With the stock market breaking records almost daily, leaving longtime market analysts shaking their heads and revising their forecasts, a study of the concept of risk seems quite timely. Peter Bernstein has written a comprehensive history of man's efforts to understand risk and probability, beginning with early gamblers in ancient Greece, continuing through the 17th-century French mathematicians Pascal and Fermat and up to modern chaos theory. Along the way he demonstrates that understanding risk underlies everything from game theory to bridge-building to winemaking.


From Publishers Weekly
Risk management, which assumes that future risks can be understood, measured and to some extent predicted, is the focus of this solid, thoroughgoing history. Probability theory, pioneered by 17th-century French mathematicians Blaise Pascal and Pierre de Fermat, has made possible the design of great bridges, electric power utilities and insurance policies. The statistical sampling methods invented by dour Swiss scientist Jacob Bernoulli undergird diverse activities such as the testing of new drugs, stock-picking and wine tasting. Bernstein (Capital Ideas) animates his narrative with a colorful cast of risk-analyzers, including gambling addict Girolamo Cardano, 16th-century Italian physician to the Pope; and John Maynard Keynes, whose concerns over economic uncertainty compelled him to recommend an active, interventionist role for government. Bernstein also traces the development of business forecasting, game theory, insurance and derivatives, and surveys recent advances in risk forecasting made possible through chaos theory and by the development of neural networks. Copyright 1996 Reed Business Information, Inc.


From Library Journal
For several centuries, mathematics has been the language of the exact sciences. Only in the 20th century has mathematics become predominant in other fields, particularly economics and finance. In this book, Bernstein (Capital Ideas: The Improbable Origins of Modern Wall Street, LJ 12/91), head of an economic consulting firm, traces the development of probability theory from its beginnings in analyzing games of chance, through its application to statistical theory and insurance, up to its present use in developing investment strategies to control risk. He includes excellent sections on portfolio analysis and on investments in derivatives. Bernstein clearly describes the people, their work, and the events that have revolutionized the thinking on Wall Street. A worthwhile acquisition for business and math collections.?Harold D. Shane, Baruch Coll., CUNYCopyright 1996 Reed Business Information, Inc.


The Wall Street Journal
In his delightful history of risk, Peter Bernstein traces how humanity has put itself less and less at the mercy of the laws of chance.


The Washington Post Book World, September 20, 1998
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."


From AudioFile
Jesse Boggs honed his expressive, laid-back vocal style narrating his own award-winning documentaries. Here, as reader and abridger, he goes a long way to clarify Bernstein's convoluted theory of risk management. His careful phrasing also brings into high relief the sweeping generalizations and questionable axioms that give pause to the analytic listener. Only in this careful frame of mind can one separate wheat from chaff and learn whatever this book has to teach. Y.R. (c)AudioFile, Portland, Maine


From Booklist
Bernstein's lively history chronicles a profound transformation in attitudes about the future. How one's fate changed from depending less on capricious outcomes and more on predictable ones forms the backbone of the narrative. His central characters are mathematicians who began pondering the statistics of gambling, or gamblers pondering the risks of gambling: about one sixteenth-century polymath, Girolamo Cardano, Bernstein writes that his "credentials as a gambling addict alone would justify his appearance in the history of risk," and that comment is typical of Bernstein's engaging presentation. Amid his recounting of the insights into probability from Pascal to Keynes, he touches on an array of modern fields in which risk analysis is crucial--insurance, commodities futures, stock markets, and that old standard, gambling. This cornucopia of biographical sketches, mathematical examples, and reflections on the nature of human expectations about the future faces little risk of idling in libraries; patrons of the business section might be keenest to read it. Gilbert Taylor


Review
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

"...Fun-to-read introduction to how humans feel about risk..." (Electric Light and Power, 2 July 2002)


Review
"...Fun-to-read introduction to how humans feel about risk..." (Electric Light and Power, 2 July 2002)


Book Description
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


Book Info
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 more distant past. DLC: Risk Management


The publisher, John Wiley & Sons
To what degree should we rely on our past to determine our future? This riveting book describes how the rational process of risk taking propelled the progress of science and enterprise into the modern world of speed, power, instant communication, and sophisticated finance. Risk management is now an indispensable skill whose applications range from allocating wealth through planning a family to wearing a seatbelt. Drawing upon history and biography to trace the development of its concepts, the author explains the origin of risk management--the basics of probability, sampling, regression to the mean, game theory, and rational versus irrational decision making. Bernstein introduces complex concepts via an accessible, entertaining narrative between the great minds behind the ideas. Against the Gods features the epic quests and questions of great thinkers such as Pascal, Fermat and von Neumann who have embarked on a reworkable adventure of intellectual discovery, proving that the future is more than just the whim of the gods, that men and women are not passive before nature.


