During his recent interview with Tobias, Dan McMurtrie, Founder of the Long/Short hedge fund Tyro Partners and Bangladesh VC fund – Anchorless Bangladesh, discussed his very popular paper The Dating Market: Thesis Overview which has received upwards of 500,000 clicks. Here’s an excerpt from the interview:
Tobias Carlisle: Well, let’s change gears entirely and talk about the dating paper. A fascinating paper, I’ve read it a few times. Just give us a flavor of what’s the thesis of the paper?
Dan McMurtrie: Okay. So everybody’s unhappy with online dating, but everybody’s online dating. That’s kind of the thing, without any bar.
Tobias Carlisle: That was the impetus for it.
Dan McMurtrie: Well, I mean, we’d done a lot of work. Actually this was a former Rajat and I project as well. Rajat and I both found this market so interesting. It was growing like wildfire and I’m a little bit of a stand-up comedian and so I actually started my Twitter account which a lot of people may know to test stand-up comedy jokes and comedy is interesting because it tells you what’s on the fringe of culture and what’s becoming mainstream because they’ll talk about the thing everybody knows.
Dan McMurtrie: The best thing as a comedian is somebody everybody believes but nobody wants to talk about. So for several years it was like, “I know you’re on Tinder.” And it was a cheap joke and we saw these user metrics continue to grow and it was always regarded as the sideshow. And then it got to a point where Rajat and I, and a bunch of other people were looking at it and saying, “How do you even meet somebody offline anymore? Can you even do it?” I mean, you obviously can go to a bar or something like that but one of things that was really noticeable was that people don’t make introductions anymore below a certain age and generally the reason is, it’s just too risky if it doesn’t work out, you blow up the friend group.
Dan McMurtrie: We go, this is really interesting. At the same time we saw the earliest stories about how divorce is skyrocketing. We saw a lot of claims that American family formation is dying. We have a big thesis attire about affordable housing. So we look a lot at household formation, and housing. I mean, so this is just really interesting and so we’ve kind of read everything about it and we’ve had like 10 different views about how we think this market’s working, and we might just be over-fitting, but we finally got to one where every incremental piece of data we’re getting really clicks it in. And also spending time in Asia and the Middle East really kind of made some things click. And so basically the idea is that online dating is a transparent market like the stock market.
Dan McMurtrie: It’s allowing unlimited liquidity on either side, which is causing pricing transparency. Nobody is actually happy with price and transparency because even if they’re getting a better price, everybody thinks they’re going to hit above their weight. Everybody thinks like I’m going to be the genius who buys the cheap stock and makes all this money. And so when you have to trade things at a fair price, everyone is on average, less happy. And so I think that’s why everybody’s not happy is everybody’s getting kind of a fair price, and then there’s some adjustments to that.
Dan McMurtrie: So some distortions about, okay, we generally think it’s an efficient pricing mechanism, but what are the frictions there? And so the big friction is the visualization of dating. And so everything now is Instagram-ified. It’s about how you present yourself in photos, and also there’s other things like time of day. And so we’ve talked to everybody at all these companies, women get at least five times as many inbound likes as men do and in many cases, 25 times or more, and so it doesn’t matter if you’re the nicest guy ever, if you’re really good looking even, if you’re six pages back in the queue on some of these websites, they’re never going to see you.
Dan McMurtrie: It’s like when you get an email from Sony back in like eight months being like, “Hey, I completely lost this.” It’s not going to happen. So there’s some structural dynamics in terms of the UI that are really changing how dating behaviors are happening and so that’s a pricing inefficiency, and there’s a few other things I can dig into.
Tobias Carlisle: There are a few fascinating charts and one of them I think came from Plenty of Fish or I’ve seen it before where the distribution of men rating women is basically a normal distribution from most attractive to least attractive, the tails, as you’d expect. But then the women rating men is a totally different distribution where women think that most men are unattractive and for most attractive, the score, and I’m guessing it’s rounded is 0% of men. Women regard 0% of men as most attractive. And so then how does that dynamic play out on a dating app?
Dan McMurtrie: I don’t think that’s entirely true.
Tobias Carlisle: I’m guessing it’s rounded down, a couple zeros.
Dan McMurtrie: I think it’s slightly misinterpreted. So one note is, the average female user has a much higher match rate than the average male user and so-
Tobias Carlisle: How is that possible?
