Tell me—how can you possibly pass up a book with the title An Economist Walks Into A Brothel? And on top of that, it promised to talk about risk management. So I couldn’t resist. True, from the title you expect to learn about risks of a very different kind, but still…
In reality, the book is meant to explain the risks in our lives through examples of how people in completely different professions deal with them. And yes, the book starts with a description of how one of the largest brothels in Nevada operates: what risks sex workers face, and how a legal brothel helps address them compared to freelance sex workers.
I have to admit, it’s a genuinely unconventional approach, and Allison Schrager—who specializes in working with risk—managed to attract a lot of readers that way.
And besides sex workers, her examples include paparazzi, a professional poker player, surfers, horse breeders, and even the military. Using those examples, Allison tries to show both what risk is in itself and different sides of dealing with it, including insurance and hedging.
In practice, though, the book is less useful than you expect. It has a lot of stories and personal reflections, but not much actual substance about risk.
The stories do offer plenty of interesting facts about fields we’re unlikely to see from the inside very often.
How sex workers assess their risks is interesting. How paparazzi work is great! But the poker chapter can be boiled down to: don’t take pointless risks, don’t give in to emotions. And that’s it.
In the section about horse breeders, I honestly don’t really understand what point the author was trying to make. That breeders use inbreeding when they should be aiming for more diversity? But she herself describes why they do it: because their short-term goal—“sell the stallion before he’s actually proven himself”—is exactly what demands that approach. A different approach is needed for a different goal. But the breeders’ goal doesn’t change. So it’s unclear what this has to do with risk at all (other than the fact that, in the long run, the current approach leads to degeneration because of inbreeding).
So overall the book is very superficial. The author gives a lot of examples, but sometimes they’re very ambiguous or feel shoehorned in. That ambiguity shows up in the final chapter too, about a brave soldier who, in battle, violated an order not to go past Line 70 and explains it as, “We didn’t let the enemy catch their breath and regroup.” And the entire chapter is then built around how great he is for improvising and disobeying orders in conditions where you can’t plan everything. On the one hand, acting based on circumstances rather than strictly by the book is a useful skill. On the other hand, why does the chapter never once ask the question of why he was given the order not to go beyond Line 70 in the first place? It reads as if there were idiots sitting there who didn’t account for uncertainty. But what if that’s not the case? Maybe he got that order because right beyond Line 70 there was going to be an artillery barrage or a nuclear strike. And then, by violating the order, this brave general would’ve gotten all the soldiers under his command killed. Or maybe it was because he wasn’t supposed to expose another unit’s flank, and by pushing past the line he created a gap the enemy could pour through. But of course it’s much nicer to say: look, this is how he deals with uncertainty. And that’s just one example of how the author rigs the facts to fit the picture she wants.
But like I said above, even if the stories are interesting, from the standpoint of practical knowledge about risk—and, most importantly, how to work with it—the book gives you almost nothing. It’s basically just reflections along the lines of “and this, too, can be considered a risk in life.” Yes, it tries to draw some conclusions, to lay out certain rules. But in reality you can’t just take those conclusions and rules and apply them. At best, the book gives you an understanding that you shouldn’t make decisions recklessly without weighing the pros and cons, without thinking through what you stand to gain and what you might lose. But even there it doesn’t offer any guidance on how to do that properly.
So while the book is informative, its usefulness is overrated—barely a two out of five, in my view.
My rating: 2.5/5
