Living the Robot-Mediated Life

Friday, March 21, 2014
By dreeves

As seen on TV (with a bee)

It turns out people are pretty morbidly fascinated by Bethany Soule’s and my auction-based lifestyle. After Bethany’s Messy Matters article, “Love and/or Money,” it was picked up by NBCnews.com, which sparked a mini media firestorm. We were in New York Magazine, were fodder for morning radio ridicule, and were even interviewed on Fox News. And we’re apparently about to go global, with an article in a huge South American magazine. [1]

So, by popular demand, I’m here to answer more questions about decision auctions and paying your spouse to put the kids to bed! Of course, this is part of a general theme with Bethany and me: applying principles of economics to everyday life. Which, if you haven’t noticed, has been a running theme on Messy Matters: [2]

In other words, practice applied rationality! Overcome biases and be, generally, less wrong. Also, quantify yourself! Good decisions require good data.

But without further ado, questions…

Q1. What do you have auctions about besides chores?

It’s most common that we have auctions about who has to do something that’s a shared responsibility, or who gets to do something that only one of us can do. But recently Bethany forgot her keys when she went to the office and we weren’t sure if it made sense for me to bring them to her. Here’s how we’d have handled that if we were normal people:

Bethany: I forgot my keys, any chance you were going to skate in soon?
Danny: I wasn’t going to but I could, because I love you!
Bethany: That’s ok, honey, I’m fine at this coffee shop till my next appointment, when I was going to come home anyway.
Danny: Well, ok, I’ll let you fend for yourself. I’ll clean the bathroom to make it up to you.

And here’s what we actually did, as taken from the logs of our Beeminder developer chatroom (in which lives a chatbot that helps mediate the auctions):

D: /bid with @bee for skate in with keys
Bot: Ok, collecting bids from: @bee, @dreev
  [we each reply privately to the bot]
Bot: Bidding complete! Here are the bids: @bee: 8, @dreev: 45
     Bernoulli(.1) says... PAY 10X!!

I then paid Bethany $80 ($8 times 10, which happens with 10% probability) to not skate her her keys. Notice how, in essence, it’s the same as the normal-person version. Instead of feeling each other out, we quantified and let a bot compare our preferences. And instead of me assuaging my guilt about not helping her by cleaning the bathroom, I just paid her.

“Instead of feeling each other out, we quantified and let a bot compare our preferences.”

We think of the auction as mathematically equivalent to me halfway skating Bethany her keys. I could’ve just done it because I’m nice, or she could’ve just refused the favor because she’s nice. Instead we made it a 50/50 joint decision for which outcome would happen — half a favor. Or you can think of it like this: I’m committing to either doing her the favor for less money than she values the favor, or to giving her an amount of money equal to how much she values the favor. Most importantly, it ensures the favor only happens if it’s socially efficient — if it’s not more skin off my nose than the favor is actually worth to Bethany. We do this half-a-favor form of decision auctions quite often and to us it’s quite sweet and loving. (See also, “Generosity without sacrificing social efficiency” in Bethany’s original article.)

Q2. Do you use auctions to make decisions about Beeminder?

It’s rare that we have an auction to make product decisions about Beeminder. We seem to be living the dream of the the management-free organization where we discuss a question until the right answer is obvious to all. But we do have auctions about, say, who will deploy code or babysit the server when it’s redlining.

Q3. What’s the real story on auctions for sex?

It was true when we told the NBCnews reporter that we don’t. But then after that we thought, what the heck. It turned out to be super boring, because we’re both super easy. So technically we have now, but there weren’t conflicting preferences so money hasn’t changed hands. Not that there would be anything wrong with that!

Q4. Was this a subtle PR piece for Beeminder? How did you pull off such a press coup?

