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on April 14, 2004
Against the Gods draws you through a vast time span. Peter Bernstein begins with the conception of the Arabic numbeting system, up through present time super speed computers. Although, the history found in this book is interesting, the title leads you to believe it is all about investment risks, however it is more of a history text book than a manual. This book is a story of theories and how they developed. You will learn quite a bit about ancient times and how things evolved into the way that they are now, but do not expect any great help or advice on how to deal with risks in the investment world. Once you get into this book, Bernstein's writing sytle draws you in. The book is interesting enough, Bernstein's knowledge of hisotry is astounding. History Buffs: here ya go!
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on July 14, 2001
Centuries ago it was considered evil to predict the future. Even games of chance were played with little understanding of the odds. Today predicting the future, while no longer the forbidden fruit, is done with reckless gusto. Games of chance are centuries old demonstrations of how poorly humans deal with the future. Games provide an unbroken leak to modern man that is willing to enter a billion dollar casino and believe there is money there just for him despite the odds.
Those of us that predict for a living understand that it is extremely difficult and the casualness that the average person applies to the task entitles them to poor outcomes. This book has great appeal for those wanting to start over again. The author addresses the history of risk management and puts into better prospective the opportunities for financial reward. There is a degree of risk in any investment or savings strategy. Owning your own business lacks diversification and yet is the shining path to freedom and independence. This book adds to the dogma of throwing away every analytical approach you would use in investing in your own business. The trauma created for individuals and society by treating the stock market as one giant casino is very real. This book encourages that mentality. It has become a seductive point of view as we approach 24 hour trading. You won't learn much about what makes businesses and the economy tick but it will help you consider the wild, dark side of the stock market.
The first half of the book is a historical review of writings on risk and probability. As a history of mathematical ideas about risk it is a good start. The last half of the book in its treatment of stock market concepts and ideas becomes very shabby. As a professional investment person for the last 40 years, I can not help but wonder why the author was so lazy in the writing effort. We can all accept the idea of trying to make a small minor point in building an argument, but why do it clumsily only to then leap at the main points with the reader surprised and unprepared. In the book's last half on the stock market, he superficially reviews academic points that were make by surveys of investor feelings and viewpoints. Bernstein leaves us with the conviction that the quality and construction of these surveys are not to be questioned as they are put together by academics he respects. Sorry, with statistics the devil is in the details that he conceals. Through out the book are sloppy sentences and paragraphs. The editor really fell down on this book. There are many clumsily described observations.
Don't be turned off by the many errors in fact and concepts that other reviewers have pointed out. This may be the first book of its kind that tries to find the foundations for dealing with forecasting the future. Read it as a historical story that gets close to the facts though not dead center. Their is the exciting possibility that the author will encourage greater minds to deal with human behavior and forecasting the future.
The author knows a lot about the stock market and is constantly pulling his punches to simplify the material and broaden the readership of the book. What he starts to reveal to the lay reader is that despite the unremarkable results of institutional investors that dominate the stock market, their resources to research with computers, data bases and human interchange with corporate managers are well beyond imposing and intimidating relative the individual investor.
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on July 1, 2001
As a mathematician I found the first half of this book fascinating. During this portion the author speaks about the mathematical history probability and risk. He traces a nice path through famous historical mathematicians and what inspired them to research the fields of probability, statistics and game theory. Most of the examples focus on games of chances.
Then second half of the book, as the author pulls into the current centuries focuses hard on the economy and the stock market. The reader will need to have some knowledge of economics to appreciate this portion of the book. With little experience and knowledge about stocks, bonds, options, etc., I found most of his examples difficult to follow and did my best to trudge through for the interesting mathematical tidbits I found interesting.
If you're not a mathematician the first half might be a little confusing. If you're not an investor the second half might be a little confusing. Still, it's a good look at risk from many different angles.
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on March 21, 2001
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.
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on May 23, 2000
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.
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on February 17, 2000
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.
