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Against The Gods: The Remarkable Story Of Risk (1998)

Against the Gods: The Remarkable Story of Risk (1998)
3.92 of 5 Votes: 4
0471295639 (ISBN13: 9780471295631)
john wiley & sons
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Against The Gods: The Remarkable Stor...
Against The Gods: The Remarkable Story Of Risk (1998)

About book: I give this book 3.5 stars. Against the Gods is a chronology of advances in probability, statistics, and the concept of risks from around the year 1000 to around the year 2000. I thought it was interesting context, but thought the book dragged at times. It seemed like it was a book for people who knew the basic concepts – the descriptions weren’t deep enough to really explain them to someone who had not been exposed to them before. One idea I thought was interesting was how important it was to move from Roman numerals to Arabic numbers. While Roman numerals allowed for record keeping, Arabic numbers allowed for computation, which has a lot more possibilities. Until Fibonacci popularized Arabic numbers in Europe with a book he published in 1202 (26), much of Europe was constrained by the use of Roman numerals. Prior to this, there was much more emphasis in Europe on the philosophy of math. “But the Greeks asked why that should be so, in all right triangles, great and small, without a single exception to the rule. Proof is what Euclidean geometry is all about. And proof, not calculation, would dominate the theory of mathematics forever after.” (31)I thought the discussion of Pascal was interesting. He was a person whose life was entirely dedicated to God or to a combination of science and a more free-spirited lifestyle. “Pascal explained that belief in God is not a decision. You cannot awaken one morning and declare, ‘Today I think I will decide to believe in God’ You believe or you do not believe. The decision, therefore, is whether you choose to act in a manner that will lead to believing in God, like living with pious people and following a life of ‘holy water and sacraments.’ The person who follows these precepts I wagering that God is. The person who cannot be bothered with that kind of thing is wagering that God is not.” (69)Daniel Bernoulli, as well as the others sharing his last name, had a lot of interesting discoveries as well. Of particular interest were those concerning decreasing marginal utility. There was an interesting dichotomy regarding the asymmetry of utility from gains and losses that I had not explicitly heard before. “If the satisfaction to be derived from each successive increase in wealth is smaller than the satisfaction derived from the previous increase in wealth, then the disutility caused by a loss will always exceed the positive utility provided by a gain of equal size.” (112) This is consistent with other research I’ve heard about, such as writings by Kahneman and Thaler, but gives an explicitly economic spin on it. Another topic that was interesting was covering Francis Galton and reversion to the mean. Galton was a cousin of Charles Darwin, and very focused on measuring things, and took particular interest in measurements of people in London. He later ventured into the realm of eugenics, resulting in some not so favorable perceptions, but I liked the insights regarding regression to the mean. “The trick is to be flexible enough to recognize that regression to the mean is only a tool; it is not a religion with immutable dogma and ceremonies…Francis Galton spoke wisely when he urged us to ‘revel in more comprehensive views’ than the average.” (185)Due to my background in economics, I liked the discussion of Kenneth Arrow, the youngest recipient of the Nobel Prize in Economics. I wished they got into more of the details, but they basically summed it up as how we make decisions under uncertainty, since we realize we can never know as much as we would like to. “We are never certain; we are always ignorant to some degree. Much of the information we have is either incorrect or incomplete.” (207)Along with Arrow, I liked the discussion of von Neumann and Morgenstern. It was interesting how they had different skills that complemented each other, with von Neumann more adept at the math, and Morgenstern more familiar with the intuition and economics side of things. They helped provide a mathematical structure for framing game theory, allowing calculations of optimal strategies. “An empirical motivation was also there – the aspiration to make mathematics the triumphant master in the analysis of society as well as in the analysis of the natural sciences. While that approach would be welcomed by many social scientists today, it was probably the main source of the resistance that game theory encountered when it was first broadly introduced in the last 1940s. Keynes ruled the academic roost at the time, and he rejected any sort of mathematical description of human behavior.” (237)The book closed out with bringing in some of the behavioral finance contributions of Kahneman and Thaler, giving some (but not very much) insight into how we are not quite as rational as we probably think we are. Overall, I wish the book either had more engaging stories about the people or more technical details about the theorems. It seemed like it was caught in the middle a little bit, not offering much depth in either. It gave a high-level understanding of a number of topics that were important, leaving you with a bit more context, but I wish it gave a little more technical depth to provide a deeper and more complete understanding. I like depth, and this was covering about 1000 years, so it was bound to not offer everything that would make me happy, but it was a pretty good review of some different people, their personalities, and their contributions.

