One 'shrewd' blonde

The owner of the Moonlite BunnyRanch when I visited was Dennis Hof, a large, slightly hunched, bald man in his seventies who had an imposing presence. He often wore a bowling shirt and khaki pants and walked the halls of the brothel flanked by young blondes vying for his attention and approval. Hof died in October 2018 at the age of seventy-two, found in his luxury suite at one of the brothels by porn star Ron Jeremy.

Hof grew up a beloved only child in Arizona. In high school he worked at a gas station, knocked up his girlfriend, and married her. Soon after, Hof started buying gas stations; he sold gas illegally during the 1970s energy crisis and pocketed a small fortune. He had a series of affairs and his marriage fell apart. Hof moved to San Diego, started a business selling time-shares, and befriended people in the porn industry. He also became a regular customer at Nevada's legal brothels.

The only places in the United States where selling sex is lawful are a handful of counties in Nevada, where the industry is heavily regulated. Licit sex workers must work out of a licensed brothel, be regularly screened for sexually transmitted diseases, and undergo extensive background checks.

In the 1980s, when Hof and his friends frequented the brothels, they were dingy, sad places-often a trailer in the desert where women were expected to perform any sex act the customer wanted for whatever price the house set. The women weren't allowed to leave for days at a time.

In 1993, Hof bought the Moonlite brothel in a small town just outside Carson City and decided to approach sex work the same way he sold time-shares. He abolished set prices and let the women choose what services they wanted to provide and to whom. He set up the business so every woman at the brothel worked as an independent contractor who could come and go as she pleased and negotiate the terms of each transaction herself. This gave her more autonomy and an incentive to hustle and ask for more money. By the time he died, Hof had bought six other brothels in Nevada; I visited four of them.

In many ways, the brothel is like any other workplace. There are weekly staff meetings (in a departure from the tradition at most companies, the women often wear outlandish hats and drink tea), access to financial advisers, performance bonuses, and even corporate housing (Hof owned a local apartment building where many of the staff live). The Moonlite BunnyRanch, his best-known brothel, was even featured in a racy reality TV show called Cathouse.

But where Hof provided value was by reducing risk, for both buyers and sellers of sex.

This is an extract from Allison Schrager's An Economist Walks Into A Brothel published by Portfolio