Against The Gods: The Remarkable Story of Risk

Abstract

Against the Gods: Remarkable Story of by Peter L. Bernstein. 1996. New York: John Wiley & Sons. Reviewer: Brian J. Glenn, St. Antony's College, University of Oxford; Insurance Law Center, University of Connecticut School of Law In Against the Gods: Remarkable Story of Risk, Peter Bernstein presents the reader with an easy read and often entertaining introduction the history and theory behind financial analysis. first half of the book is devoted the development of statistics and utility theory. As Bernstein walks the reader through the history of probability, he brings life not only the theories being developed, but also the colorful lives of some of the major figures involved, such as Cardano, Pascal, Fermat and several members of the Bernoulli family. Those who use statistics on a daily basis will find the book offers a rich and interesting history behind statistical methods that are otherwise cold and impersonal. In the second half of the book, Bernstein presents the reader with the theory that underlies financial analysis. Written in the same historical style as the first half, the second half of the book focuses on issues such as incomplete information, case selection, utility theory, and the appropriateness of quantitative analysis estimating future events. These standard issues of probability theory are presented in a highly approachable manner. non-statistician will find these chapters helpful. Those who already understand the material will find Bernstein's handling of it remarkably refreshing. A major issue with the book is the depiction of Bernstein explains that, The word risk derives from the early Italian riscare, which means to dare. In this sense, is a choice rather than a fate. actions we dare take, which depend on how free we are make choices, are what the story of is all about. (p. 8) is consistently presented as something be embraced, rather than something be avoided. is also depicted as a highly personal decision made in pursuit of financial gain, as opposed a highly social-or indeed, societal-necessary evil be shared. In his discussion of utility theory, for example, Bernstein notes that different people have different levels of tolerance, And that's a good thing. he explains, since, If everyone valued every in precisely the same way, many risky opportunities would be passed up ...Without the venturesome, the world would turn a lot more slowly. Think of what life would be like if everyone were phobic about lightening, flying in airplanes, or investing in start-up companies. We are indeed fortunate that human beings differ in their appetite for risk. (p. 105) wise risk-taking financial entrepreneurs are the heroes in this book. Indeed, after a discussion of how Bernoulli assimilated methods of financial assessment, Bernstein declares that, Risk is no longer something be faced; has become a set of opportunities open choice. (p. …