Odd Lots - How Online Dating Is Reshaping the Entire Economy

Episode Date: December 16, 2019

By this point, everybody knows that online dating is a massive phenomenon, reshaping the social habits of the young and the single. But perhaps people are still not appreciating the significance of it. On this week's podcast, we speak with Dan McMurtrie, a hedge fund manager, who has done significant research on the impact of online dating. Through his work, he has found huge potential ramifications in terms of family formation, economic development, commerce, and more.See omnystudio.com/listener for privacy information.

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Oh, and welcome to another episode of the Oddlots podcast. I'm Joe Wisenthal. And I'm Tracy Allo. Tracy, remember how you claimed on a recent episode of the podcast that you're a millennial? I knew you were going to start with this again. Yeah, I did. claim. I backed it up, too, even by your own definition of being a millennial, which is someone that had Facebook while they were in college, I am in fact a millennial, although I am an older one, I admit.

Okay, did you ever, but here's the thing. Did you ever do online dating? No. Is this another, is this a new definition of millennials that you're going to start using? Kind of. I mean, no necessarily, but I do think that's pretty important. And the fact that you never did online dating and neither did I, it kind of makes us both not really millennials. Yeah. I mean, I'm definitely not one. But I also kind of think maybe that's another thing where I'm like, that is a pretty big thing

in the world that really divides people by a few years, wouldn't you say? Yeah, I think so. And I have to admit, I have absolutely zero personal experience with online dating, although I don't know about you, but I've always been sort of curious about it. And whenever I meet up with my single friends, like I would sometimes borrow their phones and look through their Tinder profiles and the Tinder app and just sort of play around with it, which was kind of interesting to see how it works. Do you swipe for them? I do. I do. I swipe on everyone and then just see what happens. Yeah, I've heard that's like a thing, like people who never did online dating vicariously swiping on behalf of their friends.

I think that's like a phenomenon. Anyway, I do really think this is a pretty big bright line dividing one generation from the next, and especially because there will never probably be another generation in history that didn't have online dating. It's kind of a big thing and kind of makes me and you more similar to boomers and previous generations than millennials and so forth. So forth, but it seems like the implications of the rise of online dating are probably still at this point underappreciated in all. under explored. Yeah, it kind of gets to a point that has been brought up on previous Oddlots episodes, which is this notion that a lot of the economic models that we still use today are sometimes based on really outdated notions of society. So the idea that we're all going out to,

say, a bar or a restaurant and meeting our future partners or spouses does seem pretty out of date given the rise of online dating. And the same for, you know, meeting your future partner through friends. Like nowadays, you're just as likely to meet them through an online platform, if not more so. So definitely something new that would need to be sort of factored into a lot of economic models, I think. Absolutely. And, you know, like, in essence of the economy is sort of predicated on people getting married and having kids and buying a house and all of that stuff. And if that process is going to change in some way, then you would imagine there would just be all kinds of ripple effects. So anyway, obviously we're going to talk about online dating today. But specifically, we're going

to be talking to a hedge fund manager who, I guess in the spare time or maybe as part of investing, we'll find out, has done a lot of research into the world of online. dating and even put out a very entertaining note on the subject examining it from various data points. So without further ado, let's bring in Dan McMurtry of Tyro Partners. Dan, thank you for joining us. Hey guys. Thanks so much for having me. So Dan, before we get started, or I guess to get us started, why don't you tell us a little bit about who you are, what you do, and why this was a subject that you thought was worth spending your time on, going through charge, collecting data, and even sort of writing up a note on the subject?

Sure. Short fund out of Manhattan. And our approach is to look for what we think are big thematic drivers that are going to play out over five or ten or twenty years. There's a million things you can research. And so when we think about how to best allocate our research time, we don't necessarily want to focus on and, you know, chief stocks or expensive stocks and momentum stocks so much as what we think are qualitative angles that are really starting to show up in data, but haven't really been discussed.

And we especially like things that are kind of validated but are not appreciated for the magnitude of the change. You know, I'm 28. And so as somebody in my age bracket, I've kind of observed this shift where it's not just that online dating has become popular. It's killed all other forms of how people meet. And so it's now, you know, 70, 80, 90 percent of relationships depending on where you live. And in some cities, I mean, it's become completely dominant.

And so this is interesting. And kind of in every part of my life became interesting. One, you know, in terms of dating, it was the only option in trying to figure out, you know, how the hell does this work. And at the same time, at work, we were looking at, you know, how is that impacting consumer spending? How is that impacting household formation? How is it impacting, you know, any number of other things? And we've observed this shift. And so as we started to dig into it and get some data, we realized, wow, this is a much, much bigger deal.

