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'Against the Gods' Comes Up Short

By David Veitch

Peter L. Bernstein takes readers through the history of risk.

“The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature.” (pg. 1)

With this bold thesis, Peter L. Bernstein in his book Against the Gods: The Remarkable Story of Riskdocuments the development of risk management throughout history. Beginning with a simple brainteaser by Luca Pacioli regarding a rudimentary game of chance named balla, and ending with Markowitz’s theory of efficient portfolios and the explosion of derivatives in modern times, Against the Gods takes a comprehensive look at risk throughout the ages. Bernstein describes how foundational ideas of risk management developed and how a number of individuals and circumstances were instrumental in facilitating these developments. The book is accessible to a wide audience as it focuses on conceptual, rather than technical issues surrounding risk management; for readers, little to no prior knowledge of finance/mathematics/statistics/economics is required.

The book is especially relevant today given the increased focus on risk management in the wake of the 2008 financial crisis. While the book is somewhat dated (first published in 1996), the majority of the content is still relevant as it deals with the academic developments in risk management which have occurred gradually over hundreds of years. The author, Peter L. Bernstein, is sufficiently qualified to cover such a topic. Bernstein’s career has included stints in academia, commercial banking, and portfolio management; as well, he has written numerous books on the financial markets and has been published in the Harvard Business Review, Bloomberg, New York Times, and the Wall Street Journal.


Bernstein begins by examining the reasons why risk management took so long to develop. The intellectual advancements of the Greeks positioned them well to develop these ideas, but because of their tendency to favour mathematical proofs and their practice of turning to oracles instead of philosophers in predicting the future, they did not. It was not until the Arabic numbering system (what is used today) was adopted by Europe that meaningful advances were made in the study of risk.

The author then takes readers through how academics studied games of chance to make early advances in the fields of probability. Many references are made to mathematical heavyweights of the time including Fermat, Pascal, and Laplace. One of the most interesting tidbits I was able to pick up in the book was how one can use Pascal’s triangle in determining the probability of outcomes in a game between two individuals.

The reader then learns of how actuaries and insurance brokers in Britain further developed risk management through discoveries in sampling and statistical inference. After this, the author describes applications of risk management to the world of finance; option pricing and efficient portfolios are discussed at length. As well, the author touches on decision making and how psychology often leads to irrational decisions.


Against the Gods accomplishes the goal of providing a history of academic thought regarding the concept of risk management. A broad survey of the literature is taken, leaving readers with a thorough understanding of the topic. What is lacking, however, is an examination of how these advancements have impacted the real world. The best passages of this book are those about Lloyd’s of London and the 1987 stock market crash, when readers see the real-world consequences of the development of risk management. However, these types of passages are unfortunately few and far-between, making the book feel overly academic.

Another downfall of Against the Gods is the extensive backstories provided for the individuals discussed in the book. While these do produce some interesting tidbits (such as the sandwich being invented as a result of a gambling problem), the irrelevant pieces of information regarding the personal lives of mathematicians quickly become tiresome. Also, the author is often overambitious in his word choice, a trait which takes away from the legitimacy of the book’s message. For example, in the introduction, the author describes computers as “contraptions that devour numbers like voracious monsters and insist on being nourished with ever-greater quantities of digits to crunch, digest, and spew back”.

Finally, for most topics the author only skims the surface and hints towards what the ramifications of certain findings are. This makes the book feel like a number of chapter introductions from textbooks on probability, introductions which lack meaning without a more thorough discussion.


While Against the Gods may appeal to individuals with little background knowledge of risk, its lack of depth makes it a frustrating read for those that are somewhat familiar with the topic. At 400 pages it is a grinding read, although there are a couple of interesting passages which make it bearable. With this in mind, a more effective examination of the history of risk would be welcome, especially one that incorporates the lessons learned from the 2008 financial crisis.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.