Spicuiri din recenzia finala care se gaseste pe blogul meu ..........................................Peter L. Bernstein și-a propus să scrie istoria răzvrătirii oamenilor împotriva zeilor și a asumării riscului, risc văzut ca și independență a umanității în fața vrerii și prescrierii demiurgice. Transformarea viitorului imprevizibil și de negândit, datorită adâncilor rădăcini ale minții subjugate de credință și religie într-un pas care poate fi înțeles, prevăzut și ordonat din prezent astfel încât să permită omului să gândească în avans, să plănuiască, să riște, să investească în mâine, va fi posibil datorită apariției și a conștientizării cauzelor de risc și a calculului probabilităților.Bernstein o ia metodic și-și începe povestirea explicându-ne cât de mare noroc avem că numerele arabe au fost inventate și adoptate de europeni, numere fără de care matematica nu ar fi existat vreodată, numere fără de care riscul nu ar fi putut fi calculat vreodată și, extem de posibil, ruperea de misticismul și determinismul religios ar fi ținut omenirea legată de prezent cu lanțuri de tăria diamantului.Autorul scrie pe înțelesul oricui, inclusiv pe al meu, despre evoluția numerelor și rostul acestora în evoluția umanității.Primii care și-au pus vreodată problema riscului și a calcului probabilității au fost jucătorii de jocuri de noroc cu zarul. De fapt, calculul probabilităților se datorează în primul rând împătimiților de astfel de jocuri care doreau să-și reducă pe cât posibil pierderile cauzate de nărăvașul pătrat numerotat care-i putea îmbogăți sau sărăci dintr-o simplă rostogolire și maiestuoasă așezare. Culmea, nu?Leonardo Pissano a scris în 1202, pe când avea doar 27 de ani, Liber Abaci (Cartea de calcul), carte care va primi sprijinul împăratului Frederic al II-lea. Leonardo Pissano este mai cunoscut sub numele de Fibonacci (Fibonacci este o prescurtare de la „fiul lui Bonacio” care Bonacio înseamnă „prostănac” iar Fibonacci ar însemna „cap sec”) și datorită renumitului său șir de numere care a și născut atât de cunoscutele spirale logaritmice create cu ajutorul proporțiilor lui Fibonacci, spirale care se va descoperi că sunt absolut peste tot în natură. Fibonacci cu al său Liber Abacci este primul care pune bazele algebrei în Europa.Păi, cum adică în Europa?Pentru că al-Kwarizmi – așa-i că sună cunoscut acest nume arab? – în 825 a fost primul, deci cu ceva timp înainte de Fibonacci, care a propus o regulă de calcul și tot el a fost cel care a „nășit” cuvântul, care a ajuns cunoscut drept algebră, al-jabr, știința ecuațiilor........................................
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John Gonzalez
Peter Bernstein writes about math and finance with such ease that you almost forget he's covering complicated foundational concepts. Some of the material here has been covered in other historical accounts of probability but the fascinating part is the intertwined relationship among these concepts and the basic assumptions of investing, finance,and risk managing. The same salient points that the Social Sciences hammer as limitations can't be ignored when applied to finance. Measurement is often imperfect whether we are measuring customer satisfaction or the volatility of a stock. This makes the estimation of risk and valuation of complicated insurance policies (derivatives and such) as much complicated matter than some would have us believe. And yet, if you read a page of the Wall Street Journal, you might notice the money managers, auditors, and rating agents act as though these are foregone conclusions (in a way resembling the social policy makers that apply the same disdain to the caveats of social science research). I never though finance could capture my imagination, but after this book I'm hooked.
Charles Gonzalez
A fascinating read; Mr Bernstein takes the reader on a step by step review of the major discoveries and pioneers of probability theory; that is how does mankind deal with the apparently random movement of life. His historical approach, describing each of the special men who through pure curiosity and impatience with the conventional wisdom sought out answers to very basic questions; why do things happen and is there anyway for humans to know more about it.....his approach leads to to financial markets and his expertise in investment management, which he argues is based on harnessing the imponderable of markets. The book was published in 1996 so his description of risk, especially financial risk is out dated. His description of the changes to risk management, the challenges in understanding and managing risk in an increasingly complex world are right on. I would be interested in his update given the financial crisis and its total destruction of conventional wisdom about risk....A really, really good book that makes you think about the world around you while forcing us to appreciate that as far as we have come in the lasts 1200 years , there is much more that we don;t know, perhaps can't know about managing risk....
Risk is inherent to any activity and uncertainty is all prevalent. Today, we have comlpex mathematical and statistical models to help us quantify and assess risk, but this was not always the case. This book tells the story of how modern Risk Management evolved with contribution from eminent scientists, statisticians, mathematicians and later, economists. What I really liked about this book is the fact that I was able to place the various names like Bernoulli, Pascal, Fermat, Fibonacci, Da Vinci, Euler, Leibniz, de Moivre and many others in the chronological order of scientific development and the glimpses into their work and lives. We all know these names and generally associate them with one or the other mathematical/scientific development, but this book helped me realize the vast scope of their work and the extent of their brilliance. Also, Bernstien walks us through the the various milestones in mathematical history, like the adoption of the Hindu-Arabic numbering system, the impact of Zero; the significance of which most of us are still not able to understand, the development of statistics; average, mean, median, standard deviation, regression, correlation etc and how one led to the other over a course of decades (We study them all in one chapter today), how statistics led to the development of probability theorem and then to the study of human nature pertaining to choices and decision making, which is the crux of risk management today! The initial half of the book reads like the history of statistics and probability theory and would be extremely interesting to most of us who have some background in mathematics. The latter half of the book focuses more on human behaviour, philosophy behind choice and decision making and its measurement using the mathematical and probabilistic models and modern risk management, particularly in the insurance industry and stock trading.
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