AGAINST THE GODS, The Remarkable Story Of Risk, Peter Bernstein, John Wiley, $280 If fate and luck are your enemies, why not use the laws of probability to lessen your risk? For thousands of years people have used their ingenuity in an attempt to control fate and luck or, in the modern phrase, to manage risk. A search by this reviewer through the catalogue of a large library failed to locate any history quite like this one, which is surprising given the central role risk avoidance plays in the modern world. Bernstein, therefore, has been brave even to embark on the subject. And he wins full marks for his achievement. The story of risk management, seemingly obscure and easily dull, ceases to be either when subject to his breezy style. Against The Gods is therefore an ambitious landmark. What is especially satisfactory about his book is that it blends ancient and modern historical theories about luck with modern finance. The author shows how risk management has taken the mystery out of chance, fate, luck, and uncertainty itself. Bernstein explains with energetic clarity how progress in mathematics and science has steadily whittled away the role of fate and chance while giving a scientific role to uncertainty in general. Modern mathematics have, in a sense, tamed unruly and fateful uncertainty. The laws of probability can now be used to quantify uncertainty and manage risk with results that affect many aspects of life. In insurance, the profession of actuaries has thrived on the result. Scientists constantly use probability tables in research. Bankers monitor risk by business sector and occupation. The list seems endless. The role played by the insurance world in developing risk management receives special and appropriate coverage. Much of the early application of quantified risk analysis started in the chocolate and coffee houses of London where ship-owners sought insurance coverage for their cargoes and ships. Businessmen and traders used their understanding of the laws of probability to create a framework for insuring against losses. The concept of the 'insurance pool' was born, whereby the risk was spread among many individuals. At this stage of his argument Bernstein makes an alluring proposition. Was it, he asks, because businessmen and financiers developed means to insure against natural disasters that the Christian church increased its long-term distrust of the men of commerce and finance? There can be little doubt that before the arrival of insurance, a loss such as a shipwreck would have been blamed on 'an act of God' or that risk management permitted the insured party to gamble against God's will. Bernstein is surely right when he maintains the Christian church was unhappy with the idea of insurance because it placed Mammon first and God second; God's role in the world of uncertainty and disaster would never be quite the same. However, it was not long before the church itself succumbed to the irresistible lure of insurance. We learn that many apparently modern financial devices are in fact medieval or earlier in their origin. For example, it was a common practice for farmers in ancient times to indulge in a form of futures trading by selling their next harvest in advance. In the 11th century, the Arabs (especially the luminous mind of Omar Khayyam) were the first people to use mathematics to study the rules that govern probability, although their work did not proceed very far. According to Bernstein, it was the Italian Franciscan monk Luca Paccioli, a close friend of Leonardo da Vinci, in the late 15th century who was the first to attempt a mathematical analysis of risk. More than two centuries later Paccioli's writings spurred two French mathematicians to write the world's first complete formula for understanding probability. Pierre de Fermat was a successful lawyer with a fascination for mathematics and algebra, while Blaise Pascal was an unruly, though brilliant, dissolute with a gift for geometry. Assisting them was a nobleman, Chevalier de Mere, who combined a love for gambling with an interest in mathematics. Their contribution to risk management was to develop a mathematical procedure for delineating the probability for future events of chance. As the history progresses from the 17th century to now the central subject of uncertainty becomes ever more complex and academic, through chaos theory, genetic algorithms, risk aversion, ambiguity aversion, backwardation, linear programming and the bell curve. They sound daunting but Bernstein does a competent job explaining the jargon for a lay audience. Against The Gods is clearly written for a general audience - Bernstein is not an academic but runs his own economic consultancy - and may not appeal to all professional historians and academic mathematicians. However, for the multitudes who make their living out of insurance, risk analysis and actuarial services, it must rank as very useful reading indeed. Bernstein's product is vivacious and exceptionally competent. With the world increasingly dominated by computers and 'number-crunchers' it is understandable that Against The Gods is being well received in Hong Kong after being a hit in Europe and America.