econofdating101

Economics (of Dating) 101: Tangibles vs Intangibles

8:26 AM

A series where I attempt to explain basic economic principles through the dating scene. Rule #1: Don't take anything I say too seriously.

Q: So I finally caved in to 21st century dating and installed a bunch of dating apps....but it's been thoroughly disappointing so far. Can you believe that the only matches I've been getting are cute girls who want to sell me health insurance?! What a scam of an app!

Well, actually, I can believe that. It seems that you've neglected to disclose your education, height, and job, as well as forgotten to include dashing photos of yourself carrying a ten pound baby while skydiving into the sweeping shoreline of South Africa. What a scam of a profile!
Q: Excuse me? I refuse to be reduced to just a paper trail and a JPEG image. I mean, I'm neither a rock star nor an investment banker, but I certainly have my strengths--my charming personality and undying loyalty! 

 O naïve child, it seems that you haven’t taken any of my advice to heart—as we’ve previously established, love is a delicate dance of risk and reward. Much like a middle-school-gym dance where self-doubt and inaction reign, and everyone ends up dancing in a big circle for fear of rejection, the dance of love is fraught with risk-averse acts committed by risk-averse players.

 In these dire circumstances, perhaps it's helpful to consult some risk-averse experts of the game. Whenever I peruse the scintillating profiles of Tinder and other apps, I always ask myself this timeless question:


You see, Warren Buffet is the poster child of risk-aversion and a lifelong advocate of quality investing. According to him, "it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Market trends will come and go (dad-bods, lumbersexuals, tech billionaires...), and it's frighteningly easy to succumb to such trends with a swipe of the index finger, but Buffet urges us to be disciplined, do our research, and invest in fundamentally sound assets that will grow and succeed in the long term. For those of us who dread heartbreak and loss, Buffet's investment philosophy allows us to still enter the dating arena (one must still take risks after all when opportunity strikes), but with relatively more margin of safety and peace of mind.

Here are some questions that Warren Buffet and other long-term investors ask late at night.














Hm, sounds like many of us after a tentative first date.

(Note: I do not view "earnings" here as strictly financial, but as the total utility that the investment brings to the investor)

Q: But I'm totally a great long-term investment! That just proves my point! 

Well, let's dive slightly deeper and analyze what investors consider as "quality companies." Here is a very simplified matrix (developed by consultants, adapted by yours truly) that divides all potential partners into four major categories:

The Growth-Returns Matrix for Potential Baes
  • Star:  High returns, high growth potential
    • Everyone hopes to meet a star--someone who brings you bliss and magical moments, but who also has the potential to grow with you over the long term. A date worthy of your time and effort if you are lucky enough to meet him/her.
  • Cash Cow: High returns, low growth potential 
    • In the business world, a cash cow is an investment in a mature, slow-growth industry that brings steady returns. In the dating world, treating someone as a literal "cash cow" is definitely not recommended due to human rights/dignity and all. "Cash cow" here means a date that is already mature, stable, and reliable, yet is still a good match that you could potentially love. 
  • Question Mark: Low returns, high growth potential
    • Sometimes, you meet mysterious people that could turn out to be either the love or the disaster of your life. A high risk investment, but because of the high potential returns, it's worth taking the time to collect more information to determine whether to invest more in this date.
  •  Dog: Low returns, low growth potential
    • What are you even doing with your time? Life is short. Avoid unnecessary heartbreak. Move on immediately.
But now we encounter a new problem:
How can we accurately determine "growth potential" and "returns"? 

Investors have developed various ways to assess the fundamental value, growth potential, and well-being of a company. Most of them are based on the firm's projected future earnings and/or cash flow, because at the end of the day, if a company is healthy and growing, it should be able to generate long-term earnings and cash that can be returned to investors. Furthermore, tangible assets and outcomes are easier to quantify and compare, and allow some margin of safety--ie: in the worst case scenario, I can still sell all the firm's expensive machines and get some cash!

This focus on tangible, quantifiable returns was seen in marriage markets of the olden days as well, when marriage was effectively a political and financial transaction. Many old patriarchs have thought long and hard about these questions:

  • If my son marries this lady, will we be more equipped to survive the harsh winters to come? 
  • Will I be able to acquire more land and cattle and finally build a new wing to my house?
  • Will I have healthy descendants to take over our family's farming business?
  • In the worse case scenario that all my descendants die in the winter, can I still sell the marriage dowry? 

