"What is it that distinguishes the thousands of years of
history from what we think of as modern times?" What is "the
revolutionary idea that defines the boundary between modern
times and the past"? A hint: It is something that "goes way
beyond the progress of science, technology, capitalism, and
democracy." (All quotations from the introduction to,
Against the Gods, the Remarkable Story of Risk, by
Peter Bernstein, unless otherwise noted.)
According to Peter L. Bernstein, dean of US financial writers
and author of a monthly financial letter which (according to
its promotional literature) is read by an audience that "own
or manage assets of more than five trillion dollars," that
key idea is the management of risk: "how to understand risk,
measure it, and weigh its consequences."
Bernstein argues that understanding risk and being able to
measure the amount of risk associated with various
investments is crucial to the buildup of modern society and
its means of production. If we only know that something is
risky, but not how risky, then we have no way to choose
between investing in that or in something else that is also
risky. We would have no way to compare the two risks.
Moreover, without the modern tools of risk management,
including insurance and large parts of the world financial
markets, a lot less would get done. If farmers and
agricultural companies could not guarantee themselves a
minimum price for their harvest — which they can do by
selling all or a part of it on the futures market before they
even plant the seeds — they would no doubt produce much
less. If businesses could not diversify the risks they
undertake in doing big projects by selling insurance, which
is resold to third parties, many important projects would
probably never leave the drawing board.
Even if we are a bit skeptical about some of the extreme
claims that Bernstein makes for the importance of risk
management, it is clear that it is a development that has
been very important in the achievement of many of the
material gains of the modern world.
This is background to understanding the significance of the
new programs announced this week by Kupat Ha'ir of Bnei Brak
and the Vaad HaRabbonim LeInyonei Tzedokoh. With minor
differences, they bring interested families together in very
large groups (10,000-12,500) in order to provide the effects
of an insurance policy. However the exact rules of the plan
are different from the insurance industry in significant
ways.
There are no monthly premiums. Rather, in the event of the
death of a parent of one of the families in the group, each
family agrees to pay $5 (or $4) on a one-time basis for each
of the orphans. This provides a fund of $50,000 for each
orphan which is supervised by the rabbonim of the charity,
and is to be used primarily to pay the marriage expenses of
that orphan. (The rules also provide for a cap of $18 (or
$16) in one month, so that the one-time payments may have to
be spread out over several months if there are many orphans
in one month, R"l.)
Mr. Bernstein writes, "Our lives teem with numbers, but we
sometimes forget that numbers are only tools. They have no
soul . . . "
These new plans are a very welcome initiative to deal with a
recurring problem in a proactive way, rather than just
responding to the tragedies as they arise as has been done up
until now. Developed together with today's leading Torah
authorities, the result is risk management that also attend
to the soul. It should be noted that they differ in subtle
but enormously important ways from traditional insurance.
In buying a traditional insurance policy, the considerations
are just those of any business decision. Do the benefits of
the promised payout justify the cost of the monthly
premium?
In this new plan, since they are applied directly to
providing funds for orphans, the payments are pure charity.
(This can make the plan attractive even to those who have
married off all of their children.) Participants receive the
benefits of classical insurance because of their commitment
to give charity on demand. In a moral sense, that is a pure
win-win result.
Also, the plan promises to be a success even though no one
will be making any monetary profit from its execution.
Although profits are certainly not evil per se, it is
certainly in its favor that the plan does not require them in
order to work properly. As we are so often reminded these
days, profits breed greed.
Let us hope that this plan will help the soul of Klal
Yisroel while it helps to manage the inevitable and
unrelenting risks of its body. (Contact: 1599-513-517; or 03-
671-6930 to join or for more information.)
