Against the Gods - another book by author with surname Bernstein

Author is "Peter L. Bernstein" -  the surname sounded familiar to me. Have I read one of his books before? What then? I don't read non-fiction, investment/risk - related books until late 2009, I remember their authors' names, certainly not Bernstein. (Thinking hard...) Ahhh!!! I know. The Birth of Plenty is written by William J. Bernstein .

So are these two persons related? Father and son? Brothers?

I googled "Peter Bernstein and William Berstein related" - and found the disappointing answer that they are NOT!!!

(Quote book review for The Birth of Plenty)

"Bill Bernstein's erudite history of the causes and consequences of growth grasps the main issues and keeps them up front all the way through. This book is a great magnifying glass for studying the complex world of today.� � Peter L. Bernstein (NB: Mr. Bernstein is not related to the author of The Birth of Plenty.) "

Damned!!

I thought I've found an evidence to the hypothesis "Like father like son" or "Like father produces like brothers" - the evidence is even stronger if Peter Bernstein and William Bernstein were brothers and happened to have a father who also wrote investment/trading books.

Anyway, it is an enlightening masterpiece, especially for us actuarial students who went through gruesome actuarial training that plants the idea of probabilities all over our head.

This book is really about modern risk management, but why is the book's title Against the Gods? The first step of managing risk is to believe that God doesn't control 100% of your future, that you can change the future by changing the ways you behave/your actions today.

Risk management necessitates understanding on how the future might turn out to be - Would Gillard lady change immigration rules after winning the election? Would Woolies (woo woo tongue-twister it is)  have special offers on canned tunas tomorrow morning? Would Claire be eliminated in today's episode of Master Chef (I'll find out soon)?

In one word: PROBABILITIES.

Probabilities=Probable+abilities=what is the chance (how probable) that something is able to happen

Why are probabilities invented anyway? Is it because we love the number zero and one so much that we'd love to invent something that always lie between those two extreme ends? LOL~ 1 and 0 are my favourite numbers when I was a school kid - they were so EASY in elementary maths.

6+1=7

6-1=5

6*1=6

6/1=6

Me in Elementary school: "So EASY!!! "

9+0=9

9-0=9

9*0=0

9/0=???

Me in Elementary school: "So EASY!!! Oh wait, teacher!! What is 9/0?"

Teacher: "Girl we don't divide something by zero."

Back then I imagined the hardest math (ie math in high school, uni) must have involved HUGE numbers e.g. 998883666388277673889298983+87837283787848787872=?

Of course I found out later that it is not, especially after starting Actuarial Studies when I realised that sometimes getting that answer between 0 and 1 can be such massive headache.

Probabilities are calculated because we want to know the rough picture of how the future would look like, and so that we can tailor our actions to either change the future or to cope better with the future. BTW, the title of this book should be Predict and Against the Gods - clearly doesn't sound as good, but that's the main thesis. Can human predict the future and go against what God has pre-arranged ???

BTW for those who have misconceptions about what an actuary does, the kind Blog author has some explanations for you:

Actuaries DO NOT know for sure what the future would look like!!!

So, don't come to me and start asking me to calculate how long you can live, who would be your wife/hisband, who would win the election in November (I personally want Gillard lady to win, Tony Abbott looks like an old-fashioned man with old-fashioned ideas.)

Because I DON'T KNOW. If I do know I would have become the richest person on earth by placing wagers on everything e.g. football matches. Actuaries are NOT fortune-tellers. Paul the octopus can predict better than me.

Probabilities all straighforward for games of chance ie games that are invented by human, such as roulette wheel, black jacks, kiddish games that I see in Jim Farmer's combinatorial probability notes. (How kiddish? e.g. Anne and Bob plays a game by throwing 2 coins, if the sides turn out the same, Bob pays Anne $1; if the sides that turn out different, Anne pays Bob $1.)

Which sane person would play a game like that? LOL~ The games I played as a kid were much more interesting than this one. But having said that many mathematicians, statisticians studied kiddish games like that and work out answers to questions like "What is the chance that Anne's pocket has more $$ then Bob's after 100 throws". The purpose is either to get rich - by working out the "optimal" ways to place bets if they so happened to have played these kiddish games with their best mates; or simply to kill past times or satisfy the inner curiosity of theirs.

Regardless of the motives, probability theories were developed over time by great nerds from the 17th , 18th, 19th centuries (from the way Peter Bernstein portrays them.)

BUT, God doesn't play simple games of chance!!!!

