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Paying the Tax for Our Decisions

Published 1/27/2021

Every episode has its downside. In this episode we talk about a mental model called the "Strategy Tax", and how it applies beyond business strategy.

  • Mentioned: Developer Tea Interview with Gabriel Weinberg (@yegg) - https://developertea.com/episodes/e140196f-6a26-4ff3-8f21-3848e53080ef

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Transcript (Generated by OpenAI Whisper)
We all know that tax season is around the corner. For some of us who have already started our paperwork because we have these side businesses that take a lot of our time and effort and energy when we think about taxes and that in and of itself is kind of like a special tax that we have to pay for having our own business, right? In today's episode, I want to talk a little bit more about how tax can work in other scenarios, not financial tax, but instead behavioral tax. My name is Jonathan Cutrell listening to Developer Tea and my goal on this show is to help driven developers like you find clarity, perspective, and purpose in their careers. Quite a few episodes ago, we had Gabriel Weinberg on the show and Gabriel is the CEO of Duck.go. He was promoting a book that he was working on at the time called Super Thinking, which is now available. I highly recommend you go check it out. I was reading through it and there's this excellent passage about something called Strategy Tax. If you're not familiar with Strategy Tax, that's essentially what we're talking about and expounding on in today's episode. Strategy Tax is the simple idea. Again, go read the book because he expounds on it as well. But Strategy Tax is the simple idea that you have a strategy and that strategy requires you to act in a particular way. Even when that type of act, even when adhering to the strategy may actually cause some dis-traction towards your ultimate goal. That's a lot of definition that's make that tangible. The book, Gabriel, talks about, for example, Google. Google choosing to make their business built on advertising. That in combination with the recent increase in demand for privacy tooling means that Google is paying a tax because it's very difficult for Google to build privacy tooling that goes in opposition to their strategy. Their strategy is to get as much information about people as they can. This is a very simple strategy. Get as much information about people as we can so we can understand our buying habits. We can understand our browsing habits. We can do all of these things with all these data points and everybody's happier. Unfortunately, this isn't always the case. People don't necessarily want all of that information shared. The strategy breaks down when there's a cultural transformation that pushes against the requirements of that strategy. In this case, the requirements of the strategy are gathered as much data about people as you can. This is important because there are other kinds of tax that we are paying every day, behaviorally speaking, that go beyond business strategy. For example, we have habit taxes. What does a habit tax? One tax might be, I've decided to cultivate this particular habit. I've decided to cultivate the habit of, let's say, reading every day. This is a good habit. We can universally agree that we probably should all read a little bit more, but it doesn't come for free. There is some level of investment that we have to put into reading. Sometimes there is a pure loss. There's not a 100% gain that comes from reading. It might be a very high gain, but there is some tax. One tax might be that instead of listening to a digest or you can gain the same amount of information, you may go read a much more long-form book. Ultimately, there's a lot of fluff in that book. That would be an example of a tax on reading. There's a lot of other habitual taxes that are more obvious. One basic example of this would be, let's say you start working out. This is again known to be a good decision. It's a good investment to go and work out, but there is some downside. Of course, your time is being taxed, but also, what if you get injured? This is a type of tax that you can imagine paying for being more physically active. If you're more physically active, you have a higher chance of being injured while you are working out. That's not a perfect system because, of course, working out also decreases your chance of injury because of your lack of flexibility, for example. We're all doing this calculus, this mental calculus all the time, trying to understand the positive effects of a given decision and the negative effects of a given decision. Sometimes the negative effects are part of the game. They're unavoidable. That is exactly what a tax would mean in order to stay consistent, for example. Let's say you have a particular belief system. In order to stay consistent with that belief system, which is very important to humans psychologically that we maintain consistency, sometimes we have to accept something that cognitively down the road. We're going to want to change. We don't want to necessarily accept that part of the belief. This is something that happens very often in politics because especially in places like the United States, there are two party systems that require, to some degree, if you want to be a successful politician, it requires some kind of adherence to one entire set, kind of a binary set of beliefs or another binary set of beliefs. There's very few examples that break from that norm. The vast majority of the people in those two parties, they pay a tax. The tax that they're paying is maybe they don't necessarily want to back a position. Let's say about climate change. This is an example once again that Gabriel uses in the book. They don't necessarily want to back a position that denies climate change. They don't really want to back a position on the other side that in their minds is spending a little bit too much on public assistance programs, maybe they want to send that money to the states. This is not a political show. Instead this is about understanding that even though those individual politicians almost certainly have opinions that divert from each other, even if a little bit, they have to either pay the tax of backing opinions that they otherwise wouldn't or they don't succeed as politicians. This is frustrating. It's frustrating not to pay these taxes. It's frustrating not to accept that there is a downside, but this is the case in most of our decisions. There's a downside with most of our decisions. What can we do about this? That's what we're going to talk about right after we talk about today's sponsor. Listen notes. We talked about listen notes a handful of times already. They've sponsored a couple of episodes of the show. In fact, the last couple of episodes of the show have been sponsored by Listen Notes. I just want to reiterate the cool factor here. Listennotes.com. If you go to ListenNotes.com, you're going to find an incredible search