An Economist Walks into a Brothel

Introducing Risk: The What and Unusual Where of It

Despite the bright Nevada sun, the room was dark and the air stuffy; an obscure I Love Lucy rerun played on mute. A bell rang and a nondescript, pudgy man entered. Suddenly about a dozen women came running from a maze of long hallways, whooshed past me, and lined up in the foyer. Each woman folded her hands behind her back, stepped forward, and said her name. The man pointed to the second woman on the left, a zaftig platinum blonde wearing a red thong and lace bra. She took his hand and led him to her room.

Welcome to the Moonlite BunnyRanch. A legal brothel is perhaps not where you would expect to find an economist who specializes in retirement finance, but I m an unusual kind of risk junkie. I hunt risk to understand it better. I don t seek out adrenaline-charged situations. I ve never bungee jumped, I don t ski, and I may be the only New Yorker who is afraid to jaywalk. Rather than look for risky situations for the rush of defying the odds, I search for unusual places that can teach me more about risk and how to manage it.

I was trained to shape policy, advise captains of industry, or write research papers at a university. And yet there I was, sitting on a red velvet sofa in a vinyl-sided house in a remote corner of Nevada because unusual markets like sex work thrive on risk. We can always find better ways to measure and reduce risk, so I go wherever people might be defying the odds. After all, financing retirement when you don t know if the stock market will soar or crash, or how long you will live, requires mastering risk.

Sex work is a risky business. I went to Nevada to understand how the industry isolates and assigns a price to this risk. Most sex workers and their clients could be arrested or subject to violence. Sex workers who find their customers on the streets are thirteen times more likely to be murdered than the general population. Thirty-five percent of sex-worker homicides are

Allison Schrager is an economist, journalist at Quartz, and co-founder of LifeCycle Finance Partners, LLC, a risk advisory firm. Allison diversified her career by working in finance, policy, and media. She led retirement product innovation at Dimensional Fund Advisors and consulted to international organizations, including the OECD and IMF. She has also been a regular contributor to the Economist, Reuters, and Bloomberg Businessweek. She has a PhD in economics from Columbia University, currently teaches at New York University, and lives in New York City.

"In this delightful book, financial economist and risk expert Allison Schrager shows us that the same principles employed by multi-billion dollar pension funds can help us improve risk management in our own lives. She teaches these principles while entertaining us with a series of off-the-beaten-path case studies. By creating distance from our own experiences, she allows us to better understand the principles of risk. It works! Whether a complete novice or a seasoned risk professional, the reader is in for a treat: Bon Appetit!"  Robert C. Merton, Distinguished Professor of Finance, MIT Sloan School & Nobel Laureate
 
Allison Schrager offers a highly readable, yet nuanced, guide to navigating the risks inherent in today s increasingly complex world. A must-read for anyone seeking to command, to govern, or to teach. General Stanley McChrystal, New York Times bestselling author of Team of Teams
 
If you want to understand risk better, you have to go into some unconventional settings.  In the tradition of Freakonomics, that s what Allison Schrager does as an economist, and her book is not just informative it s an entertaining read too.   Adam Grant, New York Times bestselling author of Originals and Give and Take
 
"Allison Schrager's An Economist Walks Into a Brothel is the best, most readable, most informative, most adventurous, and most entertaining take on risk you will find." Tyler Cowen, Professor of Economics at George Mason University

A colorful, empowering guide to intelligent risk-taking. Kirkus Reviews

Provocative. New York Times

The most entertaining book on risk management ever written. Booklist

Prostitution seems like a long stretch from the risks most of us deal with, such as outliving our retirement funds, but Schrager inventively extracts five life lessons from her interviews with practitioners of the