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Against the Gods: The Remarkable Story of Risk (平装)
by Peter L. Bernstein
| Category:
Risk, Risk management, Insurance, Investing |
| Market price: ¥ 218.00
MSL price:
¥ 208.00
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In Stock |
MSL rating:
 Good for Gifts |
| MSL Pointer Review:
A remarkable history of risk and a great study of how we make decisions. |
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AllReviews |
  1 2 Total 2 pages 14 items |
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Gregory McMahan, Japan
<2006-12-25 00:00>
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. |
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Don Nguyen, Australia
<2006-12-25 00:00>
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
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N. Tsafos, USA
<2006-12-25 00:00>
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 meta-morphosis of the way people thought about the future: mathematicians and philosophers could only develop risk mathematics once people were convinced that the future was unpredictable and depended on their choices more so than the whims of any particular deity.
Most of the advances in the field came from the seventeenth to the nineteenth century. Often, the impetus was gambling; in fact, most of the puzzles that mathematicians tried to solve by developing probability mathematics were related to card games or craps. After that came the actuarial science, with mathematicians gripping with questions of life expectancies and illnesses.
Only in the second half of the twentieth century does risk become highly mathematical, as it enters into economics and finance, where precision and quantitative data overtake rough estimations and qualitative analysis. But with the emergence of precision have also come severe criticisms-on one end from psychologists who have cast doubt on the robustness of the rational behavior hypothesis, and on the other, from chaos mathematicians who prefer non-linear and complex explanations that go against the intellectual tradition of statisticians.
The history of risk, readers will find out, is more interesting than expected. It is a story of gamblers, philosophers, mathematicians, economists, psychologists and many others. Most of all, it is a chronicle of an ever ending dream: to anticipate or even predict the future. Whether people will ever be able to do that is doubtful; but there is no better account of that quest than Mr. Bernstein's Against the Gods.
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Leo Kee Chye, Singapore
<2006-12-25 00:00>
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.
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