The Remarkable Story of Risk
By Peter L. Bernstein
I have to admit I was pleasantly surprised by Against the Gods. I expected this book to be a typical dry book on a given financial subject, detailing use, application, and theory. I completely took for granted the fact that math, particularly risk, has history. The author did a fantastic job of painting a picture and explaining how, why and when concepts we use today came into being. While reading this book I became excited about risk and statistical analysis. The author is Peter L. Bernstein graduate of Harvard, economist, educator, and historian. He lived from January 1919 to June 2009. Bernstein is best remembered for his contributions in investment economics. He created interest in the subject and made it popular through his vast experience and knowledge.
Bernstein did an excellent job simply defining risk for those like me that don’t have any experience or prior understanding of the subject. “Risk management is the ability to chart future possibilities and choose the most likely alternative.” From this simple basic statement Bernstein wove a compelling tale and related risk to my life and the issues we all face in life today. It was surprising to me to learn that it is risk management at work behind contemporary social issues like public health and safety; weighing, planning, and executing wartime efforts; planning a family; decisions on what and how much insurance to buy; the choice to wear or not to wear a seat belt; and even something as simple as marketing cereal.
Once Bernstein lay down the foundation to what risk was he expertly moved into detailing what it involved. “A portion of risk involves taking into consideration error and malfunction which involves probability theory.” Again I was impressed at how the author took concepts that I knew, risk and probability theory and seamlessly tied them together. Probability theory along with other tools used in risk, is...