The games that God plays are much more complex!!!

Hurricanes and Tsumanis don't happen like how heads and tails appear on a coin toss, or how the ball lands in a roulette wheel, or how the faces of 6 dices turn up in a single throw. Global temperatures and sea levels don't go up like a straight line you drew on a graph paper. Things around us don't happen in neat fashion: independently, frequently and consistently - which are the qualities in games of chance invented by mankind. The three qualities are what we need to work out or approximate probabilities, and we have neither in circumstances where probabilities are most needed.

As if things are not complicated enough, the MOST COMPLICATED game invented by God is actually the brain of human. Yes, your brain, my brain, everyone's brain. I don't even know precisely what, when, how I am going to do something tomorrow (what more to say in a month, year, decade's time?), even though I am the person who should have the most amount of infomation about myself.

If you can't even predict yourself, how can you fancy predicting other people? Well, we hope that although each of us behave in erratic ways, the collective us behave in predictable ways - RATIONALLY, in the long run. Being rational means choosing the action that is best/optimal for your own good. E.g. you choose to do your homework despite not liking it because you know it is good for you. Being rational also means not being swarmed by emotions - you should keep your emotions at bay when choosing the option that is best for you e.g. if you know your wife is going to kill you if you keep a mistress, you should not keep a mistress even though your emotions tell you to hide her in your cupboard.

Sounds simple? Not till you start trading in the stock market - the place where emotions override rationality in the biggest scale. No stocks go up forever, very few stocks go down forever - you know that, I know that, but still when we see stock prices going up most of us choose to believe it to climb endlessly, and cry (if we've invested our $$) when it collapses.

Are you rational? I am not. Rational people don't make decisions based on sunk cost (cost you incur in the past e.g. $$ I paid for my gym membership) but based on opportunity cost (cost that you will incur by choosing something over some else e.g. the time I could have spent sleeping had I not chosen to go to the gym). The fact is, LOL~, the biggest motivation for me to head for my workout is the thought that if I don't my $$ would go to waste.

But all models used in the world of finance assume rationality - that is, hoping that the irrationalities of everyone happen to cancel out so that we as a population behave rationally. It's like "Oh please God, please~ ~ ~ We know each of us are not rational, but can you make all of our irrationalities combine into a big rationality fondant that ooze out thick stream of rationality when I cut through it?"

God isn't listening - that's why we have the Global Financial Crisis. Human came out with great, accurate formulae to predict our nature - the plants, the animals, the rocks, the rivers, but we are nowhere near to be able to predict our own thoughts and actions.  

Peter Bernstein said perhaps human would become better over the time and eventually come out with something that can predict ourselves.

Let me see, this book is published in 1996. 14 years down the track, has human, with the help of computers, moved closer to that noble target?
No. There will be no economic crisis if we were that good.

Can we ever be smart enough to create something to mimic ourselves close enough? Perhaps not, unless:

1. The earth is conquerred by aliens who turn us into robots e.g. send human for reformating so that all our brains are programmed identically - with emotions extracted and rationality inserted.
2. Someone become God's best friend and got the secret algorithm that determines how the 7 billion persons in this world think and act.

So why go Against the Gods?

We should Befriend the Gods.

Over Mount Fuji - As volcano erupts, Hot German guns won against Uruguay!!!

Hahaha...I just LOVE matches with >=4 goals ~ ~ They exceeded my expectations!! 3 goals to Germany and 2 goals to Uruguay!  Hot young german guns  held off Uruguayans, who also played exceptionally well in this tournament, to seal the third place of FIFA World Cup 2010. Forlan and King of Volleyball (Suarez) were dramatic too, and they almost forced the match into extra-time!! But thank you germany for producing such entertaining display in this tournament. *Clap clap clap* for both Germany and Uruguay .... and Paul the Octopus who predicted 100% correctly for the German's games.

Fellow Malaysians: this is a book written by one of our countrymen residing in Australia - but the setting is not Malaysia, he is too scared about being caught by ISA.

Instead he wrote about Japan - where the mystic Mount Fuji is located. You know Mount Fuji? Is it the place where Fuji Apples came from? No need to do research folks, because the kind me already helped you to do so:

(Source: Wikipedia)

"The Fuji apple is an apple clone developed by growers at the Tohoku Research Station (農林省園芸試験場東北支場) in Fujisaki, Aomori, Japan, in the late 1930s,[1] and brought to market in 1962. It originated as a cross between two American apple varieties, the Red Delicious and old Virginia Ralls Genet (sometimes cited as "Rawls Jennet") apples. It is named after "Fujisaki ([藤]崎)," Aomori Prefecture (青森県), but often mistakenly thought to be named after Mount Fuji (富士山)."

