Against the Gods: The Remarkable Story of Risk
Against the Gods: The Remarkable Story of Risk book cover

Against the Gods: The Remarkable Story of Risk

Paperback – Unabridged, August 31, 1998

by
Price
$14.69
Format
Paperback
Pages
400
Publisher
Wiley
Publication Date
ISBN-13
978-0471295631
Dimensions
6 x 1.2 x 9 inches
Weight
1 pounds

Description

AGAINST THE GODS appeared in the "Washington Is Also Reading..." section of The Washington Post Book World. The book is described as, "A comprehensive history of man's efforts to understand risk and probability, from ancient gamblers in Greece to modern chaos theory."-The Washington Post Book World, September 20, 1998 From the Inside Flap A Business Week, New York Times Business, and USA Today Bestseller "Ambitious and readable . . . an engaging introduction to the oddsmakers, whom Bernstein regards as true humanists helping to release mankind from the choke holds of superstition and fatalism." -The New York Times "An extraordinarily entertaining and informative book." -The Wall Street Journal "A lively panoramic book . . . Against the Gods sets up an ambitious premise and then delivers on it." -Business Week "Deserves to be, and surely will be, widely read." -The Economist "[A] challenging book, one that may change forever the way people think about the world." -Worth "No one else could have written a book of such central importance with so much charm and excitement." -Robert Heilbroner author, The Worldly Philosophers "With his wonderful knowledge of the history and current manifestations of risk, Peter Bernstein brings us Against the Gods. Nothing like it will come out of the financial world this year or ever. I speak carefully: no one should miss it." -John Kenneth Galbraith Professor of Economics Emeritus, Harvard University In this unique exploration of the role of risk in our society, Peter Bernstein argues that the notion of bringing risk under control is one of the central ideas that distinguishes modern times from the distant past. Against the Gods chronicles the remarkable intellectual adventure that liberated humanity from oracles and soothsayers by means of the powerful tools of risk management that are available to us today. "An extremely readable history of risk." -Barron's "Fascinating . . . this challenging volume will help you understand the uncertainties that every investor must face." -Money "A singular achievement." -Times Literary Supplement "There's a growing market for savants who can render the recondite intelligibly-witness Stephen Jay Gould (natural history), Oliver Sacks (disease), Richard Dawkins (heredity), James Gleick (physics), Paul Krugman (economics)-and Bernstein would mingle well in their company." -The Australian A Business Week, New York Times Business, and USA Today Bestseller "Ambitious and readable . . . an engaging introduction to the oddsmakers, whom Bernstein regards as true humanists helping to release mankind from the choke holds of superstition and fatalism." -The New York Times "An extraordinarily entertaining and informative book." -The Wall Street Journal "A lively panoramic book . . . Against the Gods sets up an ambitious premise and then delivers on it." -Business Week "Deserves to be, and surely will be, widely read." -The Economist "[A] challenging book, one that may change forever the way people think about the world." -Worth "No one else could have written a book of such central importance with so much charm and excitement." -Robert Heilbroner author, The Worldly Philosophers "With his wonderful knowledge of the history and current manifestations of risk, Peter Bernstein brings us Against the Gods. Nothing like it will come out of the financial world this year or ever. I speak carefully: no one should miss it." -John Kenneth Galbraith Professor of Economics Emeritus, Harvard University In this unique exploration of the role of risk in our society, Peter Bernstein argues that the notion of bringing risk under control is one of the central ideas that distinguishes modern times from the distant past. Against the Gods chronicles the remarkable intellectual adventure that liberated humanity from oracles and soothsayers by means of the powerful tools of risk management that are available to us today. "An extremely readable history of risk." -Barron's "Fascinating . . . this challenging volume will help you understand the uncertainties that every investor must face." -Money "A singular achievement." -Times Literary Supplement "There's a growing market for savants who can render the recondite intelligibly-witness Stephen Jay Gould (natural history), Oliver Sacks (disease), Richard Dawkins (heredity), James Gleick (physics), Paul Krugman (economics)-and Bernstein would mingle well in their company." -The Australian PETER L. BERNSTEIN is President of Peter L. Bernstein, Inc., economic consultants to institutional investors. Mr. Bernstein is the author of six books in economics and finance, including the bestselling Capital Ideas: The Improbable Origins of Modern Wall Street , as well as many articles in the professional and popular press. He is the Editor of The Portable MBA in Investment (Wiley) and was the Founding Editor of The Journal of Portfolio Management . From The Washington Post AGAINST THE GODS appeared in the "Washington Is Also Reading..." section of The Washington Post Book World. The book is described as, "A comprehensive history of man's efforts to understand risk and probability, from ancient gamblers in Greece to modern chaos theory." Read more

