Two People. Two Sides. Four Entries
- Sean Lewis
- Feb 7, 2024
- 2 min read
Updated: Apr 23
I have a philosophy that the Accounting Equation is actually the Life Equation.
Some philosophies are more universal than others. Some capture the laws of nature. Like Gravity. Supply and Demand. Motion. Or Three’s.
Three elements bound together are fundamental to life. Two Hydrogens and one Oxygen. Water.
Three is the smallest number for a pattern to be made.
• One event is an instance.
• Two similar events are a coincidence.
• Three are a trend.
The “Rule of Three,” is a literary device. “Three little Pigs.” “Friends, Romans, Countrymen.” “Goldilocks and the…”
We also have three branches of government. The Holy Trinity. Three laws of motion. Three strikes and you’re out.
However, fundamental to business, the power of three comes in the form of the accounting equation. Assets. Liabilities. Equity. It is the foundation of our Balance Sheet. Like gravity, we ignore it at our peril.
Since business is life and life is business, our personal lives also have Balance Sheets. Business success is measured in Equity. Retirement planning measures us in our “personal net worth.”
However, when we want to live a “Balanced Life,” more important than just our bank accounts is how we think about our entire Balance Sheet.
• What makes up our Personal Chart of Accounts?
• How do we prioritize the intangible items that we need to consider for our lives to be successful—beyond the “cash?”
• How many fall into the category of Goodwill?
Goodwill accounts like family, community, memories of foreign lands and other adventures, skills, books read, time left in this world, emotional experiences, and more.
For business to happen, there must be two people. For any relationship to happen there must be two people. We excel in both our business and personal lives by making positive entries to those goodwill accounts...like "Community" or "I care" accounts, for example. Always applying the “Life Equation” forces us to consider the two forces that are affected by any interaction we have with another person. What are the two entries that they will be making to their balance sheets?
In the course of our daily lives, we simply auto-populate these balance sheet entries without much thought on consequences. When things go wrong, when we have drama, or when fail in our relationships, we often apply the term “unintended consequences.”
These consequences are actually failures in considering the balancing-side transactions. Things we didn’t fully think through, over-promised, or failed to honor. When we ask someone for a favor, we may be asking for money or time. In order to maintain that relationship, we have to return that money, give back some time, or exchange that favor in the future. This applies whether for a friend or an employee.
Good Business is about the quality of relationships. Good relationships are about the quality of our interactions with each other. The quality of our lives is measured by the quality of the people we have in them.
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