Then and Now in Investing, and Why Now Is So Much Better
Peter L. Bernstein
This Foreword originally appeared in the first edition of The Theory and Practice of Investment Management. Peter Bernstein passed away in June 2009. References to the updated chapters mentioned in the Foreword are provided by the editors.
As I read this book for the first time, I was constantly reminded of the contrast between the investment world of today and what professional investing was like at the beginning of my career 50 years ago. The revolution in investing over the past half century has been far more remarkable than most people with a shorter memory bank can realize.
While sophisticated investors back then understood a few of the basic ideas and principles that drive today’s investment practices, their methods were crude, undisciplined, purely intuitive, and wildly inaccurate in terms of achieving what they hoped to accomplish. Entire areas and techniques of investment management had yet to be discovered, many destined to appear only 20 or 30 years later. The momentous Nobel-prize-winning theoretical innovations that did develop during the 1950s—Markowitz’s principles of portfolio selection, Modigliani-Miller’s contribution to corporate finance and the uses of arbitrage, and Tobin’s insights into the risk–reward trade-off—trickled at a snail’s pace even into the academic world and were unknown to nearly all practitioners until many years later.
We did understand the importance ...

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