Hence the emphasis on the following "tangible assets" when selecting a partner:
  • Wealth
  • Land/properties owned
  • Family/political reputation, connections, and titles
  • Family health history
  • Religious beliefs
  • Skills and professional qualifications
  • Specific physical attributes that one hopes to see reproduced in one's offspring
In our modern era, dating is more an exercise of "free will," but ironically, amid the deluge of choices and noises, we are now searching harder than ever for what is "real" and "valuable." For example:

  • He's texting me a lot, but will he ask me out on a date?
  • He's looking good in this picture, but how do I know he's not a 13 year old boy trolling the Internetz? 
And this is where your Tinder profile comes in! Assuming you are advertising to risk-averse dates, it's absolutely necessary to include tangible facts that your audience can easily understand and evaluate, as opposed to vague pick-up lines that attempt to portray your "charming personality," but in effect raises your perceived risk.

It's important to differentiate between perceived risk and actual risk here--while in reality you might be the most stable and dependable cuddly bear worthy of long-term companionship, your failure to include signifiers of "stability" and "maturity" leads to an increase in your perceived risk level. Tangible, verifiable signifiers can thus help to narrow the gap between perceived and actual risk.

Q: Are you saying I need to list out my degrees and achievements not to appease materialistic suitors, but to help risk-averse "investors" make a "sound investment decision?" 

 Yes. You are reducing noise and feedback by stating actual truths. After all, materialism is borne out of uncertainty and anxiety about one's existence and future, so you're essentially making the world a more meaningful and hospitable place by disclosing something real, something that minimizes stress and regret and uninformed decisions.

 Q: Okay...but I think you're forgetting something important here. What about love? What about chemistry?

 Oh, right....feelings. This is something that risk-averse daters struggle with on a daily basis. Can you value a future with someone based on warm and fuzzy feelings? Can you forecast potential utility based on amazing conversations that go on from night to day? Can you quantify someone's radiant, beautiful smile and the feeling of home that emanates from the depths of your soul when such a smile is beamed your way?

Investors are still figuring out the solution to this. They call these intangible assets: non-physical assets that still generate some measurable economic benefits to the owner. (ex: intellectual property, brand recognition, etc.)

Good feelings can be regarded as intangible assets since they bring benefits to the owner. In fact, intangible feelings can be a better indicator of growth potential than tangible assets, much like how a company's patents and brand power can affect its future earnings and economic benefits. However, neglecting to properly value these feelings can lead to underestimating or overestimating the risk and return of a potential dating partner.

Here are some possible ways we can value intangibles, based on current accounting methods:
  • Savings incurred
In this method, we estimate the direct savings generated from possessing an intangible asset. You can think of it as "relief from royalty payments"--if you already have this asset, you won't have to pay various third parties for the right to enjoy similar benefits.

In the example above, an anonymous person estimates the total savings incurred from one month of dating a "funny guy." Since he/she already has non-stop entertainment in the form of a date, this has resulted in massive economic savings! Hence he/she views the characteristic of "funny" as valuable, despite its intangible nature.

  • Replacement costs
The replacement costs approach is similar to the savings approach, but from a different perspective. It asks, how much would the nearest equivalent cost? Compared to the savings approach, which only accounts for direct savings,  this includes indirect costs such as research and development:

Q: Oh, that's great! So based on these intangibles valuation approaches, I'm not totally worthless after all! 

I didn't mean to confuse you, dear hunter of love--someone will still appreciate your worth! From our discussion today, it should be pretty clear that both tangible and intangible assets are evaluated among daters today. However, tangible assets are much easier to understand, which is why you should always seek to provide as much clear information as possible. Additionally, intangible assets such as "passion" and "charm" are often inaccurately valued, which is why we need to continue to educate ourselves and others and think hard about what we value in our life and our relationships!

I've given you more than enough ramblings to think about today. Go forth and revise your Tinder profile once more!

econofdating101

Economics (of Dating) 101: Pt I -- Scarcity, Choice and the Production Possibility Frontier

7:27 AM

Introducing a new series where I attempt to explain basic economic principles through the dating scene in Hong Kong. Rule #1: Don't take anything I say too seriously.  
(Note: imported from previous blog)


Q: What is economics, anyway?
Explained in Gen Y terms, economics is simply the study of how one confronts FOMO (“fear of missing out” for you non-millennials). Young professionals, armed with idealism and Sheryl Sandberg’s Lean In, want it all—careers, love, family, friends, parties, vacations, spiritual enlightenment…but alas, physics is real and time waits for no one. Unlimited desires are constrained by limited time, money and our slowing metabolisms. As the three-dimensional body gradually acknowledges its impermanence in the space-time continuum, it gazes up at the universe of infinite opportunities and….freaks out. And thus economics steps in—how can we make the best choices? How can we make the most of our youth? Or, according to the self-help book my mom once bought me, how can I know if someone is worth pursuing in two dates or less??