So we've been working on it for about three or four years. And one of the things we do is we sort of partner with people who are entrepreneurs or other things like that and talk to people on kind of the startup scene in private markets. And we were actually looking at potentially starting a dating company several years ago. So we did a lot of work and we spoke to a lot of engineers. We were thinking about poaching some for a little startup. We decided not to do it because we saw it was a kind of network effect business. But this thesis really kind of came together.

I spent some time in Asia and in the Middle East this summer and kind of seeing how these apps have affected culture globally really kind of clicked into a place of view of what was going on and how this was a much, much bigger deal than anyone really thought. Dan, first of all, let me just say that this paper is really amazing and very, very funny. And part of the thing that makes it so special is it's sort of written. in this very dry way, and it includes sentences like, you know, men struggle more in the dating market when young and overtime adjust expectations as the market prices their deficiencies more shrewdly, which is just an amazingly entertaining sentence. But I'm curious, when you

started doing research for this paper, like, how much was anecdotal or based on your own experiences versus sort of rigorous academic research? In other words, Did you go out and sort of do your own field research for this one, let's say? There's a very funny subject matter to write. It's a strange topic to write about in any sort of professional context. So we wanted to write about it. We figured it'd be funny to sort of ironically write it very straight and then, you know, put little jokes in there.

But yeah, all of the above. I mean, it started out, you know, the interest in this started out because it's the way people in my age bracket date. And so everyone's sort of commiserating about their problems and their successes and things like that. I've used all of these apps and all of my friends have and it's something that's frequently discussed. As those of you who followed my Twitter will know, I'm a bit of a comic. And so a lot of people in the comedy community talk about it's just been a frequent discussion. And so what I was interested in was I was hearing a lot of opinions that sort of up close may be conflicted. and a lot of people on average were frustrated with the experience.

And I was fascinated to see everyone simultaneously be frustrated, and yet they continue to grow and grow and grow, even though a lot of people would say, oh, you know, I'm just generally disillusioned with using dating apps. And I've also seen great successes. I know people have gotten married off of Tinder, which leads to amazing best man toasts and things like that. And I've seen people have terrible experiences.

But it's one of the things where everyone seemed to be talking about it, but I haven't seen any, and it's become a very serious day-to-day part of almost everyone's lives who's under maybe 35 and some over, and yet there hasn't been a lot of serious research done, at least in the financial economic community. So I said, okay, what literature exists? So we first thing we do when we're looking at any subject at work is we do a thorough literature review. So we looked at, you know, a number of nonprofits, think tanks, university research entities.

And there's a lot of good sociological research done on dating and health information. and marriage and all of that divorce. And one of the things that was very interesting to me was, as we looked through these papers, it was kind of like, you know, at one point we could find a lot of data showing that online dating had now become the dominant factor in dating. And at the same time, all of these papers still sort of treated it like a footnote. It was kind of, oh, and by the way, some people are dating online, even though 80 or 90% of the data inputs into those papers were being heavily influenced by that factor.

So we said, that's a really interesting setup for further research. So at that point, we spoke to people at pretty much every dating company. You can imagine ranging from E-Harmony to OKCupid to match to Tinder, Facebook dating, all of them. And we also spoke to people that ran actual matchmaking businesses, kind of old school, and those tend to be higher end. It was a very iterative research process where we kept having different hypotheses about how this market was working. and then as we did more research, we kind of kept invalidating them until he came to something that made a lot of sense. And then we started going back out. And when we had an idea of what we thought was going on, we started going and doing specific polling and then looking in specific geographies. Because we had a sort of view that essentially what happens is an online dating site goes up, goes up, men immediately join it because dudes are going to do that.

Women slowly go onto the platform. There's a lack of trust at the beginning. and over time, what tends to happen is the women are actually in a position of control, even though that is what is initially scary about online dating, particularly for women, is the unknowns and the lack of feeling safe and things like that. But particularly looking at markets in the Middle East and in Asia, where women have significantly less agency than they do in the United States, what we saw happen was this very clever dynamic of women all of a sudden realizing, okay, wait, I can see unlimited guys I might want to go out with.

I can say no to as many of them as I want without any possible repercussions. And I can be very, very choosy about who I want to go out with. But that also means I don't have to go out with whoever my dad wants to introduce me to. I don't have to participate in the sort of weird pseudo-arranged structures that I don't really like. And also, instead of having to date within my immediate social circle, which can have bad ramifications if things don't work out, I can date everyone in this city or everyone within 50 miles. at least level the playing field, if not put women in a dominant position, particularly in those markets. And that's the first time that's ever happened in, you know, most of the Middle East and in a lot of places.

