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Mental Accounting

Published 4/1/2019

It's the beginning of April and for many folks, this will be a fresh start, especially if you run an accounting department. Many things are measured in quarters and most influence or story has been written, but when the next quarter is beginning we have the ability to write a new story for ourselves and our teams.

In today's episode, we're talking about making the most of our fresh start.

Today's Episode is Brought To you by: Discover.bot

Discover.bot​ ​– a digital space for bot developers and enthusiasts of all skill levels to learn from one another, share stories, and move the bot conversation forward. Want to learn more about building bots? Get started with their​ ​Guide to Bot Building Frameworks​

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Transcript (Generated by OpenAI Whisper)
What do company benefits, birthday presents, and IOUs have in common? That's a strange subject that we're talking about on today's episode of Developer Tea. My name is Jonathan Cutrell, you're listening to Developer Tea. This show exists to help driven developers find clarity, perspective, and purpose in their careers. It's the beginning of quarter two, the beginning of April on the day that this episode releases, and for many people, this will be a fresh start for them, especially if you run, for example, an accounting department. And the way that we see time when we look at the last week of the previous quarter and the first week of this quarter, we see it very differently. Now part of the reason is because things are measured in these quarters, and by the time that the quarter is ending, you don't have a lot of influence on how that thing is measured, right? Most of the quarter is over, so most of the story is written. And now whatever happened in quarter one has pretty much already happened at the end of quarter one, but when quarter two is beginning, we have a fresh start. We have the ability to write this new story. Now the interesting thing is, there's nothing particularly different about yesterday from today. There's nothing explicitly different about the first of the year, but because we have accounting systems that make those things important, we also make them important. We create mental accounts that mirror those real accounts. But we don't just do this when a real account system has real consequences. The real consequences of this kind of accounting system where you have quarter one sales goals, for example, may be very real. But our brain is addicted to categorization. And the reason for this is categorization allows us to think about things less. Instead of having to parse every detail about a thing, if we can put it into a broader category, we have some heuristics. How should I treat this particular thing? Well, I can imagine every detail or I can fall back to however I treat that category of things that can make fewer decisions. And so if we're addicted to categories, then we should expect to create categories when perhaps no categories exist. We create meaning out of thin air. This tends to happen with money quite often, going back to the original question of IOUs and company benefits. Let's say that your company provides you with a $500 voucher and your company tells you to spend that $500 only on entertainment. You're not allowed to spend it on something that is intended to advance your career. You're only supposed to spend this $500 on entertainment. And this is as a thank you to you. So imagine how you would feel if your company did something like this. And then imagine if your company said that they were going to give you and all the other employees just a $500 bonus. Of course, I'm framing these things very differently, but the two scenarios are parsed very differently by our brains. In the first scenario where the company is specifically identifying the use case for this $500, we feel the category. The category has given us some sense of freedom to use this money on something that is self-gratifying. If the company only gives us $500 that we didn't expect in the form of a bonus, then this feels like something that perhaps we have a responsibility to use wisely. And so these two different mental accounts, these different categories that we've applied to the money, changes our perspective of the money. And why does this matter to us as developers? Well, mental accounting doesn't just happen with money. We're going to talk about how you could be applying mental accounting to your code right after we talk about today's sponsor, discover.bot. Discover.bot is an online community for bot creators designed to serve as a platform, agnostic, digital space for bot developers and enthusiasts of all skill levels to learn from one another, share their stories, and move the conversation forward together. Discover.bot was built by Amazon Registry Services, Incorporated, and it's an informational place for novices and experts in the bot development space. If you've ever asked the question, how does my voice-based service speak and emoji? Well, maybe this community is for you. Discover.bot shares expert advice and provides insights on all things related to bot development. Like, for example, what KPIs are worth measuring? You can find how-to guides, you can find resources for beginners, newcomers in the space, and if you already have a bot of your own, Discover.bot can help you choose a framework that's aligned with your business to release that bot. Go and check it out, head over to Discover.bot slash Developer Teato get started today. That's Discover.bot slash Developer Tea. Thanks so much to Discover.bot for sponsoring today's episode. Mental accounting is a difficult thing to understand because it happens so automatically. It's something that we can't really escape, but we can see it in practice. It's quite possible that you are actively practicing mental accounting with your code. For example, you may be ascribing a certain amount of value to your code based on the amount of time that you invested in that code. It's possible that you were not as productive as you could have been, for example, maybe you were sleep deprived. Let's say that you were sleep deprived and it took you twice as long to do a particular feature. It's possible that you are ascribing an unbalanced amount of value because it took you that long. Another example of this is putting different types of value into your code, perceived value from you, into your code based on what kinds of problems you are solving. Maybe you are imagining that the bug that you fixed is less valuable than the feature that you created. Perhaps those things have equal business value, but because one was going from a broken state to backed normal and the other one went from a normal state to better than normal, we can trick ourselves into categorizing those things as different levels of value. Similarly, we may be practicing mental accounting when we're writing tests. It's easy to try to rush through certain parts of our coding process because whatever that thing is is accounted for differently than another part. There are many different ways to practice mental accounting and typically these are distortions. They end up leading us to believing that something has a different value than it actually has. It's important to think about this and identify places where you feel like perhaps mental accounting is occurring. Identify different categories that you automatically create in your mind. Another example of this may be the category of something that my boss told me to do versus something that we decided we were going to do together. These may be accounted for differently. I encourage you to find the different categories and try to remain aware of these. When you're planning out your week, for example, try to understand how you are describing different types of value. Another good heuristic or kind of a flag that you can watch out for is when you feel pressure to do one thing versus another. That pressure may be an indication of a mental accounting error. Thank you so much for listening to today's episode of Developer Tea. If you enjoyed today's episode, I encourage you to subscribe in whatever podcasting app you're currently using. Thank you again to Discovered Upbot. For sponsoring today's episode, head over to Discovered Upbot slash Developer Teato get started with Discovered Upbot today. Today's episode was a part of the spec network. Go and check out all the other awesome content for designers and developers like you who are looking to level up in your career. You can find that amazing content at spec.fm. Today's episode wouldn't have been possible without our producer Sarah Jackson. Thank you so much for listening and until next time, enjoy your tea.