Q: Sounds useful. But how does economics relate to dating?
Ah, it comes down to scarcity, scarcity, and scarcity. Scarcity is the root of all economic problems. Take this scenario at some swanky bar in Lan Kwai Fong, for example: 

Girl: Hm…there aren’t enough cute guys here above 180cm who are well-educated and have a good job, are funny and ambitious and loyal and kind and SINGLE.
Guy: There aren’t enough cute girls here who are not overly aggressive and ambitious and slutty and psycho. Man, I just want a sweet girl to take home and show my parents.

Because of the scarcity of resources, choices must be made. Expectations must be adjusted. Trade-offs must be considered. And this brings us to the next fundamental principle of economics—opportunity costs. In making a choice, we essentially give up the benefits of pursuing the next best alternative. If a guy spends $1000 on a nice watch, the opportunity cost would be $1000 worth of Michelin-starred meals he could’ve had to impress his date. If a girl spends her Friday night watching Disney movies with her best girlfriends, the opportunity cost would be a Friday night she could’ve spent going on Tinder dates and possibly meeting her real-life Prince Charming. Of course, these opportunity costs are relatively trivial, but as young professionals we do have to consider the significant opportunity costs of going to graduate school, committing to a stable relationship, having a successful career, pursuing a low-paying dream job, moving somewhere new, even getting married. 

Q: TLDR. I heard economists love charts. Where are the charts? I want to see some charts.
Okay, okay. Let’s talk about the production possibility frontier (PPF). The PPF shows the maximum possible output combinations of two goods/services an economy can achieve given fixed resources. Here’s an example of a PPF curve in the context of your life:
Moving along the PPF curve from B to D, we see that the more hours we spend on sleeping, the less hours we have for socializing, and vice versa. Points B and D illustrate “specialization”—a person at point B would be an expert socializer, one of those people with 7000 Facebook friends and is the life of every party, but tradeoffs incurred include severe sleep deprivation, dark eye-circles, and high risk of liver disease. On the other hand, a person at point D would reap all the physical and emotional benefits of an 8-hour-daily beauty sleep routine, but would celebrate these benefits alone in his room.  Point C would be an appropriate compromise, a path that most people take—give up some sleep and some socializing so that we can have an adequate amount of both. Point A shows an inefficient allocation of resources—this person is under-utilizing his time and doing too little of both! (ex: playing Candy Crush, reading celebrity gossip, watching Netflix, etc.) It seems that basic economic theory seems to agree with the “YOLO” principle—you only live once, so please live at full capacity and make the most efficient use of your time and money! Lastly, Point E is outside the PPF and is thus unattainable—there are only 24 hours a day after all. This could change with technological progress or if you get your hands on Hermione Granger’s Time-Turner.  

To illustrate the prevalence of opportunity costs in our daily lives, here are some extra PPF graphs explaining some common tradeoffs we make:



 That's all, folks! Tune in for Part 2 at some point in the future--we still have lots more to cover!




econofdating101

Economics (of Dating) 101: Tinder and the Art of Adverse Selection

4:55 AM

A series where I attempt to explain basic economic principles through the global dating scene. (Note: imported from previous blog)

Q: I just came back from the worst Tinder date ever! My date definitely added at least 20 beauty filters to her profile photo, brought a life-size doll to our date, and spent 15 minutes justifying Hitler's existence...I feel so cheated, but tell me, is it my fault for falling for her photo? 

Promise me this--never blame yourself for taking a chance on love! You, a fearless explorer, have left the cozy but parochial world of "conventional dating" in search of new adventures, and it's only natural that a few rotting space debris come flying your way. But the online dating universe is boundless and ever-expanding, so who knows what beautiful stars and planets you'll encounter in your lifetime! Having said this, I should've warned you that phenomena such as "beauty filters," "flattering angles," and "bad lighting" could distort your field of vision and hinder your judgment, so one should always err on the side of caution and add a Skepticism Filter: apply a 50% discount to every profile picture you see!

Q: That's the problem though--I wish there were some warning system, some rating system in the online dating world...sort of like Yelp or Uber! But I feel disgusted at myself for even considering something so dehumanizing. 

Indeed, dating would theoretically be much more efficient if we had reviews for everyone, but we would basically be trading in our humanity and souls for maximum efficiency. Also, given most humans are walking contradictions and attraction is subjective, it's debatable how accurate ratings would be! Hence we find ourselves in an awkward situation economists call information asymmetry--when one party in a transaction has more information compared to another.

