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Buy self-constraint at StickK.com
The Yale Economic Review informs me:
...stickK.com , scheduled to launch in December 2007, will provide "commitment contracts" that let individuals set a goal, choose consequences for failing to comply, and decide how to verify their progress. With the options of choosing to lose money every time they fail and designating third-party verifiers to check their success, users will face powerful incentives to meet their goals.
The very smart Dean Karlan and Ian Ayres are behind the idea. I've long predicted this won't work; one group of potential customers doesn't really want to change, the other group is unwilling to give up control. It's not exaggerating to say that human nature is on the line here, and that if I am wrong this is probably the most important idea you will ever encounter.
Posted by Tyler Cowen on December 18, 2007 at 12:58 PM in Economics | Permalink
Comments
I would love for this to work, but I'm uncertain what's in it for stickK.com. I'm also uncertain of whether these "contracts" would be legally binding, as stickK.com doesn't seem to be bringing any valid consideration to the table.
Posted by: Dave at Dec 18, 2007 1:37:03 PM
If I could send them a check for a large amount of money ($10K or something), designate it to go to the RNC if I lose, specify a verifier I couldn't influence, I think it would be a huge incentive. I would do it to lose weight. They should make one where they cut off your finger instead or something.
Posted by: frup at Dec 18, 2007 1:39:28 PM
So which wouldn’t work, the business model or the concept?
I’ve got real doubts about the model.
It seems like the concept is aimed at the first group mentioned, self-coercion toward worthwhile goals, and might work.
But I’d really like some elaboration on your fish hook line, how the heck would this be the biggest idea ever?
Posted by: burger flipper at Dec 18, 2007 1:42:45 PM
It is a huge idea as it suggests the way to overcome how human is programmed to do. That is, time inconsistent behavior about how people discount their future.
But I do not see this model will work. It is not because the business or conceptual model will not work. It is because if it works, it gives another opportunity to counter it. For example, if this works, someone will be able to set up a profitable insurance scheme to pay back whatever is lost because one fails to stick to the plan. I will be waiting for this to work so I can set up another insurance business to counter it. So the question is which one will be more profitable? Incentive to stick or Incentive to Insurance when fail to stick?
Posted by: Sang at Dec 18, 2007 1:52:39 PM
My guess is that well-off people with confidence in their self-control will use it.
As frup mentioned, choosing a verifier that you couldn't influence is important, as is choosing an easy measurement. Tim Harford has been using it to make himself do 200 press-ups and 200 sit-ups each week (see here). But he could probably just lie about having done them if he didn't want to lose his money.
Posted by: Dave at Dec 18, 2007 1:53:17 PM
If you take weight loss as an example or quitting smoking....people already put huge amounts of capital towards a dream of meeting their goals. These programs are not cheap and most often don't work. If the individual was to put up cash and then have to meet a goal without being able to blame a third party you may see a revolution in the health sector be born from this idea.
One man - one kit....great idea!
Posted by: david geertz at Dec 18, 2007 2:18:28 PM
I fail to see the big deal. Weight Watchers charges $14 for every meeting that you are above goal weight or if you haven't attended a meeting in a month.
Since their model has no thermonuclear war option ($1000 single payment.) it is a more realistic incentive (a la inner economist) for contracts that people might be willing to enter. I for instance was willing to bet $14 per week that I could lose 20 lbs (the easy part) and keep it off indefinitely (the hard part). But I doubt I'd be willing to put all that money on the line for one weigh in, say, Jan 2nd.
Also for the second part of weight loss---keeping it off---when do you trigger the nuclear bomb? All incentive is then lost. I've paid my $1000, might as well put the treadmill on Craig's list and check out Tyler's best ethnic restaurants in the DC area nightly.
To be sustainable---as opposed to "fit into the wedding dress for the big day" type events---you need death by a 1000 cuts types of bets rather than a nuclear option.
Posted by: philipw at Dec 18, 2007 2:45:46 PM
Stephen White's "Kill Me" (http://www.authorstephenwhite.com/Book_Collection/KillMe/killme.html) is a fun read that takes this idea to the extreme. A main character, fearing that his future will hold a lingering death, contracts with an organization that will kill him if/when his symptoms get too bad. Then he changes his mind, of course.
Posted by: tom s. at Dec 18, 2007 2:58:27 PM
These guys just ripped off what weight watchers has done for years. Nothing smart about that.
Posted by: ted rew at Dec 18, 2007 3:07:20 PM
For private conflicts among different versions of yourself, it's a poor commitment device for the reasons you mention - many don't actually want to commit, and those that do can probably find other devices.
However, if it evolves into an external signaling mechanism, it could work. It's an appropriately expensive signal, which can be publicly verified and is difficult to fake.