Unfortunately, the answer is No.

Nonetheless, it's good effort by first time novelist Joel Huan. Fictions are always difficult to write - I remember the narrative essays I wrote in primary and secondary schools. They can be summed up in one word: LOL.

Lame,  funny and ridiculous -->pretty good value huh? But my school teachers don't appreciate that type of qualities, so in the end I settled with writing argumentative essays instead.

If you are curious to have a quick look go to http://wulfstein.wordpress.com/, you can read for FREE! All there, if your eyes are strong enough to endure about 300 pages of reading on computer screen.

Bloop...Bloop...Bloop...what's that??? A Dragon? Water Bubbles? Mother Earth's "fart" maybe?

After today's football match, I'll say it must be King Octopus snoring!! Octopuses are set to become the next ruler of planet Earth after homo sapiens!! The whole human race, with thousands of football pundits, can't predict anywhere close to 50% as well as that little octopus Paul. OMG.

Life and Death have always been what human are struggling to comprehend - not just the science of it, but also the spiritual part. Where do we head to after death, or rather, is there anything left in us to make this question relevant? Is everything as simple as what science has put it: that you and I are temporary visitors to this world, and our existence, insignificant. Just like the dust on your furnitures, each of us, when the history of whole universe is looked at. *Blows* Gone! No marks, no legacy, not even memory.

Do heaven and hell exist? Or are they just spiritual inventions by us - to make the evils amongst us guard their behaviours, to exploit the fear amongst us for the good of the community. Everything around us, their existence, their smell, their taste, their touch are temporary - aka impermanent. What are maths, what are science, what are statistics, what are philosophy, what are money and numbers? They are really just creation by us, homo sapiens - the most intelligent creatures on planet earth. Strange enough, if you think about them individually, they don't add much value to life and survival - or do they? Perhaps they create power, authority, hierarchy in the society that are necessary for a species to prosper. We can't eat numbers, we can't eat laws of physics, but in a strange way, the creation of those allow human race to rise above the beasts. 

But can we beat Mother Nature? No.

Who is Mother Nature then? Just a planet formed by random particles during the Big Bang? Is there a force that regulates the happenings around us, aka God? If there is God, everything that seems random is predestined - your race, your gender, your wealth, your success or failure, survival or death. If there is predestination, theoretically time travelling is possible, since occurrences are 'lined-up' in  a preorganised fashion and therefore 'forwardable' or 'reversable'. Conversely if randomness is the force, time travelling is not possible because (as stats students know), a string of random numbers can never be reproduced or predicted exactly (with your limited lifetime).

Maybe there are cycles of life that we are yet to comprehend. The forces that wiped up Dinosaurs may be acting to wipe out Human, but we don't know when.

Volcano eruptions, tsunamis, severe storms, rising sea water - if there is such thing as an 'equilibrium' like how economists put it, what then explains the increased frequencies of those natural disasters? Human greed, you may argue. Human are too greedy and exploit nature too much. But why does greed exist in our blood (not just human, all other beasts as well)? Greed is essential for survival, leopards can't survive in the wild with limited food supply without the hunger to out-power the others. With greed, human/animals launch wars against one another, to destroy, to assume dominance. Terrorism in the homo sapien's world is akin to territorial intrusion in Safari. What's the difference? It might then be the case that greed is a double-edged sword, that ensures survival and the eventual extinction of living creatures.

Who is the Mighty Force that is smart enough to design such regularity that ensures no species is bound the rule planet Earth forever? We might never know the answer, because our intelligence and senses might be programmed in such a way that we would never find out. 

Shall we human then be proud of our achievements? We're the second ruler of planet Earth after Dinosaurs. Who is going to be next? (Answer: Octopus)

Okies, I am clearly not giving a book review here - but this book provokes the above thoughts. 

Now some suggestions to Joel the author (may contain spoiler, close the window immediately if you're planning to read the book!):

Overall Wulfstein and Eileen are the main characters - whether or not they fall in love (as in, develop romantic feelings for one another) is not clear. Byron and Nobuko are just supporting characters. I especially think you could have involve Byron more in the storyline, not just a detractor of his mentor for the most part of the book. Romance between Byron and Nobuko isn't very "smooth" - as in, I think you could have developed the feelings of both a little more before making them hold hands, kiss, hug and have sex. 