To fully understand information asymmetry, let's consider the scenario below:

Jane, a perfectly normal girl, is browsing Tinder at home. Jane sees the following Tinder profile:

Using her perfectly normal deductive reasoning, Jane concludes three things about Brian:
1) Brian bears a striking resemblance to Zayn Malik;
2) Brian is new in town;
3) Brian is somewhat flirtatious given the winky-face emoticon and playful statements.
Thus, Jane assumes Brian is also relatively normal/friendly and swipes right.

However, here are some facts that Brian *conveniently* forgot to disclose:
1) Brian looks nothing like Zayn in real life;
2) Brian has a terrible, incurable case of bad breath;
3) Brian has an estranged mother who left the family to join a traveling circus; 
4) Because of all the above, Brian is extremely insecure around women and overcompensates by always dating six different girls at a time.

In this scenario, information asymmetry hurts the "buyer" and benefits the "seller": Jane overestimates Brian's quality due to the lack of information, while Brian lacks incentive to provide more information (the more he reveals, the more left swipes he would get). This is why information asymmetry often leads to adverse selection--the party with less information is at a disadvantage to the party with more information.

Q: Okay, that's quite depressing...

Actually, it gets even more depressing. Adverse selection can lead to a downward spiral in quality for the entire market!

Let's make a gross generalization and divide the Tinder market into two equally-common types of goods: High-quality dates (H) and Low-quality dates (L). High-quality dates value commitment, good conversation, and meaningful relationships, while low-quality dates are usually either browsing on their toilet or seeking bootycalls. If our dear Jane realizes she can't differentiate between high-quality and low-quality dates due to missing information,  she will assume the following for every person she swipes:

Expected Quality = Average Quality = 0.5H + 0.5L 
(50% probability of high quality and 50% probability of low quality)

Due to lack of information, Jane is unwilling to put in as much time and effort to attract 100% of potential dates, since there is a 50% chance that they will be duds anyway and she doesn't want to be let down. This will push high-quality dates out of the market, as they will look elsewhere for people who actually want to commit to something meaningful. This leaves the market with only low-quality dates left, which we will further divide to relatively-normal (N) and downright-creepy (C) dates. Jane will now assume:

Expected Quality = Average Quality = 0.5N + 0.5C

As a result, Jane spends even less effort attracting potential dates, since her dates will be not only low-quality 100% of the time, but also downright creepy 50% of the time. What's the point of trying hard at this point? This negative feedback loop basically keeps repeating until there are only bots left on Tinder, mindlessly echoing "FREE 2NITE?" and "NICE PIC" into the vast dating wasteland. In other words, we now have...



Q: Wait, weren't you just encouraging me to try new things and broaden my horizons? Why am I now the lone human in a Tinderpocalypse of bots??

Apologies for getting carried away...I definitely wanted to be more positive! But the market failure of Tinder does expose some discrepancies in 21st century man--we put up a curated front on social media and hide our insecurities and flaws, while at the same time expecting others to understand our true selves and accept us for who we are. We label others non-committal while being similarly afraid of commitment, for fear of being disappointed and exposed. There's definitely a way to correct this market failure, and perhaps it has something to do with making information symmetrical again, something to do with putting away our pride and being transparent, honest, and real with each other--both online and in real life.

Q: That's the cheesiest you've been yet...I want some ECONOMIC solutions please! 

Okay, okay, we can discuss more detailed solutions to market failure next time, but in the meantime I'll leave you with the wise words of Duke Ellington:

"How can anyone expect to be understood unless he presents his thoughts with complete honesty? This situation is unfair because it asks too much of the world. In effect, we say, "I don't dare show you what I am because I don't trust you for a minute but please love me anyway because I so need you to. And, of course, if you don't love me anyway, you're a dirty dog, just as I suspected, so I was right in the first place." Yet, every time God's children have thrown away fear in pursuit of honesty-trying to communicate themselves, understood or not, miracles have happened."

Until next time, and keep swiping!



econofdating101

Economics (of Dating) 101: Talk is Cheap

3:49 AM

A series where I attempt to explain basic economic principles through the global dating scene. (Note: imported from previous blog)

Q: In college, I used to wait two days before replying someone I was interested in. But now I have bills to pay, corporate ladders to climb...you know, these games are getting pretty exhausting. Why can't we just be direct with one another?

Actually, that's something I've been pondering as well. Why is it so hard for two human beings to be completely honest and upfront with each other? Sure, there's the so-called "thrill of the chase," but shouldn't we have evolved enough to figure out more efficient ways of courting?

