Incentives matter

Divorce lawyers and wedding planners have been gearing up for the Facebook IPO, waiting for the influx of wealth in Silicon Valley to stir up drama in romantic relationships, for better and for worse.

“When Google went public, there was a wave of divorces. When Cisco went public there was a wave of divorces,” says Steve Cone, a divorce attorney based in Palo Alto, near the social network’s Menlo Park headquarters. “I expect a similar wave shortly after Facebook goes public.”

There is more at the link.

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Hi Tyler, this is a fun fact, and perhaps not entirely surpising, but what is the most likely explanation? I for one have some guesses, but I am not sure.

California is a very alimony-friendly state, and this IPO has been predicted for a long time.

If I were a non-earning spouse or simply a spouse with an ordinary tech job and i was tired of my spouse, I would certainly have waited.

-dk

Oh, and it can get worse, for the FB employee.

There's a notion of imputed income. If you have unvested shares in FB that are solidly in the money, you will get income over the next few years as they vest. Alimony can be set based on that income stream. If a payer has a high-paying job he doesn't get to take an easier job that doesn't pay as well -- he can, but his alimony stays set at the amount he could be earning. I am not a lawyer, but I suspect that if a FB employee whose alimony is set based on a stream of continued vesting changes to some other tech job where he doesn't have in-the-money options vesting at the beginning, he still has to pay alimony on what FB options would have been worth [until they run out].

-dk

My sister who does divorce law attributes this to the housing market. Divorce is always a costly process. In the good old days of the housing bubble, the cost of the divorce was paid by the sale of the house which is the main asset for most people. Now when houses are not profit centers waiting to be cashed out, things are different.
Imagine being stuck in a unsatisfactory marriage with an underwater mortgage. Suddenly, an IPO gives you a bunch of dough.

Google's IPO was in the middle of the housing bubble, 2004. Cisco's was 1999.

Do divorces peak in both hard times and boom times?

Maybe mediocrity promotes a stable marriage?

No, they peak in boom times. They drop in hard times.

I tried to dig up some data: Overall Divorce rates in America seem quite invariant to booms and recessions over the last 10 years at least.

http://www.cdc.gov/nchs/nvss/marriage_divorce_tables.htm

The obvious explanation here is that husbands are using their new wealth to upgrade to younger, hotter wives. The other explanations offered in the comments are, I imagine, secondary.

Facebook has a spectacularly young average employee age. Why would a typical 27-year-old Facebook geek who already has a 25-year-old wife want a younger wife? How much younger could she be?

-dk

Since the average age is so young, how many of Facebook's employees are even married? I think the divorce lawyers may be in for a surprise.

Incentives matter, but actual data doesn't. Tyler's wacky "markets-in-everything-freakonomics" in a nutshell.

With alimony, a wife-upgrading argument would imply divorce spikes before windfall wealth, not after.

On the other hand, spikes after windfall wealth would be consistent with male upgrading...

That assumes hot blondes have the foresight to invest in your not-yet-realized windfall.

Do people only 'upgrade' partners in this model if they definitively have a candidate identified? Surely the husband has foresight that his desirability on a Roissy-type marriage market would increase in the future, even if hot blondes do not buy in now?

Presumably some of it is wives making off with the loot?

Some of it? Come on. If it was the men doing the divorcing they would not have waited for the IPO. They would have done it earlier and so shared less of the loot with the ex. Facebook's employees will be mainly men. Mainly STEM graduates with, I expect, little understanding or experience of women. Who suddenly find cheerleaders interested in them once they get a job at Facebook. Then they cash out and said Barbies leave.

You don't need to be a super-genius to work this one out.

The West's divorce laws are insane and need to be redrawn.

Sorry I missed who was the the victim in your example, high IQ is an evolutionary staretgy easily matched by beuty, there are many paths to rescource accumulation in this species and you gto to respect the game.

