No objective truth? We’ll see.

There are those who say things like: “There is no objective truth. Everything is relative. There are no objective standards of beauty, value, right or wrong. There is only opinion and no truthful way of judging opinions.” These statements, taken together, form a “philosophy” labeled relativism, subjectivity or postmodernism. If my 40+ year career in psychology and financial planning has taught me anything, it’s that people will say anything, no matter how absurd or irrational (like those statements in quotes) until their own money is on the line. When their stated beliefs are almost certain to lose money, they can temporarily become, or try to become, rational.

In 1979, behavioral finance founders Kahneman and Tversky presented a concept called prospect theory. Prospect theory holds that people tend to value gains and losses differently from one another, and suggests that losses hit us harder. There is a greater emotional impact associated with a loss than with an equivalent gain. As an example, consider how you may react to the following two scenarios: 1) you win $50, 2) you win $100, then you lose $50. Either way, you end up ahead $50, but the pain of the loss is greater than the pure gain. Lets apply this and another principle of behavior to the person who insists there’s no objective truth, whom I’ll call doubter. Cognitive Dissonance is the mental discomfort (psychological stress) experienced by a person who holds two or more contradictory beliefs, ideas, or values simultaneously (Festinger, 1957). Typically it is triggered by a situation in which a person’s belief clashes with new evidence perceived by the person. Note how almost everything in this paragraph contradicts doubter’s assertion that there’s no objective truth. If you presented the $50 scenarios to doubter, and assured him he would really get the money, it doesn’t matter which he would prefer, because by choosing either one, he is admitting that the $50 is real and has value. That fact just caused cognitive dissonance, because he is simultaneously holding the belief that there’s no objective reality while admitting he would value ending up with $50, which is objective reality. Even the very definition of cognitive dissonance admits to objective reality, since if two beliefs are contradictory and there’s evidence for one of them, the other is likely to be false. That’s objectivity. The existence of evidence itself contradicts subjectivity.

My favorite real world example of debunking relativism was J. Gresham Machen, a theologian who founded Westminster seminary, teaching a course when one of his students loudly proclaimed “there’s no truth, everything is relative” in class. Machen paused, and asked, “do you absolutely believe that?” Ignoring the fact that the word “absolutely” contradicts his assertion, the student blundered ahead. “I certainly do.” Machen’s response: “Then I’m giving you a failing grade.” The student spluttered, “you can’t do that, I have high scores.” Machen pointed out that in a world without objective truth, his scores were meaningless.

Going back to the finance example, give doubter the following choice: I will trade you a certain multiple of stock value for all the money you have saved (ignoring the obvious that if he’s saved money, he must believe in objective reality). You can have either twice the value of your savings in Amazon stock, or three times the value in Microsoft stock. You can have a full day to decide. Which would you take? I guarantee you, mr. there’s no objective reality would be checking P/E ratios, growth history, analysts’ reports. You don’t even need to know about prospect theory or cognitive dissonance.

A friend of mine, who firmly believes that we are all god, would argue that doubter’s belief in his money only proves that he is under the illusion that the material world is real. She would say that human beings don’t perceive the true reality of the universe. Okay, but she still lives mainly off her investments.