engine that has indexed over 91 million episodes of podcasts. The best podcast search engine I personally used, the best one I have found, because it's searches across a bunch of different fields and it has pages and pages and pages of results. It's so much easier to use than let's say like iTunes for searching for particular topics. There's an excellent research tool. It's an excellent tool for preparing for an interview, for example. You could probably go and find specific episodes that have either content that's related to your potential viewer employer or you can find an interview with a person who was actually interviewing you that day. In the case of a startup especially, it's very likely that you can find something very relevant. This is harder to do in the traditional podcast platform apps. Again, Apple Podcasts is kind of an infamous example of this. The search in Apple Podcasts is pretty terrible. If listen notes you can go and search and find so much more content, it's helped my discovery process of content dramatically. So I want you to go and check it out. Head over to listennotes.com. Thank you again to listen notes for sponsoring today's episode of Developer Tea. We're talking about this idea of paying a tax. A tax is something that kind of pays for the benefit. If you think about the concept of a tax, this is money that is automatically, you're not offering this up. This isn't a free market decision aside from the idea that you are choosing to live under that taxation. But assume that that is removed. I guess in some ways you are choosing to live under that taxation, even in our theoretical examples. You're choosing to live under that taxation because you've chosen one political party or one set of behaviors, etc. So there's a downside to every decision is almost certainly a trueism. We can rely on this idea that there's a downside to almost every decision that we will ever make. That downside may not be immediate. The obvious idea here is there are downsides that are delayed. The tax on immediate gratification is the delayed effect of that gratification. Sometimes that gratification doesn't have very much of a tax. But in the example of sitting on the couch rather than working out, maybe you avoid injury today, but your long term sedentary lifestyle leads to different, perhaps more serious health problems later down the road. And the same thing with so many other decisions that we might make. Code hygiene would be another great example of this. We can get something done very quickly today. We can launch new features today. But at the expense of technical debt that we're all so overly familiar with. The idea that our code base is not tested. And when there's only one or two of us working on this, this is typically not very much of a problem, but very quickly it becomes a problem as we add new team members as we forget some of the code that we wrote previously. As the code gets stressed in one way or another, that technical debt begins to increase that tax. We start to feel that tax. So what are some ways that we can think about mitigating this tax? Or we can think about decisions that will help us avoid some of these unnecessary downsides. And we talked a lot about downside of failure, the downside of inaction in the last episode of the show. But how can we make decisions that reduce the downside more generally speaking? And we'll refer to this letter that Jeff Bezos, regardless of your position on Jeff Bezos, he sent this to his shareholders. And he has a model of thinking, kind of a razor, if you will, of thinking that could be very helpful in limiting our downside or limiting our tax. The idea is very simple. I'm going to paraphrase rather than read the letter itself. There are two essential types of decisions, two basic categories of decisions in this model. The first is a type one decision. The type one decision is something that you pour all of your chips into. You're sold down the river in Hohei without a paddle. There's no way back. You can think about this as a door that will only open one way. Once you go through that door, you can't come back through the door. You have to deconstruct the door or something. There has to be some kind of destructive process to move backward out of the decision that you made. Typically these doors tend to be a little bit cheaper. It's easier. And potentially there's some higher upside to going these routes. But there is a second type of decision, what he calls type two decisions. And these type two decisions allow you to return back from where you came. And this model of thinking applies in almost every area of our lives. The idea that we can make a decision given a decision that has the same outcome, right? The same cost and the same outcome. And you have two options, one allows you to go through that type one door that you can't come back. And the other allows you to go through that type two door where you can come back, right? If the outcomes and the costs are essentially the same, the type two door is vastly better than the type one door. In other words, the ability to undo what you've done, very generally speaking, is better. It's better because it's flexible. It's better because the tax on our decisions we can avoid when we see that tax happening and reverse the decision. We can come back from where we were. There are some kind of good arguments against this, right? The historical example of this is the burn the ship's example. We cross the ocean in order to establish ourselves in a new land. And instead of turning back when things get hard, we burn the ships. So we've removed our option of falling to our weakness, right? We've removed the option of reversing out of fear, going back to where we were out of some kind of emotional state. And this is a reasonable argument from a behavioral science standpoint that we should burn the ships. In other words, we shouldn't give ourselves an easy out. But most of the time, most of the time flexibility is going to be a better route. I highly recommend you think about this on a more regular basis, even when you're writing code, you can imagine what is the easiest way to write this so that if we need to change it, we can. This is a variation on the same idea. It's not just coming back from that place, but being able to move away from that place in any direction forward or backward. If we need to change this, it's easy to change. This is an excellent heuristic for resilient code bases. It's an excellent heuristic for avoiding those downsides of decision making. Thank you so much for listening to today's episode. Thank you to today's sponsor. Thanks for listening to this episode. If you're interested in joining the Developer Tea Discord, the Developer Tea Discord, we're still handing out invites manually. Send me a message on Twitter, twitter.com slash Developer Teaor slash jcatrall, either one. If you send me a direct message, I will give you an invite to the Discord. Thank you so much for listening and until next time, enjoy your tea.