Girlfriends, Mistresses, Providers and Wives

I wrote about the cost of relationships in a post about 18 months ago. Here is a summary of what I wrote then:

	Annual cost	Investment cost
Girlfriend	$140k	$2.5M
Mistress	$300k	$5M
Wife	$400k	$10M

I have a friend who was discussing with me the finer points of financing a mistress. In his case, in fact, multiple mistresses. He was complaining about escalating long term costs and the diminishing benefits versus his wife. I pointed out that he wasn't collecting antique collectables, and he must have known about this going in. It wasn't like an adverse economic event, or corporate malfeasance, was at fault. He sighed and admitted that he did not look at it closely enough, in particular the bidirectional value in different kinds of relationships that drove future behaviors.

I don’t really have any other point to this posting; other than an update on the old post and to try to jot down some of my responses to my friend. So recently I tried the numbers a different way, taking into account some other expenses and removing others. Rather than looking at my peak cost girlfriend (who required therapy and living support, and who, therefore, I hope is an extreme case) I looked at more typical numbers... for me. More importantly, I counted the amount of time spent together in activities over a typical year and computed the hourly cost for each relationship. Your numbers, of course, would vary.

	Annual cost	Hourly cost
Girlfriend	$80k	$77
Wife	$430k	$207
Provider	$120k	$385
Mistress	$165k	$1585

Even if you quibble with the exact numbers, the basic ratios are of interest. Given this table, the rational actor economics of the long-term commitment become clearer:

A provider has to provide tremendous value compared to the other options. This value is no longer-term attachment: you can switch, cheat, or leave. In return the provider needs insurance in the form of higher costs and the reciprocal ability to retire, leave, deny service, and have other customers.

Beyond a provider, a mistress does provide love and fidelity. Compared to a provider she trades away the ability to leave or have other partners in return for more support. In so doing, she makes herself vulnerable to her partner switching (as well as affairs of the heart), so her insurance costs are higher. In many cultures the form of that insurance is real estate ownership from her patron. Real estate is actually a very sensible approach since is remains both useful when illiquid and investable when liquid, has more favorable tax treatment when gifted in most countries, and tends to appreciate over the long term.

The wife uses family and social convention (and possibly children) to bind her partner with a commitment. Note my figures do not include the cost of shared resources. There is a significant difference if we factor in shared resources and independence variables. For example, providers or girlfriends are usually self-sufficient (e.g. have their own living setup) whereas a mistress needs her own living setup and a wife shares one with you. If we factor that in, wives and families become enormously expensive, although you can extract back some of that value, in most states between your pro rata share and half, plus whatever appreciation occurs. All that is lost In the Mistress case.

Girlfriends are very economical. One wonders if this reflects some kind of risk or painfulness in the relationship, or if it’s more an issue of a statistically-adjusted game wherein one or more partners may be trying to establish a high value commitment and therefore are willing to take an early discount for a later payoff. It is not unlike taking a salary cut to join a startup, hoping for a big payout.

The figures also indicate that a wife must add value over a girlfriend, presumably the fidelity, constancy, familiarity, long-term commitment, comfort, family, and so on.

It is interesting to look at this from the other direction. A mistress can obtain the highest hourly payout, meaning that for a fixed financial requirement she can enjoy the most free time to pursue her own interests. In return, however, she has the highest risk of being left "high and dry." A wife has far lower risks, but also a lower payout. But this is deceptive. Consider the following counter-example. Let's say there is a woman whose life ambition is a major charitable vision. If she is a mistress to a centi-millionaire she may have time and income to express that vision, but at considerable risk. And the income is large, but not fabulous. On the other hand, mated to the right Mr. Right, she would have a portion of his centi-millionaire wealth (in partnership) at her disposal. Put another way, for a wife, certain expenses can be carried interests on her partner rather than absolute fees. On the other hand, perhaps a mistress could find a similar situation if she were employed as the director of her patron's foundation.

I would present a more comprehensive model based on shared interests, but that will have to come later.

Again, no profound point here.