Interview with Paul Oyer, Author of Everything I Ever Needed to Know about Economics I Learned from Online Dating
I am a sucker for cute book titles and anything to do with digital culture. So when I heard that no less than Harvard Business Review Press had published a book called, Everything I Ever Needed to Know about Economics I Learned from Online Dating by the Stanford University academic, Paul Oyer, I had to interview the guy. Luckily, he agreed to the interview and this is the result.
First of all, Paul, thank you for agreeing to this interview. Let’s get to the matter of online dating. Why that? Couldn’t you have learned just as much about economics by holding a garage sale or working for a year in a pawnshop?
Online dating is a great place to learn economics because it is a market like so many others we engage in every day and it’s a market that people understand. Most people associate economics with money, but money is a boring and unimportant detail for most economists. I like that online dating allows me to explain economic ideas without mentioning money.
There is, indeed, lots of great economics happening at a garage sale and a pawnshop, too. I just don’t have as much experience with those.
Who is your intended audience? Economics students? Businesspeople? If so, in what sector? Corporations? Start-ups? Small businesses? Lonely people looking for love?
All of the above! I hope this book will be of interest to anyone who is curious about how economics is playing out around us all the time in everyday life. The book should also be of interest to people who want to know how the principles of economics can help them use their time and resources more efficiently as they search for their next life partner.
You say in the book that you want to teach people about economics through the lens of online dating. You start off your book by describing many of your day-to-day activities (e.g., working on crossword puzzles, playing the piano, doing analysis for an academic paper). You mention happiness and the concept of “utility.” Could you explain how utility relates to happiness? Not everything we do is necessarily enjoyable, but it may be worthwhile. Please tell us a bit about utility.
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Everything I Ever Needed to Know about Economics I Learned from Online Dating[/caption]
“Utility” is both one of the most abstract and one of the most intuitive concepts of economics. As you go through your day, every decision you make — no matter how large or small — is driven by your best guess at what will make you “happiest.” That doesn’t necessarily mean happiest at a given moment but happiest over the course of your life. So you invest in some painful and unpleasant actions (for example, exercising) in order to enjoy some other benefits that outweigh the unpleasantness (through a longer, healthier life and looking more attractive). By the same token, online daters make an investment in looking at other people’s profiles hoping to enjoy the benefits of a happy relationship. But, just as we stop exercising at some point, we stop looking at profiles so we can do the crossword puzzle and walk the dog. That maximizes our happiness (or utility.)
You mention that many people realize that they are probably never going to find the perfect partner and that they tend to settle for what they eventually end up with. Could you tell a little about the concept of “settling?”
You are, indeed, never going to find the perfect partner. That person does not exist. So, just as you settle for a good job that maybe doesn’t have every challenge or perk you would like and you settle for a nice house that doesn’t have every feature you saw in that cute Colonial in House and Garden, you should also realize that it is best to settle for a life partner who is wonderful even if that person has a few “quirks” you would ideally want to modify. Just as not being willing to settle for a good but imperfect job leads to unemployment, holding out for the perfect mate leads to loneliness or “romantic unemployment.”
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“Dating For Introverts” (Photo Credit: UrbaneWomenMag, flickr CC)[/caption]
One of the things that struck me as I read your book is how many things you compare online dating to. You say, for example, that online dating is more like looking for a job than looking for a house. How so?
Online dating (and searching for a partner, more generally) is remarkably similar to the job search in many ways. There’s the “romantic unemployment” aspect we talked about before, there’s the use of matching websites (Match.com and OKCupid.com are very similar to Monster.com), and there’s the fact that resume padding is similar to shading the truth on a dating profile. House hunting has some of these same characteristics, but it is missing one key thing — a house does not have to love you back! My top pick for a date or for a job may be irrelevant if they don’t have any interest in me. But if I have enough money, I can have pretty much any house on the market.
Focusing a bit more on “romantic unemployment,” do you think that the Great Recession has resulted in more loneliness due to the loss of jobs and the social networks that jobs provide and has there been a concomitant surge in online dating activity?
There have been a few attempts to study trends in marriage and divorce over the recent hard times in the economy, but I think it’s a bit too early to say for sure what the effect was. Similarly, I don’t know of any evidence to suggest much of a link between the state of the economy and online dating. There might be a bit of ebb and flow that connects traditional unemployment (not having a job) with “romantic unemployment” (loneliness). But the broader trends are very strong and long lasting. Marriage has been on the decline for a long time, especially in many European countries. Divorce rates have stabilized but they went up dramatically over the 20th century, especially in the ’70s and ’80s. At least in developed countries, there has also been a decades-long increase in the fraction of people living alone. And online dating has, obviously, risen from nothing to important in just twenty years. Compared to these longer-term trends, the year-to-year movements caused by the state of the economy are trivial.
You mention that people in their online dating profiles tell white lies. Could you give some examples of the kind of lies they tell and how that relates to economics? Many of the lies seem to be about height, weight, age, and income. The last item I found particularly interesting — can you tell us a bit about lies about income?