To explain further: Communication essentially involves a sender transmitting a message to a receiver. In the 21st century, when we send a text message to someone, it's assumed that our service provider will successfully and accurately transmit that message to the receiver. But it seems that the evolution of human interaction has not matched the exponential growth of satellite communications. When we humans communicate, elements such as "pride" and "selfishness" create noise in the channel, distorting our true intents into confusing mixed messages.

For those who like diagrams--in a perfectly efficient world, dating would look like this:

So simple. So truthful. But alas, so far removed from the realities of our time!

Instead, modern day dating seems to be more like this:

 **Note: I've learned that this type of message falls under the category of "negging"

Or, it might also look like this:

Q: Those are definitely accurate portrayals, but my question still stands--isn't it easier to just tell each other the truth then?

Well, from an economic perspective, sometimes people really have no incentive to tell the truth. I know that's a depressing answer, but let's try to break it down to understand why.

In game theory, cheap talk is a type of communication where sending and receiving messages is:
  • costless (in terms of both time & money)
  • non-binding
  • unverifiable
Sounds a bit familiar, doesn't it? Indeed, society and technology have progressed such that there are now multiple dating channels where one can communicate with no/low cost and with no commitment:
  • free online dating apps
  • social media
  • bars
  • etc., etc. 
More specifically, because there is no obligation to see or talk to each other again in most of these settings, each party will choose the action that maximizes their short-term gain. But because they both know this of each other, they are less likely to believe 100% of what the other party says. This leads to situations where both parties can harmlessly flirt with each other but no "action" is taken. For example, why would Justin ask Selena out on an actual date if there's a good chance that she was only flirting for her own short-term satisfaction?

That's cheap talk in a nutshell---when communication is costless/non-binding, most "messages" sent are uninformative and do not affect outcomes. Therefore, people can lie about their true nature/intentions without incurring any negative payoffs.

Q: Uh...too many words--where are my graphs?

Unbelievable...fine, let's try to visualize the decision-making process of a player:
As you can see, if Justin Bieber's true nature is that of a playboy, he can either flirt with Selena (and lie about his true nature) or be an honest man and not hurt her feelings. His two possible expected payoffs would be:
  • Honest: 0
  • Dishonest: (50%)*(0) + (50%)*(5) = 2.5
    • Note: here he assumes there's a 50% chance Selena will respond positively to flirting
Conclusion: Justin has zero incentive to be honest! The rules of game theory and probability have thus concluded that in a noncommittal environment, a player will always play.

And what about our dearest Selena? Given that Justin will always flirt, her optimal strategy here is to not fall for Justin's tricks. She can either ignore him completely or harmlessly flirt back with no expectations, but she definitely should not walk down the "fall for Justin" path.

Q: That's horrifying...is there any scenario where dishonesty and distrust are not optimal strategies?

Oh yes, let me try to end on a more positive note. As I mentioned before, in some cases people do have incentive to tell the truth! Here's an example:
If Justin really does like Selena, his best strategy is to follow his true intentions and flirt with Selena, due to the expected payoffs below:
  • Inaction: 0
  • Action: (50%)*(5)+(50%)*(-2) = 1.5 -----> still a higher payoff than not trying
    • Note: He's still assuming a 50% probability of reciprocation. Also, I gave Justin a -2 rejection payoff as opposed to a -5 (that I gave Selena previously) because Selena never led him on/gave him false hope in this case!
However, a problem arises--Selena will benefit if she falls for a Justin who truly likes her. But based on her past experiences with players, she also knows that it's risky to always fall for whoever flirts with her. How can sincere Justin differentiate himself from all the other players to ensure Selena always responds positively to his flirting?

 Economics has provided a couple solutions to this problem:
  • Sign a contract: Just to clarify, I'm not referring to 50 Shades of Grey-type contracts. I mean that Justin should signal commitment to Selena through "binding actions" such as proposing a date and eventually even referring to her as his "girlfriend" or "significant other." These acts of commitment are easy for Justin to do if he truly likes Selena, but much more costly for the players to do as it requires them to give up other opportunities. Contract theory is probably why some people insist that "if you like it then you better put a ring on it"--having a binding contract not only sends a positive signal to the receiver and facilitates trust, it also gives both parties more incentive to act in each other's interests. 
  • Send costly signals: Instead of communicating through flirting, which is low cost and thus easy to disregard, Justin should also send indirect, costly signals to indicate his interest more effectively. Examples of costly signaling include (but are not limited to) dressing up in "honest", "nice guy" attire, buying her gifts, writing her poetry, possessing jobs, degrees and habits conventionally regarded as "dependable" and "trustworthy." Since these signals require more effort than just talking or messaging, they might help to reassure Selena that Justin is being serious. Of course, I would not recommend the costly signaling seen in the 1997 film Titanic, where Jack signaled his love for and commitment to Rose by giving up his life.  
    • (Yes, I'm on team "there was totally space on that raft") 

 Q: Wow, who knew there was so much theory behind this silly game of dating?

