It’s All Relative

einstein image relating to relativity biasEinstein equation, E = MC2, may have cracked the scientific code with his theory of  relativity stating that small amounts of mass are equivalent to huge amounts of energy. However, I’m going to uncrack the psychology code on a predisposition in our buying psyches called the relativity bias.

Relativity is about everything we do.

In fact, we can’t do anything that is not relative. For example, your happiness is not just derived by what you have, it’s derived by what you have relative to other things. Only when the other things come into contact, the comparison of relativity bias helps us understand how much we care about them, want them, or are willing to pay for them.

Comparative sets surround every decision.

This tendency to estimate the value of things according to how they compare with other items can really trip us up on a daily basis if we don’t control the underlying impulses.   For that reason, I’ve collected 3 lessons (with examples) that will empower us all to keep the relativity bias in check.

Set yourself up for success with these 3 rules:

1. Control the circles around you

When looking for a car or a house, avoid looking at options that are outside of your budget and instead focus on options that you can afford. For example, I once had $30k saved for a car so got a used 2012 Honda Pilot fully loaded with the tech package vs. the newer editions (that I liked a lot) that were $44k – a one-time savings of $14k!

2. Fight adaptation and see the truth

Find the savings you forgot about; just because you pay that price now, doesn’t mean you should. As an illustration, back then I used to pay $4.99-$6.99 per video rental about 2x per week on my streaming services (vudu, Amazon video, etc.); however, I now either rent them from our library or a Redbox – an annual savings of about $727! 

2. Broaden your focus

Most people won’t make a trip to save money when buying a bigger purchase because the percentage off is less; see the savings by themselves, not in relation to what we’re buying. Case in point, at one point I needed a new dishwasher and sought out all the ads to find one that was a mere 10% off (not anything too catchy) at a store I wouldn’t typically visit, but it was worth it to go there – a single savings of about $60!

"Everything is relative and only that is absolute."

As the saying goes, take what you will from this article and see how it compares to other advice you receive or experiences you have.   Leave a comment to share your ideas as this discussion could be a great resource!

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