An Economist Walks into a Brothel summary

What do you do when you want to make a bold, risky choice? Do you just dive in, whatever the consequences? If you do, then you may want to reconsider your approach.

The key message here is: Every risk should be taken in service of a clearly defined goal.

How can you determine if a risk is worth taking if you don’t have a clear goal? It’s impossible. So, the first thing you need to do is define an ultimate goal. Visualize it in your head and make it specific. If you're thinking about a career move because you want to make more money, figure out what you want it for and how much it'll take for you to achieve that goal.

Once you’ve decided on that goal, think about all the ways you could possibly achieve it with little or no risk. Why take chances when you don’t have to?

Okay, this won’t always be possible. Not every goal is going to have a risk-free option. And sometimes, the risk-free option isn’t actually possible or even desirable.

Let’s say you’re house hunting. You want a house of a certain size, in a certain location, at a certain price. Now, you might find the perfect house but have to pay more to guarantee the winning bid. If you can’t afford to do that, you might have to settle for something smaller. The risk-free option, paying whatever price necessary to get the house, may not be possible for you.

Or take a more extreme example: Nevada’s legal brothels. Sex workers are in one of the world’s riskiest occupations. Women in this line of work risk their personal safety, their health, their reputations, and in most states, they run the risk of arrest. But they do it because the work can be extremely lucrative. Their goal is to earn a great deal of money.

Renting a room in a legal brothel eliminates or reduces much of the risk inherent in the work. The sex workers are required to have regular health screenings, and security guards provide protection from potentially dangerous clients. But here again, the risk-free option comes at a price. In addition to the costs associated with relocating to Nevada, the women turn over about half of their earnings to the brothel owner.

At the end of the day, the rationale behind every risk we take is always the same: the price of achieving our goal without risk is just too high. But how do we decide what risks are worth taking? There’s no one right answer to that question but there are some wrong ones that we’ll discover in our next blink.