Dan McMurtrie: … Because a lot of people are just not getting matches. There’s a lot of people are just never getting matches. There’s inbounds, outbounds and then you basically have a power law distribution where you have like, I guess everything has to clear, but the women on average, if they have an inbound or they produce an outbound, they will get, I’m sorry, the absolute numbers are different. It’s the percentage wise. And so women are going to say yes on a far smaller percentage of the pool.
Dan McMurtrie: So if you have a hundred women, they’re saying yes, they’re all saying yes on 10 men and those 10 men tend to say yes to basically all a hundred women, if that makes sense? So it’s like the match rate is different from the absolute number of, so there’s a lot of people who are, and that’s the way it ends up working out. But I think the issue there is its like if you go to a buffet and you can have whatever you want, you might be a little pickier about, well maybe not in America, but you might be a little pickier about what you get because you can have whatever you want. And so I think some of the online dating data, it really amplifies that because if you can have whatever you want, you’re probably going be a little more selective.
Dan McMurtrie: You’re going to be like, “So, would you like a Toyota or a Ferrari? Would you like any of these five Toyota’s or this Ferrari.” And you’re like, “I don’t really need the Toyota. Just give me the Ferrari.” And I think that’s kind of what’s happening. So I think it’s a little, I don’t think women are as harsh is what’s happening. But I think it’s an exaggeration.
Tobias Carlisle: I think the implications for the dating market are sort of interesting, but I think more interesting are the implications more broadly for society. What do these apps do to society?
Dan McMurtrie: Yeah, so I think that this is, it’s counter-intuitive because some people look at it and they go, people are getting married as much. I’m from a Catholic family and so people are living in sin and all of this and they focus on all these unethical traits. And I think I’m a big believer that a lot of the things that we have culturally and religiously in whatever are logical adaptations for a different era.
Dan McMurtrie: So if you go through a lot of the old Testament or whatever, a lot of the rules made a lot of sense under the context they’re written. And that’s really where this conflict is happening is we are still benchmarking against that versus the world we actually live in right now. And so what’s happening here is because everybody has unlimited and instant access to dates, everybody not only can go on a date, but also if you’re on a date, you’re aware you can get another date. And also as you go on more dates, you really know what the dating pool looks like, right? And so when I talked to my grandparents or my grandparents siblings or something like that about what their dating was like, they got married-
Tobias Carlisle: They had to get a debutant bowl or something.
Dan McMurtrie: … Well probably that.
Tobias Carlisle: You had one chance in the season.
Dan McMurtrie: Yeah, and so they got married on their, I know some people got married to the first person they kissed, some got married on the second or third date they ever went on was the person they married. And so that the pool you were choosing from was very small. It was people your family knew, it was maybe people you met at school, church and a few other places, and it hasn’t, I think some people view ourselves as very progressive.
Dan McMurtrie: The United States is not very progressive, but on a global standard, it’s really, really risky for women to date. There’s a lot of physical risk, there’s a lot of reputational risk, it’s really bad, and so that dynamic is even stronger in other countries. And so now younger people have access on a no risk basis to an unlimited size pool, and so if you’re on unlimited size pool where there’s no called strikes, like Warren Buffett talks about.
Dan McMurtrie: So you’re just going to say no unless you’re really, really interested. On the flip side, guys typically just go, yes, yes, yes, yes, yes, because they’re guys. But as a result of that, the stakes of dating are just generally much lower because it’s very commoditized. And so when you’re younger and you’re skinny, and in shape and you look good and you’re having fun and you’re not looking to make a commitment, you’re not going to get married.
Dan McMurtrie: You’re going to go on a lot of dates, you’re going to have a lot of bad dates, and the bad dates are going to inform what you can’t really tolerate in a relationship, and that’s going to go forward. And so people are not getting married younger, and so marriages from 18 to 25 are collapsing, but by the time you get to 30, 35 marriages are going up, and the divorce rate of overall marriages is declining. And so my hypothesis is look, when people are young now they’re dating more meaning they have more information on the market, if you think about this like an economics problem.
