Don’t Let That Anchor Hold You Down (Or Why I Wear Long Pants Until June)

When I was little, my dad’s rule was that you weren’t allowed to wear shorts unless it was at least 80 degrees outside. Depending on where you live, that may sound insane, but now that I’m a parent, I realize his genius. My father set this rule because:

1. We lived near Houston, Texas, so if you let your kids wear their summer clothes before it hit 80 degrees, those summer clothes wouldn’t last through the summer, and
2. Back in the early 80s, there was a phone number you could call that would tell you the local temperature, which meant that instead of badgering my dad about whether we could wear shorts, he could just say, “You know the rule,” and my sister and I would leave him alone and call the temperature number over and over until it hit 80 degrees.

I now see my father for the genius that he is.

Now I’m a parent with two small people asking me what they can wear and do. And when my kids ask if they can go swimming in the creek, I find myself saying things like, “Swimming?? It’s 75 degrees outside. That’s not even shorts weather!”

I can usually be swayed. My kids know I’m a pushover, and clearly do not have the same respect for me as I did for my father whose logic I would never have dreamed of questioning. But whatever my kids end up being allowed to wear or do, my “appropriate weather for shorts” meter is firmly anchored at 80 degrees. And there’s a very good reason.

WHAT IS THE ANCHORING BIAS?

This month we’re talking about common biases that can cause us as sales professionals and business leaders to make decisions that aren’t in our best interest. Last week we introduced the sunk cost fallacy—this week we’re talking about the anchoring bias.

The anchoring bias is a cognitive bias that leads us to rely too heavily on the first piece of information we are given about a topic. Let’s say you’re shopping for a new laptop. The first one you look at is $1,200. Next, you look at one with a few more features that’s $2,000. That price sounds much too high to you. But what if the first laptop you had looked at had been $1,850? Chances are that paying $2,000 for a few more features would have felt quite reasonable. That’s the anchoring bias at work.

The anchoring bias is so strong that the anchor itself does not even have to do with whatever decisions we’re making. Founding fathers of behavioral economics Daniel Kahneman and Amos Tversky conducted an experiment in which they had participants spin a wheel of numbers between one and one hundred. Next, participants were asked to estimate what percentage of African countries were part of the United Nations. Kahneman and Tversky found that those who spun lower numbers had lower estimates, while those who spun higher numbers, had higher estimates.

The anchoring bias makes it nearly impossible to look at something with fresh eyes. Instead of learning something and being completely objective about that piece of information, we can only interpret the new information from the reference point of our anchor. Obviously, knowledge builds on itself, and it makes sense to incorporate new knowledge into what you already know, but what happens when your anchor is way off?

THE ANCHORING BIAS AT WORK

There are so many examples of the anchoring bias at play in our everyday lives. The example above of purchasing a new laptop is a great one. Anchoring has a significant impact on what you are willing to pay for an item. It’s also why prices are often shown with the “original” price crossed out and a discounted price next to it. The seller is providing an anchor for you so that the asking price looks good in comparison.

Anchoring can also greatly influence salary negotiations. It feels intimidating to throw out a number for the raise you’re asking for or when negotiating your salary as a new hire. It might even feel more appropriate to let your boss (or potential boss) throw out a number first. But keep in mind that the number given first is going to be the anchor for the entire salary discussion. It behooves you to speak up and set the anchor higher than your boss likely would.

Money is far from the only thing the anchoring bias impacts. Here are a few more examples:

• Judges are impacted when attorneys suggest the amount of jail time an individual should receive.
• Doctors tend to put more value on a patients’ initial symptoms when diagnosing them. Even though more symptoms present themselves, the symptoms seen first often skew the diagnosis.
• Why are first impressions so important? Because that’s what serves as our anchor. People tend to think about the beginning of a relationship when assessing the current state of the relationship, even if the current state has devolved into something clearly less than ideal.
• The anchoring bias also affects hiring. The first resume you see will become the anchor for the rest of them.

KNOWING IS NOT HALF THE BATTLE

In last week’s blog about the sunk cost fallacy, we said that simply being aware of this fallacy can do a lot to help combat it. Unfortunately, this is not true for the anchoring bias. Studies have shown that even when forewarned about it, individuals still succumb to the anchoring bias. I, for example, know that many completely reasonable people wear shorts when it’s in the 70s. Will I? Absolutely not.

Protecting yourself from the anchoring bias takes more effort and intentional work than simply being aware of it. Here are some strategies you can take:

• Come up with reasons why your anchor might be inappropriate. In other words, besides just being aware of the fact that you are being anchored by the first information you learned, look at that information critically. Write down the reasons why this information might not be true. Make a good old-fashioned list of pros and cons.
• Get some experience. If you have been burned by the anchoring bias before (such as when it has caused you to overpay for an item), you are less likely to make that same mistake again.
• Use multiple sources when learning about something. For example, tell yourself that you’ll research at least three sources before you determine what the price of something should be.
• Ask for a second opinion. Maybe even a third or fourth.
• Use a red team. Spending too much on a computer isn’t going to kill you. Deciding whether or not you should invade a foreign country could. For decisions that can have a far-reaching impact on you, or that could potentially impact a lot of people, employ a red team. This can be done in a number of ways, but essentially a red team’s job is to come in and play devil’s advocate. They are there to poke holes in your rationale without fear of being seen as negative or contrarian.

The anchoring bias can impact everything from what you’re willing to pay for a cup of coffee to who you hire to lead your sales team. Especially for more influential decisions like the latter, it makes sense to have tools in place to protect you from being overly influenced by your anchor point.

You’ll be happy to know that I have employed my own red team for my 80-degrees-for-shorts problem. He’s nine. He is red-headed. He likes to swim in 65-degree weather and then push me out of my comfort zone by dropping something into the creek thus making me jump into the water (in my pants) to fish it out downstream. I highly recommend him, but his rates are astronomical.

Contact us at mastery@maestrogroup.co to schedule workshops for your team or ask about our leadership development program.