And we think that's a really interesting dynamic, just looking historically, because dating for women is so much riskier than it is for men. And so we did a lot of interviews with women using these apps in different countries and their experiences. And I think that Americans have a very, Americans and Europeans probably have a very skewed appearance. of what dating is like globally. And I also think men tend to have a very skewed opinion of what dating is like just in general. So it was this iterative process of, you know, we've used them all, we've talked to a lot of people, we've done the academic research, we've talked to people at companies, and then we've kind of iterated that with question lists we had, and then we've tried to test our hypothesis against new incoming data. And really, we got to a point where all the

new incoming data was sort of confirming our model, so to speak, and that was where we got very comfortable with the overall thesis. And we shared the thesis to the few people, and everyone was very, very interested in it. Most of the stuff we write about as hedge fund guys, nobody cares about. And so we made a decision to publish it. We just wanted to put out, you know, not a stock pick so much as just here's our general framework on this market. We think it's a very big deal, and we think people aren't really appreciating that this is not a fad and this is not a niche app. I mean, this is the number one grossing app on the Apple Store and Google Play for, you know, forever and it needs to be taken seriously. And I think it's fascinating to me how I think it's just

psychological bias against something that is still categorized as being sexual in nature that is causing people not to really think big picture about what's going on here. So you mentioned that if you look through existing literature, sociological literature on household formation and so forth, that dating apps, the rise of dating apps is often treated as a footnote, even though much of the data and much of these new households are being formed by dating apps. And so they're being simultaneously, they form the core of the new information, but also they're dismissed. What is the error that that leads to when you see people dismissing the significance of dating apps or treat partnerships, relationships that form via dating apps as being exactly equivalent to partnerships that form via any other form, whether it's being. in a bar or through churches or work or whatever, what kind of errors does that lead to in terms of

analysis? Yeah. So it's really about if you think about any sort of analysis of a process like this, there are gating items. So before you get to a question of who somebody might want to date, the first question is, what is the available pool off of which they're making those decisions? So particularly in America and in other places. is not a very densely populated country.

So in America, especially if you're dating within your social circle, and particularly before the 70s or the 60s, people generally less mobile, the actual dating pool people are selecting from is quite small. So it might be a few hundred people, and then you filter for people who are available, people in the appropriate age range, people who are from good families, things like that. And there's a lot of other variables that get upweighed around the social standing within that given sort of click or tribe. And so there's a lot of variables to get thrown

out. So the first effect that online dating has is that your dating pool size effectively becomes unlimited. So it's going from realistically several hundred people. I mean, let's say it's the people at work, it's the people at the bar after work, it's your church, and it's a couple of social activities. You're not going to interact with in any material way more than several dozen people, if not a few hundred people. People go through that many people on a dating app in like an hour. The average time somebody spends looking at another profile on a dating app is two to three seconds. So the initial pool being drawn upon goes up massively. And so then the question is, if somebody has millions of people to choose from instead of a hundred, do the variables they're

selecting people on change? And most of the historical papers we've seen really try to take a really, really rational approach to dating. And I don't know if either of you know anyone who's ever dated, but it's not the most rational process. I've met people who have dated. And so we've seen a lot of things where these papers are sort of arguing that men and women create like a spreadsheet in their brain of, okay, this person went to this college, this person has this income power, they sort it, and then they select based on that.

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We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your... client's consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio, all investing in subject to risk vanguard marketing corporation distributor. Most people have had very small, actual available dating pools, particularly

in smaller towns. You have your work, you have your after work activities, church, a few other things, particularly historically that pool gets very small. You're talking a few hundred people at most when you adjust for appropriate age range and correct gender for your preferences and things like that. Online dating flips that and now the pool size is unlimited. In addition to that, a lot of the historical studies and still a lot of studies, really focused on academic attainment and things like that, as if people are using a ranking algorithm in their head, and that just tends to not be true. It can be true in certain populations in cities, which tends to be the people doing the academic studies, but it doesn't really bear out over broad populations with the exception of sort of minimum gating items.

So, you know, if you don't have a high school degree or if you're in a college educated area, you don't have a college degree, it does get harder. But beyond that, you're looking at now, so basically going from a few hundred people being your choice set to millions. And then when people are looking at profiles, they're spending between two and three seconds deciding yes or no. And so that means that the decision about swiping it left or right or saying yes or no is a lot more about kind of the visual element of the profile. And so you can get there's different elements in there, which might correlate with college education. But it really comes down to how can you present yourself with photographs and some text. Each platform, individual platform, uses a slightly different user interface so that people can either find different information about potential matches they value or showcase and or showcase. showcase information they think is valuable. So it's leading to kind of an Instagramification

of dating. People are making very quick snap judgments, and then people chat. But the other thing is that the match ratios for men and women are radically different. Women are getting a minimum of five times and in many markets 25 times the inbound likes that a male account is getting. And so that introduces a lot of other gamifying elements around, look, you could be the greatest person ever, if you come into somebody's message queue and you're 40 back, you're probably not going to get seen. So then it introduces elements of just random chance around what time of day, a like, or a message is sent, and how do you really draw attention? So also rewards behaviors that draw attention so you can stand out because there's just so much volume. And it's very similar to a lot of things in markets right now.

