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Nate’s Notes 14: The Anchoring Bias

By July 20, 2021June 8th, 2023No Comments

In 2010, a psychology paper found that people could predict the future. And this paper wasn’t published in some rogue journal by some rogue academic. The paper was published in Psychology’s flagship journal and the researcher was a renowned professor who used widely accepted experimental standards. But this finding led to an obvious question: What was more likely, that people could predict the future, or that the widely accepted experimental standards were flawed?

Five years later, in 2015, a group of psychologists tried to replicate 100 psychology experiments that had been published in top scientific journals. But what the researchers found further rocked the psychology world. More than 1/2 of the experiments did not replicate.  Questions that had been raised in 2010 had been answered by 2015. The accepted experimental standards of psychology were deeply flawed. Many of the clever psychology findings from recent decades could not be trusted.

This time period and these events came to be known as the replication crisis, a time period that is unforgettable to me because I was earning my PhD in social science at the time.

It is because of the replication crisis that I am skeptical, by default, of most psychological findings. For example, does standing in a power pose actually improve performance? Does reading words like “old” and “tired” actually make you walk more slowly? Does putting a pencil in your mouth, forcing your face into a contorted smile, actually make you happier? I doubt it.

However, not all psychology findings are wrong. And one psychology finding that is robust, that has been demonstrated time and time again, is the anchoring bias.

The anchoring bias refers to our tendency to depend too heavily on the first information we receive. For example, the initial price offered for a new car sets an arbitrary focal point for all future discussions about the car. If a seller sets the initial price, or anchor, at $50,000, we are prone to feel like purchasing the car for $45,000 is a good deal, even if the true value of the car is only $40,000.

The anchoring bias can also be seen in a simple exercise I conduct in my negotiation class. I divide the class into 2 groups, and then privately ask the first group whether the Missouri river is longer than 10,000 miles, and I privately ask the 2nd group if the Missouri river is longer than 2,000 miles. Once each group answers that first question, I then ask them to estimate how long the Missouri river is.

Without fail, the first group, on average, estimates the Missouri river to be significantly longer than the 2nd group…in other words, the first group gets anchored to the number 10,000, and bases their estimate close to that number, while the 2nd group gets anchored to the number 2000.

Accurately estimating the length of the Missouri river, is not that important but, the anchoring bias does have important consequences for some aspects of our lives, most obviously when we negotiate.

For example, in another exercise I conduct with my students, I have them negotiate the price of a piece of property that is worth anywhere from $5 to $27 million. What the exercise demonstrates over and again, is that whoever makes the first offer, whoever sets the anchor, gets the best deal. In fact, if students want to fully exploit the anchoring bias, they are advised to make the most aggressive first offer that they can possibly justify without getting laughed at. This sort of anchoring technique is often used in business but by politicians as well. For example, when Donald Trump claimed that he was going to build a wall on the southern border, and make Mexico pay for it, I immediately saw Donald Trump trying to set an aggressive anchor.

The anchoring bias can affect other decisions we make as well, such as decisions about how old our kids should be when they first date, or how much time our kids should spend playing video games.

It even affects doctors’ abilities to accurately diagnose illnesses because their first impression of a patient’s symptoms can anchor them to a particular diagnoses that impacts all future assessments.

Even our expectations of a future spouse or partner will largely be anchored by how our parents behave toward each other.

But so what. Why does this matter?

What the anchoring bias demonstrates is that we can be easily influenced by factors that may be outside of our conscious awareness. My advice for my students when someone tries to anchor them, is to “wipe away the anchor” and set their own anchor.

But I think the more important, practical advice is to frequently question our own assumptions and beliefs, recognizing that the anchors we are exposed to regarding politics, religion, anti-religion, dating, and even parenting may be influencing us more than we realize. Sure, we should watch out for people who are trying to anchor us, and we should counter anchor when appropriate.

But we should also take a frequent, hard look at ourselves to examine whether our beliefs are being overly influenced by anchors.

It’s a simple idea. Please take it seriously.

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