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Friday, August 20, 2004

The Cost of Relationships

On another board somebody posted the following question:

What is the most you've ever spent on a escort or mistress? Who is the champ here? Let me see.
Champ or chump?

Let me broaden the question by looking at different kinds of relationships and their annualized all-in costs. These costs are not just the stipend or cash component, but also includes other expenses.

GIRLFRIEND: peak $140k/year or $2.5M investment

The most expensive girlfriend relationship I've been in cost about $200k over a year and a half in gifts, cost of living subsidies, helping family, travel and entertainment, extraordinary medical expenses, and several rounds through rehab. Call this about $140k per year.

That relationship wasn't worth it.

Sometimes it seems that every time I'm in boyfriend mode, I seem to attract women that are very needy in some way. Because I enjoy helping them out it initially doesn't seem bad, but so far these relationships have never worked out. I wonder if I can blame circumstances or other issues, or if the money is to blame.

MISTRESS: peak $300k/year or $5M investment

The most expensive mistress I tried cost about $40k over about three months in patronage, and probably another $80k or more in hotel, entertainment, travel, and other expenses. This is probably equivalent to a sustainable $300k per year.

I admit at that time I thought it was worth it. But since then I have had so many more experiences that I now know it was not. Expensive lesson. I have met more expensive mistresses, but have not engaged them.

But the best girlfriends and mistresses aren't that different. This implies that the value of a lack of long term commitment in a mistress is about 2x the uncertainty of a traditional relationship.

FAMILY: est. $400k/year + upfront, or $10M investment

When I was planning my last set of big charitable donations I planned several scenarios to determine how much I had to keep as a hedge against a change in my circumstances. If I had a wife and two to four children, I had estimated it would cost me about $300-500k per year in expenses and about $3M in up front costs. Put another way, I saw it as about a $7-12M investment allocation. The peak number is probably twice that.

At $10-20M these figures are not too dissimilar to the tax and depreciation-adjusted real cost of a jet or a motor yacht. Not a romantic way to look at it, I know! ;)

Can I imagine family being worth that? Sure, but it's difficult to imagine unless kids are really as great to have as some people say. I can't imagine a single woman being worth that if it requires monogamy and a lifetime commitment. It's costing an additional 2-4x premium.

Of course if that family needs a motor yacht and a jet, well... :eek:

What is kind of weird is that I have spent that kind of my own money, and much more on charities and companies. So I have some comparables:

HIGH TECH COMPANY / CHARITABLE FOUNDATION: $10M+ investment

I'll write more about the similarities and differences between relationships and startup entrepreneurship in high tech and social charities. Both require a kind of an insanely hopeful naivete.

CURRENT RELATIONSHIP SPENDING: $50-150k/year or $2M investment

Most relationships and escorts were, of course MUCH less expensive. My annual spending on relationships is probably in the neighborhood of $100k per year all in (all these numbers do not count the cost I'm spending on myself).

The interesting fact is I have seen very little correlation between cost and quality, an interesting point to debate about escorts. On the other hand I have seen correlation between cost and lower variability, which does have value, for example the value of beta in derivatives analysis.

I'll probably come back to this post from time to time and improve the underlying assumptions and models. I may also add other forms of relationships, such as supporting parents and siblings, and even the cost of friends.

3 Comments:

Anonymous Anonymous said...

Wow! this must be the most romantic entry you posted so far. Maybe your financial analyst should talk to mine:)

RB

8/20/2004 6:55 AM  
Anonymous Anonymous said...

How much does it cost you not to be in a relationship?

8/20/2004 4:20 PM  
Anonymous Madoka said...

I think when you analyze relationships by using cost factors, then it would really have to measure up to a high standard to be worth it. But since you regard it more like a service rather than a commodity, then there is variable correlation with price and service quality.

The problem with attracting needy women, is probably because you used the wrong 'bait' to start the relationship. It's like fishing, what you use as a bait, will determine what kind of fish you get.

I guess the most beautiful relationship are priceless and not based on money at all.

Like first loves when we were young and poor sorta thing.

6/03/2005 2:36 PM  

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