Economics (of Dating) 101: On Risks and Rewards
3:42 AM
A series where I attempt to explain basic economic principles through the global dating scene. (Note: imported from previous blog)
Q: ISIS, Racism, Brexit, Donald Trump...I've just been feeling so depressed about the state of the world lately. Why do people kill the innocent to make a point? Why do we hate and hurt each other over differences? You know what--why are we even talking about dating? In the face of all this, it's such a selfish act of wish fulfillment and self-preservation, and most people will get hurt in the process anyway!
Oh dear, it seems like I've caught you at a bad time. However, I think your angst is worth exploring--Why do we even try to do anything at all, amid so much uncertainty, chaos, and suffering in the world?
In my humble opinion (and after years of wearing my heart on my sleeve), we still pick life over death, action over inaction, all because humans are genetically programmed to hope--to hope for a sense of belonging, to hope for a better future, to hope for approval, to hope for change. In foolishly hoping for something more, and in irrationally believing that "things will be different this time," we throw ourselves into reckless and unforeseen situations, living life in the process.
Q: Wait, so you're saying that I'm genetically programmed to want to get hurt?
Well...it sounds counter-intuitive when you put it that way. It's a bit more complicated than that, so let me try to explain it in...*drumroll*...economic terms!
In life, we face many risks. Even an act as simple as Regular Joe asking Regular Jane out at a bar involves the following risks:
- risk of rejection
- risk of public humiliation
- risk of losing one's "manly pride & dignity"
- risk of getting emotionally hurt
- physical risk--being slapped, having drink poured on face, physically threatened by Regular Jane's intimidating "platonic male friends," etc.
- financial risk--might only get a positive response after buying drinks for all 25 of Regular Jane's friends (in this case, it's not worth it!)
- etc., etc., etc.
One wonders--how does Regular Joe not constantly live in fear after considering all these possible consequences?
...Because Regular Joe understands that in love and in life, no risk means no rewards. Economic theory tells us that "low levels of uncertainty, or low risk, are associated with low returns, whereas high levels of uncertainty, or high risk, are associated with high potential returns." In other words, due to probability and other reasons, there is a fundamental trade-off between the riskiness of an act/event and the expected return of that act/event. This is illustrated in the graph below:
As we move from point A to point B on the graph, the level of risk increases significantly, but so does the level of expected return (note the use of the word "expected"--nothing is ever 100% guaranteed!). This makes sense from a mathematical point of view, since if uncertainty increases, the range of possible results also increases, so it is more possible to get higher highs as well as lower lows. In economic talk, this means that higher potential profits are only possible if the investor is willing to accept a possibility of higher potential losses.
Because of this risk-return trade-off, and because of an intrinsic desire for companionship, Regular Joe concludes that in order to have a higher possibility of love and happiness, he will have to take risks and put himself in a vulnerable position from time to time. In this way, his hope for a great love outweighs his fear of incurring various risks.
Q: I see...but I still don't think that everyone is as willing to risk rejection as Regular Joe! Just ask my shy brother Ronnie and his pillow Kimiko-chan...
You're absolutely right! Due to differences in personalities and experiences, everyone has a different risk appetite. Some of us might be more conservative and less willing to initiate interest without a guaranteed reply, while others love risk and don't think twice about serenading strangers in public or writing love poems to their crushes. Here are a couple more factors that might determine your specific risk appetite:
- Age: Age is a key determinant of risk appetite, as the older we get, the more we have to lose, and thus are less willing to put our reputation or emotional well-being on the line. Also, when we're younger, we tend to think that we still have a lot of time to explore and make mistakes, so are willing to take on more risk. However, I don't think it's a totally negative correlation, but rather something that looks like this:
- Potential to replace losses: We take on more risks if we believe that we are able to earn back potential losses within a reasonable time frame (ex: betting more on poker if you think you can win it back later, investing in risky stocks if you're already making a high salary). How does this concept work in the context of dating? Well, this involves perceived self-worth--the more likely you think you can find someone else in the event of a rejection or relationship failure, the more willing you are to take on risks:
Having said this, most people are somewhat risk-averse, as given the same level of expected returns, they would pick the action that holds less risk.
Q: Okay, that makes sense...but if I'm extremely risk-averse, should I still hope for human love?
Fear not! Thanks to our diverse dating market (as previously discussed), as long as you are willing to hold some sort of risk, you can still find someone out there who fits your risk/reward profile. Of course, the trade-off still stands and the more risk you're willing to take on, the more potential satisfaction you might find in your partner. But in general, we look for someone who can help us achieve the highest level of expected return for the lowest level of acceptable risk.
Let's look at the example below:
- Imaginary Isaac (0% Risk, 10% Potential Fulfillment):
- Imaginary Isaac is the imaginary partner you've had since childhood, whom you've created based on Disney princes, male leads from romantic comedies, and Jesus Christ. Imaginary Isaac is all you've ever wished for and more--charming, passionate, dependable, kind, loyal--but alas, he will forever remain a figment of your imagination, a Platonic Ideal who blows away all real world competition and causes bitter disappointment in your adult life. However, if you are unwilling to take on any risk when finding a real world relationship, Imaginary Isaac is ultimately who you'll end up with, and your potential level of satisfaction is confined to the realm of daydreams.
- Boring Bob (15% Risk, 25% Potential Fulfillment):
- As the name suggests, Boring Bob is quite a boring guy. Of mediocre looks and abilities, he is nonetheless stable, dependable, and loyal. He'll wash the dishes after dinner and fix the toilet when it's clogged, but dinnertime conversations will be uninspiring and you might have to resort to watching Korean dramas to fulfill your desire for a romantic and exciting relationship. But if you are extremely risk-averse and still looking for a real-world relationship, Boring Bob is your best bet--embrace dullness for the sake of emotional and financial stability!
- Normal Norman: (40% Risk, 50% Potential Fulfillment):
- Normal Norman is the compromise most people go for--a moderate-risk relationship that promises somewhat more excitement than Boring Bob. You'll have to accept the risks of occasionally getting hurt and potential relationships not working out, but there will be a higher chance that Normal Norman has qualities and beliefs that complement yours. Of course, like any normal relationship, there's a chance that the initial passion will fade, but that's a risk many are willing to take in order to have a "normal" amount of both satisfaction and stability.
- Crazy Carl (90% Risk, 80% Potential Fulfillment)
- Oh, Crazy Carl...where do I begin? Crazy Carl is basically Ryan Gosling's character from The Notebook, someone who understands you to your core, who can bring great love and hope into your life, but who can also drive you into the depths of despair, anger, and insanity. If you're willing to put your sanity and health on the line, if you're willing to constantly yell at each other then make up in the pouring rain, then you, my friend, are a risk-seeker. Not everyone is as crazy as you and Crazy Carl, but by putting all your cards on the table, you just might have a higher chance of finding that great love (note: but also have a higher chance of ending up legitimately crazy).
So there you have it--regardless of your risk appetite, you'll be able to find some form of relationship if you accept the corresponding levels of expected returns. For the sake of self-protection, it is important to do some "due diligence" and evaluate the potential risks and rewards before entering into any relationship. But it is still more important to hope, to accept some uncertainty in your life in order to change for the better, as the zero-risk alternative is isolation, is alienation, is indifference, is the slow death of the universe....
That's all for now...so go forth and take some risks!
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