The sign of a great commentator is that when they die, you really wish they were around to comment on their own life. That's the case with Peter Bernstein, who The New York Times lauded Monday for his ability to explain the abstract and theoretical notions of risk to the general public. Indeed, his passing -- he was 90 and died of pneumonia after breaking a hip -- comes at a time when the body of ideas that he championed faces grave challenges, although if he was around to comment, he would almost certainly undercut the momentousness of that in his sensible, intelligent way.
Bernstein lived a long time, and he was incredibly productive for most of it. He personally experienced the transformation of American finance and money management that began with the rise of institutional investing after World War II. He seemed to have been everywhere: grade school with Robert Heibroner, Harvard with John Kennedy, Cogan, Berlind, Weill & Levitt with Sandy Weill and the boys, a disciple and interlocutor of the great minds of financial economics that primarily hailed from Chicago, a skilled investing practitioner himself. It's true that he popularized issues around risk in books like "Capital Ideas" and "Against the Gods," but he also bridged theory and practice in graceful, carefully composed and regular-as-clockwork columns he wrote for decades. These really should be republished; is there a memoir hidden away? He had been around so long that Bernstein, with his suit, bow tie and thick glasses, seemed to be a custodian of a kind of sane perspective on all things investing.
Bernstein's world is now under attack. He would almost certainly criticize that statement by arguing that the attack began decades ago, out of the public eye, and that "attack" is really the wrong metaphor for what is actually a natural dynamic of vision and revision. Nonetheless, even Bernstein recognized the challenge the recent crisis poses to the "science of risk" that he explained to the world (for evidence, see John Auther's review of Time reporter Justin Fox's "The Myth of the Rational Market" in Monday's Financial Times). Fascinated as he was by deep insights into probability and risk that began to remake investing in the '70s -- so much changed in that benighted decade -- he was never a utopian or an ideologue, like some of the Chicago gang. He recognized the dangers and weaknesses. His last book, "Capital Ideas Evolving," tries to wrestle with incursions like behavioral finance against those keystones of portfolio theory like the efficient market thesis or the capital asset pricing model, which somewhat unfairly cast him into the camp of defending what is now orthodoxy.
Such is the plight of the discriminating commentator in old age. Still, if we are to understand what unfolded in American finance over the last 50 years -- and we'd better -- Bernstein remains among the finest guides we have. He still gives tremendous value. - Robert Teitelman
See video of Bernstein interview from The McKinsey Quarterly:
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