Against The Gods

Here are two fascinating stories from a thought-provoking book I read recently. 

One is about a wartime weather forecaster who went on to win the Nobel Prize in economics. The other is about a gambler whose obsession with gambling laid the pathbreaking groundwork for the science of probability.

1. Story of a Weather Forecaster

During World War II, the U.S. Army assigned a young mathematician named Kenneth Arrow an unusual task: forecast the weather weeks and months in advance to assist with military planning. Arrow and his team quickly discovered that these long-range forecasts were largely unreliable. Being a man of science, Arrow raised his concerns to the commanding officers and argued that these predictions were, essentially, useless.

The response he received was both ironic and profound. The Commanding General acknowledged that the forecasts were inaccurate but insisted they were still needed for planning purposes.

Arrow would later reflect on this paradox: even when we know predictions are flawed, we still crave them to create a sense of structure in uncertain environments. It was a moment that shaped his understanding of risk, probability, and human behavior—insights that would later influence his groundbreaking work in economics and decision theory.

Kenneth Arrow went on to become a celebrated economist and was awarded the Nobel Prize in Economics in 1972. 

2. Story of a Gambler

Another intriguing story is of Gerolamo Cardano. Cardano was born in 1501 in Pavia, Italy, and spent much of his life in Milan. He was a renowned physician, mathematician, and astrologer. But beyond this, he was a passionate gambler. Cardano wasn’t just any gambler; he was obsessed with understanding the odds behind his wins and losses. In smoky gambling dens of 16th-century Italy, where most relied on luck and superstition, Cardano brought a notebook and a mathematician’s mind. He carefully observed the outcomes of dice games, recorded results, and tried to make sense of what others saw as pure chance. For him, gambling wasn’t about fortune—it was figuring out the invisible rules that governed uncertainty. While others lost their shirts hoping for luck, Cardano stayed ahead by calculating the risk, turning a gambler’s playground into a mathematician’s laboratory.

Driven by his obsession with gambling, Cardano wrote a groundbreaking book titled “Liber de Ludo Aleae” (The Book on Games of Chance). It was the first known text to systematically analyze the mathematics behind probability. Cardano introduced foundational concepts like expected value, fair odds, and techniques to detect chance, centuries ahead of his time.

Cardano’s work demonstrated a profound shift in how humans think about uncertainty and risk. Before his work, chance was often seen as pure luck, but Cardano showed that chance could be understood, calculated, and even predicted with some degree of accuracy. His influence on probability theory would later help shape modern statistics and, by extension, the science of risk management. Today, risk is calculated using probability and statistical analysis, and the foundations laid by Cardano continue to guide us in everything from investing to insurance.

I discovered these exceptional individuals through the book,

Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein—one of the most impactful books I’ve ever read.

It’s not a typical finance book. It’s a historical journey through how human civilization evolved from fearing uncertainty to understanding, quantifying, and ultimately embracing it. In his book, Bernstein delves into the fascinating and often complex role of risk in human history, economics, and decision-making.

The book’s title—Against the Gods—comes from the idea that early humans believed the future was in the hands of the gods. But through probability and logic, we slowly took back control. We stopped relying solely on superstition and started building models.

Bernstein also illustrates how the concept of risk has evolved. It wasn’t until the 17th century that mathematicians like Pascal and Fermat took Cardano’s early work and formalized the principles of probability theory. This provided us with the tools to measure and quantify risk, which in turn led to the development of modern economics and financial markets.

The stories of Arrow and Cardano are reminders that even in the face of unknowns, the ability to calculate and understand risk can make all the difference. Against the Gods offers us an enlightening perspective on risk and decision-making under uncertainty.

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