Book Review: The Nature of Risk

I’m here this evening to review another excellent book on risk control by David X Martin.

This is a difficult book to review, because if I describe what happens, I end up spoiling the book.  This is a small book, and I read it in less than an hour.

This book came into existence because the author had a hard time explaining risk to the family of a friend who had died, and then his own family.  He wanted to come up with a simple way to describe risk to those who don’t know markets.  His tool was using common animals in a forest to explain risk, because their behaviors mimic those of different sorts of people as they face risks, or decide to ignore risks.

One thing I appreciate about the book is that it takes an ecological approach to risk.  My view is that markets are not like physical systems, they are like ecological systems.

Risk can never be eliminated, but it can be prepared for and managed.  I think that is the main message of the book.

For most of you reading me at Aleph Blog, this book would be fun for you but not necessary for you.  But consider some of your friends and family members that are not as sharp as you.  Personally, I am planning on having my wife and kids read this book.  Living with me, they pick up a lot, but this book is a clever way to teach risk management without making it seem like it is being taught.

To me the real use of this book is to teach less market oriented friends, family, and children about risk.  This is a small, simple but powerful book.

For those that are advanced, and want something more meaty, please read my review of the author’s book, Risk and the Smart Investor.

Quibbles

It’s a little book, and it is a very good book, but 15 clams for such a small book?  I would have priced it at $10 or so.

Who would benefit from this book: This book is designed for beginners and intermediate investors.  Get it as a gift for friends who you think are taking too much risk, and don’t get that.  Or, use it to educate young people about risk.  If you want to, you can buy it here: The Nature of Risk.

Full disclosure: The author asked me if I would like the book and I assented.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

3 Comments

  • Conscience of a Conservative says:

    Risk is mis-understood by not only novices but old pros. Too many people in the market believe volatility is the same as risk.

  • Helical_Investor says:

    Risk is tough to describe since by its nature it means different things to different people or institutions. Perhaps the forest analogy is effective at conveying that. For me, I tend to engage in discussions of risk by first noting that for an individual, risk is not a measure, it is a perspective. I’ve found that once framed as such, it tends to be a more appreciable concept.