The part about Wulfstein being swipped away by a tornado is a bit too rushed - given that he's the main character you could have explored the feelings of him a little. E.g. what occurs in his mind when he realised that his end is near. To me, Wulfstein is clearly the main character, he's the one who drives the plot. LOL~actually it'd be good if you let Eileen and Wulfstein fall in love with one another (you might have, but it isn't real enough). You might have let them talk about things apart from tetonic plates, you know, about her marriage to Jerry, about her life thereafter. Maybe you could have made Wulfstein a divorcee after several failed marriages, because his wives couldn't stand his obsession with earthquakes. You know, things like that.

I have to be honest here - I haven't quite developed enough affections for your characters after reading the story, which are essential for me to cry or laugh when the characters cry or laugh. This comes with experience I suppose, I'm sure your second novel would be much better on this. For example, I'm sure you could think of alternative/creative ways to describe Wulfstein's obsession with science other than making him sweat, tremble and refuse to talk. Those are typical "nerdiness"- we readers love to read about "craziness" instead.

We chatted about dialogues last time, and yes you write far better dialogues than I do. Just would like to suggest, perhaps make the English sentences said by Japanese different from the Americans? You could argue that Nobuko grew up in US, but given how long she's been staying in Japan, the Japanese culture would have a greater influence on her speaking. By varying the tone of language a little, the conversations become more real.

Some other minor suggestions:

* Remove page numbers 1-4, you don't need them. Start page 1 with the prologue.
* page 75, 6th line from the bottom: now it is "on" the move.
* Use a wider variety of "swear words" - not just damn it, shit. LOL~ e.g. certain spots can be replaced by "oh my goodness" or "damnation" or "you must be kidding me". Just some suggestions.
* Think you could also have used some alternative to "nothing". ~Just my opinion, coz I realised that I read them a number of times.~
* A couple of diagrams, pictures in the book showing the archipelago, how the electromagnetic field spreads, how the "ambience" moved, the relics of shipwrecks would be effective at helping readers to understand what Wulfstein is talking about. This technique is not unusual in many books which explore ideas that aren't straightforward e.g. the Da Vinci Code.
* pg 260: "As Eileen rushed back to the deck, assiting survivors..." --> you mean, her leg has recovered? She just got injured on pg 258.

The Birth of Plenty - Awesome read for those who doubted their economic lecturers

To non-economics students -  think of "Plenty" as the everything that you're now having: a comfortable house/room, a TV set to watch Netherlands vs Uruguay, pocket money from your parents, books to study for exams (does this excite you babe?), and in future, a car to drive around, a nice book like this one to read in your bed, a massage on a trip to Bali - basically, why are you, YES YOU, not planting corns to feed your tummy and sleeping on the mud, like how our less intelligent cousins who talk like GWAK GWAK GWAK?

Bruce Edward has a pretty similar taste for books as me, I realised. "The Black Swan", "The Birth of Plenty" and "Against the Gods" are all good books for people who'd like to exercise their brains a bit during this cold winter. Just like how gym workout makes your body fitter, reading books make your brain fitter - and the activity generates HEAT which - you would agree with me - a precious commodity in July of Australia.

You can safely assume that economics-related BOOKS are nearly always more interesting that economics JOURNAL ARTICLES or TEXTBOOKS. The latter are full of graphs and over-simplified models which no one believes in practice but everyone writes down on exam scripts LOL~

How is "Plenty"  born? How does the world start growing the pace it does today? In other words, how did we human start to realise that we can generate much more than what we thought we could. WB puts the source of "growth" in a package that contains:

1. Property rights and Rule of law - ie a set of rules that restrict what you and I can do, but not too much, and a set of rules that give me assurance that my money, ACST notes, Indomee, this blog, my business (when I become a boss one day), my invention (in case I invented some gadgets, models, theories that have a wow factor one day LOL~) would still remain mine tomorrow, next month, next year, ...., if I choose not to sell them to someone else. In other words, if there is no rules to protect my property rights to my ACST notes tomorrow, economic growth might be stunned (to some extent) because XinYin can't study -->just kidding. What's the point of making more money, if the 'king' can take them from me whenever he likes; what's the point of investing in a business if at anytime it can be stripped from me; what is the point of creating something e.g. a gadget, a theory if I can't claim ownership and thus reap rewards out of it?  

