Page 4 - Valentino Cattelan - In the name of God: managing risk in Islamic finance

VALENTINO CATTELAN

«The word “risk” derives from the early Italian risicare,
which means “to dare”. In this sense, risk is a choice
rather than a fate. The actions we dare to take, which
depend on how free we are to make choices, are what
the story of risk is all about. And that story helps
2
define what it means to be a human being» .

1. Gods, men and the (un)expected: from Bernstein’s risk to the Arabic rizq (ﻕﺯﺭ)

Peter L. Bernstein’s extraordinary book Against the gods: the remarkable story of
risk has been able to popularize and make accessible to the general public the
3
intricacy of a concept, that, as he remarks, «touches on the most profound aspects
of psychology, mathematics, statistics, and history» (p. ix). The volume itself won
the Edwin G. Booz Price for the most insightful, innovative management book in
1996, as well as the Clarence Arthur Kelp/Elizur Wright Memorial Award in
1998; not really unexpectedly, considering this success, Against the gods has sold
over 500,000 copies worldwide.
Indeed, dealing with the (un)expected is what risk management is all about:
something that Bernstein defines as that ‘revolutionary idea’ shaping modernity,
where, far from being an antagonist, as the unpredictable whim of gods or the
mysterious fate, the future has become an opportunity. Moving away from the
fear of the unexpected, his volume tells us about «[…] the story of a group of
thinkers whose remarkable vision revealed how to put the future at the service of
the present… [converting] risk-taking into one of the prime catalysts that drives
modern Western society. Like Prometheus, they defied the gods and probed that
darkness in search of the light that converted the future from an enemy into an
opportunity. The transformation in attitudes towards risk management unleashed
by their achievements has channelled the human passion for games and wagering
into economic growth, improved quality of life, and technological progress» .
4
From Fibonacci’s Liber Abaci (1202), Cardano’s Liber de Ludo Aleae (1525) and
Galileo’s Sopra le scoperte dei dadi (1623), the astonishing story of risk developed in
Western society through the laws of probability framed by Pascal, Fermat, and
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Chevalier de Méré , and the science of statistics of Graunt, Petty, and Halley,
fostering the development of insurance as a commercial concept in the eighteenth
6
century . It was in that time, with Bernoulli’s paper on Specimen Theoriae Novae de
Mensura Sortis (1731), that risk-taking was related not only to objective facts but
also to a «subjective view about the desirability of what is to be gained, or lost, by

2 BERNSTEIN, Against the gods: the remarkable story of risk, New York, 1996, 8.
3 See previous note.
4 ID., 1.
5 ID., 57-72.
6 ID., 92.

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