Arbitrary Coherence

In my last Observation I mentioned that people use a point of reference to analyze a situation and make a decision. In effect it is a mental shortcut (aka judgmental heuristic) we use to solve a problem.


Sometimes that reference point resides in our subconscious mind and is in no way relevant to the matter at hand. Psychologists call this tendency “arbitrary coherence” and it’s a companion bias to “anchoring” the bias I discussed last month.

If I asked you to think of the last two digits of your social security number and then evaluate the intrinsic value of a certain stock, did you know that (multiple studies have shown) your responses would vary depending on the value of the ssn digits.

Those of you that have two tailend ssn digits closer to 99 would tend to value the stock higher than those of you that had digits closer to 00.

Like many of the mental biases we have being aware of this tendency allows you to adjust for it - but doesn’t make it go away.