Against the Gods: The Remarkable Story of Risk

Chapter 1

The Winds of the Greeks and the Role of the Dice

Why is the mastery of risk such a uniquely modern concept? Why did humanity wait the many thousands of years leading up to the Renaissance before breaking down the barriers that stood in the way of measuring and controlling risk?

These questions defy easy answers. But we begin with a clue. Since the beginning of recorded history, gambling—the very essence of risk-taking—has been a popular pastime and often an addiction. It was a game of chance that inspired Pascal and Fermat’s revolutionary breakthrough into the laws of probability, not some profound question about the nature of capitalism or visions of the future. Yet until that moment, throughout history, people had wagered and played games without using any system of odds that determines winnings and losings today. The act of risk-taking floated free, untrammeled by the theory of risk management.

Human beings have always been infatuated with gambling because it puts us head-to-head against the fates, with no holds barred. We enter this daunting battle because we are convinced that we have a powerful ally: Lady Luck will interpose herself between us and the fates (or the odds) to bring victory to our side. Adam Smith, a masterful student of human nature, defined the motivation: “The overweening conceit which the greater part of men have of their own abilities [and] their absurd presumption in their own good fortune.”1 Although Smith was keenly aware that the human propensity ...