Well I guess that depends on what you think of marriage for the purposes of extortion. Personally I don't think a few mediocre f**ks is worth billions. Not even millions. The victim is the idiot who thinks that he married a girl like the media says they are instead of someone who is going to screw him for his cash.

I am unconvinced that high IQ is a good evolutionary strategy. Certainly the emotional and intellectual crippling of young men in Western culture through teaching them the inherent nobleness and purity of women is not adaptive.

Even if you were right, the question would be whether we want to encourage this form of resource accumulation or not. Given it relies on large men in body armor to enforce. I would suggest not. If she wants the cash, she can pretend she likes sleeping with him on a permanent basis.

I think the underlying forces are just so much more powerful than your finely calibrated logic accounts for. If anything, the shear disruptive effect on established elites of ascension via IQ (Courage and athleticism(combat skills) in time of yore) and Beauty/Sex appeal, as well worth the injustice. It seams clearly the extraordinary attractive power of Beuty/Sex appeal is an adaptive strategy with positive outcome for the species, otherwise, it wouldn't be so powerful, and effective. This is a war among lovers after all, and all's fair.

Not sure I am following your English. Does IQ help disrupt the Established Elites? One would hope so. I am not so confident, but let us assume it does. Fine. Is that a good thing? Zuckerberg has used his smarts to provide the world with a service. A net plus for the world. This sort of disruption we clearly want to encourage. But all means girls who are pretty seems to be an adaptive strategy. Do we want to encourage upward mobility by poor pretty girls marrying rich less pretty men? I think there are arguments on both sides of that, but let's agree that we can remain neutral on this. The alternative, a sort of socialism of beauty, seems a little hard to pull off. None of this is relevant. The question is whether we want someone like Robin Givens to walk away with half of Mike Tyson's money for provide some mediocre sexual services over a small period of time. Or Heather Mills with Paul McArtney's money or whoever. I would think not. There is no social benefit in doing this whatsoever. Large unearned wealth is bad for society. Large dis-earned wealth is even worse.

What makes happiness is often increase in income rather than absolute income. If your income is about to multiply by ten, then splitting it in two so that both parties have five times more than before leaves you still felling pretty well off. One problem with divorce is that, however alimony is organised, both sides probably feel worse off than before. A huge windfall allows you to buy off an unwanted spouse and still feel rich.

Oh my God how dare everyone here imply that men want hot, young women and that women are incentivized to divorce by women-friendly divorce-proceedings and an expected increase in husband wealth? Clearly everyone here is a white and/or Asian male with the privilege that comes with that, and we all know they're evil people and are thus always wrong.

What strikes me as really funny is that the same PUA/Roissysphere/etc. model here can be argued to apply, just not in the way people are applying it. It isn't suddenly-rich men dumping young women for hotter young women, since the divorce spike follows the windfall. It's the now-rich young women dumping their Facebook employee husbands because they've gotten what Roissy-type models suggest what women want out of marriage, i.e., money. It's entirely consistent!

But for some reason the usual suspects are not hyping up this interpretation up, even though it follows straightforwardly from the same model of human sexual behavior. Of course, here it implies women taking advantage of a institutional quirk rather than men. Can you say 'mood affiliation'?

"It isn’t suddenly-rich men dumping young women for hotter young women, since the divorce spike follows the windfall. It’s the now-rich young women dumping their Facebook employee husbands [for the divorce theft]"

ya know, it could be both reasons. just a thought. and both incentives in play is perfectly consistent with a pua-sphere worldview.

while we're at it, if a dorky beta male hits it rich, it's very plausible that the hot golddigger wife he attracted after he scored his riches will, with the treasures promised by the divorce industrial complex, suddenly find her darling hubby an asexual lump worth looting. these things aren't often crassly conceived in women's conscious awareness; it's more like a subconscious undercurrent that carries them to the tune of their beating hearts.

it's perhaps equally likely that men who have found sudden riches will want to dump their frump partners for an upgrade, motivated in part by the fact that there will be plenty of usurper women making the job easy for them.

