Ep. 120: Allison Schrager - Risk in Brothels, Big Wave Surfing, the Paparazzi and more

What can we learn about risk from how services are priced at legal brothels? What does systemic risk have to do with the paparazzi? How are big wave surfers a bit like actuaries? What does fraud tell about how people mis-calculate probabilities? Meet Allison Schrager, author of An Economist Walks Into a Brothel. Allison is an economist, a journalist and co-founder of LifeCycle Finance Partners. She worked academically and professionally on retirement finance. She has worked with some of the world's prestigious financial institutions and has written for the likes of The Economist, Bloomberg, Wired, Playboy and Foreign Affairs. It's this stacking of skills and experience that I think makes her book An Economist Walks Into a Brothel so insightful and entertaining. In the book, Allison looks at the pricing of sex work at the Moonlite Bunny Ranch in Las Vegas, risk calculations of big wave surfers, how poker players stay rational in the midst of high stakes and a lot more. So many the risk concepts are highly applicable to contexts outside of hardcore finance, Allison's work exemplifies that and today, she joins us to share her insights in our latest episode. We get into: The origin story of the book; Brothels, surfers and the paparazzi as well as the a spectacular fraud that went wrong, studying H.R. McMaster and the Gulf War; How a number of financial risk concepts are applicable to wider applications – Allison's 5 rules to risk-taking: The risk free rate and risk versus reward Knowing that we are irrational Diversification Hedging Knowing that uncertainty happens She shares a number of colourful stories from her book and how she conducted the research for it Lots more This was a fun and incredibly insightful conversation. Show notes: Allison's website Allison on Twitter An Economist Walks Into a Brothel The Moonlite Bunny Ranch Allison's article – "Why big-waver surfers are just like actuaries" Crazy Eddie Robert Merton The Black-Scholes-Merton model H.R. McMaster _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Like what you heard? Subscribe and/or leave a rating and review on Apple Podcasts: http://apple.co/1PjLmK Subscribe on Stitcher: http://www.stitcher.com/podcast/all-things-risk/the-all-things-risk-podcast Subscribe on Soundcloud: https://soundcloud.com/ben-cattaneo Follow the podcast on Twitter: https://twitter.com/RiskThings Drop us a note: [email protected]  _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Our free course module "How to Set Up Any Decision for Success" from our upcoming course How to Make Decisions With Calm and Confidence