Prudent valuation vs confidence accounting

Accounts shouldn't pretend valuations are exact - but how best to fix the problem?


A single number is always easier for humans to understand and to recall than a vector. As a result, we often try to simplify complex concepts by reducing their dimensionality. For example, we talk about the stock market rising or falling by a certain percentage amount when we are really talking about the change in an index that is a weighted average of the prices of many different shares. Such simplifications are necessary and usually fairly harmless. The more complex underlying reality is us