Gosh, you’re making us feel like marketing geniuses! The NBCnews reporter is actually a Beeminder user, which is how he knew about me and Bethany and our craziness, and he was happy to agree to our stipulation that the article link to Beeminder. So I guess we have no advice on how to actually orchestrate something like this. Last year we had our biggest press coup just by having our phone number at the bottom of beeminder.com. Southwest Airlines inflight magazine called us after trying and failing to find a number for our competitor, GymPact. I guess that’s the real tip here: Be so crazy that journalists seek you out!

Q5. Doesn’t such mercenary decision making take all the fun and passion out of a relationship?

Not if you’re game theorists! I’d like to answer that it saves time and effort in decision making and creates more time for the relationship. But that would be delusional in the same way that programmers delude themselves that they save time by automating tasks that they spend a lot of time on. I might have to concede that the whole thing is untenable unless you actually enjoy geeking out about the game theory and mechanism design and whatnot.

Q6. Is this all meaningless with infinite credit?

No, it’s for real. Yes, Bethany is currently negative by about $80k but at our age (lots of future earning ahead of us, etc) that doesn’t seem like a big deal. We could actually wipe that debt out immediately by an adjustment to Beeminder’s cap table! I guess the danger is if you start to worry that the debt will never actually get repaid. But that doesn’t seem like a worry right now. We’ll come up with payment plans and whatnot if it ever does. We do use a 6% interest rate on that balance, which seems steep at current market rates, but not so much so that Bethany wants to transfer Beeminder equity to me to pay it off.

Q7. Are you sure there’s not a way to game the bidding?

We actually believe that our system is, in practice though not quite in theory, strategy-proof. It’s explicitly ok to game the system to our hearts’ delight. It seems to be quite robust to that. Our utilities tend to either be uncannily well-matched, in which case it’s kind of a coin flip who wins (and is in fact fully theoretically strategy-proof in the case of perfectly matched values), or they’re wildly different, but we never seem to have enough certainty about how different they’ll be for it to be fruitful to distort our bids much.

The strategy of “just say a number such that you’re torn about whether you’d rather win or lose” seems to be close enough to optimal.

In theory you can game it if you can confidently predict that the other person’s utility is a lot more than yours. In that case you want to inflate your bid so you still lose but get paid more. In practice we never seem to be that confident that it seems optimal to inflate much. Also the fact that the other person can punish you for doing that by shading their bid down, causing you to pay a high price for something you didn’t care much about. [3]

As far as I can tell that has never happened where the blatantly wrong person won an auction. It would be a huge flaw with the system if it did. My sense is that that does happen for normal people, that the person who cares more yields, either due to failure to convey the magnitudes of the preferences or for fairness reasons.

But I’ve clearly lost all touch with the concept of normalcy.

Q8. Technical question: Why do you split the surplus so unevenly?

Lay-person translation: If one of us is desperate to win and bids $1000, and the other person bids $1, then the desperate person pays the loser $1. That means one person gets $999 of surplus utility and the other person gets none (assuming truthful bidding — see Q7).

It seems unfair but, after a lot of trial and error, we gradually came to the conclusion that it’s worth it to not have people feel like their desperation is being capitalized on. Another way to put it: when you’re really desperate to win a particular auction it’s really nice to be able to just say so honestly, with a crazy high bid. Trying to allocate the surplus equitably means that I have to carefully strategize on understating my desperation. (And worst of all, a mistake means a highly inefficient outcome!)

Q9. How do you decide when to have an auction? What if one of you doesn’t want to?

We have a protocol for deciding when to yootle (as we call it): if the possibility of yootling is so much as mentioned then we must yootle. The only fair way to object to yootling is to dispute that it’s a 50/50 decision. If it is a fundamentally joint decision then how would you object? “I want to get my way but not pay anything”? Not so nice. You could say “I don’t want to yootle, I’ll just do it your way”. But that’s equivalent to bidding 0, so might as well go through with the yootling. And after 9 years we do have quite efficient ways to conduct these auctions, with fingers or our phones or out loud.

Q10. Think of the children! Also, how do you track all this?

