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Putting Your Money Where Your Mouth Is

Michael Nielsen asks:

"Could you run an ultramarathon, solve a major scientific problem, or write a bestseller?

What if you had a deadline to do it by the end of June 2009?

Sound too hard? What if you placed $10,000 of your own money with an escrow service (say, a beefed up version of www.stickk.com, with instructions that the money is to be donated to an anti-charity that you strongly dislike, unless you provide proof that you've succeeded?"

Stickk.com is a commitment enhancing device: a) you state your goal, b) pick a referee, and then c) put your money where your mouth is.

In essence, your present self writes a contract that your future self will have achieved the goal stated in a), confirmed by the referee in b) or else you lose the money you put up in c).

The psychological underpinnings of this commitment device are reasonably understood: a public commitment to a goal, with a clear penalty for failing. The penalty is supposed to annoy your present self so much that it is easier to commit to the project than pay the penalty.

Thomas Schelling has a wide ranging discussion about a particularly hard addiction to give up - smoking.

Steven Levitt writes of his experience in attending a Thomas Schelling class:

"I was an undergraduate, I took a class from the future Nobel Laureate Tom Schelling. One day in class, he was talking about commitment problems: when you want to achieve a goal, but lack the self control to do it.

As I recall, he offered two pieces of advice for those trying to lose weight. The first was to clean out the refrigerator and throw away anything you might want to eat in a moment of weakness.

The second was to write a check for a substantial amount of money to the American Nazi Party, seal it up in a stamped envelope, and vow to drop it in the mail if you break your diet.

If you really do intend to mail that letter after cheating on your diet, it serves as a commitment device. Not only does the diet pay off in terms of lost weight, but it also keeps you from subsidizing a cause you despise.

I've always wondered whether anyone would actually mail the check. If they won't do it, the whole exercise is likely to be a waste of time."

This would be a fascinating exercise to try with people who investigating a franchise. It is very easy to give people homework to do which would allow them to screen franchise systems.

The problem is that very few people do the work.

Now what about if the attorney gave the homework assignments for free, marked them for free, but charged $500 per homework assignment missed?

Think more people would engage in serious due diligence?

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Full post as published by Misleading Advertising Law on June 10, 2008 (boomark / email).