Business  •  February 8, 2017

Why Psychoanalysis Is Not a Viable Business

As a hobby, most people take up things like cooking, ceramics, dancing, and knitting. I attend meetings of psychoanalysts on a regular basis. No, I’m not an aspiring psychoanalyst. I’ve always known that psychoanalysis is not a viable business. Naturally, if you are already a psychoanalyst, you would defend your profession. And, if you are a psychotherapist, you would have a vested interest in arguing why psychotherapy (like cognitive behavioral therapy) is superior to psychoanalysis. I’m neither. (Although my wife is a cognitive behavioral therapist.) And, having gone through the whole experience of running a startup, my brain has been trained to think about what can be “monetized”, what “business models” are viable, and how the “unit economics” would work out for any given model. From my outsider perspective, I’d like to share my theory on why psychoanalysis is not a viable business.

Just to be clear, I’m not saying it’s impossible to make a living as a psychoanalyst. It’s just that, practically speaking, it is not wise to rely on being able to do so. It’s like trying to make it as an actor or poet. It’s not a path you should choose if you are looking for a reliable way to make a living. Most actors and poets don’t think of their pursuits as a business.

From an economic point of view, psychoanalysis is not a viable business because it makes inefficient use of the most expensive resource in today’s market: human resource. It’s similar to the business of selling handmade ceramics. Because of automation, the cost of almost all goods we consume has dramatically gone down in relation to the cost of human resource. Because of this disparity, any products or services that require human intervention push the prices beyond what the market can bear.

Expanding our analogy to handmade ceramics, how much could an average person afford to pay for a coffee mug? Ten dollars would be pushing it. Twenty would be excessive. A hundred would be absurd. Yet a hundred dollars would be the minimum you would have to charge in order to make a living if each mug ends up needing about an hour of your time total. This hour must include not only the time to make it (the fun part) but also the time to source the materials, maintain the tools, clean up, transport, market the business, and make the sale. Before the Industrial Revolution, it was possible to make many things by hand and make a living from selling them. Outside of the few niche markets, this is no longer possible. Some people do manage to charge a hundred dollars or more for a mug, bowl, or plate, but, needless to say, it requires finding wealthy enough clients.

In designing a business model for a startup, the most difficult puzzle to solve is how to avoid human intervention. This is why many startup founders are software engineers. As soon as any humans are involved in the unit economics, the price shoots up, and also the model becomes less scalable. Both psychotherapy and psychoanalysis are at the opposite end of this calculation. They involve almost nothing but human intervention. Even worse, they require highly educated people, not unskilled laborers.

This fact alone wouldn’t be such a big problem if the demand for psychoanalysis were based on dire needs. Most people would be willing to pay almost any price if they needed surgery to remove their malignant tumors. This is where psychoanalysis falls off the list of viable business models while psychotherapy stays on.

Mental health is a serious matter, and many people are willing to pay a significant amount of money for it but only if it can guarantee some degree of success. Psychoanalysis can’t, despite the fact that it takes longer and more frequent visits. Furthermore, there is no way to prove or falsify its claims because each case is singular and unrepeatable. Such a service is not suitable for addressing the demand arising from critical needs.

This puts psychoanalysis in the luxury market. It’s a nice-to-have, like buying a Porsche instead of a Toyota. Well, actually, Bugatti might be a better example. Most people at least understand the differences between Porsche and Toyota, why some people would pay a lot more for the former. In contrast, most people have no idea what the difference is between psychoanalysis and psychotherapy. So, if they are told that the latter has a success rate that can be backed up by data, they cannot possibly consider choosing psychoanalysis over psychotherapy. To spend more money for less certainty would require a robust understanding of the differences between the two fields. What percentage of the population/market have such understanding?

Another factor that prevents us from finding a workable unit economics is confidentiality. If it weren’t for this requirement, as a psychoanalyst, you could offer group sessions for twenty dollars a person with ten people in the room. At twenty dollars a session, many more people would be willing to take the risk of not getting any results.

Alternatively, as a psychoanalyst, you could publish books and get paid for speaking engagements like the British psychoanalyst Adam Phillips does. But you would probably have a better chance of succeeding as an actor.

Or, you could move to Argentina where psychoanalysis is still quite popular. One of the reasons, according to this article, is that “evidence-based” psychotherapy is expensive. I assume the writer means for the practitioners. Because the definition of what constitutes a competent psychoanalyst is vague, it’s cheaper for the practitioners to become qualified as one, particularly if the alternative is in short supply. Also, there are cultural differences in how people define “need” versus “want.” If psychoanalysis is defined more as a “need”, the consumers would be willing to pay more. Market perception certainly plays a significant role in price expectation.

Psychoanalysis as a theory is quite profound and useful in understanding why we behave the way we do and how we end up being who we are. But understanding how something works does not necessarily lead to solutions. Freud himself was aware of this. There are many profound theories that cannot be monetized because the requirements of the market forces are independent of the requirements of the theories. Only when they happen to overlap sufficiently, could we have a viable business model.