Dan McMurtrie: They have more trading experience, so they probably are better able to price things. They are better aware of their opportunity costs. So nobody who grows up in the online dating era is ever going to have the classic rom-com mid 40s like, “Sometimes I just wonder like what else is out there?” If you’re in my age bracket, you know what else is out there. You’re like, “No, I’m really good. I don’t want to go back out there.” And so it’s causing, you can price your opportunity cost better, you can price the market better, you have more experience, and you don’t feel the need because the pool is so large, you don’t feel like you need to marry as soon because you might run out of options.
Dan McMurtrie: It’s clear there’s a lot of options and so people are getting married much later, but I think they’re getting married on a much more informed basis. I think it’s also because there’s so much information communicated and because there’s so many iterations, I think a lot more conversations are happening. I think people are having conversations about personal finance, about what your actual lifestyle is. I also think this renter’s generation topic, which kind of lays on top of the online dating is causing… So there’s an interesting statistic.
Dan McMurtrie: Cohabitation is up with younger people. So people move in with their boyfriend and girlfriend, but the conversion from cohabitation to marriage is down. And so that’s another evidence of there’s more trials. So you’re going to go in and you’re going to actually figure out, okay, do I like this person? Do I like this person relative to all my other options? Okay, then we’re going to actually try to live together. Can we actually live together?
Dan McMurtrie: You might really like each other, but might kill each other if we’d live together. You’re figuring that out. So it’s just a lot. All these things I think you can all think of as more trading volume that’s causing pricing to come. And then when people are getting married, they’re getting married with a lot more information about themselves, about other dating options, about the person they’re marrying, and divorce rate appears to be dropping.
Tobias Carlisle: Do you think it’s curious that a finance guy has done this analysis on the dating market, which is probably, I was trying to think of an analogy and I don’t know whether it’s like a reformation or if it’s like a Jerry Maguire kind of, or… I went with Carrie Bradshaw eventually, but then it’s not any of the more social sites that pick it up. It’s picked up by institutional investoring, chat to Joe Weisenthal on Bloomberg. I just think it’s a funny kind of direction that that observation took.
Dan McMurtrie: Yeah, I mean, a lot of that’s based around this kind of Twitter brand I built, which was largely light spirited and supposed to be funny and make up jokes and stuff and-
Tobias Carlisle: Will the actual Twitter account change or is just the name?
Dan McMurtrie: … Just the name. I mean, I just make jokes instinctively.
Tobias Carlisle: Deleted some old tweets, I saw that.
Dan McMurtrie: Yeah. I mean, I didn’t know what was on there. I’ve just been gunning out offhand comments for like… And literally what I was doing in 2015, 2016 was I would just tweet all these jokes and then I would go look at which ones people liked, I’d take those out and that was my stand-up set and it seemed like I was like freakishly good. And I was like, no, you just didn’t see the 81s that panned.
Dan McMurtrie: But I think, we have this thesis and there’s a reason we published the paper, a high level beyond the thesis and that is that the average person on the internet doesn’t have a lot of stuff to say that’s really high value, but there are nominally a very large number of people that have really good insight particularly in fields that are fast moving, that are changing because even if you were to as a hedge fund hire an expert network, you’re going to get some guy who has a really, really nice pedigree but he hasn’t really been in the trenches in probably 10 years and if he’s telling you he is, it’s because he’s calling a guy who’s actually in the trenches.
Dan McMurtrie: If you can actually… I’m trying to do kind of for industry RootWork what Patrick O’Shaughnessy and some of these other guys are talking about in terms of build, share, learn, repeat. Where I’m not advocating that people go out and buy Match stock. I’m saying this is what I think is going on in this industry. And I think it’s a topic a lot of people are interested in because it’s vaguely related to sex and also everybody’s frustrated with it. Nobody understands. You go to any bar or any stand-up show or any of these things, everybody’s talking about how they’re not happy with online dating. And so we have a view, we think we understand why people are still doing it, we think what the impacts are, we think there’s some ways you could game it, and we think there’s a lot of investment implications and specifically in consumer and in online dating itself, and all the-
Tobias Carlisle: How do you hack it then?
Dan McMurtrie: … So, how you hack is, yeah, I’ll talk about the paper hack and I’ll talk about how you hack online dating because I do know how to hack online dating, and you can’t hack Tinder. Tinder is the one you can’t hack, and everybody gets frustrated and I’m like, “No. Tinder is a one variable, yes, no. There’s no gaming there.” But the idea with the paper was we’re going to publish papers like this and put it out there, and just kind of use it to solicit feedback. And so when we put this paper out, we’ve had something like you’ve had well upwards of 500,000 people click on it and we’ve had 50 plus people reach out that either work at one of these dating companies, they want to talk about our views and a lot of them called and said, “This is really interesting because this corroborates what I’m kind of seeing, but I hadn’t really put it together.”