2. Environment that gives incentive to scientific research and intellectual development - ie there must not be a tight regime which restricts intellectual thinkings of yours and mine. E.g. we should be allowed to tell our lecturers how wrong their models are, and not get a sour face in return.

3. Easy access to capital - ie there must be fairly abundant $$ at affordable interest for you and I to borrow to invest in something we invented. For example, if I want to set up a new instant noodle company to challenge the superpower status of Indomee, I should be able to borrow to employ workers, buy machines, build factories that churn out massive quantities of dried noodle and seasoning full of toxic, so that I could sell them off to university students who are too lazy to cook. Because I set up a rival company, Indomee would feel threatened and do more research on how to improve their toxicating seasoning so that more people would be willing to spend $0.50 on each packet of poisonous monster.

4. Efficient transportation and delivery of goods and ideas - ie I must be able to obtain the things that I don't produce myself, access the knowledge/news/gossips/world cup matches, and fly to Australia from Malaysia in 8 hours, not by boat in 6 months. I must also be able to access the (mostly boring, long, some pretty interesting) academic papers to do my thesis, and to obtain a copy of 'Over Mount Fuji' to understand the ideas that had Joel Huan obsessed for 10 years.

The historical path that eventually led to "the birth of plenty" was rocky, with many emperors rose and fell, countries achieving glories then collapsed. The first sign of economic growth was seen in Holland and Britain - not US the modern superpower. There is an interesting chapter on British Imperialism that explains the economic side of British colonialism in Southeast Asia. Well, the account that I read on History textbooks was all about how humuliating it was to "lose national sovereignty" to whites, about "natural resources that got litched off by whites", and spirits of patriotism that eventually motivated "heroes" that fought for independence. 

I dread to think about how Malaysia would look like if there was no British colonial masters. Would the country still be run under a feudalistic system? Would I have the opportunity to study overseas? Would I become a paddy farmer who has to pay >70% tax to the landlord or the king, and sing Dollar Tuanku everyday? I suppose no, because the fact that the country was run feudalistically was the trigger point for western colonialisation i.e. British took advantage of exactly that to topple the local kingdoms and negotiated (forced) the rulers to hand over controls. 

For the price of having to call the British "masters", roads and railwork were built, schools were set up, local governments were established, rules and laws were enacted, foreign banks were allowed to set up branches. In some ways, these were exactly what led to the nationalism movements. Who cares about the flag on top of government buildings if there were no educated minds and adequate income to feed the stomachs so that energies can be generated to run the minds?

By the turn of the second half of 20th century, the superpowers - the US and Britain especially - realised that imperialism was poor investment so they retreated. If they didn't, many countries today would still be colonialised.

Of course, it is far easier to explain what happened in the past than to predict what would happen in future. WB is pretty smart, he avoided speculation in 95% of the book and only gave a brief, broad speculation at the end: the growth shall continue, the growth figures are there to stay.

I would guess so, but given how unpredictable future are to human at any point - the Europeans living in the Dark Ages wouldn't imagine how XinYin could type a blog entry while eating porridge, and post it up at whims, he/she simply couldn't understand how XinYin who doesn't know how to loosen up the soil in front of her house could possibly have rice to cook porridge - our guessing in the 10th year of 21st century about the economic landscape of the 22nd, 23rd ...centuries, might just be as inaccurate.

Hang on, maybe we as human have become more intelligent over time and therefore can predict better? 

Read this book if you're the kind of person who question what your economics lecturers are/were telling you. (It is a bit thick, though, almost 400 pages, still less than your one-semester lecture notes?). Economists  loves to draw "frontiers" -  a cool name for really just an ugly line on a paper- to represent the process of economic growth. And I remember there was this line drawn by Alex Blair that intersects some curve so that the magic model gives you "equilibrium" level of output. The possible questions in exam about economic growth are either "change in labour force" or "increase in capital resources" or "technological advancements".

If everything about mankind stays unchanged, growth would of course continue --> a pretty lame assumption, since when human are static? E.g. I won't even know what I would eat tomorrow as lunch, but maybe not porridge. Resources on earth are limited - which is the reason why some economists in the past predicted growth to be "stunned" at some point in the 20th century (and those people were so good at justifying why their predictions didn't come true, retrospectively). If so, how could countries grow forever? Where can we find the extra GDP when the amount of soil and oxygen is essentially fixed? More babies? More financial contracts (which aren't natural resources)? More land exploration?

Or, perhaps, conquer other planets and make them our second home?

P/S: Joel Huan, your book is next.