Each winter morning, hordes of parka-clad addicts descend on the ski resorts that dot the mountains of the western US. They share one goal: allocating their time to maximize stoke levels at the moment they return to the lodge. The skiers employ a wide range of strategies to optimize these so-called "stoke returns." Chairlifts overflow with self-described experts who claim unique approaches for achieving the best results. Sadly, many are little more than charlatans.
It's a sad fact of life that an individual's stoke returns are largely driven by mountain conditions. A harsh drought can drive stoke returns so low that many skiers slide into depression. Conversely, ideal mountain conditions benefit everyone who visits. In either scenario, though, some skiers achieve higher stoke levels than others.
Unsurprisingly, many economists devote their careers to understanding which factors drive the variation in returns. The first breakthrough occurred when a group of economists visited Alta in the 1960s. Over their two week visit, they noticed that they could achieve consistent albeit modest stoke returns by sticking to the safer parts of the mountain. Stoke varied minimally with snowfall levels because groomed parts of the mountain almost always remain skiable.
On the other hand, skiers who take on more risk seem to capture higher average returns. Venturing off trail gives skiers access to solitude, challenging terrain, and the miraculous form of upside known as "powder days." But it also exposes them to stoke-destroying catastrophes: embarrassing crashes, injuries, and the shame of taking off their skis and hiking 100 yards back up the mountain to avoid a cliff. Furthermore, skiers who commit to this strategy are prone to sulking in the lodge in dry conditions, thereby forfeiting the modest stoke returns of skiing groomers.
Careful empirical analysis found that expected stoke returns increased as a linear function of risk. Indeed, variations in risk-seeking explained about 70% of the variation in returns across skiers. The single-factor model became a skiing industry standard, and a rich vocabulary developed around it. For instance, a skier who takes outsized risk in exchange for marginal stoke is said to have a high "Scar Ratio."
By the 1990s, the single-factor model was ripe for improvement. Following a month-long visit to Snowbird, a team of University of Chicago economists proposed a three-factor model. Risk remained important, but they introduced two addtional factors: boot value and grooming levels.
Anyone who has ever jammed his foot into the plastic vice known as a ski boot will appreciate the importance of boot value. Indeed, the failure of economists to recognize it earlier reflects poorly on their profession.
By contrast, the impact of grooming on stoke returns is more subtle. Skiers seeking more risk have always been drawn to ungroomed, off-trail terrain. The breakthrough of the three-factor model was to recognize that even after holding risk levels constant, skiers can achieve higher stoke returns by allocating more time to low cat-utilization parts of the mountain.
For now, the three-factor model is the most widely accepted theory among alpine economists. Practitioners, of course, have their own perspective. Overcrowding is a real problem; no matter how great your strategy looks on paper, it will be ruined if swarms of other skiers execute on it at the same time. On the other hand, stoke seekers rely on techniques that are still controversial in the academic community. Some skiers have achieved great returns by focusing on maintaining high momentum, although critics say this increases the risk of running into a Cliff.
Despite the subtleties of maximizing stoke returns, most economists believe that anyone can achieve good returns over a long time horizon by skiing all parts of the mountain and maintaining modest levels of risk. And while critics occasionally claim that skier stoke levels are irrational, a morning of skiing invariably silences them. So it was that on a recent powder day, one naysayer was heard yelling "Rational exuberance!" as he floated through the unblemished snow.