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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.

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." a??The New York Times

"An extraordinarily entertaining and informative book." a??The Wall Street Journal

"A lively panoramic book . . . Against the Gods sets up an ambitious premise and then delivers on it." a??Business Week

"Deserves to be, and surely will be, widely read." a??The Economist

"[A] challenging book, one that may change forever the way people think about the world." a??Worth

"No one else could have written a book of such central importance with so much charm and excitement." a??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." a??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." a??Barron's

"Fascinating . . . this challenging volume will help you understand the uncertainties that every investor must face." a??Money

"A singular achievement." a??Times Literary Supplement

"There's a growing market for savants who can render the recondite intelligiblya??witness Stephen Jay Gould (natural history), Oliver Sacks (disease), Richard Dawkins (heredity), James Gleick (physics), Paul Krugman (economics)a??and Bernstein would mingle well in their company." a??The Australian

Customer Reviews:

• A Learned Companion Volume to an MBA Course in Risk Management
  Against the Gods was written with a public in mind. It is mainly intended for the professional investor, who deals with notions of risk and uncertainty on a daily basis, and for MBA students who wish to complement their courses in probability theory and financial analysis with a learned companion volume. It will provide such readers with a cultural perspective on the history and cultural significance of risk. According to Peter Bernstein, the taming of risk and its breakdown into something quantifiable and manageable defines the boundary between modern times and the past.
  
  Why did humanity wait the many thousands of years leading up to the Renaissance before breaking down the barriers that stood in the way of measuring and controlling risk? The idea of risk management emerges only when people believe they are to some degree free agents. The notion of risk implies that the future is more than a whim of the gods and that men and women are not passive before nature. For all their wisdom and skills as mathematicians, the Greeks turned to the oracles instead of consulting their wisest philosophers when it came to predicting the future. The Arabs used the numbering system developed by the Hindus, but they too believed that men's worldly destiny is always determined by God.
  
  The Renaissance and the Protestant Reformation would set the scene for the mastery of risk. It put human beings squarely in control of their own destiny, and enjoined them not to remain passive in the face of an unknown future. Like Prometheus, the Renaissance Man defied the gods and probed the darkness in search of the light that converted the future from an enemy into an opportunity.
  
  But to put the future at the service of the present, people needed more than a free-thinking spirit, a passion for experimentation and a willingness to take risks. For most of the Middle Ages, scholars had to depend on a clumsy numbering system based on the Roman alphabet. Fibonacci's Liber Abaci, published in 1202, was a spectacular first step in making measurement the key factor in the taming of risk. Cardano's obsession with gambling led to the first exploration of probability in 1565, but his Liber de Ludo Aleae wasn't published until 1663.
  
  It took a French Connection to lay the foundation of probability theory. The first French Quants appeared in 1654 when the Chevalier de Mere, a nobleman with a taste for gambling and mathematics, challenged the famed mathematician Blaise Pascal to solve a puzzle. The question was how to divide the stakes of an unfinished game of chance between two players when one of them is ahead. Pascal turned for help to Pierre de Fermat, a lawyer who was also a brilliant mathematician. The outcome of their collaboration led to an explosion of mathematical innovation.
  
  Probability theory owes much to games of chance because gambling provides an ideal laboratory in which to perform experiments on the quantification of risk. But God was never far from Pascal's thoughts. In his Pensees, he frames the question of whether to believe in God in terms of a wager or a bet which reason cannot answer. Ian Hacking, the Canadian philosopher, asserts that Pascal's line of analysis to answer the question of belief is the beginning of the theory of decision-making. Pascal's fellow Jansenistes from Port Royal were also well-versed in decision theory and their Logic, published in 1662, was a reference throughout Europe up to the nineteenth century.
  
  Whether motivated by God, or by gaming, or by commerce, or by the law, the same kind of ideas emerged simultaneously in many minds. This spurt of mathematical innovation was to last about a century, and all the tools that are now used in risk management and in the analysis of decision and choice stem from the developments that took place during that period. In England, John Graunt and William Petty were compiling numbers of births and deaths in London, laying the ground of statistical analysis. Edmund Halley carried the analysis further by breaking down the population into an age distribution and calculating life expectancies. Later in the eighteenth century, Jacob Bernouilly, Abraham de Moivre, and Thomas Bayes showed how to infer previously unknown probabilities from the empirical facts of reality, and invented thenormal distribution, the standard deviation, and the modern method of statistical inference.
  