And, you know, a lot of people right now are looking at, you know, a few high-profile CEOs that are doing some very flashy things. Whereas what people think, they're getting all of the attention. And that's really the same thing that's happening right now in dating, is if you are not able to draw attention to yourself to stand out because the pool is so much larger, you have a big problem. So that's leading to people going on, people having to change their strategies, try to get dates. And then when you go on the date, you have to stand out because everyone knows that in 10 seconds,

you can go on your phone and you can have another date. Or you may know that you have 5, 10, 20 alternatives waiting in the wings on your phone. So if there's a red flag on date one, there probably is not a date two. People are not hanging around on overall, in the whole population. People are not hanging around in bad relationships as long. Wait, Dan, can I ask a real quick question? Sure. Whether it's on the profile itself, like on one's profile or whether it's showing up, is it smart strategy to be wearing cargo shorts? I am an advocate of 100% cargo shorts all the time, but my cargo short oriented dating app is not doing that well.

And I just think there's a conspiracy against me at Apple from the top. And Tim Apple himself does not want this to happen. But I think it's just an inevitability. Everyone's going to wear nothing but cargo shorts in the future. I just wanted to clear that up. Yeah. Are you AB testing? Like, is there one profile where you're wearing cargo shorts and another one where you aren't?

You know, you joke, but we did several years ago do some AB testing with dummy accounts. accounts and I think one of them did have cargo shorts on. We made an account called Chad that was worst person ever. And it did way better than I thought it was. It was really offensive. I think it actually outperformed my actual account, which is just crushing. But it comes back to like attention. Like if you make, if you, if you have like a shirtless dude in cargo shorts that the entire profile is ridiculous, you're going to get some percentage of people saying yes because they say, oh, that's funny. They're actually such a thing as like a hate like.

Some people will match with somebody just to say mean things to them in the DMs. You get a lot of that. But yeah, we did a bit with cargo shorts. So before we get on to more of the economic implications, I just wanted to ask. You're talking about online dating, basically making the whole dating market more efficient. So you have greater access to a bigger pool of potential mate. which is a terrible word.

But I just wonder how much of that efficiency is actually offset by having an enormous amount or a number of people to actually choose from and having to go on dates with various people. In other words, how much of the efficiency from online dating is actually offset by the stress and burnout of doing this constantly? Excellent question. So I think it's important to understand that stress and burnout is a huge factor in dating. That's the least romantic thing to say ever. But at some point, you're making a judgment of I really like this person. You know, we're in love, da, da, da, da, but, you know, I think there might be somebody else that could convince you to break up with them and go to somebody else in a lot of circumstances. And historically when, you know, if you live in a small town, like I'm from Rich in Virginia, if you know, 300 people and there's really like 20 that you think are potential long-term life partners, at a certain point you're going to say, do I really want to risk this good thing for, you know, five or six other potential options when the clock is starting to run down?

It starts to be an illogical and irrational decision. The real difference is, and so that still exists. As you get older, you get to a certain point, like at some point, you're going to say, I'm really tired of playing this game. I'd really like to, you know, not do it. And that's not true for everybody. Some people enjoy dating. I think that's insane.

I think dating is stressful, especially early dating. But there are people who like that. But what's important to understand is that it's more about during, like, specifically during your 20s and early 30s, this is providing at any point in time you have an escape pass you can pull. You can always go and you have hundreds, if not thousands of potential options. And so you're going to try on, this is not bad, you're going to try on more pants. You're going to have more options to try out.

You're going to go on more first dates that are going to end badly. And I think what's happening is that's allowing people to sort of build a database of what their deal breakers are, which, you know, I'm going to include all 30 rock references in that, because I love that show. Like you're going to figure out that doesn't work for me. That doesn't work for me. This is a problem. And now those characteristics are going to be good. But you're not going to stick around in a relationship if there's a clear red flag off the bat because you can be on another day tomorrow.

So you're not going to go out with, you know, a sketchy person two, three, four times. Again, overall, obviously individual people will make terrible decisions. It's what America's all about. But it's the massive increase in alternatives. And so as you go through more and more dates, and one of these has been studied quite a bit, I'm going to post some more papers about this, is that between about the 1950s and now, the median person when they get married is having seven to 12 times as much dating. experience as their parent. I think that number is low balls because I think people still

don't want to sound promiscuous. So people are, when they are making a decision to get married, they're coming in with way more information. They've seen a lot more. They're also more aware of how stressful it is to date. So there isn't that factor of, oh, I wonder what else is out there. You're like, no, I know what else is out there. I'm really good. Like, this is solid. So you're just making a more informed purchasing decision if you want to sound like an economist about it. And that's really, really changing things. And as a result, I think this is driving a reduction in divorce. The other issue is that absolute marriage rates, particularly marriage rates below 25, are going down a lot. And in my personal opinion, this might offend some people formed around 25 years old is kind of crazy because you have very little life experience. You said getting divorced before 25. Did you mean getting married before 25?