Back Cover Copy
Advance Praise for Against the Gods

"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

"No one else could have written a book of such central importance with so much charm and excitement." —Robert Heilbronerc author of The Worldly Philosophers

"A fascinating and unusual perspective on modern man's Promethean attempt to master risk. The book reads easily and provokes thought—a rare combination." —William Kristol Editor and Publisher, The Weekly Standard

"Peter Bernstein leads us effortlessly through the history of risk because he writes so beautifully. This is a book on a left brain subject that will have right brain readers lining up for more!"—Robert Ferguson Managing Director, Bankers Trust Australia Limited

"In Against the Gods, Peter Bernstein, a scholar, historian, and successful investor gives us the history of great thinkers whose visions put the future at the service of the present."—Dr. Marc Faber Managing Director, Marc Faber Limited, Hong Kong

"This looks like a new classic to me."—Barton M. Biggs, Chairman Morgan Stanley Asset Management, Inc.

"It's a sizzler!"—Charles P. Kindleberger author of Manias, Panics & Crashes

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 more distant past. Against the Gods, a narrative that reads like a novel, chronicles the remarkable intellectual adventure that liberated humanity from the oracles and soothsayers by means of the powerful tools of risk management that are available to us today. This is a richly-woven tale of Greek philosophers and Arab mathematicians, of merchants and scientists, gamblers and philosophers, world-renowned intellects and obscure but inspired amateurs who helped discover the modern methods of putting the future at the service of the present, replacing helplessness before the fates with choice and decision.

When investors buy stocks, surgeons perform operations, engineers design bridges, entrepreneurs launch new businesses, astronauts explore the heavens, and politicians run for office, risk is their inescapable partner. Yet their actions reveal that risk today need not be feared: managing risk has become synonymous with challenge and opportunity.

Bernstein presents fascinating vignettes of such towering intellects as Omar Khayyam, Pascal and Bernoulli, Bayes and Keynes, Markowitz and Arrow, and Gauss, Galton and von Neumann. With his engaging literary style, he clarifies the concepts of probability, sampling, regression to the mean, game theory, and rational versus irrational decision making. The final sections of the book raise important questions about the role of the computer, the relationship between facts and subjective beliefs, the impact of chaos theory, the role of the burgeoning markets for derivatives, and the looming dominance of numbers.

Against the Gods: The Remarkable Story of Risk is that rare book that turns the most profound issues of our time into pure reading pleasure.


About the Author
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 OUR EDITORS

The Barnes & Noble Review
What is it that distinguishes the thousands of years of history from what we think of as modern times? This is the question Peter L. Bernstein asks in the beginning of his new book, Against the Gods, and the answer put simply is...risk management.

Risk management? Well, that's not very poetic, is it? But as Bernstein points out, risk is essential to the development of our society; this is as true as the maxim 'nothing ventured, nothing gained' is old. But how did we discover the proper method for calculating insurance premiums in the first place? At what price should a crop future be set so as to be fair to both buyer and seller? It is questions like these that Bernstein, the author of a number of books on economics and finance, answers as he traces the emergence of risk management from calculating the probability of dice games to insuring investment portfolios.

Risk management by definition has to do with '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 linkage between effect and cause is hidden from us.' But at the end of the day, a risk is still a risk no matter how carefully measured, so where does the time-honored 'gut feeling' come into play? This is the central question of Against the Gods, and the answers are enlightening.

We have Blaise Pascal and his probability triangle to thank for the birth of risk management. Pascal solidified the notion that there was a difference between playing games and thinking about playing games. His triangle of numbers is ageometric algebraic equation that can be employed to calculate, for instance, the odds that a team down one game to zero in the World Series has of coming back to win the pennant. (There are 22 combinations of wins and losses out of a possible 64 that the underdog will come back to win, by the way.) The problem with applying such calculations to real-life situations is that pure odds only work if each team has an equal chance of winning.

It wasn't until the Reformation that people began to that understand that they must take responsibility for their own decisions, and as Bernstein duly points out: 'Risk management only becomes possible when people are free agents.' So as awareness of self-determination spread, mathematicians put their minds to methods of determining risk while businessmen put their wallets towards using this information to limit risk.

