This podcast episode explores the evolution of understanding risk in investing, tracing it from ancient gambling to modern financial theories. The host, Kyle Grieve, reviews Peter Bernstein's "Against the Gods," covering key figures like Fibonacci, Pascal, Fermat, and Bernoulli, and their contributions to probability theory and utility theory. He connects these historical concepts to modern investing strategies, emphasizing the use of bear/bull/base case scenarios, Bayesian updating, and prospect theory to manage risk and make more rational decisions. Grieve also discusses the importance of understanding behavioral biases like loss aversion and the impact of luck on investment outcomes. The episode concludes with practical advice on tilting the odds in one's favor by thinking probabilistically and adapting to new information.