Posted by: Dagon at Dec 18, 2007 3:11:39 PM
Where does the money you lose go? One obvious possibility is "to charity", but maybe that interferes with the supposed negative incentives too much. In fact, maybe the money should just be withdrawn from the bank and burned. Or maybe it should be sent to someone you hate. I trust they've thought of this, but I'm curious to see what they'll do...
I for one am likely to try something, if the details look reasonable when the site goes live.
Posted by: mk at Dec 18, 2007 3:41:52 PM
I'm much less sceptical than Tyler. It won't work for everyone but there are plenty of people who will sign up because they really want that goal and are over-confident in their self-control. Once in, provided the costs of failure are high enough, a lot of people will come through. I'd do it for things I really wanted.
Posted by: Finnsense at Dec 18, 2007 3:54:09 PM
This is a totally valid concept, provided that the people dedicating money are actually striving toward actual goals. I mean, what if I set a goal to never eat McDonalds? Would they know that I never eat there anyway? If they dont, this is easy money for me.
Posted by: Kid Marine at Dec 18, 2007 5:48:24 PM
It seems like placing a bet where the best you can do is win your own money back. Didn't P.T. Barnum say, "There's a sucker born every minute."
It would seem to me that a better self-imposed penalty would be one that helps you attain whatever goal you've set. For example, if you're trying to lose weight and you miss a target, then you have to fast the next day or do an extra few laps on the track.
Posted by: Gunther at Dec 18, 2007 6:12:11 PM
Kid Marine, who says it's a two-way bet? Why would they pay you?
Also,
Stephen King wrote a short story called Quitters, Inc (from Night Shift) about muscularly enforced commitment contracts
[plot synopsis with major spoilers]
Posted by: at Dec 19, 2007 12:26:30 AM
You can make two-way weight bets. The bookmaker William Hill in London will take them. Here's a fun paper on the topic.
Posted by: mike at Dec 19, 2007 1:33:39 AM
At last, an all-purpose commitment device for the sophisticated hyperbolic discounters of the world! If they do a good job setting it up (keep the hassle low, etc), I believe there will be times I will gladly participate. In response to Tyler's comment about this not working, I think there is a large enough group of people who really want to change and recognize that the only way they can is by giving up short term control in return for long term control. Committing to these things is just giving up a level of control which many people realize they don't really want to have.
Posted by: xman at Dec 19, 2007 6:29:45 AM
Splendid idea... Great way to enforce bets with friends. For instance, before the superbowl starts, I could see this website getting major hits. Will it only be for money? I could see them keeping a transaction fee, but think about facebook.com, totally free, just a couple ads.
Posted by: brainwarped at Dec 19, 2007 6:35:08 AM
Emerson is spinning in his grave.
Posted by: meter at Dec 19, 2007 9:58:07 AM
I don't really see the market here. That's because you could just do the same thing with a friend, who is also in a much better position to control you.
Posted by: LemmusLemmus at Dec 19, 2007 4:21:53 PM
Building on mk's comments, I think if I were to take such a bet, I'd probably want to make it so that if I failed to meet my commitments the money would to go to the BNP, or the National Front, or some other equally unsavoury organisation. I'm fairly sure the thought of funding them would be significantly more of a disincentive than the thought of funding Amnesty (or whatever other charity I chose).
Posted by: John Faben at Dec 19, 2007 11:04:09 PM
Cat's Eyes also has a cool commitment contract for people trying to quit smoking. They address the issue of telling the truth about whether you stick to your goal by using supernatural means.
In the real world, one way to get a semi-honest verifier would be to put control in a friend or a family member. That person might lie, too, but psychologically it seems harder to lie or cheat the more ritual and time is involved in doing it. It is one thing to peak into a stack of graded papers that happen to be in front of you. It is another to involve multiple people plus an external institution in it. I find it psychologically influential even when a web form goes through an extra layer saying "are you really putting in a valid email address?" Logically I should always say yes, but psychologically it makes it harder if I have to lie twice.
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Posted by: Alii at Apr 3, 2008 10:39:47 PM
I have applied the principle to my nailbiting habit which I have wanted to break/curtail for years. After 6 weeks the result is amazing to me. For every nail I bite I fine myself 2 euro...and the money is going to my church. This I recognise is gentle...but I have discovered that the fact that a 2 euro coin is real to me and I know what I can get for it in terms of goods/services and that times 10 it comes to 20 euro it serves as a break. And this is what has happened. With the exception of one finger all my nails are currently longer than ever. I don't think I have broken the habit but I have modified it. I want to get this to three months. And to think of my nails in a completely different way.
Posted by: Roland at Jun 18, 2008 10:58:21 AM