It was in 1976, however, that one of the most highly developed forms of risk management heretofore imagined was spawned, from the mind of a Berkeley finance professor named Hayne Leland. For a premium, portfolio insurance guarded an investor against incurring huge losses in the stock market. Hayne had devised a scheme that severely limited the downside of the riskiest institution of all! For a time, everything went along gloriously for portfolio insurance, making millions for Leland, until the market crash of October 1987, when such huge losses could not be traded against the income of the premiums paid. At the end of the day, the best risk management failed in the face of the market's oldest precept: You cannot expect to make large profits without taking the risk of large losses. Related work was done by economists Robert C. Merton and Myron S. Scholes: For their mathematical theorems that accurately priced options (thereby drastically reducing the risk factor), they were recently awarded the Nobel Prize in Economics. Their theory is explained in depth in Against the Gods.

I felt a growing sense of anticipation as I read this book, expecting that the progress of risk management would lead me directly to the best investment strategies available. And though the book indeed follows this path, risk management as we know it today stops well short of achieving a foolproof method of playing the market. More to the point, it is human nature that does not allow these measurements to limit risk. "Against the Gods" reads like a good piece of historical fiction in which the events, facts, and dates come alive in the midst of the personalities who effected them. Pascal, for example, renounced mathematics twice in his life, both times turning to religion. With the claim of Renunciation, total and sweet, he gave up high living in favor of the monastery, leaving the unsolved intricacies of managing risks to future generations. And perhaps it is well he did, for it seems that we adhere more to the blind faith, rules of thumb, experience, instinct, and conventions that make up our gut than to the results of risk analysis.—Woodall Taft is a freelance writer who resides near Silicon Valley.

FROM THE PUBLISHER

Against the Gods, a narrative that reads like a novel, chronicles the remarkable intellectual adventure that liberated humanity from the oracles and soothsayers by means of the powerful tools of risk management that are available to us today. This is a richly-woven tale of Greek philosophers and Arab mathematicians, of merchants and scientists, gamblers and philosophers, world-renowned intellects and obscure but inspired amateurs who helped discover the modern methods of putting the future at the service of the present, replacing helplessness before the fates with choice and decision.

SYNOPSIS

In a narrative that reads like a novel, Against the Gods tells the story of a group of famous scientists and ingenious amateurs who actually discovered the notion of risk—of scientifically linking the present to the future. Like Prometheus, these pioneers equipped humanity with a set of tools that would spark the achievements of the modern world.

People constantly make choices, arrive at decisions, and take risks. Savers buy stocks, doctors perform operations, poker players figure the odds, spaceships soar into the skies, and business managers launch new products. Without the instruments of risk management, such decisions would be impossible, because no one could figure the likelihood of successful outcomes. Indeed, the idea that human beings need not look to the heavens or listen to soothsayers for advice is less than five hundred years old. Hence, without the modern techniques of risk management, most of these decisions would be inconceivable: no bridges would span our widest rivers, our great corporate enterprises would never have come into being, no lives would be saved by coronary bypasses, space travel would be a dream, and no one would play poker.

Against the Gods blends biography with history and science to show how famous thinkers like Pascal, Bernoulli, Bayes, Keynes Markowitz, Arrow and von Neumann paved the way from superstition to the super computer. But Bernstein tells of others as well: men who were less known but equally important in developing the theory and practice of risk management, 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 suchconcepts as probability, uncertainty, the distinction between chance and skill, the interactions between gambling and investing, and rational versus irrational decision-making.

FROM THE CRITICS

New York Times

Ambitious and readable. . .an engaging introduction to the oddsmakers.

Robert Ferguson

Peter Bernstein leads us effortlessly through the history of risk because he writes so beautifully. This is a book on a left brain subject that will have right brain readers lining up for more!.

William Kristol

A fascinating and unusual perspective on modern man's Promethean attempt to master risk. The book reads easily and provokes thought—a rare combination.

Wall Street Journal

An extraordinarily entertaining and informative book.

Marc Faber

In Against the Gods, Peter Bernstein, a scholar, historian, and successful investor gives us the history of great thinkers whose visions put the future at the service of the present.. Read all 17 "From The Critics" >

WHAT PEOPLE ARE SAYING

"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."—Professor of Economics Emeritus, Harvard University — John Kenneth Galbraith

"Peter Bernstein leads us effortlessly through the history of risk because he writes so beautifully. This is a book on a left brain subject that will have right brain readers lining up for more!"—Managing Director, Bankers Trust Australia Limited — Robert Ferguson

"A fascinating and unusual perspective on modern man's Promethean attempt to master risk. The book reads easily and provokes thought--a rare combination."—Editor and Publisher, The Weekly Standard — William Kristol

"In Against the Gods, Peter Bernstein, a scholar, historian, and successful investor gives us the history of great thinkers whose visions put the future at the service of the present."—Managing Director, Marc Faber Limited, Hong Kong — Marc Faber

This looks like a new classic to me."—Chairman Morgan Stanley Asset Management, Inc. — Barton M. Biggs