I mean both. But yeah. I mean, yeah, getting married before 25 is statistically. a worse idea because you're not at a point where you're not a point of stability personally. You don't have a lot of life experience. You don't have a dating experience. You're making a huge decision with very little information going in. You're going to generally be unable to withstand kind of shocks better than, you know, we could wheel in the seam to 11 here and he could explain it. But you're not going to be able to withstand shocks very well. One of the things that's happening as a result of that is that people are are dating a little bit longer. People are also moving in together more and the probability that if you live together, if you cohabitate, you do get married

is dropping because people are moving in for six months, 12 months, two years, and just saying, okay, can we actually live together? We might really love each other, but are we going to kill each other if we live together, which is an important question to ask if you think of getting married. So you're seeing, you know, you're just seeing a lot more trials. And so you could you could comp that to the market and say you're seeing a lot more trading volume, which tends to lead to more efficient pricing. And so what we think is happening is people are basically going on more bad dates, figuring out more of what doesn't work for them. They're living with people before they get married. And then when they do get married, and all of that up until the marriage decision can be

very stressful and hard. And I think that's why all the dissatisfaction is there. But when they do actually finally find somebody, they have way more information. They're making a much more informed decision overall. And you're seeing better marriage outcomes where people actually, you know, they know what they're getting into and they actually can make a they're making an educated decision about whether or not they think this is going to work. I think it's important to note that on a statistical basis, marriage is a lot more about downside risk and upside. I mean, you can't really predict if you're going to be the most happy you've ever been, but you can probably predict if like this person's going to kill you with an axe.

So you need to really, you want to avoid the axed murder situation as much as possible more than you want to have like the notebook happen, right? That's really like kind of depressing and unromantic though that like, okay, yes, maybe there are fewer divorces now. But basically that's just about eliminating the left side of the tail, basically. It's not that marriages are per se better. It's just that there are fewer of the really bad ones, it sounds like. Yeah, but I mean, I think, you know, I'm from a family that had, I'm from a divorced family. And I can tell you that, you know, the left tail is not fun.

Right. And people getting into these decisions of like where, like, you see this a lot of investing. People optimize, people in their head optimized to this dream scenario that it's really, really dangerous. It's kind of a siren song. You're thinking about perfection. You're not thinking about something that is consistently good and consistently positive. And I think overall it's better for people and people are happier if they have something

that is consistently good than if they, you know, make these moonshot bets. Now, I will say that the moonshot bet thing is huge in this because because the dating pools are so large, people are a lot pickier, particularly women when they're under, call it 25. Everyone is trying, no matter who you are, what you look like, whatever, everyone is trying to punch above their weight because statistically it'll probably happen given you have unlimited swipes, right? So you have unlimited at-bat that's never been the case before. And so everyone is trying to punch above their weight. And that's actually causing there to be more competition in the market. But people tend to find that that doesn't actually work so well. That doesn't, you know, you're probably going to get to go on a few dates with people that are way out of your league. And, you know, if you make that happen, great for you. But over time, people sort of, you know, get their expectations. Your expectations get priced to a reasonable level in the market over time. And all this sounds very, very unromantic. I'm just kind of describing what's happened. I think this is part of the issue also is it's very hard for people to describe this market dispassionally because it says something about you. I don't want to sound like a psychopath describing people falling in love as a pricing function, but the data looks a hell of a lot like a pricing function. And using a pricing function is the only way we've been able to actually solve this.

So I kind of got to put on my psychopath hat and talk like one for a minute to understand what's going on. But then there are strategies you can use to get outcomes that you're happy with here. I mean, it's not a circumstance where everybody's doomed. It's just people are going to go through a period of struggle. And then the bright side is people are finding what they're looking for. And the great thing about online dating also is that there are all the big properties, but there's increasingly more and more deep niche categories where people can find very specific traits if they want a certain type of partnership.

Some might be considered abnormal or interest oriented or ethnicity oriented or something. like that, people can select into that. So for example, we have a friend at the firm is Orthodox, a Jewish family, and he was talking about how, you know, when he was a kid, it was all family introductions, and now all the kids are on, you know, J-swipe and things like that. And it's, like, it's weird because I don't understand it at all, but they're still dating within the pool that I'd like them to date with. So great. So, you know, people are getting the outcomes that they want, and they are eliminating the left tail. So it's kind of like, it reminds me a lot of when people, get into investing.

