This content is from: Portfolio

Risk Raconteur

Editor's Letter: A tribute to Peter Bernstein, a master interpreter of the complex world of probabilities and risk.

"Irreversibility dominates decisions ranging all the way from taking the subway instead of a taxi, to building an automobile factory in Brazil, to changing jobs, to declaring war."

Peter Bernstein, Against the Gods: The Remarkable Story of Risk

Imagine if banks had ignored subprime temptations, Lehman Brothers had survived or Bernie Madoff’s schemes had unraveled sooner. Such possibilities — irreversibly vanished now — were the stuff of routine supposition for Peter Bernstein, a master interpreter of the complex world of probabilities and risk.

Peter, who passed away in June, was much more than that to this magazine. Working with founder Gil Kaplan, he generated ideas that nurtured the fledgling Institutional Investor. He later founded the acclaimed Journal of Portfolio Management , a small publication that thought big, explaining academically rigorous topics from quantile regression to clairvoyant value teases. (See Bernstein tribute, www.iijpm.com.) Peter was that rarity, an economic scholar who wrote with the flair and precision of a great novelist. And he had a delightful sense of humor. "The world would be a dull place," he wrote in his landmark risk study, Against the Gods, "if people lacked conceit and confidence in their own fortune."

Fortunately for us, good writing mattered to Peter. He told stories simply, without pretense, building on strong verbs, always in the active voice. There was a power and elegance in simplicity. Big things can be accomplished with small words. He admired Winston Churchill, no small accomplisher, who wrote that "short words are always best, old words best of all." If ideas could not be clearly stated so they could be understood, they were probably not good ideas in the first place.

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