Imagine you’re meeting a friend for coffee, and they text you to say they’re running 10 minutes late. You wait for 10… then another 10. Finally they arrive, 20 minutes late. How do you feel?
Now let’s back up and imagine their original text said they’d be 30 minutes late. Again, 20 minutes later, they arrive. How do you feel?
If you’re like most people, in the first scenario you’re kind of annoyed. And in the second scenario, you’re pleasantly surprised. This is despite the fact that in both scenarios, your friend showed up 20 minutes late.
Which brings up some questions:
- Why do you feel differently in the two scenarios?
- Should you have ordered a chocolate-raspberry scone while you waited? (Yes, the answer is always yes.)
Actually, forget that second one. But the first one is interesting. What’s happening is a form of cognitive bias known as “anchoring.”
The Basics of Anchoring
Anchoring occurs when someone's "decisions are influenced by a particular reference point or 'anchor'." In other words, you receive (or already have) certain info, and that info overly influences your thoughts or actions going forward.
In this case, the anchor was how late you expected your friend to be. In the first scenario, you expected them to be 10 minutes late. When they arrived 20 minutes later, it felt like they were an extra 10 minutes late. Annoying.
In the second scenario, you expected them to be 30 minutes late. So, when they arrived 20 minutes late, it almost felt like they were 10 minutes early. What a pal.
Related vs. Unrelated Data
What’s fascinating about anchoring is that it can happen whether or not the anchor has any connection to the topic at hand.
Sometimes there’s a direct connection. This can help make educated guesses. Let’s say someone asked you what year Abe Lincoln was born. You’d probably use an anchor or two related to the general topic to help you make an educated guess.
Maybe you remember that the Civil War was in the 1860s. That’s your first anchor. It has placed you in the mid-1800s. You also remember that in photos you’ve seen of Lincoln during the Civil War, he looked middle-aged. You subtract around 45-50 years using both anchors and guess that Lincoln was born around 1815. (You’d be close, btw. He was born in 1809.)
But anchoring can also happen when the anchor has nothing to do with the guess/decision.
For example, researchers Kahneman and Tversky conducted a study where participants spun a wheel and landed on a random number between 1-100. Then each person was asked to guess how many African nations were in the United Nations.
Those two things were clearly utterly unrelated, and the wheel was a random number assignment. But amazingly, people who spun higher numbers tended to guess higher numbers of African countries, and people with lower numbers guessed fewer countries. The random number acted as an anchor and affected their subsequent guesses.
Internal Vs. External
Anchoring can happen in our minds or from information from external sources. The example we gave above of guessing Lincoln’s birth year was internal. As was another famous study by Kahneman and Tversky (did those guys ever take a break?) where some people were asked to quickly guess the answer to:
1 x 2 x 3 x 4 x 5 x 6 x 7 x 8
And others were asked the same but in reverse order:
8 x 7 x 6 x 5 x 4 x 3 x 2 x 1
It’s the same set of numbers, so the answer was the same. But people who got the first list, where the beginning numbers were lower, tended to guess far lower than people who got the higher numbers first. This is because they internally anchored their guess based on the results of multiplying the first couple numbers in their heads. And that skewed their answer.
(It’s 40,320 btw. You were way off.)
But anchoring often happens when you receive information from the outside world. One common example is in retail sales. How often have you been swayed by a ‘discounted’ price, even when you suspect it might just be a marketing ploy. When stores both list a ‘retail price’ and a ‘sale price’ they’re hoping your brain will use the higher price as an anchor, and you’ll be swayed to buy the ‘sale price.’
Anchoring can also happen in business and finance. Often people hear an “expert” on TV or in a meeting who spouts off their opinion. Even if you don’t necessarily agree with them, their data is still imprinted in your mind as an anchor. And that can affect your business or financial decisions (in potentially harmful ways) whether you realize it or not.
Anchoring in the Courtroom
Several studies have looked at how much anchoring happens in courtrooms. Ideally, it’s a setting where people would not be as affected by cognitive biases. But unsurprisingly, people are susceptible to anchoring pretty much anywhere.
One study took different groups of ‘juries’ and presented them with a fake case where a woman was suing her HMO. She claimed she got ovarian cancer because of a birth control pill her HMO provided. One group was told that the woman sought $5 million in damages, and the other was told she sought $20,000. Then they asked how confident each juror was that the HMO caused her illness.
In the $20K group, jurors were 26.4% confident that the HMO was to blame. In the $5 million group? They were 43.9% confident. So as the study title suggests, “The more you ask for, the more you get.”
Judges are also susceptible to anchoring. In one study, researchers had judges decide on sentencing in a hypothetical shoplifting case. The judges were told to wait for the recommended sentence from the prosecutor before making a decision ... BUT were also told ahead of time that the prosecutor’s recommendation would be completely random/arbitrary. And yet the higher the number they heard, the longer the sentences they gave.
In an even more absurd study, judges literally rolled a dice (that was weighted to sometimes land on lower numbers and sometimes land on higher numbers). You guessed it: the judges who rolled higher numbers favored longer sentences.
While sometimes having an anchor can have neutral or positive effects (remember how close you got with Lincoln’s b-day? That was dope!), it often can lead to bad decisions.
For example: it’s not a good idea to buy something you can’t afford simply because you got anchored to a higher price, and now it seems like a steal (you still can’t afford it, silly!). Nor do you want to invest in a bad stock because an ‘expert’ got it in your head that it was a good bet.
Anchoring can also affect things like the planning fallacy. This is when we underestimate the time, effort or energy it will take to accomplish a task. When we initially make an estimate, we have a hard time letting it go — even when it's clear it's not right. So if you think it’s going to take 20 minutes to drive to meet your friend for coffee, and then find out there is major traffic, your brain still kind of assumes it’ll be around a 20-minute drive. (Pro Tip: Tell them you’ll be 30 minutes late and arrive sooner!)
How To Avoid It
Anchoring is a tough one to avoid, tbh. It often happens unconsciously, so avoiding it isn’t always an option. But you can potentially lessen its effects by slowing down and avoiding making rushed decisions (the more thought-out and well-researched, the better). And in cases where you suspect an anchor might be affecting your choice, it helps to come up with a mental list of why the anchor isn’t connected to your decision.
And if you just want to get your mind off this, you could always buy our Deep Game, which, TODAY ONLY, is marked down from $999.99 to $29.99!