Absolutes Quote by Michael Mauboussin
“People are, by and large, quite poor at judging correct absolute values but are astute about determining relative values. Psychologists call this coherent arbitrariness, which suggests that individuals are coherent when they compare prices on a relative basis but arbitrary when those prices are considered versus fundamental value.”
About This Quote
People struggle to judge absolute values accurately but excel at comparing relative differences, a phenomenon called coherent arbitrariness.
In simple terms: We are bad at absolute value judgments but good at relative comparisons.
Key Takeaway
Use relative benchmarks when absolute standards are unclear.
Themes
decision making
psychology
economics
valuation
bias
Mood
thoughtful
educational
Type
informative
practical
When to use this quote
- pricing strategy
- investment analysis
- consumer choice
- policy evaluation
- education
Key Concepts
coherent arbitrariness
relative valuation
cognitive bias
Questions to Reflect On
- How can we improve absolute value assessments?
- When is relative comparison preferable?
A Different Perspective
Absolute value judgments can be misleading without context.
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