And they start thinking, okay, I'm going to pick some genius stock. I'm going to be the guy by Amazon at a dollar a share. And I'm going to make all this money. And they realize over time, like, you know, if I can do a solid like 8, 9, 10% on my retirement portfolio over 30 or 40 years, like that's great. But that's not a fun process of adjusting your expectations, you know. And I think it's a lot like that. That's a good analogy.

Well, since you're talking about dating from a slightly. a psychopathic numbers-based slash investing strategy perspective. I'm wondering, given that online dating is sort of the dominant form of dating now, is real-life dating where the alpha is? Like, is that where you could maybe find some interesting matches and maybe outperform the broader market, if that makes sense? I think so. I'm going to just put my hypocrite hat on here for a second, but my girlfriend and I actually met offline. But it's happening less. I think one of the things is, you know, one of the common comments about millennials,

you go to a bar and everybody's on their phone. So there are less people who actually have the conversational skill to, you know, strike up a conversation, form a connection. The other thing is, as I said, when you're on the apps, people are spending two to three seconds at most on average on each profile. So if you can actually start a conversation, and then you and that person are going to share, you know, let's say two, three, four minutes of mutual attention. That's giving you, you know, hundreds of times the exposure that you're getting otherwise.

So I definitely think that if there are a way, if you can do that without being creepy, there's definitely a lot of, you know, alpha there. I think that things like friend of friend introductions and family introductions are likely structurally dead because the risk, there's such a big risk factor there that now is not necessarily. theory. You know, it's always in the case that, well, you introduce somebody within your friend circle because it may strengthen, you know, loyalty within the tribe over time. But if it doesn't work, then it's a really bad thing. And it's going to be awkward as hell and it's going to make Christmas parties terrible. I think everybody's been through that experience. And so because there's unlimited dating alternatives, nobody's going to do that anymore. But I do think there's, there are a lot of opportunities to, you know, do better than you might on the apps by being proactive in real life.

And the other thing that we point out is we joked in the paper about don't ask us about dating advice. And I really don't want a bunch of people asking me about dating advice. But I do have some dating advice. Finally, this is probably going to be one of the first actionable things on odd lots ever. Because we don't normally are in the business of investing or trading advice or anything. But finally, someone is going to offer something substance. These apps are, in many cases, the engineers at the dating app companies are actually programmers who are coming from slot machine programming jobs, like gaming related to Las Vegas.

That says a lot. So they are incredibly good at manipulating these quick dopamine feedback loops. Basically, like, you know, the Stanford marshmallow test thing. And everyone fails it, and everyone fails it, particularly if it has anything to do with sex. It just override everything else. And you're competing against your lizard brain. You're going to lose. So it's very hard to draw attention and stand out.

One of the ways that it seems like you can get around that is if you can target, or if you're targeting audiences that have a demonstrated ability to resist that. And I think a good proxy for that is people who are very passionate about something or have some sort of intense hobby or something like that where they're very, very focused on long-term skill development, things like that. So, you know, athletes, artists, things like that, people who are very, very focused on kind of not immediate payoff work and things like that. So I think a lot of people are having very positive experiences, meeting people, you know,

A lot of people when they go to a new city are talking to me, they're like, well, how do I meet people in a new city? I'm like, well, you can do their dating apps. That's going to work overall. But, you know, join a club. Go do, you know, not to be too serious. Go to like a CrossFit class. Go to yoga. Go to an art class. Go like go do an activity. Join some sort of club where it's centered around. Everybody really enjoying that thing and being very passionate about that. And that can be a good place where, again, you can meet people in real life who may share similar character traits that you value. and you can do well that way. But you've really got to put yourself out there. And I think the other thing is for people who are, especially young professionals who are trying to, you know, make it and are grinding

and they've got all these things going on, you know, it is a lot of work. Very easy to hop on your phone and just go swipe, swipe, swipe, swipe, and then you've got a date versus, you know, spending several hours, finding an activity, going to activity, you know, going out and doing something. And so that's a strategy that can work. It just takes a lot of work. It's similar to doing kind of fundamental investing. It's going to have to do an enormous amount of work and you're going to feel really stupid about it a lot of the time.

You know, it's not an efficient market in the sense that you can't achieve your desired outcomes or you can't, you know, find somebody. Everybody finds somebody eventually. But I do think that focusing on people who have kind of established delayed gratification skills is a really, really good strategy. And then I also think that, you know, time of day of when you're when you're using these apps is very important given the queuing dynamics. And I also think people should try up multiple apps and figure out which ones they like. So, you know, for example, OKCupid provides a lot more information about its users. You're getting several pages of text about somebody and you can respond. You can write something that indicates you actually care and it's a lot slower of a dynamic.