Some of the lies about income and other topics you mention are nicely summarized and analyzed on a post on the OKCupid Blog. They estimate, for example, that there are about four times as many online dating profiles claiming an annual income of $100,000 as there should be. Another pervasive form of online “lies” is showing an old picture while implying it is current. The reason this relates to economics is that people are rationally saying things in hopes of getting someone to do something in return (date them.) They are paying a potential cost of getting caught and embarrassed in order to improve their expected utility. It’s like so many other trade-offs we make every day.
I had never heard of the concept of “cheap talk” vis-à-vis the world of online dating. Could you explain how cheap talk can be somewhat controlled for in the labor market and in online ecommerce sites like eBay but not very well in the world of online dating?
The best way to control lies and keep people honest is to have a mechanism for catching liars. This increases the value to a person of telling truth. eBay understands this very clearly and has set up a “feedback” system to reward people who are honest when they sell products. Employers use references to make sure people are representing themselves honestly on resumes and in interviews. But there has been less success in coming up with good ways to incentivize online dating honesty. A few sites ask users to provide documentation of income, education, and other items, but for some reason this has not caught on widely. More recently, a site called onlulu.com provided a feedback mechanism — women can rate their former boyfriends. Luckily for me, the site started after I left the online dating market!
It is hard not to come away from your book without a rather jaded view of humankind. That is, some of the dating advice you proffer, based on your experiences in the world of online dating, is that a moderate amount of exaggeration about one’s physical attractiveness and personal wealth is within the bounds of acceptability because everyone else is playing fast and loose with facts, but telling whoppers is inadvisable because you will get dumped almost immediately. Is that about the gist of it? Would all social scientists agree with you on that or only your fellow economists?
Well, they don’t call economics “the dismal science” for nothing. I can’t speak for the other social scientists but most economists do have a jaded view of humankind. Some might say this is sad, but we would say it is realistic. I would never tell anyone to lie. But I can tell you (and the facts back me up) that others are lying on their dating profiles. If you are going to be successful in the market, you have to remember that what you read on a profile is not necessarily completely accurate and that the other people you are competing with are not always telling the whole truth. Jaded? Perhaps. Realistic? Definitely.
For those of us who have never heard the term “network externalities” could you give a quick definition? Or, is that too complex a concept for that?
Not at all — it sounds much worse than it is. A product has a network externality if the value of the product increases with the number of people who have the product. Phones have network externalities — your phone is of no use whatsoever if nobody else has one. Social networking sites have network externalities. And, of course dating sites have network externalities. You do not want to be the only person on a dating site.
But there are lots of things that do not have network externalities. Lettuce, desk chairs, and cars are good examples. If more people have any of these things, that does not make it any better for me to have one.
What are congestion externalities? Am I likely to encounter any this weekend? I live in a small Oregon town and get around on my three-speed bike. Are you more likely to encounter congestion externalities than I am?
Congestion externalities are the opposite of network externalities. Products that have a congestion externality are less valuable as more people use them. Highways are the canonical example because I value driving a bit less when an additional car gets on the highway. You are not likely to find much in the way of congestion externalities biking around a small town. But you might find them in that town when you go to the coffee shop or a restaurant and find there is a line.
One of your online dating tips is to use the bigger sites. Is there no future, then, for niches in the online dating world? Should I give up my idea of creating one for vegetarians who are into steampunk?
Yes, give up. Niches are great for some things. But you want to cast a wide net when looking for a partner. “Go Big,” I like to say or, in economics-speak, choose a “thick” market. The best matches for you on Match.com are much more likely to be appropriate than the best matches for you on VeggieSteampunkDate.com.
I learned quite a few economic terms in your books. One of them was “signaling.” Could you give some examples from your own life when you have “signaled” about your intentions? You have a doctorate, for example. Was that a case of signaling your seriousness about a career in academia? Did you ever signal your interest in one of the women you wanted to meet via an online dating site?
Signaling, for it to work right, has to be costly. It has to be the case that those who have some attribute are willing to incur a cost to credibly show they have the attribute, and that those who do not have the attribute are not willing to incur that cost. A good example of this is early admissions to college where, by applying to only one school and committing to go there if admitted, a student signals to the school that it is his or her first choice. The student gives up the chance to apply elsewhere, so it is costly. Students that do not feel a particular attachment to that school will not be willing to pay that price. If that school wants to be sure its potential students have thought about their options and that they believe they are good fits for the school, the school has a good reason to give favorable admissions treatment to early applicants.
Education is sometimes thought of as a place where people signal. In the Ph.D. context you mention, a stark version of this would be that writing a doctoral dissertation has no actual value. However, by writing a thesis, a student shows that he or she has what it takes to be a professor or researcher. Those who cannot cut it in academia or research will not be able to pay the price of spending years and years writing a thesis. I don’t particularly believe this is important in the Ph.D. education context, since I think I learned a great deal while I was in graduate school. But I am, admittedly, biased.
