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An Economist Walks into a Brothel

And Other Unexpected Places to Understand Risk

By Allison Schrager
12-minute read
Audio available
An Economist Walks into a Brothel by Allison Schrager

An Economist Walks Into A Brothel (2019) explains how every decision we make carries an element of risk. It can’t be avoided but we can learn to examine those risks, weigh them against the possible rewards and make smarter decisions in our careers, finances and life. Life lessons from high-risk professions like professional poker and the armed forces illustrate the fine art of taking a risk.

  • Anyone weighing an important, potentially risky life choice
  • People who look but don’t leap
  • Anyone who has seen a risky decision backfire

Allison Schrager is an economist and journalist with a background in retirement planning, finance, public policy and media. Her writing has appeared in the Economist, Bloomberg Businessweek, Wired and numerous other outlets.

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An Economist Walks into a Brothel

And Other Unexpected Places to Understand Risk

By Allison Schrager
  • Read in 12 minutes
  • Audio & text available
  • Contains 7 key ideas
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An Economist Walks into a Brothel by Allison Schrager
Synopsis

An Economist Walks Into A Brothel (2019) explains how every decision we make carries an element of risk. It can’t be avoided but we can learn to examine those risks, weigh them against the possible rewards and make smarter decisions in our careers, finances and life. Life lessons from high-risk professions like professional poker and the armed forces illustrate the fine art of taking a risk.

Key idea 1 of 7

Every risk should be taken in service of a clearly defined goal.

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.

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