Here’s our strategy with the kids: No allowance or anything like that — we just pay the kids for anything and everything (we recently paid our 5-year-old 50 cents to tell us a story about what “the 1980s” were) and we intend for them to be on the hook for their own educations, etc (maybe). Maybe at some point when/if they learn to think like economists (quasilinear utility, etc) we’ll give them one last lump-sum transfer (or not) and declare the whole family to be fully financially autonomous from each other. (Which, to reemphasize, entails no diminishment in family ties, sense of teamwork, emotional bonds, etc — it’s mainly just to be able to take full advantage of auction-based decision-making!)

We obviously haven’t thought all this through yet. The kids are still just 5 and 6.

As for tracking debts and interest, we actually wrote our own ledger that’s kind of like a spreadsheet but also computes interest automatically and does repeating payments and group payments and such.

Q11. What about income disparity?

Bethany and I philosophically bite the bullet on this, which is basically to say that, yes, the wealthy person gets their way all the time and the poor person gets what’s to them a lot of money and everyone is happy.

If that’s unpalatable or feels unfair then I think the principled solution is for the wealthy person to simply redress the unfairness with a lump sum payment to redistribute the wealth.

I don’t think it’s reasonable — ignoring all the psychology and social intricacies, as I’m wont to do — to object both to auctions with disparate wealth and to lump sum redistribution to achieve fairness.

I suppose it’s the case that Bethany and I tend to seize excuses to redistribute wealth, but they have to be plausible ones.

Q12. Could you still have decision auctions if you had shared finances?

The economist Steven Landsburg, in his book The Armchair Economist, proposes a clever way to have meaningful decision auctions with his wife despite having shared finances with her. His solution is to find another crazy couple and you send your payments to each other. Specifically, the winner (high bidder) pays the loser’s bid, but pays it to the other couple. Now the payments matter even though there’s no such thing as payments between you and your spouse. You lose the fairness of compensating the loser that way though. So it might be tough to swallow using it for super high-stakes decisions. Unless the other couple did too. But then, oy, the incentives get messy! Besides, I’m sure Bethany has convinced you not to have shared finances anyway.


 

Footnotes

[1] We’re keeping a list of links to all the latest in the ongoing media frenzy in an addendum to Bethany Soule’s original article.

Basically our response to every reporter who wanted to jump on this was “if you let us talk about Beeminder we’ll pretty much debase ourselves in any way you’d like!”

[2] Sharad’s Messy Matters posts, on the other hand, are mostly about society and public policy and Big Data. Things like forecasting elections and diversity on the web.

[3] Fun research question: What’s the equilibrium of the repeated game with consistently mismatched preferences? My guess is a mixed strategy where you accept some small risk of the person who cares most losing but mostly the person who cares most wins and pays a small fraction of their true utility to the loser.

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  • Emanuel Rylke

    Footnote 3 isn’t referenced in the article.

  • http://beeminder.com Daniel Reeves

    Thanks Emanuel! Fixed now. I might owe you $20 for that, though it was kind of intentional at the time. I made a ton of edits since I hit publish on this seconds before the deadline. I’m definitely still honoring the $20 typo bounty, btw, for anything that’s unambiguously an error.

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  • David Rutter

    Wouldn’t the simplest answer to both of questions 8 and 9 be simply “Vickrey auctions are honest”? Actually, now that I look at it, this argument has some difficulty adapting to decision auctions. I feel like it can be adapted, at least in expectation. I’ll be thinking about it. http://en.wikipedia.org/wiki/Vickrey_auction#Proof_of_dominance_of_truthful_bidding

  • http://beeminder.com Daniel Reeves

    Great question! Our mechanism is similar to a Vickrey auction in that the 2nd highest bid is used as the price, but it’s different in that there’s no 3rd-party seller. The good is jointly owned and the payment will go from one player to the other. So our decision auctions are not strictly incentive compatible like Vickrey is (though in practice it seems to be close enough). If you’re *very* interested I can tell you the Nash equilibrium for a decision auction (with unrealistic assumptions about type distributions).