A few days ago a junkie broke into my friend’s car while I was talking to her in front of the school gates. We were actually standing just 150 metres away from her car, but it was ten minutes after the police descended on the busy street that we realised they were actually converging around her car. The policewoman asked her what had been stolen. As she peered through her brutally smashed car window, she mentioned her new brand-name handbag and the D&G sunglasses that her sister had gifted her for Christmas. I noticed a expectant look in the policewoman’s eyes as she asked my friend whether these were really the only things of value that were lost. “What about your bank and insurance cards, and driving license,” I reminded, as my friend glazed over. She choked, but after a good 30 seconds she whispered that her employer’s office keys were also gone. I remembered a conversation we had had a few months earlier, when she started her new job. She had deliberately neglected to insure the keys to the firm.
As we gathered our respective children and all crowded into my car, she told me that her new employer had repeatedly encouraged her to get the keys insured so that she would not land in a situation where, in case of loss, she would have to pay to change the locks of the entire 11-story building where the office is located. At that time, she did not take his advice seriously. I understood her initial dilemma. A mother of two, she had started her job after an eight-year long hiatus. I knew that she had long dwelled on whether incurring the extra expense of an au-pair, parking, and all the other costs of going to work would outweigh the advantages of the income generated by a part-time job. Any further increase in the expenses was in danger of tipping the balance. In any case, as she had never lost a key before, so the chances that she would suddenly become absent-minded seemed very low. Now, however, her regret was immense and not just because a two-figure investment in the insurance premium would have spared her a loss that might pile up to a four-figure amount, but because the employer’s warning made the alternative cause of action more salient.
On the next day I met my friend again. I have to admit that she looked better than I had expected. After all, revealing to a spouse that one has made a potentially costly mistake is not one of the high spots of married life. But she seemed to have come out all right. She told me that during an hour-long discussion with her husband, they had reconciled themselves to the idea of paying up. They had already decided to forego a Spring holiday in Florida as her new job did not allow her an immediate vacation entitlement. So the costs could be met from the savings in the holiday budget. I was happy to hear her story. Without knowing it my friend had wisely chosen to optimize her happiness using mental accounting. Instead of choosing to look at the impending loss as a dent in their savings, which would have led them to regret it longer and more intensely, they had elected to ‘debit’ a mental account whose balance would anyway have been fritted away in a few months.
Related posts:
- Has Gold Lost its Gleam?
- Illusory Profits on the Way to JFK
- Flight to risk?
- David’s Dream (Regrettably) Fled to Ed
- The Tyranny of Choice
Tags: mental accounting, regret