I was studying in Grade 12. One day, while having a casual talk, my uncle asked me-“How much you will score in your Grade 12? Do you think you will get 1000 out of 1200?”
“Definitely”. I surprised myself with that reply.
I have not thought of any target score up until that moment. From that moment onwards, 1000 became my target.
Anchoring bias is one of the cognitive bias where Humans tend to rely heavily on one piece of information to make decisions.
Kahneman and Tversky conducted a study where a Spinwheel containing the numbers 1 through 100 was spun. Subjects were then asked whether the percentage of U.N. membership by African countries was higher or lower than the number on the wheel. Afterward, the subjects were asked to give an estimate. Tversky and Kahneman found that the anchoring value of the number on the wheel had a pronounced effect on the answers the subjects provided. When the wheel landed on 10, the average estimate given by the subjects was 25%. When the wheel landed on 60, the average estimate was 45%. The random number had an “anchoring” effect, pulling subjects’ estimates closer to the number they were shown even though the number had zero correlation to the question.
Anchoring Bias is any reference point in our mind. Another good example of this bias can be a price reference point between a Parent and a Child. A Child may like a particular dress which is priced at $200. However, a Parent may feel that this is overpriced, even if this price $200 is after a discount of 50% from the original price of $400. As a Parent, the reference point for a dress is the price paid for a similar dress when we were growing up, which in this instance may be $50. Even after considering the inflation, as a parent, we may be willing to pay $100 but not $200. However, for the Child, the reference point for this dress is $400 and hence a discount of $200 is a huge gain.
The perception of the Parent for this deal is a loss of $100 whereas for the Child it is a gain of $200.
This shows that Anchoring bias is any reference number in our mind. Research on the anchoring bias has shown that negotiators may be able to gain an edge by making the first offer and anchoring the discussion in their favor.
If I extend this logic to my Grade 12 exam, I can say that I was super thrilled with my result. I scored 13 marks more than what I perceived that I could achieve. However, my mathematics teacher had a completely different expectation. He thought I could have easily scored 1100. In his opinion, I aimed lower than my full potential. He has never revealed this opinion to me until that time. There was a possibility that I would have reached 1100 had he spoke about this much before my uncle had put the anchor around the target of 1000.
“The greater danger for most of us lies not in setting our aim too high and falling short, but in setting our aim too low, and achieving our mark.”
Fortunately, I aimed reasonably high and achieved it. Anchoring Bias can be tweaked in our favour if we always aim high when it comes to reaching our potential.
When I confirmed that I could score 1000 out of 1200, in my mind 1000 became the anchoring mark and it started preparing ways and means to achieve that mark.
In a famous study by the psychologist Robert Rosenthal, school teachers were told that their students were “gifted” even though they weren’t; yet somehow, by the end of the term, those students did outperform their peers. There’s been some pushback as to whether teacher expectations really have such a large effect. A recent study by a pair of economists at Louisiana State University looked at Dragon kids born in China. These kids did have better educational outcomes than their non-Dragon peers. But the researchers found no difference in the kids’ cognitive abilities, self-esteem, or their expectations. What they did find was that their parents had higher expectations. And those parents invested more time and money in their kids’ success — talking to their kids’ teachers, for example, or letting the kids do fewer chores. Research by Yoko Yamamoto and Susan Holloway has found multiple links between a parent’s expectations and a child’s academic achievement. (http://freakonomics.com/podcast/dragon-child/)
This idea of the gifted child implanted in the young minds by their teachers or the high parental expectations is like the Anchoring used in the negotiations. Once the Anchor is set around a number by one party involved, the negotiations then mostly happen around that number. This can be extended to our life. Our goals are like the Anchor. Once we set it right, our mind will find ways and means to live to the expectation set by the Anchor. This is anchoring bias working in our favor.
Our mind is always on the lookout for an anchoring point in every field of activity and it feels comfortable to settle down to the anchoring bias once we reach a particular level of achievement in any field, unless we push the boundaries.
Anchoring bias can either be a point which ties us down or pushes us up.
When it comes to challenging oneself, I would recommend using anchoring bias to push the potential.
However, I would recommend the anchoring bias to remain constant in one area of our life –our values.
Our Mind will keep looking for the anchoring point for every decision in our life. Keeping the Core Human Values as constant will pave way for Anchoring Bias to help us to follow these values in every decision we make.
When it comes to personal goals, keep moving the anchor to the upside and enjoy the benefit of anchoring bias.