A Recommendation For Those Looking to Read More About the History of “Risk”
I’m not someone who recommends a lot, if any, books on my weblog like some, but after the post about the nature and history of risk yesterday a few readers were wondering what I based my position off.
With that, I’d recommend an excellent book on the subject I read a few years ago, Against the Gods: The Remarkable Story of Risk
Risk management, which assumes that future risks can be understood, measured and to some extent predicted, is the focus of this solid, thoroughgoing history. Probability theory, pioneered by 17th-century French mathematicians Blaise Pascal and Pierre de Fermat, has made possible the design of great bridges, electric power utilities and insurance policies.
The statistical sampling methods invented by dour Swiss scientist Jacob Bernoulli undergird diverse activities such as the testing of new drugs, stock-picking and wine tasting. Bernstein (Capital Ideas) animates his narrative with a colorful cast of risk-analyzers, including gambling addict Girolamo Cardano, 16th-century Italian physician to the Pope; and John Maynard Keynes, whose concerns over economic uncertainty compelled him to recommend an active, interventionist role for government. Bernstein also traces the development of business forecasting, game theory, insurance and derivatives, and surveys recent advances in risk forecasting made possible through chaos theory and by the development of neural networks.
While the book was written during a time when markets were setting records in a positive way, it’s still as relevant now as it was back in the mid-90′s, if not more so.
And while the synopsis might sound like a lot of numbers and boring history, it really is an excellent explanation of what risk is wrapped around a number of very interesting and exciting historical events and people.