Tinder is a very quick lottery type dynamic that really, I think unless you're like an 8 or above, I don't know why you're on Tinder personally. You have no shot. Hinge has a different dynamic, J-Swipe different dynamic. you know, e-harmony, things like that. And some of these are really optimized for long-term relationships, and some of these are optimized to make you swipe. And so I think you need to, like, you can't judge the entire category by just doing one.

And I would just, you know, encourage people to experiment with a lot of them if that's what they're looking for, because they're very, very different experiences app to app. Well, this has been obviously some very useful insight into dating and how to produce alpha. But we can't end without talking at least a little bit about how you're actually using your research. I mean, there's only so many, you know, obviously there's publicly traded online dating companies, but not many. Like, Madge is one of them.

But big picture, this is research that you've done as part of your fund and you talk about investing in dynamics that are going to change the world over the next five to 10 years. So as you continue to build on this research, where are the areas? areas that people might look to see the ramifications of the change in dating or mating habits show up in the world of, in the investable universe? So obviously there's the publicly traded dating companies and, you know, full disclosure, we're long, one of them. It's not hard to guess which one. But I think one of things it really drew me to this subject to dig into it deeper and we're going to be putting out more research on this is household formation as a concept has been a major,

driver of economic spending, you know, purchasing a house, having kids, buying all this stuff. And this is changing that dynamic. It's not eliminating it, but it's changing it. And one of the things we've seen the last few years that, you know, a lot of people comment online all the time is, okay, why are people getting married at different ages? And a lot of people have jumped straight to, oh, well, it's just economic uncertainty. And no doubt it is one of the variables in that equation is economic uncertainty. But I think online dating is actually a very underappreciated factors.

So it might be a 1% waiting, but people might have it in as 1% waiting, but I think it's probably more like a 20% or 25% waiting. Because I think when people get in a position where they're looking to get married, that priorities reshift a lot. So I think adding online dating in with what the income distribution in the United States really looks like, particularly among young people, and particularly around housing prices and certain geographies is a very, very important explanatory variable. And so we're very focused. Another secular theme that we're very focused on that will probably be one of our next papers. I'm not sure if it'll be the first one or, you know, but it'll be coming out in the near future is around affordable housing. There's a massive structural shortage of affordable housing in the United States. And you could argue it's 10 to 30 million people and you could argue that it's growing, that shortage is growing at 20 to 30 percent a year.

And if that isn't solved in the next five years, it's the only issue in every election. And I'm baffled that this is not a bigger discussion. So we think looking at the affordable housing shortage in conjunction with people getting married later and also it's going to be a huge, huge issue in terms of, okay, how do families actually form and then how many kids are people having? And what does that do to the demographic tail into the United States, especially with our immigration policy being fairly restrictive right now? In addition to that, I think, as I said, this is an Instagramification of dating. And so you're seeing massive shifts in consumer trends. And I don't know if you guys have noticed this, but there's a huge boom in male cosmetics. And I don't mean, like, just makeup.

I mean, there's a makeup brand I was sold about this for men. It's called WarPaint, which I don't know anything about it beyond that, but I think that's amazing branding. But you're seeing like all these, you know, I think they began with beards. There's been all these beard oils and waxes and, you know, some company called Manscape that is selling a male hair trimmer and they have these hilarious ads. And now there's the number of different male moisturizer brands. I was in a target yesterday. There was an entire aisle of just male skin care stuff.

And to see that in a target in Rest in Virginia five or 10 years ago is completely unthinkable. I mean, it's ridiculous. And so I think you're seeing huge trends in particularly the startup market in CPGs based off of people needing to look better on camera to find somebody. And I think it's changing everything else. And I think one of the other things that's not appreciated is, you know, when you look at something like Match Group, you know, there's an argument to me made that they have a dominant position. in that market, they just did a partnership with Open Table. And so what they're doing is they're going to partner with Open Table and they're going to place dates at restaurants. The margin that a restaurant earns from somebody who is just going in and buying a few drinks is astronomical compared

to any other type of customer they have. So they can actually pay quite a bit for that. So what I'm also interested to see, okay, what other types of business models come out of online dating? Do they start selling these cosmetics directly? Do they start selling seats at bars? They start selling event tickets? Did they start doing them your curated thing? One of the questions that I had that I looked at a lot when I was thinking about starting one was, why is there not an app that kind of continues to work with you as you date? Why don't they, because they'll do a promotion and say, hey, you know, $5 off movie tickets or something, but why are they not continuing to provide date ideas? Why is it not, you know, the wine and painting thing or, you know, go to trapeze on

the west side, New York or something like that? I think there's a lot of ways that products will be marketed through these online dating platforms. So the online dating platforms are going to change consumer demands. It's going to change how household information is working. I think people are going to start to route a lot of products through online dating because it's becoming a central nexus. And I think people below 30, I think more of them are using Tinder and things like that on a daily basis than are using Facebook.