Exactly! Dating is a complex web of signals, action, and reaction, where participants try their best to optimize their choices at each step based on prior experiences and beliefs. With this in mind, perhaps we should not totally blame the more "selfish" and "heartless" participants, and instead think about how we can create a better dating ecosystem where dishonesty is not an optimal strategy.

Q: Hold on, are you saying what I think you're saying? Are you basically saying...don't hate the player, hate the game? 

 ........you caught me there. I definitely could've explained this whole concept in that one line....

econofdating101

Economics (of Dating) 101: On Free Trade

3:46 AM

A series where I attempt to explain basic economic principles through the global dating scene. (Note: imported from previous blog)

Q: So I just got back from my trip from San Francisco and I gotta say...they call it Man Francisco for a reason! But why do I get so much attention from the men there but only attract retired professors here in Hong Kong?
You, my friend, are a beneficiary and victim of the free market economy. Over the last few thousand years, mankind has domesticated camels to trade silk, built vessels to trade spices and tea, created multilateral institutions to trade freely...and now, cheap airline tickets and visa exemption agreements have allowed you to fly seven thousand miles to trade flirtatious glances with male programmers in San Francisco. What a time to be alive and single! 

But it's great that you brought up the discrepancy between your perceived value in San Francisco versus that in Hong Kong. Free trade has its drawbacks too. Just listen to the impassioned speeches of Bernie Sanders and Donald Trump--introducing lower cost, foreign goods and labor will certainly put us honest, domestic folks out of business! Similarly, as a domestic product of Hong Kong yourself, it's only natural that you feel the forces of global demand and supply and the threat of external competition.

Q: Okay...so I'll ignore the fact that you just commodified me, but do go on... 
Well, here's a disclaimer--I will continue to commodify you, but it's really to prove a point! Hong Kong has one of the most open economies in the world. Most of the time, people enter freely and leave freely. Things are bought and things are sold. If someone has a demand for a good, it's relatively easy to find a supplier--such is the beauty and convenience of free markets.

However, an open economy does cause more fluctuation in the value of goods. Let's look at this supply and demand chart of Hong Kong (straight) females in a closed economy here:

In a closed economy, there are only two options on the market: Hong Kong males and Hong Kong females. Assuming an even gender ratio, demand and supply will match each other as Hong Kong males have no choice but to date Hong Kong females, and vice versa. This balanced state is point A, or equilibrium. P1 represents the "price" value of HK girls--the price is not low as the average HK girl receives more education and earns a higher income relative to the region, and dating one might entail a few expensive French meals, a nice handbag, a soul-sucking job, your undivided attention, etc. It might not be ideal, but that's just another day in a closed economy.

This all changes with free trade. Suddenly, there is an influx of similarly attractive females from all over the world who can be wooed in easier ways (hence the lower "price")! The supply and demand chart now looks like this:


As you can see, this new supply of "lower cost" (P2) but not necessarily lower quality females completely disrupts the original equilibrium. With free trade and an increase of total supply, some buyers will not see a point in paying a much higher price for a good when there is a plethora of more affordable options on the market. Demand for international females will increase as demand for HK females decreases. The happy equilibrium is no more, and instead demand and supply meet at point B, in favor of international females. Note that at point B, the quantity of matches (Q2) is more than the quantity of matches (Q1) in the closed market! Perhaps the increased supply has also made more Hong Kong males more confident about entering the dating scene.

Q: Wait, so are you saying I have no chance of dating guys in Hong Kong due to free trade?

Let's be more positive, please! Many nations have survived in the face of globalization, and you can too! One option is to position yourself as a "luxury good" with "brand value." Brand value is why even though the world is flooded with cheap Japanese/Korean cars, even cheaper Chinese smartphones, and $1 shirts sewn by the unpaid hands of 12-year-olds, many people still pay ridiculous amounts for Ferraris, iPhones, and Chanel. If you can find a "luxury market" that appreciates your high standards, all the better for you! Of course, this requires justification that you are indeed a "luxury item" worthy of adoration.

Or, you can engage in an act commonly known as "lowering your standards." This act illustrates how free trade forces its domestic producers to lower their prices in order to survive amid foreign competition. To compete in this new market, HK females would have to move down their supply curve from Point A to Point C (in the chart below), where P2 = domestic price = international price. Females who prefer the term "being pragmatic" to "lowering standards" will be happy to move from point A to point C, but there will still be females who don't budge and prefer to keep waiting for Prince Charming. Thus, the quantity of matches also decreases from Q1 to Q3.


