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!

gamesweplay

The Art of the Date (according to a certain American president)

8:03 PM

As the rise of Donald Trump, Rodrigo Duterte, and Theresa May have shown, the age of the gentleman is over. What do smart, suave, and sophisticated get you except compromises and non-binding multilateral treaties? The public has announced its preference for the brash strongman/woman, and with this comes a seismic sea change not only in international relations, but in romantic relations as well.

We therefore present to you four new dating strategies in our era of mistrust, isolationism, and alternative facts:

1. The "Fake News"
When confronted with unsatisfactory responses that contradict your worldview or deflate your ego, deny, deny, deny! Everyone obviously wants to date you and those who reject your awesome advances were hired by your rivals to undermine your eligibility.
Fake news dating strategy as inspired by Trump


2. The "Covfefe"
While the so-called "intellectuals" and "authorities" were hiding in their ivory towers, dictating rules and regulations to the public, you were out here in the real world making something of yourself. Who do these "experts" think they are, that they can arbitrarily determine proper word usage and behavioral norms? And thus "Covfefe" becomes your rebel yell--don't let Big Brother tell you what to do. You set the terms and conditions now. Late to your date? Covfefe. Dating ten people at once? Covfefe. Blatantly lied about your age? Covfefe. Refuse to backtrack on your statements and actions and soon enough, people will interpret your obstinance as confidence. And everyone likes a confident date.

Covfefe dating strategy


3. The "Loser" 
Humans are simple creatures. We understand, and take comfort in, binaries: black and white, night and day, left and right, heaven and hell. But what about nuanced arguments, complex character development, and conciliatory democracy, you ask? Well, good luck making a blockbuster out of that! Dichotomies give rise to clarity, and when faced with the faintest threat of romantic competition, embrace the "Loser" strategy and antagonize your opposition head-on. By creating hero/villain, winner/loser narratives, you paint a clearer picture for your date--in the zero-sum game of love, does he/she really want to risk it all with a potential good-for-nothing? Label all competition as losers

4. The "Ambiguous Affirmation"
This marketing maestro knows best--keep it catchy, hopeful, and vague. Promise nothing tangible and you won't be held accountable to anything tangible. Instead, shower your date with empty promises (not of the golden variety), elevator-music adjectives and first-person plural pronouns, assuring him/her that your future together will be bright, great, wonderful, fantastic....as the fable goes:

"Why are your statements so vague?" the Little Red Riding Hood asks.
"Ah, my dear Red," answers the Wolf, "So you can interpret whatever you desire from them." 
use ambiguous, positive statements to your advantage


**Author's Note: Do I even have to disclose that you shouldn't actually follow any of these? 

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!




wine

Wine Notes: Four Common Varietals

9:10 AM

action, alcohol, art
Drink and date responsibly.
Whoever said "all men age like fine wine" was grossly misinformed. While only a select few men are complex, intense, and structured enough for long-term bottle aging, one can still appreciate the wide variety of men present on this planet--regardless of your palate, be assured that there will be some varietal that will please your senses and your soul. Below we have some tasting notes of four common varietals found in urban vineyards around the world:


Mr. Pinot Grigio

  • Tasting Notes: Mr. Grigio embodies the millennial dating philosophy of "expect nothing and you will never be disappointed." Easy on the eyes and on the palate, Mr. Grigio is most frequently spotted on midsummer Saturday evenings, wearing a cotton v-neck shirt and lining up for the latest hipster act in town. Marked by the light, albeit utterly forgettable, aromas of lemon, lime, and orange peel, he enjoys keeping conversation fun and easy-going, cracking politically-correct, self-deprecating jokes each time the conversation risks becoming too serious or awkward. Before you know it, you've already been chatting for four hours, had two pizza pit-stops, and danced to Bruno Mars at some random rooftop party. And yet, as dawn breaks, there is no pressure to keep in touch, no promises of "calling you back," no falling in love--just a pleasant souvenir of having met a nice boy, a memory that quickly dissipates once the stressful workweek resumes. 
  • Suitable for:  Commitment-phobes, post-breakup rebounds 
  • Drink by: Not suitable for aging. Drink immediately.


Mr. Champagne 

  • Tasting Notes: Your mother, your protective older brother, your friends--they all warned you about meeting guys at nightclubs. But Mr. Champagne roared into the driveway in his silver Porsche, sauntered out in a crisp Armani suit, and ordered a table for eleven, and all the bubbles went straight to your head. Giddy with intoxication, you giggle as he whispers sweet nothings into your ear while the DJ plays some bass-ridden beats in the background. As the music culminates in chants of "put your hands up in the air," Mr. Champagne looks you in the eye and solemnly proclaims: "...And just this year my hedge fund's assets under management reached US$10 billion." Wow. So you put your hands up in the air like you just don't care--you're going to be a trophy wife with three thoroughbred horses and a personal chef, starting tonight. Unfortunately, the sparks only endure a couple hours, the euphoria replaced by a flat, acidic taste in your mouth once you spot Mr. Champagne flirting with another girl in a short dress across the dancefloor. 
  • Suitable for: Fans of "players" and "bad boys", secret & non-so-secret gold-diggers 
  • Drink by: Once opened, consume immediately. Imbibe with a sizable grain of salt. 

Mr. Barossa Valley Shiraz

  • Tasting Notes: Mr. Shiraz is intense, bold, and mysterious. Years of toiling under the glaring Australian sun have led to his tanned, muscular frame, but what sweeps you away is not sight, but smell--beneath the deceptively jovial blackcurrant bouquet lies layers of complex, brooding, aromas: you sense tobacco, wet clay, smoked meat, black pepper...each additional scent a battle scar incurred from past disappointments and heartbreaks. You lose yourself in this labyrinth of odors, searching for clues: Who is he? What does he want? While on a date in an empty whisky bar, your conversation inevitably turns into a profound discussion of the need for God and the meaning of life. Alas, after his third glass of Scotch, he confesses in his rich, velvety baritone voice: "I have too much emotional baggage to be in a relationship right now." But what can you do? You are already drunk. Your senses overwhelmed, your emotions inundated, you allow his memory to linger just a while longer--for you know that everything after will just taste like water.
  • Suitable for: Hopeless romantics, fans of "dark, brooding types" 
  • Drink by: Store in a cool, dark place and drink when he is emotionally ready. 

Mr. Pauillac

  • Tasting Notes: Ten years ago, you met Mr. Pauillac through a mutual friend, and you thought he was absolutely the most self-absorbed prick in the entire history of homo sapiens. He mentioned his Harvard degree not once, not twice, but thrice, and you felt personally attacked by his harsh, aggressive, socially conservative comments. But time works wonders. Ten years later, you serendipitously bump into him at a networking event, and you are pleasantly surprised by his transformation. Did you get older, or did he get wiser? His off-putting tannins have since mellowed into a smooth, courteous, and confident demeanor, emanating calming, masculine aromas of leather and cedar. His pride and acerbic wit still remain, but having been matured in experience and insight, now stand out in the sea of spineless sycophants at this event. You even detect a whiff of violets--could he possibly have developed a subtle elegance over all these years? (Well, he didn't mention Harvard this time around.) You are intrigued, captivated, rejuvenated. What an interesting, complex guy. 
  • Suitable for:  Fans of the "Mr Darcy" archetype 
  • Drink by: Ready now but will improve even more with age. 


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!