  That's where the author kind of lost me. The rest of the story includes memorable characters: Carl Friedrich Gauss, who was saluted by Napoleon as "the greatest mathematician of all times" ; Francis Galton, whose obsession with measurement led him to envision a science of eugenics ; Frank Knight, the Chicago economist who never forgave Keynes for having relegated him in a footnote of his Treatise on Probability ; and many others. But Bernsten often interrupts his narrative with practical advise for investors that could have been better addressed in a separate volume, and he loses focus with digressions on behavioral finance or neural networks. The commonly practical takes over the highly speculative, and the big questions that the pioneers of risk measurement grappled with, the "gods" of the title, have been driven out of the picture.
  
  The author concludes by quoting the great statistician Maurice Kendall, who once wrote: "Humanity did not take control of society out of the realm of Divine Providence to put it at the mercy of the laws of chance." Well, mankind did not conquer risk against the gods of chance to put it at the mercy of bean counters and stock traders. ...more info
• A brilliant primer on the evolution of risk management
  "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....more info

• fantastic
  for many years, i have been the owner of this wonderful book. i re-read it and keep on learning about risk. i trade and invest in the local market (Philippines), and am making good money....more info
• Put the current economic crisis in perspective
  A fantastic, well written survey of the history of understanding and mitigating financial and market risks. Should be required ready for every legislator or regulator dealing with financial markets. If you want to put the current financial crisis in perspective, read this now!...more info
• A good read
  Bernstein writes with the depth of knowledge of a university professor, and the style of popular fiction writer. He captures both the scientific and human aspects of this broad subject....more info
• Delightful and thought provoking book
  This is one of my favourite books. It stimulated me to think about stock and stock option trading in news ways. It is so readable it served as a beach holiday book! Well done Mr. Bernstein....more info
• Remarkably Enjoyable
  This was a very entertaining expose of how men love games of chance and our need to consider ourselves lucky while we cope with an often hostile and chaotic existence. Bernstein gives countless examples of how a feeling of luck gives us a sense of control over our environment, whether or not we are correct in that assumption. He makes a case that logical errors are almost a necessary part of human comfort....more info
• Excellent read!
  Peter Bernstein's AGAINST THE GODS is an extremely informative and entertaining telling of the story of risk. Through the course of the book, he elucidates the basic concepts of risk in an informal yet highly effective manner. He delves into the human aspect quite a bit; we are privy to the trials and tribulations of those ingenious men who first pioneered the ideas behind chance and risk.

  The primary purpose of AGAINST THE GODS is not as an introduction to risk management. For those who buy this book expecting such, you will be heavily disappointed. Instead, this is a terrific primer about risk and its history that will pique the interest of any person who has had little formal background in the science of risk management. The main strength of AGAINST THE GODS lies in its astounding clarity which does not come at the expense of comprehensiveness. Bernstein assumes no prior experience with mathematics or risk management. It is this accessibility which makes this the first book on risk you should buy.

  In summary, I highly recommend this to anyone who has at least a passing interest in chance or risk. For those with experience in risk management, the history of risk presented in AGAINST THE GODS will still be very interesting. However, do not expect any of the ideas to be new....more info

• Review of "Against The Gods"
  This is an excellent book on the history and development of the concepts surrounding and the measurements of risk.
  
  For the first time, a book on this subject was prepared that stands as a guide to help the individual in his professional career and investing activities and serves as a legitimate academic work worthy for incusion in capital markets study.
  
  Professor John W. Kercheval, III
  Georgetown University
  Washington, DC...more info
• Classic - will still be in print 50 years from now
  Crisp reading, articulate, gives an exacting history of math and the pursuit of managing risk through the use of math since the beginning of time....more info
• Mathematics for freethinkers, for gamblers, for bankers
  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 metamorphosis 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."...more info

• Long on history, but short on risk management strategy
  The title of my review is aimed at warning those expecting to find a risk management manual in this book that they will be disappointed. So will those who expect to find the links between the evolution modern statistics and acturial science to the rise of insurance markets and risk management instruments which have proliferated in this century. Many other books quite ably cover these interesting topics.

