Tuesday, December 4, 2007

"StickK Business" - Keep your promise, or else

StickK seems to have an interesting concept, if you don't meet your personal goal/promise, charity gets to benefit for your loss (or lack of loss, if you're trying to drop pounds).

Suppose you want to lose weight, and you have been unable to stick to a diet. Your aspiration is sincere but your will is weak. Fortunately, a solution is around the corner: you enter a contract with StickK, a new company founded by Ian Ayres, a Yale law professor, and some of his colleagues. Under this contract, you must pay StickK $1000 if you fail to lose (say) 10 pounds by the end of the year; the $1000 sum is handed over to a charity. If you lose the pounds, you pay nothing. (StickK will make money through advertising and in other ways.) A third party is retained to verify that you have lost weight. Ayres and his colleagues argue that this system will be more effective than alternatives at helping people lose weight, go to the gym, stop smoking, and achieve other personal objectives that require self-control.

Some nice legal questions arise. The system can work only if the contracts are legally enforceable. If they are not, the customer pays no penalty for failure except embarrassment, and one does not need StickK to expose oneself to embarrassment for failing to keep a public commitment to lose weight. But courts are unlikely to enforce such contracts. There is no consideration for your promise to pay money to StickK if you fail to lose weight—no quid pro quo, which is legally required for an enforceable contract. StickK does not give you anything in return for your promise to lose weight; nor do you give anything to StickK in return for its promise to pay the charity if you fail to lose weight. A rare zero-sided contract, there is no quid and no quo.

But there is a more serious difficulty. As StickK itself recognizes, it is important that the charity not be too attractive. If it is, then you will not feel bad if you fail to lose pounds—the money goes to a deserving group like the homeless—in which case you will not have a strong incentive to keep your commitment. To solve this problem, StickK will not permit its customers to choose the charity. But the problem remains. The money has to go to some charity, and at least some customers will turn out to favor that charity. For those customers, StickK can't supply the needed incentive to keep their commitments.

What StickK needs to do is donate your money to an anti-charity, a group that almost no one approves of: the government of Sudan, say, or the tobacco industry. Perhaps if you know that breaking your diet makes you complicit in genocide, you will resist that slice of chocolate covered cheesecake. Let's hope that the Sudanese government does not realize that it can cut out the middleman, and make money from obese Americans directly, by agreeing to take their money if they fall off their diets. Indeed, if Ayres' business model is sound, we can imagine a future emporium of self-control entrepreneurs, with Sudan, North Korea, the tobacco industry, baby seal hunters, and pedophiles all vying for the business of the overweight, the underdeveloped, and other sufferers from weakness of will.

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