“Another flaw in the human character is that everybody wants to build and nobody wants to do maintenance.”
- Kurt Vonnegut.
The revelation came sometime during early 2000. It was in the form of Peter L. Bernstein’s “Against the Gods: the remarkable story of risk” (John Wiley, 1998). Sadly, Mr. Bernstein is no longer with us – he died during the summer – but his legacy is likely to outlive most of the financial institutions who never woke up to his message. Hidden within the pages of this outstanding book is an equally remarkable quote from another ‘Renaissance man’, Daniel Bernoulli. In 1738 Bernoulli effectively launched the science of behavioural finance with the following insight:
For a wealthy investor, the
practical utility of any gain in portfolio value inversely relates to the size
of the portfolio.
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