Features & Highlights

  • A
  • Business Week
  • ,
  • New York Times
  • Business, and
  • USA Today
  • Bestseller
  • "Ambitious and readable . . . an engaging introduction to the oddsmakers, whom Bernstein regards as true humanists helping to release mankind from the choke holds of superstition and fatalism."―
  • The New York Times
  • "An extraordinarily entertaining and informative book."―
  • The Wall Street Journal
  • "A lively panoramic book . . . Against the Gods sets up an ambitious premise and then delivers on it."―
  • Business Week
  • "Deserves to be, and surely will be, widely read."―
  • The Economist
  • "[A] challenging book, one that may change forever the way people think about the world."―
  • Worth
  • "No one else could have written a book of such central importance with so much charm and excitement."―
  • Robert Heilbroner
  • author,
  • The Worldly Philosophers
  • "With his wonderful knowledge of the history and current manifestations of risk, Peter Bernstein brings us Against the Gods. Nothing like it will come out of the financial world this year or ever. I speak carefully: no one should miss it."―
  • John Kenneth Galbraith
  • Professor of Economics Emeritus, Harvard UniversityIn this unique exploration of the role of risk in our society, Peter Bernstein argues that the notion of bringing risk under control is one of the central ideas that distinguishes modern times from the distant past. Against the Gods chronicles the remarkable intellectual adventure that liberated humanity from oracles and soothsayers by means of the powerful tools of risk management that are available to us today."An extremely readable history of risk."―
  • Barron's
  • "Fascinating . . . this challenging volume will help you understand the uncertainties that every investor must face."―
  • Money
  • "A singular achievement."―
  • Times Literary Supplement
  • "There's a growing market for savants who can render the recondite intelligibly-witness Stephen Jay Gould (natural history), Oliver Sacks (disease), Richard Dawkins (heredity), James Gleick (physics), Paul Krugman (economics)-and Bernstein would mingle well in their company."―
  • The Australian

Customer Reviews

Rating Breakdown

★★★★★
30%
(477)
★★★★
25%
(397)
★★★
15%
(238)
★★
7%
(111)
★
23%
(366)

Most Helpful Reviews

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You'll Probably Find Parts Interesting (I'm 95% certain)

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.
294 people found this helpful
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Mildly interesting, but not remarkable

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.
103 people found this helpful
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Excellent read!

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.
34 people found this helpful
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No Risk here, The Odds areYou'll love it.

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.
27 people found this helpful
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Mathematics for freethinkers, for gamblers, for bankers

Any reader who picks up "Against the Gods" for mathematical amusement will be surprised to find out that "the revolutionary idea that defines the boundary between modern times and the past is the mastery of risk." This claim, in the introduction, should be evidence enough that this book is no brainteaser, but rather the chronicle of a concept that has transformed how society thinks about the future.
Peter Bernstein, author and consultant, begins with the ancient civilizations that came close but never actually thought specifically about risk. The reasons are many-for one, absent Arabic numerals, computational mathematics were impossible. More importantly, conceiving of risk required a profound metamorphosis of the way people thought about the future: mathematicians and philosophers could only develop risk mathematics once people were convinced that the future was unpredictable and depended on their choices more so than the whims of any particular deity.
Most of the advances in the field came from the seventeenth to the nineteenth century. Often, the impetus was gambling; in fact, most of the puzzles that mathematicians tried to solve by developing probability mathematics were related to card games or craps. After that came the actuarial science, with mathematicians gripping with questions of life expectancies and illnesses.
Only in the second half of the twentieth century does risk become highly mathematical, as it enters into economics and finance, where precision and quantitative data overtake rough estimations and qualitative analysis. But with the emergence of precision have also come severe criticisms-on one end from psychologists who have cast doubt on the robustness of the rational behavior hypothesis, and on the other, from chaos mathematicians who prefer non-linear and complex explanations that go against the intellectual tradition of statisticians.
The history of risk, readers will find out, is more interesting than expected. It is a story of gamblers, philosophers, mathematicians, economists, psychologists and many others. Most of all, it is a chronicle of an ever ending dream: to anticipate or even predict the future. Whether people will ever be able to do that is doubtful; but there is no better account of that quest than Mr. Bernstein's "Against the Gods."
21 people found this helpful
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fun...but...

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.
20 people found this helpful
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Incredible history, but a bit too much on the stock market

The book is great. It was on my wish list for years and I always pushed it off because I thought it would be a real snooze. In fact, it was an incredibly readable history of how problems of prediction (and risk management) have been handled, starting with mathematicians trying to decide how to split up the prize of an unfinished game of "balla." Some reviews mention it being dry at parts or something to put you to sleep - I disagree; there's no doubt a reader has to engage their brain at parts but I've read much much drier material. Most of the reading is on people, the problems they tried to solve and their brilliant approaches to solve the problem of uncertainty.

The reason I gave it four stars is due to the lengthy section toward the finish on the stock market. I think the discussion could have gone on with more on developments in predictive analytics, but the author focused instead on the market as well as decision theory by Kahneman/Tversky. This being said, I can understand the approach since Bernstein was an investment advisor/consultant. Also, the book was written in 1998 and perhaps there wasn't much brewing yet in topics of big data, machine learning or predictive algorithms.

Overall, I'd recommend this to anyone interested in probability or in a field that requires you to handle/address risk. This is a good primer for the works by Nassim Taleb such as Fooled by Randomness or The Black Swan.
19 people found this helpful
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Must Read for Accountants et al

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.
19 people found this helpful
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Another silly book by Peter Bernstein

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.)
18 people found this helpful
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Long on history, but short on risk management strategy

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.
16 people found this helpful

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