Anchoring: Hurry! You Might Be Stuck

Anchoring refers to the use of a reference point or “anchor” that can be completely irrelevant in forming judgments and making decisions. This initial reference point significantly skews our views, even if it’s completely unrelated. The effects can be both deliberate and unconscious.

Once an “anchor” is established, we tend to focus on information that is consistent with it, ignoring information that is not. Anchoring is very difficult to avoid. One study asked whether Mahatma Gandhi died before or after age 9, or before or after age 140. Clearly, neither can be correct, but they still skewed subsequent answers when the subjects were asked when they thought he died—the age 9 group accrued answers averaging 50, the age 140 group accrued answers averaging 67, showing the anchoring effect.

There are numerous examples of anchoring. From first impressions forming subsequent interactions to teachers anchoring onto initial student performance as a reflection of their intellect. The initial offering in a negotiation sets the tone for the final agreement. The “original price” acts as the anchor to accentuate the discount.

For example, anchoring can greatly influence the estimated value of any object. This is particularly prominent in negotiations and auctions. A high or low starting point has incredible sway over the final price of a product or service. The problem: anchoring affects everybody, even those who are experts in their field. Hence you will probably run into anchors in many instances: high initial prices with discounts in sales, products sorted from expensive to cheap in menus, the “decoy” designed to change your preferences, and many more.

The benefits of anchoring: they provide a starting point for decision-making; they reduce the cognitive load by narrowing the range of potential outcomes and options; they can be utilized deliberately to persuade people in negotiations and sales; they can help establish norms, stability, and standards. The potential risks: decisions can be overly reliant on an anchor, even when it is irrelevant; anchors can perpetuate stereotypes and flawed assumptions; excessive reliance on anchors can keep one from attaining new information; anchors can be set intentionally to manipulate behavior.

Real-life implications of anchoring:

• Budgeting: the first number suggested in planning finances can frame subsequent discussions;

• Goals: setting high initial ambitions anchors effort levels and expectations;

• Work: cancidates’ salary expectations anchor the offers they get from employers;

• Problem-solving: early solutions or suggestions are often anchored onto, influencing how problems are approached;

• Fitness: starting exercise or nutrition regimens can anchor your perception of progress;

• Time management: the estimate for one task in a project can anchor expectations for the rest;

• Consumerism: the first option shown in a list anchors perceived value of other options;

• Legal: lawyers often utilize anchors to influence jury awards;

• Learning: expectations or examples often shape how a new concept is understood.

How you might use anchoring as a mental model: (1) set strategic anchors deliberately, guiding yourself and others toward desired outcomes—such as by opening negotiations with offers in your favor and setting expectations for goals; (2) beware when you are anchoring on a particular tool or piece of information and question it’s validity; (3) adjust when new, relevant information challenges your existing approach; (4) use positive anchors to inspire yourself—ambitious but achievable goals, slightly too little time for personal projects; (5) deconstruct whatever anchors you might currently practice or fall for by examining your behavior patterns.

Thought-provoking ideas: anchoring highlights how important first impressions are in relationships and beliefs; anchoring is an effect hard to evade even when you are aware of it; cultural and social norms and expectations often act as invisible anchors; while anchoring can manipulate, it can also inspire and motivate. “Start as you mean to go on.” and “You never get a second chance to make a first impression.” both refer to the importance of initial actions and interactions. “A good beginning marks a good ending.” is just as relevant for setting initial benchmarks and expectations.

Anchors are powerful tools but must be navigated carefully. Positive anchors can inspire, motivate, guide, and frame decision-making for the better; negative anchors can be used to manipulate and persuade for the worse. Ask: “Was or is this my starting point?”, “Do I believe something about this person because of how they first appeared to me?”, “How may the first piece of relevant information—like a price or ask—be affecting my subsequent judgment?”

Questions to reflect on:

1. How does the first piece of information shape your subsequent judgments?

2. How do first impressions affect your choices in business negotiations or project planning?

3. Can you identify instances where a fixed starting point may have limited alternative perspectives?

4. How strong of a role does anchoring take when setting your expectations in situations such as pricing and performance reviews?

5. When has anchoring led to missed opportunities for you?

Quotes that encompass anchoring:

1. "We tend to fixate on initial numbers and let them guide our subsequent decisions." - Inspired by Tversky and Kahneman.

2. "Anchoring is both a bias and heuristic, silently shaping our judgments from the get-go." - Unknown author.

3. "The first point of reference is the silent dictator of our choices." - Unknown author.

Example use cases:

1. Pricing strategy: establishing a high initial price for your product or service so that discounts or offers appear more valuable to customers.

2. Negotiations: begin with an assertively low offer to set an anchor that influences the range and expectations of the other party.

3. Project planning: use an initial budget or timeline estimate as a benchmark, adjusting as new information is gathered, being mindful not to stick too rigidly to original figures.

4. Marketing: present your audience with a "regular" price next to a discounted "sale" price, leveraging the high initial anchor to create an illusion of substantial savings.