Theory Of Mind and Accounting

Earlier this week, sitting on my balcony on a gorgeous early summer day, sipping a crushed lemon drink, I was showing a psychiatrist friend how accounting and personal finance work. I was using our new (and the world's first) pop-up accounting book. It was fun. Some of our best seminars are with doctors and hospitals.

I made the point that you never tell your own personal financial story. Indeed, telling the wrong story is one of the biggest causes of confusion in personal and business finance.  

Point of view is everything if you're going to get the money-story straight.

Corporations shouldn't be confused with shareholders. That's why people don't get what Equity is, for example. They think Equity is the ownership of the company from the shareholders' point of view. It's not. It's the company's duty to its owner.  

Similarly, when accounting for your personal finances, you don't tell your own personal financial story. You tell the story of an imputed "Financial Persona You". And that invented financial-you is separate from the real, human-you.

At which point psychiatrist friend Kim asserted that accountant's "Separate Entity Principle" is like psychology's Theory of Mind. That theory describes humans' ability to attribute mental states to oneself and to others, and to understand that others have beliefs and desires that are different from our own.

Thank heavens we multifaceted children of Creation are much more than our mere financial personas. Or as they say, "Money ain't everything."

To a multifarious you,

Peter.

Photo by Huyen Nguyen on Unsplash