Dan McMurtrie: We took a dig at Facebook dating, so we had some Facebook people that wanted to talk to us about it, and we also had people who run matchmaking companies, who run startups, who all these different people that I would never be able to find because they don’t have a presence, something like that. All reach out, all want to talk, and so it’s just great in terms of, okay, now I have a list of all these people in the industry that I can reach out and talk to anytime because they know I’m interested in researching this and also they know that I’m not researching this and I’m not talking to them because I’m looking to trade the stock tomorrow and that’s not what I do. And I think this is a model we can sort of scale and use to continue to build a network.
Dan McMurtrie: In terms of how you date actually the online dating platforms themselves, there’s a few things. Like one, there are actual dating advice services that kind of look at things and 90 plus percent of the time when they look at, it’s usually men.
Tobias Carlisle: Take a bit of photo.
Dan McMurtrie: Yeah, it’s you don’t have a high quality photo or your photos are weird. You have one good photo and the other ones are really bad and grainy but usually the man has not actually filled out the whole profile. They get a little bashful, they don’t have an actual description or it’s like a joke and it’s okay to be a little funny but somebody doesn’t want to think that you think going on a date with them Is a joke and I have a problem with it because the more uncomfortable a situation gets the more I need to make jokes and I have bombed many a date with bad jokes. So filling out the profile correctly, but I think that the other two things are, on sites like OkCupid and others like that where you have a lot of information on the user, a lot of this is just kind of obvious.
Dan McMurtrie: It’s have a fully written out profile that has interesting things about you. When you have pictures, put pictures of stuff that’s interesting. Are you doing stuff? Show off your attributes that you want to show off and then if you’re going to reach out to somebody, you should actually do the work to reach out and figure out, find something that’s a hook.
Dan McMurtrie: I think the other thing people forget is a lot of these are designed to make you click. And so if you find people that have a demonstrated ability to have deferred payoffs are typically going to be a little less susceptible to that, and so I think it’s better to find somebody that has a really strong, passionate about something, that’s very interested in something specifically, something you’re interested in. You’re going to have a little more luck there versus just like Billy and Karen trying to match, and I liked going to EDM concerts on the Saturday. That’s just a very efficient market.
Dan McMurtrie: So I think a lot of it, and then the biggest hack I think is time of day because of that cue dynamic. Oh, I think they took it off, I don’t know, because I haven’t been on the apps and all but OkCupid used to show you when people-
Tobias Carlisle: Is that a humble brag there?
Dan McMurtrie: … Yeah. Well, I mean, I was on there for a long time, but they used to show you when people were online. And so I think when you send your message is very important. So a lot of times guys tend to, is there a polite way to say this? Guys tend to send messages-
Tobias Carlisle: Later at night?
Dan McMurtrie: … Yeah. When they’re currently looking for a girl. A wink, wink, nod, nod and that is not good because they all come in.
Tobias Carlisle: You got to plan ahead.
Dan McMurtrie: Yeah, you’ve got to plan ahead. They’re not written with the brain in your skull. It’s just not a good move across the board, and it’s like you have to write, typically people check these things either before work or after work. Largely is after work. So you want messages going out in the three to 5:00 PM range so that they are there when somebody gets off work and is checking something. Particularly because if it’s after work and somebody doesn’t have a happy hour date or something to go to, then they’re specifically looking for that and you need to write something that’s actually thoughtful or funny or insightful, and the other thing is you’ve got to figure out for you and for what you’re looking for, which dating platform is better because they all have very different UIs and they’re all game mobile in a different way.
Dan McMurtrie: So like Hinge for example, has individual widgets that are like topics and pictures and things and you can comment and respond to an individual one. And so if you’re somebody that likes to make jokes or if you have something interesting to say, you can make a very contextual response, and that’s really good. On OkCupid, you can write them a six page love letter if you want, and you also have to think about those audiences that are-
Tobias Carlisle: Do you recommend that people write those six page love letters?