Mark Hoekstra and Scott Hankins have a 2010 JHR entitled "Lucky in Life, Unlucky in Love? The Effect of Random Income Shocks on Marriage and Divorce" where they use lottery winnings to identify the effect of income shocks on marriage and divorce. Likely more exogenous than IPO-related wealth for couples with rational expectations, winning the lottery is conditional on being in the lottery a random event.

http://www.uky.edu/~swhank2/research/lottery_divorce.pdf

Whenever anyone brings up gender equality, I always wonder how all that's supposed to square with the enormous male-to-female wealth transfers involving sex and related activities -- marriage, divorce, alimony, stripping, prostitution, pr0n, etc. I wonder how large the net annual transfer actually is.

That would be entirely consistent, though. To pull it to its logical extreme, an extremely unequal society of masters and slaves would regularly see enormous spending of masters on maintaining slaves, whilst the labour slaves pay to masters goes undenominated.

Ah yes, as long as we pay women enough for their dependency and subjection, things are fine. Really, women who are financially and materially dependent upon men are pretty much in just as dire straights as men who are libidinally dependent upon women. Let's just call it even.

Subjection? How did you get an internet connection in the year 1889?

Nobody mentioned Mark Zuckerberg's Saturday yet?... death and taxes..

maybe a divorce is a normal good.

More broadly, living alone is a normal good -- as evidenced in recent years by the effects of the recession on the average household size and yearly new household formation.

Being married is, in aggregate, a huge money saver. A 2 bedroom house is cheaper than 2 one bedroom houses, etc. Once you become rich such things matter much less.

Everyone always says "getting rich won't solve all your problems." Well of course it will solve your current problems; at least most of them. It just brings a new and different group of problems to replace the ones you've solved.

I concede the truths being pointed to (about venality).

I guess I'm wondering, naively, is there any way to transcend this?
Its amusing at first, then despairing.

Of course there's a way to transcend it. If you want love, work on developing less robotic taste, if you want robotic pleasure, don't confuse that with love.

Go watch Eat Pray Love and then come back and tell us that.

No, there is no way to transcend this. If your wife decides to take the house, the children and half of everything else, not only can she, the whole of modern society will call her a hero for doing so. So I wouldn't put off buying that boat or taking that trip to Italy you always wanted to. Saving for the future means saving for her future.

Everyone notice Zuckerberg got married? Doing that the day after his float presumably has no effect given Californian law. But I wonder if it occurred to him when he chose that day? It may help him elsewhere.

"If your wife decides to"
For some reason the Roissyites are convinced that divorce is just something that women unilaterally decide to do. Like there's nothing men ever do or say that could conceivably factor into it. It's simply a bolt of lightning out of the blue, striking some unlucky man.

"striking some unlucky man."

you misspelled beta.

I am sure there are cases where men actually contribute to the decision to divorce. It is just that the evidence seems to show this is not the main cause for divorce. Two thirds of divorces are initiated by women. If asked why, small percentages give what most people might call good reasons like domestic violence. Divorces are most common among women aged 30 so clearly it is not men who are trading up for a younger, hotter wife.

I am sure that both parties contribute in many ways. Except that society praises women who divorce their husbands while condemning men. The system is aimed at making divorce easy for women while making it hard for men. The system is determined to punish men for divorce while rewarding women. All of that will have an effect.

I have never met a woman who was hit by divorce like a bolt from the blue. Although I do know one who was so struck by her husband's cheating which lead to a divorce. On the other hand virtually every divorced man I know has said they thought things were fine until the papers hit them. Including one class mate who came back from a business trip to find the proverbial empty house. Down to the food in the fridge.

Tyler, did you catch this bit about a flash crash on Zynga?

http://www.theatlantic.com/business/archive/2012/05/why-did-zyngas-stock-drop-after-facebook-went-public/257395/#

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