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Friday, November 22, 2019

The Dating Market: Thesis Overview

The Dating Market: Thesis Overview

"Most academic researchers have attempted to explain changes in dating, marriage, and household formation data using legacy frameworks based on commonly accepted variables from research done in the 1950s and 1960s, which are themselves heavily biased by the post-war household formation boom. No one would disagree with the proposition that cultural attitudes toward sexual behavior and the nature of marriage have changed materially since then, but models remain outdated due to the pace of change in the dating market compared to the pace of change in academia. We propose that viewing the phenomenon of online dating as a means to reduce market frictions is sufficient to explain the vast majority of changes in outcomes, with other variables having scalar effects...

The primary explanatory factor for why the share of dating online grew rapidly is likely platform access via smartphone proliferation and the shift to mobile only websites.

Note in the charts above the up spike in “met in bar or restaurant.” In data science, the technical term for these reporting individuals is “liars.” They reported meeting in a bar because that is technically where the pair met in person for the first time,but the match was generated online...

A conservative estimate of the percentage of new relationships begun online in 2019 is at least 65%, but likely over 75%. So, online dating now produces most new relationships. Why? From the perspective of prime reproductive age individuals, cost structures (safety, monetary, time, social frictions, etc.) have shifted, with many dropping to effectively zero. Because costs(physical safety, social stigma)have been disproportionately impactful to women, their elimination has had the effect of flipping the power dynamic in the market to favor women in prime reproductive age, though the dynamic changes with age.

The cost of instantly searching for potential mates is now effectively zero...

The social costs of rejecting a potential mate are now likewise effectively zero, making introductions within existing social groups (friends, family friends, church, etc.) structurally inferior propositions given significant social and reputational risk in the event of an adverse outcome. This has led to the rise of “ghosting,” where one side of a relationship simply stops responding rather than suffer an uncomfortable break up conversation. Rude? Sure. But given no actual viable retribution mechanism, it has become the norm. It’s important to note that Facebook integration into dating with their proposed dating product reintroduces potential retribution threats and social downside. This is a primary reason why we think Facebook’s dating efforts will stall.

The growing generational cohorts (Gen X, Gen Z) structurally lack the balance sheet and income power to purchase many fixed assets (housing, etc.) that the Baby Boomer generation participated in, leading to a secular rise in a “renter’s economy.” Because housing, transportation, etc. are now largely short-term commitments, many of the financial limitations that contributed to marriage decisions are now void, and the marginal costs of trial cohabitation are lower (12-month leases, etc.).

Reductions in marginal and opportunity costs lead individuals to exit potential or new relationships faster, and over time allow individuals to acquire more information about long term mate compatibility.People are less likely to stay in negative relationships, more likely to cut things off when red flags are spotted, and less likely to go on multiple dates when a spark is not there.This is leading to more short-term relationships, significant delays in marriage age, and increases in required marriage circumstances. This also has an effect of forcing people onto the dating apps, as market participants who are not on dating apps are attempting to pair with people who have structurally superior cost structures than them, leaving them generally unable to compete...

With the advent of online dating, women in prime reproductive age are in the dominant position in the dating market for the first time in human history...

These dynamics have also led to prime reproductive age individuals having less sex, with men being disproportionately priced out of the market. This is a material driver of the “incel” (involuntary celibate) social movement/problem.

There is a very interesting paper by Melanie Li-Wen Long and Anne Campbell entitled Female Mate Choice: A Comparison Between Accept-the-Best and Reject-the-Worst Strategies in Sequential Decision Making that attempts to evaluate female mate selection criteria and constraints around it. While the paper is too nuanced to go into in this overview, the punchline is that the general dominant constraint for women has been not the risk of selecting too low quality of a mate, but rather the risk of not settling for an adequate mate and in doing so ending up alone. We would expect online dating as a medium to materially alter this dynamic as a constraint...

Below are some entertaining charts from OKCupid on how men rate women versus how women rate men. Men broadly rate women on a nearly perfect normal distribution.

Women rate men on a curve that we assume approximates male ownership rates of crocs/cargo shorts.0% of men rated most attractive makes sense. Women know all men secretly own at least one pair of cargo shorts.

If we assume OKCupid’s data is roughly representative of naïve preferences, and that incentives to “settle” are lower due to decreased market frictions, we would expect women in a given cohort would net choose to opt in to dating or sex at a lower rate. This appears to be exactly what is happening...

Age is obviously a massive factor in dating, and it remains one of the most important factors in evaluating the market. Women aged 18-25 are the effective “price setters” of the market and are able to select at will from the available inventory of males aged 18-60. Generally, women will only date older and men will only date younger. Thus, as women age from 20 to 30 years of age, 25% of the available inventory of potential mates evaporates. In addition to this, the rates of partnership for both genders is fastest between 20 and 35, going from 50% to 90%. This means that as female market participants move from age 20 to age 35 their available inventory to select from may shrink to a small minority of the original pool. Male market participants face a virtually unchanged opportunity set, if not an increasing pool of opportunities.

This also means that men struggle more in the dating market when young, and over time adjust expectations as the market prices their deficiencies more shrewdly. Between ages 30 and 35, both male and female cohorts are highly predisposed to forming long term partnerships due to visibly shrinking opportunity sets from the female perspective and general exhaustion and expectation rationalizations from the male perspective...

The age dynamic creates significant inter-age cohort competition in the female population and increased overall competition in the male population. This can be conceptualized as the market becoming more efficient, which naturally leads to many market participants anecdotally expressing unhappiness with the status quo as they incorrectly identify an inability to produce low effort excess returns as the circumstances being “unfair.” Basically, the same thing is happening in the dating market as is happening in the Hedge Fund market: things are getting more efficient, very few are pleased about it, and there are lots of strange advice books, blogs, and videos coming out.

Speaking of expectations that may be over inflated by pop culture, we feel it is tremendously important that we highlight the very existence of the film “Long Shot” (2019), in which Seth Rogen, who is unemployed in the film, and Charlize Theron, who is The Secretary Of State of The United States Of America in the film, fall in love. Yes, you read that right. “Long Shot” may have actually overdone it and become totally unbelievable as a premise, because the film only grossed $53.4mm on a budget of $40mm.

An additional knock-on effect of online dating that initial potential mate matching is increasingly visual, leading to secular demand growth in cosmetics and photography products, while fragrance sales remain flat because their value is irrelevant in the current market"
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