Dan McMurtrie: … Do not. Never do that unless you can write one of the funniest. It would have to be, it’s a very high risk, high reward situation. I mean, I’m sure somebody could write like a Mick Sweeney’s type piece that would crush it, but I don’t recommend that. That’s not a great move. And then I also think like things like eharmony, and others like that, that are explicitly, like eharmony, you have to pay and apply. They say they’re using all these metrics. eharmony just screens for, are you desperate? Are you really seriously looking for a relationship right now? And then they give you a very limited number of matches so that you don’t to reverse that dopamine feedback loop. And so there’s some things like that where the more slow the dating mechanism, the more people are going to be seriously looking for a relationship, which is kind of counter-intuitive, but everything’s optimized to dopamine, and then there’s all these increasingly niche dating sites.
Dan McMurtrie: So whatever you’re interested in, I would look for, there’s probably, there’s a farmer in-
Tobias Carlisle: Value investors only.
Dan McMurtrie: … That might exist, I don’t even know. There would be like 25 women and 30,000 men and it would get really weird, and man, I would love to start that just to read the conversations. That would be weird. But yeah, you’ve got all these strange things, not strange, you just get niche conversations. So you’ve got to go all that, but the main thing is about time of day, quality of photos, quality of what’s in your profile, making that really hooky. The other thing is a lot of times guys look at their widgets added. So you can put your Spotify profile in, you can put your Instagram in and anything that’s missing from your profile looks either lazy or like you might be fake, and so a lot of times I think some of the things that assuming you’d get the time of day from the other user, you need to understand that you’re pitching them and anything that’s lazy is going to come off of course as lazy.
Dan McMurtrie: The other thing to realize, I got Tinder versus the others is the average time a person on Tinder spends looking at another Tinder thing. I think is two seconds. So first photo is very important. But honestly, if you’re not an eight or above, I don’t know why you’re on Tinder. It sounds really bad, it’s a purely visual medium where somebody is going to spend under two seconds looking at you and people spend all this time trying to hack that one. And I’m like, cool. Okay. All of the others, like Hinge is structured for you to be able to show off cool stuff. Hinge is made so you can’t actually swipe very fast. It takes a second for profiles to load all the other things.
Dan McMurtrie: So Hinge gives you an opportunity to show off. Bumble has done this weird thing where they’re like, want to be women forward, and the big culture shift always happens in online dating when women get comfortable with the platform and they realize, oh wait, I can go on this platform and now I don’t have any risk. I can just say no, and it doesn’t matter. And that what was really sticking out in the middle East and Asia, is that you had women that had never been able to have any agency in their own dating who were all sudden on Tinder because first the guys joined and girls were like, “Oh, that’s sketchy.” And then some girls join, and then those girls basically tell the other girls that, “Hey, you realize you can just say no and they don’t know you said no and you get access to millions of guys instead of your brothers five friends.” And they’re like, “Wait a minute. That’s awesome.” And actually Bumble is doing quite well in a lot of those markets because they are explicitly putting forward the women power angle.
Dan McMurtrie: But one of the things it does is men can pay to extend a match. So once there’s a match, the woman has to message the man within like 24 hours I think, and men can pay to extend the match. And actually a lot of the female users will only message a guy if he extends the match because they’re like, okay we matched. But now like are you really interested? And I’m just skeptical-
Tobias Carlisle: You have to pay per person?
Dan McMurtrie: … No, you pay the subscription, which is actually kind of genius because Tinder and some of these other platforms, the users that pay have the worst success rates. It’s people who can’t get any matches. So they pay thinking that more-
Tobias Carlisle: Maybe it why they’re paying.
Dan McMurtrie: … Right, and they think it’s going to give them an edge. But actually it’s the highest prediction of bad results. And so what all these platforms have tried to do is shifted away, sort of that it’s not just changing your odds, it’s something else like Tinder Gold and all that. But Bumble has done this great thing where the match extent thing basically is a way to make a guy have to say, “Yes, I’m interested twice.” And to girl it costs nothing. And so they’re just like, “Ladies, would you like to be a double sure that guys are interested?” And they’re like, “Yeah.” And then the guys they’re like, “Pay up.”
Dan McMurtrie: I think it’s incredibly frustrating and annoying, but I think that’s kind of part of the idea. So there’s all these monetization things happening there.
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