  Instead, the author provides a broad sweeping history of how modern statistics evolved and which answers some questions of why it took so long for modern risk management institutions to emerge. Ancient Greeks, among others, who appeared to be within easy reach of developing statisical theory, nonetheless relegated their fate to the whims of gods, rather than making them amenable to analysis with probabilities and actuarial tables. Tracing modern risk management from the time of Jacob Bernoulli's attempt to develop probabilities from sample data, the author also shows how a knowledge of probabilities can ultimately generate value. QUOTE Reality is a series of conneceted events, each dependent on another, radically diffeent form games of chance in which the outcome of any single throw has zero influence on the outcome of the next throw UNQUOTE The book closes with risk management innovations that followed the emergence of financial volatlity in the 1970s.

  Ultimately, this book may be of less interest to statisticians and investment professionals, other than those who have a curious interest in how today's highly developed set of instruments, institutions, and policies around risk came about from the foundations provided in statistical theory....more info

• Disappointing - Not really about the stock market
  I bought this book because it was suggested after I ordered other books relating to the stock market and investing. My initial impression after reading the reviews (before ordering) was that it dealt mainly with risk associated with stock markets, but after reading through, I find that it is more of a history book - related to risk, yes - but with very little content or correlation to investing. There are snippets and references but even after half of the book is complete, there is no definite flavour on investing.

  For those interested in the pure historical development of probabilistic reasoning and risk, this is a well researched book, but for those whose are misled by the notion that it helps you to understand these risks in terms of the market, well, you've been misled....more info

• Insightful
  Though I'm no investor of bonds and stocks, I happened to pick up Against the Gods in a need to read and learnt of the game of risk that's been so wonderfully played out in this book.
  There's little technical jargon and what's technical is made very comprehensive, interesting and (when it starts to tickle your mind whilst bringing in insights) entertaining.
  As if a ballet about Wall St, Against the Gods will offer anyone something for the long or short term, intangible or otherwise....more info
• Moral: There is very little new under the sun!
  As I went through the book, one thing I realized was that we seem to attribute pathbreaking ideas to people without realizing the history behind it all. For instance, it was amazing to learn that Louis Bachelier had derived an option pricing formula (albeit not very robust) before Einstein could discover the properties of Brownian Motion and well before Norbert Wiener's discovery of the Wiener Process! The insight of Daniel Bernoulli on the logarithmic nature of the utility of wealth is in some ways the foundation for Marshallian Utility Theory which in turn, I would argue, is the basis for Lord Keynes' Consumption Theory. This is not to say that we should not give credit to M/s. Black, Scholes & Merton or Lord Keynes but that we should understand that discovery of something entirely new happens very very rarely like Sir Isaac Newton's discovery of Gravity.

  All in all, a wonderful book. The chapters on Game Theory and Behavioral Finance deserve multiple reads....more info

• Very interesting approach to Quantitative Analysis.. Really
  I never enjoyed any of my stat. or quant. classes in graduate school, I wish I had read this book first. Bernstein is a good story teller who adeptly blends human faces and quantitative theories to tell the history of man's understanding of risk. The book drags a little in some spots and wanders in others, but is still worth the read. Against The Gods is user friendly enough for the everyday reader who might have trouble calculating sales tax, while offering the more studied students a refreshing dose of perspective to accompany their book smarts....more info
• probability good; Wall St. ridiculous
  I read this when it came out and thought it was pretty good. The first half, about how people figured out how probability worked, was really entertaining. The end, about how the geniuses on Wall St. conquered risk, is so wrong it's hilarious. Bernstein is a victim of what Taleb calls the ludic fallacy -- mistaking well-defined games like craps for the truly unpredictable.
  
