If online dating prospects sound too good to be true, then just like any other investment, they probably are.
The parallels between online dating and investing go well beyond the too-good-to-be-true maxim, as was discovered by Stanford University professor and economist Paul Oyer when he found himself in the online dating scene after 20 years’ marriage.
The more dates he went on, the more he recognised similar principles at play in the two arenas which led to his book Everything I Ever Needed to Know About Economics I learned from Online Dating.
Given that 51 per cent of Australians have looked for love online, one could conclude that many know a lot more about investing and the economy than they realise.
Time in not “timing”
When it comes to investing, it is argued that time in the market brings better results than trying to time your entry and exit. The longer you are in the market, the more you smooth out the cyclical movements, minimising the impact of sudden peaks and troughs. The argument goes that if you missed the best 10 days on the market over the last 10 years your returns could fall into negative territory. In much the same way, the longer you persevere with the online dating game, the more likely you are to finally find Mr or Ms Right. Patience, both in love and investment, is a virtue.
Online romances are akin to panning for gold. You have to sift through the sediment to find the nuggets and on occasion even they will be fool’s gold! All that can take time.
One of the golden rules of investment is to diversify. That way, when one asset class is suffering a down cycle, your other investments can pick up the slack.
Similarly, don’t just focus on one dating site, but upload your profile to several to spread your chances of finding a partner by playing to a larger audience.
If you invest in a company that only has a small number of shareholders, then you will be faced with a thin market that can prove problematic when you want to sell. Thin markets also can lead to higher price volatility. It’s much the same when it comes to love - thick markets are the better option as the more people who populate each dating site, the greater your chances of finding the perfect match.
Too good to be true
It’s tempting for everybody to post a glowing profile on a website. After all, you hardly want to highlight your negative attributes. But if you will fudge the truth, then so will others. As a result it’s important to execute due diligence on any potential partner.
It’s much the same with hearing a good tip about an unknown stock. You are hardly going to sink your hard-earned cash into an investment without checking with us about the validity of the tip.
Painting a good picture is what Oyer refers to as cheap talk and it is prevalent both in the world of internet dating and across society and the economy in general. Everybody expects it to happen. In fact, if you were to be honest and admit to carrying a few pounds, then potential partners would assume you were seriously overweight as they expect you to be understating your negatives.
Similarly in the world of investment you may see brokers who underwrite an IPO* talk up the stock more than an independent broker. But, as with the dating sites, the audience expects this.
Applying good business principles to the online dating game can go a long way to finding your Mr or Mrs Right. At least that is what Professor Oyer has found – and it worked for him!
*Initial Public Offering