It’s really hard to signal effectively online. One dating site in Korea set up a way for people to signal by creating a scarce “virtual rose.” People were only allowed to send a couple, which made messages with a rose more meaningful than just another “Hey, I like your profile” message. The only way I could use signaling when I was using online dating was to spend some time writing a personal and tailored message to a woman when asking her to meet me. By writing a message that showed I had invested in reading her profile and thinking carefully about why we might make a good couple, I credibly signaled that I was attracted to her. That may have, on a few occasions, set me apart from guys who wrote, “Hey, you look good, want to go out some time?”
“Finalize your divorce quickly.” That is one of the suggestions you make to those looking for life partners on online dating sites. This advice is preceded in your book by a discussion of discrimination in various settings and situations. Can you explain how all those issues are connected?
When I jumped into the online dating scene, I was separated rather than divorced. Many women find this unattractive because they fear separated men are emotional wrecks after their recent breakup or, worse yet, may go back to their wives. They don’t have anything against separated men, per se. They just think they are more likely to have qualities they do not want (such as being a basket case.) Luckily, separated men eventually become divorced and get over this. But, in the meanwhile, they are victims of what economists call “statistical discrimination.”
This exact same principle leads to racial profiling, employers’ reluctance to hire women of childbearing age, and higher car insurance rates for young men. Using the hiring example, an employer may have no animus or prejudice towards women but may have noticed that women of a certain age are more likely to take time out of the workforce. This makes the employer “discriminate,” but strictly based on an underlying statistical association. It’s a lot tougher on women in the workforce than separated men, though, because the stakes are higher and the statistical association lasts much longer.
I am having a little trouble grasping the concept of a “thick market.” Can you help me out here? In your book you mention gastroenterology fellowships, of all things, by way of illustration. Could you flesh that out for us?
Let’s go back to my suggestion to “Go Big!” On a big dating site, the numbers are more in your favor. You are more likely to find someone who is a better match for you if you have more people to choose from. It’s that simple. By the same token, there are not all that many gastroenterology fellowships and new gastroenterologists each year. But it’s important to find them good matches. Everyone will be much happier if doctors work in hospitals near where they want to live, if they get along with the other doctors, and if they are well matched to the hospital in terms of things like how much research and teaching is done there. If each hospital has to go out looking for gastroenterologists on its own and competition gets intense, hospitals start forcing people to make quick decisions they later regret.
So a group of people figured out a way to make that market “thicker” by, essentially, having a centralized gastroenterologist “store” that hospitals had to go through. Everybody ranked their preferences and matches were much better. Just as online dating sites provide more and better options than a singles bar on a given night, a centralized gastroenterologist market provides better options for hospitals than rushing around trying to beat the other hospitals to each doctor.
You tell your readers that principles that apply in dating also apply to going to an all-you-can eat restaurant. What economic law is illustrated by such comparisons?
Online dating markets were initially subject to “adverse selection” (but hopefully not anymore.) That’s an economist’s way of saying stigma — it used to be the case that online dating and other dating services were for “losers” who could not find a date the old-fashioned way. So, if a perfectly good person liked the idea of these dating services, he or she could not use them because only the “losers” were there. It was a self-fulfilling prophecy. In the same way that only people who could not get a date were on the original dating sites, all-you-can-eat buffets appeal to a certain type of person. They are largely patronized by people with larger appetites (those who use the dating site largeandlovelydate.com, perhaps). As a result, these restaurants have to price based on the assumption that the average person who dines there will eat a lot.
This is my absolutely favorite bit of academese in your book, “positive assortative mating.” Could you please provide some examples of famous married couples who fall into this category?
Too easy — Brad Pitt and Angelina Jolie. Positive assortative mating means that like matches to like, and Brangelina is hot matching to hot. Jay-Z and Beyonce are a couple where the top skills in R&B are matched together. Domenico Dolce and Stefano Gabbana were business and romantic partners for twenty-three years, rising to the top of the fashion world (though they broke up in 2005). But maybe the most important power couple was Marie Curie and Pierre Curie. They were both at the cutting edge of science in their time, sharing the Nobel Prize in 1911.
As women advance into higher-paying professions, are we already starting to see less emphasis by them on the earning potential of potential spouses?
I don’t know if there is any systematic analysis of that but there’s some evidence to suggest that they should not do this. A very nice recent paper by three economists shows that, holding other things constant, couples where the woman earns more than the man are less happy and more likely to end in divorce. The secure man who is comfortable with a wife who out earns him is still largely a person of the future, I’m afraid.
Will anything you learned from your online dating experiences help you as you market your book? Is online dating anything like selling a book about economics? Are book reviewers like the women who read your Match.com profile?
Great question — trying to get readers and critics interested in my book shares some of the basic ideas as online dating but there are important differences. Lessons learned from selling things on eBay may be more relevant, actually. Online dating is largely immune to the review process, as I noted above. But eBay’s “feedback” is similar, in many ways, to the reviews that crop up on Amazon and other sites. So, now that I’ve written the book, it’s largely out of my hands. I sure hope a few people read it as closely as you did and I hope they post nice things on Amazon!
Thank you for your time.
My pleasure. Thanks very much for your interest in the book and the thoughtful questions.
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