Reb Gregg Outdoor Liability Law: Writings

Writings

This book review written by Reb Gregg appeared in the summer 1997 issue of Zip Lines:

Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein
John Wiley & Sons, Inc., 1996 reviewed by Charles R. Gregg

Peter Bernstein, an economic consultant to institutional investors, has written a delightful and intriguing history of risk assessment. Explaining that the word "risk" comes from the Italian resicare meaning "to dare," Bernstein challenges us to understand and deal responsibly with the certainty that risk is a choice--a choice that can be measured. Unmeasured risk leaves us, and our clients, with nothing but a guess regarding what the future will bring.

The story tells of probability and the history of its measurement. It moves sequentially from before the Renaissance to the present time, describing fascinating principal figures in each era who have contributed to probability theory. We are introduced to Paccioli's game of Balla, the Bell Curve, Chaos Theory, John M. Keynes' Treatise on Probability, Blaise Pascal and Decision Theory (what do you do when it's uncertain what will happen), sampling, averaging, standard deviation, statistical inference--terms and exercises which frankly, I had not considered, by those names at least, in my own study of risk and risk management. The story is entertaining and useful

(Bernstein's book was quoted in a business section article of the March 31, 1997 New York Times., which discussed in some detail the concept of irrationality in the stock market. Chairman Greenspan had, days before, referred to the "irrational exuberance" of today's investors.)

The author begins his story with a description of the not-so-ancients, who were so certain that events occurred randomly or at the whim of the gods that they had no impulse to try to control those events or calculate their probability. In fact, numerical calculation adequate for such a task was far in the future. The ability to calculate odds, according to Bernstein, is rooted in the Hindu/Arabic numbering system, which came to Europe with the returning Crusaders. The most notable invention of this system was the zero. With the Renaissance came an understanding that we are not utterly at the mercy of the gods or fate. We have the ability with proper data to assess probabilities, including the risk of loss in what we are doing.

The gamblers among his readers will be interested in Bernstein's discussion of odds. Games of chance and the stock market in fact, receive a good bit of attention from the author. Early interest in measuring probabilities arose in part from the pastime of rolling dice--originally sheep or goat ankle bones. Probability theory quickly moved from a gambler's tool to a method of organizing information for assessing a broader range of activities in which the calculation of probable outcomes was important.

We might question whether the mathematical calculations that Bernstein describes in assessing outcomes of rolls of dice are applicable to an outdoor recreation program. Certainly not with the same precision, but analysis is available and appropriate. With proper data regarding the frequency and severity of losses, we can approach a determination of those aspects of our programs that should be continued, discarded or severely scrutinized.

To illustrate Bernstein's point regarding the relationship between severity and probability, draw a square. Label the left side Severity and the bottom Frequency. Divide the square into four quadrants. Now, collect the activities of your program in the applicable quadrants. Which of your program activities have produced losses of high severity and high frequency? High frequency and low severity? High severity and low frequency? Low severity and low frequency? This exercise may stimulate some thinking on your part regarding losses you can expect to encounter, and are willing to tolerate, in the future.

One of the most compelling themes of the book is reflected in the following quote (source unknown) offered by Bernstein: "The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. It looks just a little more mathematical and regular than it is." We are being told, I believe, that we must not allow ourselves to be beguiled by the apparent orderliness or simplicity of the systems and concepts with which we deal. Any activity involving humans is complex. Explaining or defending what we do as only perceived--not real--risk is an invitation to complacency and injury. What we do is almost safe but also it is almost not safe. We are never certain. We are always ignorant to some degree.

Decisions regarding risk have two elements, Bernstein reminds us: the objective facts based on past experience, and a subjective view of the desirability of what is to be gained (or lost) by the venture. Both are important, and this tension between the (somewhat) measurable and the not measurable--between risk and reward--complicates the risk analysis of an activity.

And, we are reminded, risk management sometimes creates new risks. Having installed seat belts and anti-lock brakes, we inevitably are less careful in our regular driving habits. Our overall exposure to harm may not be reduced at all!

The challenge of risk management is to maximize the areas of exposure that we can control with some certainty and reduce those that we cannot. Bernstein's well-written and provocative history will help us meet this challenge and offers many important lessons for the outdoor recreation profession.

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