Against the Gods

Michael L 14/12/2015

In "Against the Gods: The Remarkable Story of Risk", Peter L. Bernstein tracks the development of the scientific disciplines constituting the foundation of the modern risk management discipline. The book has received a lot of attention in various risk anagement forums as well as splendid reviews from institutions like The Wall Street Journal, ThevEconomist and The New York Times. If you’re blessed with an interest for the chaotic course of history (which, sadly, I’m not) the book is definitely worth a read. Peter states in the first chapter, that "the omission of any important material was the result of decision, on my part, rather than an act of oversight". After reading it, I must agree with him. The walk down memory lane of scientific contributions to the field of risk and uncertainty is extremely thorough and quite well balanced. The story takes off in the ancient Greece, where Zeus, Poseidon and Hades rolled dice for the universe, 'eikos' referred to the probable and life was ever subject to the whim of the gods. While the intuition, that more things might happen in the future than actually will happen, seems to have been prevailing through time, the first real breakthroughs came with the Arabic numbering system around the first decade and it didn’t accelerate until the 17th and 18th century. Along the way, we meet great thinkers like Aristotle, Descartes, Fibonacci, da Vinci, Fermat, Pascal, Bernoulli, Bayes, Laplace, Nightingale, Keynes, Markowitz and Kah neman, but there are just as many interesting sidekicks (the list of characters takes up four pages). We rediscover the renaissance, watch as the paradigm shifts towards quantification, encounter the pioneers of modern finance up close and follow the flight from the rationality. From a game of balla to the brink of the Hudson, we really do see it all. If you're interested in risk, then this is probably worth a read.