31 January, 2010

Business of LIfe

We all live with the objective of being happy; our lives are all different and yet the same - Anne Frank

I know I said that my next post would explain why we stay in relationships when we reach that point of no return, but - though anachronistic - I feel like I should explain the purpose of this blog – where all my ideas are coming from and why I feel that life can be brought down to these economical equations.

How I see it, life is a business. That sounds horrible - I know - but hear me out. A business where you make more money than you put in can be deemed successful. A life where the happiness you get is at least proportionate to the effort you put in to get it can be deemed great.


Let’s talk business. A firm starts out with a business plan. The owner will appoint a board of directors – a group of people who have the right to vote and decide on factors affecting the business.

A firm will also have shareholders – those who invest in the company and have voting rights on certain matters. They put money into the corporation in hopes of monetary profit.

A business will come across many things in its lifetime:

  1. Mergers
  2. Bankruptcies
  3. Quarters where returns are below expectations
  4. Quarters where returns are above expectations

The ultimate goal: monetary profit.


Now, life. You start out with dreams and aspirations. Your family is there to guide you, to use their known right to give input on factors affecting your life. And sometimes, to straight up tell you what you have to do.

You’ll have friends – people who invest in you. They counsel you and guide your decisions. They put in time and advice in hopes of making you more content. And in an equation of any true friendship – seeing you happy makes them happier.

In your life, you’ll come across many things:

  1. Relationships
  2. Extreme loses
  3. Failures
  4. Successes

Your ultimate goal: happiness.


Connection. Your dreams are your business plans and your family - your board of directors. Your friends represent your shareholders. Mergers equate to relationships and bankruptcies equal extreme loses. Lower than expected returns are failures and above - successes. And, most importantly: life's profit is happiness, a business' profit - money.

There will be future entries that will add more depth to what I've already mentioned above. It's not hard to draw parallels between life and economics. They both come down to supply and demand: how to get what you want and need with the resources you're given and how to find that comfort at equilibrium where supply meets demand.

15 January, 2010

Diminishing Margin of Happiness: Why Relationships Plateau

Do you ever wonder why as a relationship develops, the little things don't seem to mean as much anymore? Why the first bouquet of flowers they brought you meant so much more than the fifteenth?

Economists have a term they call the diminishing margin. In their respect, it means that each additional input yields a smaller and smaller increase in output. More simply put, the more of something you have, the less it means.

It's strange how when both people are the same as when they first met, a relationship still manages to plateau. Here's what I like to call The Diminishing Margin of Happiness. It explains why repetitiveness and consistency make a relationship boring.



I know I said before that you can't measure happiness, but for this example, I'm breaking my own rule. Let's use one of the most widely known gesture of affection: flowers. The first time your sweetheart shows up at your door with a gorgeous bouquet, you're ten times happier than you were before. The second time they come with roses in hand, you're only about eight times happier because, well, it's been done. You begin to expect this kind of behavior from them - and we all know, predictability takes away from excitement. The third, six times happier. It continues like this until them showing up with flowers leave you feeling nothing.

When it comes down to it, the same things that made you happy at the beginning won't make you as happy two years down the line. When they don't change and come up with new romantic gestures to show you their love, you lose the excitement. Things go from being endearing, to predictable, to routine. You're still happy, but they don't make you happier today than they did the day before. What's left?

When the production level of a company plateaus, they invest their resources in Research and Development. They try to find something that boosts the production output so that it's increasing as fast as it did in the beginning. That's exactly what a relationship needs when things begin to level out. You need something new, something exciting, something that hasn't been done or seen before.

However, if a company exerts its resources and can't find anything to increase production, they know that perhaps it's time to shut down. So, when you've done everything you possibily can to put that spark back in the relationship, but it doesn't work -- well, maybe it's maybe time to move on. Easier said then done, I know. But, why? Don't worry, I've come up with an equation for that too. But, I'll leave that for my next post.

12 January, 2010

Inelasticity of Love

We are never so defenseless against suffering as when we love, never so forlornly unhappy as when we have lost our love object or its love. - Sigmund Freud
Freud says it all, nothing hurts as much as getting your heart broken. We all know that overwhelming pain that you can't shake. Yet again, here's another attempt to explain something so intangible with a little empirical thinking.

Let's start off with some quick definitions any student of economics has seen:

Elastic: a slight change in price results in a sharp change in demand.
Inelastic: change in price results in a slight, if any, change in demand.
More simply put: an elastic good is something you can live without if your conditions aren't met. An inelastic good is something you need, something you have to have - no matter the price. The conditions for inelasticity include the following:
  1. There are few substitutes and they are difficult to find and obtain
  2. It's a necessity
  3. It's unimportant how much you have to put in to obtain it
  4. Little time or inclination to seek for a substitute
Ok, with that said, let's get to the point. When you first start dating someone, they're completely elastic. One little thing that irks you and your demand for them drops drastically. Or, in other words, they're out the door. But, when you start investing yourself into someone, start feeling something, inelasticity steps in:

  • You know that there's no one out there just like them. (condition 1 of inelasticity)
  • You need them in your life because things just don't feel right without them there. (condition 2)
  • You will give all of yourself to this person. (condition 3)
  • You don't want anyone else. (condition 4)

See where I'm going here? Why is losing love so hard when there are so many fish in the sea? Maybe it's because no two people are exactly the same. No one fits with you in the exact same way. The little quirky things in their personality that make you love them - that make them so perfect for you - make them completely inelastic in your life.

Yes, Freud did do enough drugs to kill a horse, but we can't argue that he's off here. Losing someone you need - someone you have to have - that hurts. Like hell.

07 January, 2010

Average Joe and Ordinary Jane

Anyone who knows me knows that I have an established list of fears - ranging from open water to kankles. But anyone who really knows me, knows that it's all gibberish. So here it is - my actual number one fear in life: being average.

I know that sounds like an awful thing to be afraid of because, well, by definition - it's typical, it's common, it's what most people are. But, I know I'm not the only one with that fear. We all want better. We all want more.

But, how do you measure average? How do we define who we are in these terms? Lucky for us, Wikipedia did all the work. The wikipage spits out all the data - telling you if you're the Average Joe or Ordinary Jane. It's broken down into categories: families, income, education, social class, occupation and homeownership...

Those are a lot of categories. The full on Average Joe has to fall into the average range for all those classifications. However, even Wikipedia admits that some things can't be measured - like the aspect of family. The more I look at these statistics, the more I question. Are any of us really average?

I know, that question makes no mathematical sense. Of course there are average people, questioning the presence of an average in anything is blasphemy to any empirical mind. But, contrary to what I try to convince myself - that most things in life can be dumbed down to equations - there's no dumbing down here.

There's too much subjectivity in it all to really categorize ourselves. Happiness can't be measured, I'll never argue that. There are too many different definitions to the word success. The life that I picture to be ideal - to someone who comes from difference experiences - could seem nothing more than average.

So, it's time to smash my own fear. Maybe, we're all above average in some aspect of our lives. Life is made up of so many components and it's hard to believe that anyone can fail at all of them. I actually believe that everyone has something they excel at. Honestly though, I think that anyone who is happy with the life they lead is already more than average.