Finance 101 applied to Dating

We are all emotional creatures, for better or for worse. More times than not, our decisions are influenced by our feelings about ourselves and others. These feelings often cloud our judgment and confusion sets in. The price to pay for letting negative emotions steer our love life can be exorbitant.

In this article, I intentionally left emotions and morals out of the equation. For the sake of argument, let me simply brush off the part of us that wants to connect, cooperate and live in harmony with others. Instead, I will consider the Single Man as a purely self-interested actor, also referred to as Homo Economicus in the economic literature.

Definition: In some economic theories, Homo economicus is the concept of humans as rational and narrowly self-interested actors, who have the ability to make judgments toward their subjectively defined ends. (Source: Wikipedia) 

Having made this working assumption, let’s get down to business and see what Finance manuals can teach us about dating.

1. Are you a trader or an investor?

An investor is a part-owner of a company. He injects some money in a business and if things go well, he can sit back and watch his money grow. The investor pretty much disproves the old adage: “Money doesn’t grow on trees.”

A trader, on the other hand, buys stocks because he expects a jump in price. He then moves to his next target and repeats the procedure. Success stories exist; they are colorful and exhilarating. However, these are the exception. Much like gamblers, traders go through ups and downs and will rarely admit how much they lost.

Choosing one approach over the other has a lot to do with personal preferences.

Some get more satisfaction in the short term while others are more inclined to prefer long-term investments. Determine how risk adverse you are and pick your strategy.

Let’s take an example:

You are at a party; you have been chatting with a decent-looking girl for the past half hour and the odds are good that you’ll end up spending the night together. The timing is perfect for a first kiss. Then another girl walks in. She’s an absolute head-turner: long black hair, pouty lips and legs to die for. Would you excuse yourself and take it from scratch with the other girl or would you close the deal with the first one?

 That, my friends, is a question I cannot answer for you.

2. Hedge your bets

Things are usually not so clear-cut. It is best to avoid committing yourself too early so you can leave multiple options open. It is actually common knowledge that you shouldn’t keep all your eggs in the same basket.

So why not diversify your investments and approach more than one girl in the bar?

In order to do this without ruining your efforts with girls you talked to previously, keep it short and casual. That way you can take things further with the one you like best and get a phone number of the other ones.

Similarly, if you’re in the market for a girlfriend rather than a one-night stand, don’t limit yourself to one girl and go on dates with different girls on different days of the week. Should one be boring and the other one a fanatic Bible waver, you still have other investments to capitalize on.

However, this comes with a word of caution. Don’t spread yourself too thin and bring yourself to the brink of exhaustion. I wrote an article about this so you’ll avoid that pitfall.

3. Risky investments generally pay more than safe ones (except when they fail)

The return on investment is a reward for the risk you are willing to take.

Remember that gorgeous girl in the first example? If you left the conversation with the so-so looking girl at the bar and went home with her instead, I bet you’d feel like a million bucks. Sure, you run the risk of losing a sure thing but hey, nothing ventured, nothing gained.

4. Know when to cut your losses

The price you pay for an investment is the absolute determinant of your return.

In dating, assuming you lost the bad habit of offering drinks to strangers, your prime resource is time. It is a non-renewable commodity, so use it wisely. If a girl makes you go through hoops for weeks in the hopes of finally sleeping with her, reassess your time investment:

Is it worth all the trouble or is she artificially driving up her value?

Are you overpaying for you investment?

Are you sticking to that one girl because the return will cover the initial investment or because you have already invested so much that you have become reluctant to leave the table and cash your chips?

If we’re talking about a few nights out, fine. It may be a risk worth taking. But if you apply the same logic to long-term relationships, you’re in for a hard fall.

Knowing when to cash in and when to cash out is a crucial skill. One of the biggest delusions of gambling is thinking that you have already invested so much that you want to see it through. This vicious logic led to the bankruptcy of Barings Bank which shook the financial world. Nick Leeson spent years in jail pondering about when he should have cashed out.

Many marriage and long-term relationships are accidents waiting to happen. Both parties are deeply unsatisfied and would be better off parting ways. Yet, they cling on to a relationship broken beyond repair because they have already invested years of their life into it.

Cut your losses and move on.

This article may seem rather cynical. It purposely leaves out the moral dimension of human thought and conduct. As such, it offers an incomplete model and should not be used as a paint-by-numbers-guide on how to live your love life. However, I do hope it brings some clarity at times of doubt and turmoil when emotions take over your best judgement.

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