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It’s the Economy

How Economics Can Help You Lose Weight

Credit...Illustration by Janice Wu

Last month, I visited the southern New Jersey plant of the Robard Corporation, a company that makes meal-replacement products for dieters. Robard’s president, Robert Schwartz, took me to the factory floor, where huge vats of powders — proteins, flavoring ingredients, vitamins — are poured into a 450-gallon V-shaped industrial mixer. The ingredients are then spun together and turned into protein shakes that sell for around $3.50 a serving. As I watched this process, it seemed as if Robard were in the world’s easiest business: take dirt-cheap raw materials, mix them together and sell them at a huge markup to America’s tens of millions of desperate dieters, like me.

I have spent much of my adulthood overweight, often obese and fruitlessly following all sorts of diet programs. Last year, however, I decided to try a new approach. I purposely didn’t apply the latest in nutritional science. (Over the years, many experts have told me that we still don’t have enough data to know definitively which diets work best.) Instead, I used economics to pick a diet that would work best for me. More specifically, I used the game theory that economists applied during the cold war.

The idea first came to me a few years ago when I was talking to the economist Thomas Schelling, who is best known for formalizing the logic behind the mutually-assured-destruction strategy. His work showed that combatants in a conflict can actually strengthen their position by restricting their choices. During the cold war, Schelling wrote, the United States placed a calculated number of soldiers in Western Europe — not enough to directly repel a Soviet attack but enough to make clear that it was committed to military action if one occurred. Schelling referred to this strategy as “commitment,” and he told me that the idea dated back to the ancient Greek philosopher and soldier Xenophon, whose writings guided Alexander the Great in his conquests. Xenophon argued that a general can strengthen his army’s position, perhaps counterintuitively, by doing battle next to a dangerous cliff. His soldiers, after all, would only have two choices: fight or die. The army farther from the cliff had a third option: to flee. This extra option, he said, made it less likely to persevere.

During our conversation, Schelling said that he eventually applied this theory to his struggle to quit smoking. He wanted to think of it as a battle with two choices — quit or die of cancer — but his nicotine-addled brain kept coming up with a third option: sneak one more cigarette and quit later. Of course, later never came. (“I was quitting for 20 years,” he said.) This theory also applies to weight loss. For years, I’ve known that the only way to lose weight was to permanently change my diet and exercise habits. But I was awfully good at coming up with third options, like buying diet books or eating Atkins bars that made me feel as if I were on the verge of weight loss even if I never jogged or ordered salads.

As I surveyed all my dieting options this time around, I realized that many companies based their entire business models on the impulse to believe in a magical third option. (Their marketing materials usually include the words “miracle,” “easy” or “suggested by Dr. Oz.”) I found it easy to dismiss the idea that a few capsules of capsicum powder or some green-coffee-bean extract would allow me to continue to eat my favorite poppy-seed poundcake and still lose weight, but I was susceptible to other products that marketed the same option in a different way. I ate two big cups of “fat free” frozen yogurt almost every day. Whenever I ate a huge beef burrito, I ordered a Diet Coke.

There is another class of products, I noticed, that have a related business model. They were not preying on my impulses to find a third way, but they still made money whether I lost weight or not. All those Slim-Fast shakes, Atkins bars and meal replacements may help some people lose weight, but much of the companies’ revenue comes from people who try and fail continuously or people who only want to create the illusion they are dieting. My desk was filled with books written by experts from the Mayo Clinic and Harvard. They contained useful information, but, for me, they acted like a miracle totem. I felt good about myself for buying them, but I never lost a pound.

Similarly, Weight Watchers makes much of its money by providing good information, a supportive atmosphere and satisfying low-cal foods. But the company also makes money — at least they did from me — by auto-charging my credit card each month even when I wasn’t going to meetings or losing weight. Like Slim-Fast shakes and big scientific books, it still caters to a broader market of people who may say that they’re hoping to lose weight but are just going through the motions. Eventually, my Weight Watchers commitment was no different from paying gym dues and never working out. I kept paying because canceling would be an admission of defeat. My denial earned them $39.95 a month.

So, this time, I wanted a company that made a commitment. I couldn’t find any programs that offered a money-back guarantee, but I was happy to learn about New York University’s Medical Weight Loss Management Program. On my first day, my doctor, Holly F. Lofton, made clear that I would have to commit to a big program: 10 or 24 weeks on a low-calorie diet consisting primarily of Robard meal-replacement shakes. If I followed the plan, she said, I could lose three to five pounds a week. There was no third, easy option.

During my weight loss, I became fascinated by the Robard Corporation’s business plan. Why would any company, I wondered, restrict its sales to a relatively few clinics rather than sell its products in every drugstore in the country? The program also put up other barriers to making money. They would sell me only enough protein powder to last to the next weigh-in, and it was a pain to trudge over to Lofton’s office each week. I tried to cheat and looked online for Robard’s products or a substitutable product from a competitor, but there wasn’t anything comparable.

This, I realized, was the financial commitment. Unlike Atkins or Dr. Oz-approved products, Robard is not focusing on consumers who make guilt-reducing impulse buys. The company is technically a manufacturer, and its main revenue comes from its powders. Its growth, however, is predicated on persuading doctors to make long-term results-based commitments. Robard provides its medical customers with free services, from individualized training to an annual conference on developments in weight-loss science. In order to charge its large markup, Robard needs to ensure that its research services are tremendously valuable. The company’s financial incentives, in other words, were in line with my own personal goals. So far, I’ve lost 60 pounds.

But aligning financial incentives with people who actually want to lose weight is not the best business strategy. John LaRosa, an analyst at Marketdata Enterprises, said Robard was one of a handful of companies, like Health Management Resources and the Center for Medical Weight Loss, that competed for a share of a relatively small market. Altogether, these meal-replacement clinics make around $400 million a year. Diet books and exercise videos, by contrast, make nearly three times as much. The real money, of course, is in the third, easy, magical-option category. All those diet bars, green-coffee-bean-extract capsules and other supplements earn close to $3 billion a year. Diet soda alone is a $21 billion business. Game theory suggests that if you want to truly change your behavior, commit and close off those options. But as basic marketing makes clear, the real money is still in the fantasy business.

Adam Davidson is co-founder of NPR’s “Planet Money,” a podcast and blog.

A version of this article appears in print on  , Page 17 of the Sunday Magazine with the headline: Your Personal Austerity Program . . .. Order Reprints | Today’s Paper | Subscribe

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