A Yale economics professor and a Yale law school professor are hoping that the next diet trend to take off is their own, which involves getting dieters to sign binding contracts committing to pay significant sums of money if they fail to meet their weight-loss goals.
The economist, Dean Karlan, tested the method himself, promising to hand over $1,000 to a friend every week that he didn't drop one pound. Soon enough, he lost 10 pounds, getting down to 170 pounds without paying a cent.
Now, Mr. Karlan and Ian Ayres, the law professor who also teaches at Yale's school of management, are launching a company based on this strategy. StickK will officially open next month, just in time for New Years' resolutions aimed at losing pounds gained at holiday parties and family feasts. The company will have a Web site offering individuals hoping to reach a goal — anything from sticking to a diet to learning to ride a unicycle — legally binding contracts where they will pay a set dollar amount to charity if they fail in their endeavor.
The author of the book "The Undercover Economist," Tim Harford, is testing out StickK's methodology. He has paid a $1,000 so-called contract bond to the company, and has promised to donate 10% of this deposit to charity if he fails to complete 200 push-ups and 200 sit-ups every week.
"When I signed up to do this, I thought to myself, the contract bond isn't going to matter at all; what's relevant is that I've made the psychological commitment to do these press-ups and sit-ups," he said. "I was completely wrong. There's absolutely no way I would have done these press-ups and sit-ups for the past six weeks had it not been for the commitment bond."
In December, customers will be able to decide on an amount to put up as collateral if they fail in their goals, and will give StickK their credit card numbers, which will be charged if they miss their objectives. There will also be a verification system, such as a designated friend or gym that will chart customers' progress.
StickK hopes to make money through selling advertising and through commissions on dieting products that will be sold on their Web site, Stickk.com. They are still choosing the charities they will include, and are focusing on ones that are not political or religious. Customers will not be free to choose their own charities, as this could lessen their motivations to achieve their goals. The name of the business comes from the idea of helping customers stick to their goals by using a "stick" as well as a carrot, the business's founders said.
Mr. Ayres said he first used the system to lose some pounds, and he now has $500 a week at stake to maintain his weight. He calculates that he has put over $21,000 — or $500 a week for almost a year — at risk through this system. But it makes more sense than traditional weight loss systems, he said. "What's interesting is that Weight Watchers costs you $500 a year and gives modest results. I put $500 at risk every week, but it's cost me nothing because I've met my goals so far."
Weight Watchers declined to comment.
Mr. Harford explains the effectiveness of the contracts in psychological terms. "There are two parts of me," he says. "There's a short-term self who thinks, 'I really can't be bothered to do those push-ups right now… I'll just do it later.' And of course later never comes. Then there's the long-term self who says, 'Look, this is not a big deal; it's not much of a hassle. You'd actually like to be fitter and stronger, and have better pecs so you should do this.'" Mr. Harford sees the StickK contract as a way of helping the long-term self beat the short-term self. "And it works," he says.
StickK is also planning to market its idea to companies that want to achieve a healthier workforce. Corporate accounts will be tailored to the customers' needs, Mr. Karlan said. "We also think that the management might use our site to improve worker productivity and time management." If people aren't punctual, for example, a company could use StickK incentives to help them show up on time. "You can see it being a fun, entertaining way for a firm to manage processes."
The company, which is being funded solely out of the pockets of Messrs. Karlin and Ayers, as well as a business graduate student, Jordan Goldberg, is located in New Haven, Conn. They plan on relocating the business to New York City once their idea takes off, they say.