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on April 7, 1999
Not what I expected at all. Very much an accompaniment to Fermat's Last Theorem rather than the analysis of risk I was expecting. Risk from risi care meaning to dare: i.e. risk is a choice not a fate. Mathematically blending new information into old to help make better decisions. Probability: ratio of favourable outcomes to total opportunities. Odds: ratio of favourable outcomes to unfavourable outcomes. A F M Smith "Any approach to scientific inference which seeks to legitimises an answer in response to complex uncertainty is for me a totalitarian parody of a rational learning process". Order is impossible to find unless disorder is there first. Changes in stock prices - normal distribution but based on unpredictable information so stock prices move in unpredictable ways. Reality contains sets of circumstances that people had never contemplated before. Reality violated the symmetry of the bell curve regressing to means that were unstable. Consequences of decisions rather than just inputs to decisions need to be evaluated. Patterns of the past do not always reveal the path to the future. Any given instance is so unique that there are no others similar in sufficient numbers to tabulate to draw any inferences of probability of results. Whatever had a measurable probability yesterday has an unknown probability tomorrow. We are not prisoners of an inevitable future, uncertainty makes us free. As we make decisions we change the world. Whether those decisions, make things better or worse depends on us. Game theory: true source of uncertainty lies in the intentions of others.
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on May 3, 1997
Remember that line in "If I were a rich man" from FIDDLER ON THE ROOF, the one that goes, "when you're rich, they think you really know!"? Well, Mr. Bernstein, a successful Wall Streeter, is certainly rich, so a former President of the Free Press decided that Bernstein really knew. As one of the guys who actually builds risk management systems, though, I didn't recognize what I do every day in his pages. Where amid the juicy historical tidbits about the origins of double entry bookkeeping or game theory is the real risk management story, that J.P. Morgan's RISKMETRICS showed definitively that market risk could be quantified? Or that there is a distinction between market risk --- the risk that the price of your bonds can change significantly overnight --- and credit risk, the risk that the bond's principal will not be repaid.

Then there are the howlers: no, the central limit theorem does not state that "averages of averages miraculously reduce the dispersion about the grand average". Instead, it states conditions under which, for example, the change in the market value of a portfolio will be distributed like a "Bell Curve". (Since this fact IS one of the cornerstones of market risk management, it seems important to get it right!). Here's another: The probability that a team, having lost the first game of the World Series, will go on to win the series is NOT computed by simply enumerating the possible outcomes of the remaining six games. If the team that won the first game also wins the next three, there will be no seventh game, or, for that matter, a fifth or a sixth!

I guess I gave the book an above average rating because I did like knowing about the origin of double entry bookkeeping, or the probability of living to old age in seventeenth century London. But, be warned, this is not the book to read if you really want to know about what risk managers do. For that, go to J.P. Morgan's web site ("[...]) and download the RISKMETRICS documents
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on April 28, 2003
The book is a reasonably interesting history of the mathematical analysis of risk. Bernstein discusses the development of probability and statistical analysis, and even some of the more modern concepts behind portfolio theory. However, I was disappointed overall. The cover and title misled me---I was hoping for a history of how the understanding of risk and the development of analytical tools led to the development of insurance markets, etc., and fundamentally changed how businesses operated in the face of uncertainty. When a shipper could insure his cargo, instead of just waiting for bad news, how did that change the world? I want to know! Instead, I got to read about who discovered the bell curve. I'm trained in a mathematical field, so I felt the discussion got a bit tedious.
I felt, overall, that the discussion was aimed more at explaining the math in layman's terms rather than exploring the impact of these developments on how people do business and make decisions.
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on January 10, 2002
If you are a statistician or a mathematician you will find this book a little slow at times. The first half is about the history of Probability and Statistics, the second half deals more with Economics (some applications of Game Thoery) and Finance. If you are new to the filed of Risk manegment and decision making when faced with uncertainty this is a good introduction. If you have been in the field of speculation for a while; this would be a good review of the history of Risk and Probability.
The book does a much better job with introducing the History of Probability and Statistics than it does with Game Thoery and Economics.
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