I met an old acquaintance in the sports studio the other day. After the usual small talk he asked me, ‘Do you remember a couple of years ago, the studio offered us the possibility of a lifelong membership?’ My recollection was vague at first, but then it came back to me. The lifelong engagement had cost something like 4000 euros. Given a monthly subscription fee of anything from €80 to €100 euros, and excluding interest rates, the figure was equivalent to between four and five years of membership fees. ‘At the time’, he continued, ‘you advised me against it, didn’t you?’ My acquaintance, an economist as luck would have it, chuckled. ‘Here we go’, I thought to myself. ‘By now,’ he went on, ‘I would be more than halfway to my breakeven.’
I must have had some good reason for warning against this lifelong membership deal. After all, I hadn’t taken it myself. Nor did I feel any particular regret for not having taken it now (perhaps this kind regret is reserved only for economists). At the time of the offer, the global economy was in the middle of the credit crisis back in 2008. To make such an offer – the sacrifice of future revenue streams for immediate upfront cash – meant for me that the enterprise was in difficult financial straits. Anyone who needs cash that urgently could well be bankrupt before that ‘breakeven’ date. Even if this were not the case, having bound its members for such a long period, what motivation would the club have to maintain its standards? When members cannot impose the ultimate sanction, what redress would they have when the showers get dirtier and the machines become obsolete.
‘I’m sure they will survive the next year or two,’ mused the economist. ‘All that remains is the risk that I die earlier.’ I joined him in a broad grin. ‘But then I wouldn’t care whether I had amortised the 4000 euros or not, would I?’ I was almost tempted to agree with him, but I know that the evaluation is never that easy. Human beings invariably try to simplify things to facilitate decision-making, sometimes to the point of over-simplification. But this is not a binary outcome – a simple case of life or death. There are countless alternative outcomes that lie between. To ignore these could lead to an over-optimistic evaluation of the risks. What if he has an accident or an illness that makes training impossible? But I didn’t say any of this this out loud; I wouldn’t have wanted to spoil his good mood just to be able to claim that I was right.
Related posts:
- An Evening at the Opera? Not Quite
- Whistleblowing: The Fitness Studio
- Super timing
- Regret For Hire
- Whistleblowing II: The SEC
Tags: availability heuristic, commitment, credit crisis, risk perception