That's all from me for now, but the gist of it is if you love the freedom, mobility and diversity of our modern dating economy, you would also have to accept the increased competition due to the open market. Economics may be a dismal science, but I'm a hopeful romantic at heart--so here's to hoping everyone can find a happy equilibrium, be it in Hong Kong, San Francisco, or elsewhere!



econofdating101

Economics (of Dating) 101: Absolute vs Comparative Advantage

3:45 AM

A series where I attempt to explain basic economic principles through the global dating scene. (Note: imported from previous blog)


Q: It’s a tough market out there, and I’m not exactly a 10 out of 10. Will I still have a shot at love?

Everyone has a shot at love, my dear. Thanks to genetic diversity, different people have different tastes. If everyone were equally attracted to Brad Pitt’s pheromones, our species would actually be worse off as a result, its homogeneous blond-hair-blue-eyed gene pool susceptible to the whims of various pathogens, as extinction looms ominously on the horizon. Granted, there are some people who always seem to attract a higher-than-average number of suitors due to the possession of certain “superior” traits such as “charisma”, “looks”, and “intellect”, but fear not and believe in your own market value in this colorful, bio-diverse world!


Still feeling insecure? Perhaps it’s time to discuss the concept of advantage in economics. What you’re fearing is absolute advantage—in economic terms, the ability of a party to produce a greater quantity of good, product or service than its competitors using the same amount of resources. In dating terms, absolute advantage represents the person who always manages to be the most beautiful, charming, intelligent and generous in every situation, subsequently crushing all competition with minimal effort as others weep on their treadmills, realizing the futility of those hours spent working out and counting calories. In pictorial terms, absolute advantage is this face: 

And this:

                                             
Okay, I’m just indulging myself at this point…you get the idea.


Q: Wait, weren’t you supposed to be encouraging me? How can I survive in the face of absolute advantage? What’s the point of even trying?

Well, thank goodness there is an economic precedent to your crisis! In 1817, David Ricardo developed the theory of comparative advantage while thinking about international trade. He basically asked: what happens when a country just doesn’t have an absolute advantage in producing anything? And basically concluded: it would still benefit from trading with other countries because it has a comparative advantage in something! His example involved Portugal, England, wine and cloth, but since everyone likes pictures of men let’s try to explain the power of comparative advantage in another way.

Meet Elon Musk:

 

Now, meet Shrek:


Elon Musk is a serial entrepreneur, inventor, billionaire, and visionary. Shrek is an angry green ogre who loves living alone in his swamp. It’s pretty obvious that Elon Musk has an absolute advantage here, so why should Shrek even attempt to venture out of his swamp to find love?  The answer has something to do with opportunity costs. Even though Elon Musk is objectively better at everything, it’s not actually worth his time to become a master of all trades, as some activities have significantly higher opportunity costs than others. For example, I’m sure Elon Musk has the resources to become a fashion icon, but choosing this path would mean sacrificing resources (time, money, brain power) that could have gone into more meaningful, lucrative opportunities such as, oh I don’t know…colonizing Mars. Also, he would probably derive less satisfaction from being voted People Magazine’s Most Beautiful Man versus successfully establishing a colony on Mars. Thus, being fashionable is not an optimal choice for him as the opportunity costs are too high.

Now, this is where Shrek stands to gain. No matter what activity Shrek pursues, his opportunity costs are low—I hate to be a cold-blooded economist here, but it’s not like he has a career as a rocket scientist to give up, a beautiful face to ruin, or a family to forsake. In order to charm the ladies, Shrek can take advantage of Elon Musk’s overabundance of talent and pursue those activities that come at high opportunity costs to Musk. Since Shrek has absolutely no interest in fashion, he decides to devote his resources to developing a sense of humor, a trait that is less essential for Musk. Gradually, Shrek becomes an expert jokester and, while not as magnetic as Elon Musk, succeeds in carving out his own niche as the “not handsome, but omg he’s soooo funny” guy.

And that, my friends, is the theory of comparative advantage—nations/firms/individuals should specialize in goods or services in which they have the lowest opportunity cost. Thanks to comparative advantage, both Elon Musk and Shrek can now participate in the dating market despite the disparity in their abilities. Also, the overall dating market is enriched due to specialization. Ladies are no longer force-fed just one “perfect” fruit, but can choose among apples, oranges, strawberries, Shreks...

Q: Wow, so you’re saying I have a chance against the Brad Pitts of the world if I learn how to specialize?