The opportunity to sell through there is huge. And so it's going to be this kind of nexus point between all these big drivers. And maybe it's not that big of a dollar category right now, but I think when you think about it demographically going forward, particularly if you assume that people are not going to stop online dating if they get older, if they're single again or remain single. And that's what we're saying. Is we're seeing older and older cohorts get on online dating? So if you think that this is going to be the way people date 20 years from now, and I do, then this is going to be a massively important area to watch because it's going to give you leading indicators on household formation. It's going to give you leading indicators on consumer brands. It's going to give you leading indicators on, you know, what's cool, what's not cool. I mean, you can see this on Instagram all the time. People on Instagram are showing off what they think are cool products or cool things to do or this, that or whatever. But online dating is a super condensed version of that. You're not putting a picture of yourself or content of yourself on an online dating platform unless you think that is attractive to people. So it's very,

very interesting the data and the insights that can come out of this. I think it has huge implications for most and not all sectors. And it's one of my favorite macro indicators is actually looking at what's going on in this dating market, not on a short-term basis, but I mean on a long-term demographic base. And I think it's also going to completely reshape entire societies in more conservative areas of the world where women are going to be able to step out from behind a patriarchal society and have agency around their sexuality, agency around their dating, agency around their marriage. And no, it's not going to happen all at once. And it's not going to allow them to immediately snap their fingers and be all good. But it's going to have this net effect of starting

a ripple process that's just not going to stop. And so I think that what's the biggest point about online dating that's interesting to me is what is it going to do to emerging markets. And so a lot of the big things that emerging markets right now is basically other than plumbing, which is a huge issue, smartphones are having this completely revolutionary idea. A lot of people look at protests and things like that and they say, oh, well, these protests are happening because the people are tired of the corruption. And, you know, I think they've been tired of the corruption for a long time. The reason they're protesting is they can coordinate so they have smart phones. So smart phones is this vector that's changing every country in the world in the U.S. as well, but not as much as it's changing

other countries. And I think that the specific subvector within smartphones that's mattering the most in emerging markets is actually online dating because it's going to unlock the value and the agency and all the power of all the women, which is half the damn population. And it's just going to be a much bigger issue. This is not. not about people looking to go out, get laid at the bar. This is a huge deal. Dan McMurtry, that was great. Really enjoyed that conversation. So much richer and thought-provoking than I had previously thought about the subject, which I guess is kind of the whole reason you got into this. But really appreciate you joining us. Thank you guys so much. Really appreciate it. Happy to come on any time.

Thanks, Dan. Thanks, Dan. That was great. Tracy, that really was, as I said at the end, sort of far more interesting in terms of the ramifications and follow-on effects of online dating than I had ever really thought about before. I don't know about you, but it kind of has me thinking about what my Tinder, my hypothetical Tinder profile would actually look like. And I think based on Dan's observations and his dating advice, I would have to put something about like, I'm really good at delayed gratification skills. Like, that's what he might. Oh, wait. That actually sounds really bad. No, I think the idea is to demonstrate that you have some pursuit, right?

Oh, yes. That's right. Demonstrates that attracts people who have delayed gratification. So the other thing that comes through from it is just he mentioned the gamification of the entire dating strategy, which is why, like, they say for guys on Tinder, you're just supposed to swipe, right, constantly just to increase your chances. of getting a match. I didn't realize that the time at which,

the time of day at which you do it actually matters as well. Well, I was wondering about that too, because maybe that would be my one edge because I always get up at 4 a.m. So I was thinking, like, well, if I were getting up at 4 a.m., I wonder if that would help me, like, in the queue, so to speak. You also have to wonder what kind of people you're matching with at 4 a.m. I can only imagine.

But on a serious note, I mean, this notion that our economic models aren't really taking into account what is a sweeping change to the way society works, I think is a really interesting one. And Dan made a very, very good case for why it matters in the broader economy and in the broader consumer market as well. Yeah, absolutely. People should read the paper and follow them. Yeah, for sure. The paper is highly amusing, as mentioned earlier. This has been another edition of the Odd Lots podcast. I'm Tracy Allowwhite. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthal. You can follow me on Twitter at the stalwart. And you should definitely follow our guest today, Dan McMurtry. He's at Super Mugatu

on Twitter. He's really great because actually for a long time he was pseudonymous. And then at the time that he unveiled this dating paper, he revealed his name to the public. Everyone should go check it out. You can find links to the papers there and all his other insights, all of which are worth following. Be sure to follow our producer on Twitter. Laura Carlson, she's at Laura M. Carlson, and follow all of the Bloomberg podcast on Twitter at podcasts. Thanks for listening. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg this weekend. I'm Christina Rafini. We'll bring you the latest headlines, in-depth analysis,

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