  So go read "The Black Swan" or "Fooled by Randomness" instead....more info
• History of risk analysis, not of risk
  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....more info

• The elaborate stupidity of the stock market
  I recommend this book for its great amount of culture and the extensive view of the stock market it provides (although its point is sometimes hard to get)
  As a value investor, this book has helped me understand why everybody else is not also a value investor (although Warren Buffett sometimes appears in this book, he is rapidly dismissed)
  Not only are the main stock market actors stupid, but they are rationalizing it. This means that they are not likely to change soon. For one that intends to profit from that stupidity, this is basically good news....more info
• Lucid, accessible history of risk management
  This work is a minor classic of financial literature. Business historian Peter L. Bernstein wrote it during the early 1990s, when faith in the power of quantitative models and financial engineering was at its apex, and he tells a heroic story. Beginning with Greek mythology, Bernstein shows how cultural ideas about risk and probability evolved through Arab mathematics, the European Enlightenment and Chicago School economics. He writes in a spare, straightforward style, and manages to convey the essentials of financial theory and the essences of great economists without losing the reader in a maze of equations. Of course, the 2008 financial crisis cast probabilistic models and financial engineering as global market villains. In retrospect, that makes Bernstein's evident admiration for those models seem rather touchingly ingenuous. Nonetheless, getAbstract finds that this is still one of the best popular introductions to the development of financial science....more info
• Five stars
  Great book on risk and on the history of risk....more info
• Very Comprehensive
  Great book. Very comprehensive in its coverage of risk and risk methods....more info
• Great read! A must read history for any gambler or investor.
  Bernstein is a true historian that writes in a very easy to read and engaging style. I had a hard time putting this book down. He takes you through the rise of mankind's understanding of risk from the intervention of gods to gambling with bones to game theory and beyond. This will also get you a quick diploma in the history of mathmatics along the way. Berstein also writes The Power of Gold: The History of an Obsession which anyone who likes Against the Gods will also want to read (or anyone who wants to learn about the history of Gold and money)....more info
• I'm a trading professional -- and this book is tops
  Dear Reader:

  I've probably read 100 investment books ranging from Reminiscences of a Stock Operator to the Wizards trilogy. Much has been written about "Against the Gods" so I won't repeat all the accolades but this classic must be on your book shelf....more info

• Stocks go to extremes and this book ponders why
  Bernstein takes more time to get to what might be useful to the reader than he ought, but his effort culminates in quantifying how winners and losers are made in financial markets from past to present. Given the present crash in stock price there are many who could benefit from reading "Against the Gods".

  The book traces the beginnings of probability theory and its evolution into insurance companies and ultimately to its contribution to the use of derivatives as a means of reducing uncertainty in the outcomes of "futures" transactions.

  The book could have dealt more with behavioral economics, but when it does engage it delivers a message that is beneficial. All students, high school thru college, should be taught about risk measurement.

  Man's capacity for self deception is what generates irrational decision making. The book covers this subject in ways that will not fail to impress the rader. Far better it would be if we could learn to be less emotionally involved with our investments and more by the numbers. Professional fund manager Robert Olstein's Financial Alert Fund examplifys a by the numbers value approach along with intense scrutiny as to how companies keep their books. He buys companies with excess cash flow for half of what he thinks they're worth and sells them when they go up 30%. He follows the prescription outlined in this book and beats the S&P index yearly. His is a real life example of the value of buying and selling with no emotional attachment to the investment. This book will help you understand why this approach works.

  Given the collapse of the CPA-Consulting firm of Arthur Anderson and the unveiling of current corporate accounting abuses would suggest that we all could benefit from a rise in the level of our financial sophistication. This book is a good first step....more info

• Against the Gods and Trading System Design
  Firstly , this is an outstanding literature review on the history of risk.
  
  The one central idea of the book is that price movements tend to revert to the mean. In other words if the price is breaking through a band or channel placed around a price. The price is most likely to revert to the mean price rather than continue up (or down) through the band.
  
  Thats it. Simple but very useful piece of knowledge.
  
  ...more info
• a fascinating tale of history and measurement
  if you're curious about the history of western cuture (like i am), specifically in the realm of science and measurement, this is a fascinating read. while a bit dry for some, overall it's a well written telling of the story of how humanity began to understand things like probability, risk, and reward.
  
  bernstein starts his story in the classical times of western civilization, and tells the tales from the perspective of the people who shaped our understanding of risk models. not just in finance, but also in gambling and games. some fun moments in there as you see how some gamblers had an inherent understanding in the rolls of dice and were able to profit from it.
  
  a good half of the book focuses on modern models of risk in the realm of finance, which is probably because the field is so important to so many of us and has so many researchers and practitioners.
  
  you wont put this book down and be a master of understanding risk models, but if you've been curious about some of the basics, you'll learn them here. but, you'll also learn a lot of history and enjoy several great tales of people who helped shape the world in which we live. ...more info