaze over, make sure it's somebody that you can understand when they come back to talk to you about it. I also recommend that if you're talking to some actuary you don't bring up that you read this unless you have a fairly substantial understanding of the contents because they may make some erroneous assumptions about your level of risk understanding..