Yep! (Unless you specialize in something in which there is absolutely no demand for...) Actually, this theory is already evident in our society today, and the best proof of specialization can be seen in none other than the boy bands of our generation. Through specialization, they have achieved unprecedented levels of success and showed us that the market appreciates having more choices rather than one!

Exhibit 1: The Backstreet Boys



Exhibit 2:One Direction


That's more than enough pictures of men for one lesson, so hope you feel more confident about your market value and, like Shrek, find your niche now! For Part III, we'll take a break from pictures and bring back the charts...

econofdating101

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!






econofdating101

Business Cycles...and happily ever afters

3:29 AM

Time passes more slowly when you're a child, which is perhaps why certain childhood impressions remain fresh to this day, having taken the time to slowly but surely sink into the safest crevasses of my mind: brushing my fingers against mimosa leaves and watching them shrink and expand; winding up my metronome and running piano scales to the pendulum's steady beats; riding a creaking rollercoaster uphill and screaming out all my demons on the way down; the love for my sister turning into hatred when she wore my clothes, melting into fondness again when we created morbid storylines with our Barbie dolls.

Without being conscious of it, I was inducted into a world of waves, where emotions rise and fall, events begin and end, and everything repeats itself with time.

Why, then, did the world tell me life and love would be different?

Linearity, defined parameters, and Disney endings are all easier to accept than chaos and impermanence, but maths, science, and economics reveal that oscillation and change permeate our universe. This doesn't mean that economics will shatter our dreams of Beauty and the Beast living happily ever after together, but perhaps we do need to alter our perspectives and frameworks....

The Business Cycle

 In economics, the business cycle describes the natural rise and fall in economic growth of a country over time. Each cycle is composed of four stages, illustrated and described in more detail below:
1. Expansion: A country's aggregate demand, output, income, employment, and profits expand, which leads to an increase in prices and standard of living.
2. Peak: Continued expansion causes economic growth to reach its peak.
3. Contraction: As the economy overheats and prices go out of control, an inevitable contraction occurs at some point--economic activity and demand slow down, as well as prices, income, and employment.
4. Trough: Economic growth reaches its lowest point, and everyone suffers.

 The duration of each business cycle might be different, but history has shown that all economies experience such cycles time after time.

Which brings us to our next point...

The Relationship Cycle

 Hm, aren't relationships (and life) awfully similar to business cycles? They grow, they peak, they recede...let's overanalyze the four stages below:

 1. Expansion: Physical attraction and lack of familiarity with each other leads to increased intrigue, number of dates, and overall interaction. A meaningful relationship forms with these increased connections and attraction levels.
2. Peak: Continued obsession with each other causes relationship to reach its peak.
3. Contraction: With time, the sense of newness fades, conversation topics are exhausted, and flaws and insecurities are revealed, leading to potential conflicts, disinterest, and/or fatigue.
4. Trough: Prolonged conflicts cause the relationship to reach its lowest point.

Now that we've plotted the life cycle of a relationship over time, it's time to ask the critical question: Is there hope for a relationship that lasts, or are we fated to repeat cycle after exhausting cycle until the end of time? 

The Silver Linings Playbook

 Luckily for us, cycles, by definition, repeat themselves, and an economy usually experiences a recovery phase at some point after the trough. The economy might pick up due to low interest rates stimulating spending and borrowing, additional government intervention to boost spending and employment, or even technological advancements that create new markets and demand.

Similarly, relationships might naturally recover over time once the rough edges are smoothed and the dynamic once again reaches equilibrium, but they might also just splutter under pressure. However, just like a national government willing to do anything to ensure its survival, if you are truly invested in a relationship, wouldn't you also try your best to actively reinvigorate it?

I hereby introduce you to the "Tru Luv Stimulus Package"-- in times of emotional downturns, let's heed the actions of a central bank/government, but instead of injecting money and jobs into the system, attempt to pump life and chemistry right back into the relationship!


Like all stimulus packages, success is not guaranteed, but as they say, 'tis better to have tried and failed to salvage a struggling economy than never to have attempted at all.

At the end of the day, the ebb and flow of life is inevitable, but instead of resisting and imposing over-simplistic frameworks which lead to future misunderstandings and disappointments, perhaps it's more fruitful to embrace the waves: ride the exhilarating tides while they last, prepare yourself for the eventual downturn, and try your best to find/induce another great wave. Waves will break onto the shore and waves will recede, but in between the peak and the trough is life--running into the sea and leaving short-lived footprints on the damp sand, discovering previously hidden glimmering seashells, and taking in the sights, sounds, and memories.