Shostack + Friends Blog Archive


A Farewell to Bernstein

From Chandler, who is in China:

Adam sent along to the authors of this blog a link to the New York Times obituary for Peter Bernstein yesterday

Peter L. Bernstein, an economic historian and a widely read popularizer of the efficient market theory, which changed trading behavior on Wall Street, died Friday at NewYork-Presbyterian/Weill Cornell hospital. He was 90 and lived in Manhattan.

The cause was pneumonia contracted after he broke a hip, his family said.

Mr. Bernstein published most of his best-known books in the last 20 years of his life, including the best-selling “Against the Gods: The Remarkable Story of Risk”

[Bernstein] embraced and explained an investment strategy that came to be known as efficient market theory. Rather than just picking stocksNobel Prize for his work developing the new strategy. Because they seemed to be good bets, investors increasingly diversified their portfolios, using sophisticated mathematical equations, developed in academia, with the goal of measuring and managing risk.”We went from naïve and haphazard stock-picking to looking at the whole portfolio in the context of how capital markets operate,” said William F. Sharpe, an economist at Stanford who received a

“Against the Gods” is one of those books that I often find on people’s bookshelves but rarely find in people’s reading lists, which is too bad.  Starting from the ancient Greeks worshipping their pantheon of Gods and believing that fate was determined by the Muses, he takes us through the people, discoveries and their driving causes which led us to the sophisticated capital markets we have today.

When I read this book, I learned more about famous mathematicians and the reasons why they were trying to solve the problems they did than I ever learned in more math classes than I can count.  Finally, math had context.

Peter Bernstein may now be gone, but I would strongly suggest that all of you who never made it past the first few chapters of Against the Gods honor him by dusting off your copies and reading it again.  You will be a better risk manager for it.

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