Book Cover

 

Today we dive into the concept of Anchors and the impact of anchor bias. This is one of my favorite topics for understanding behaviors in negotiations. Negotiations are all around us whether you are discussing salary, buying a car, or wrestling with a request for an impossible due date.  All this and more in Chapter 11 of our re-read of Thinking, Fast and Slow, so to quote Jackie Gleason, “Away we go!”

Chapter 11 begins with an example of anchor bias.  Anchor bias is a form of priming bias. In these types of bias, priming occurs when one stimulus or event influences the response to another event or stimulus.  Kahneman uses the term anchoring effect. The anchoring effect or anchoring bias has a powerful impact on how we behave. If you have ever talked to a car salesman you have experienced the anchor effect.  Other examples abound, for example, a politician standing in front of their national flag as they begin a speech is an example of the effect. The anchor bias is caused by both System 1 and System 2 thinking.  

The chapter points out that  Kahneman and Tversky had competing theories of how the effect impacted decision making, and that over time they determined both were required at different times. Tversky believed that people began with an anchor and then determined how to adjust from there. In this approach, when asked for when a piece of work could be accomplished, if a team begins deliberation with a published (or demanded) due date for a function an anchor has been set.  The team would then adjust around the edges until they reach the edge of uncertainty (where the team feels their estimate would be rejected). In experiments, Tversky found that people tend to stop adjusting too soon. The adjustment process requires using System 2 thinking.  

The alternate view is that the priming effect which selectively evokes compatible evidence at which time the associative machine (System 1 thinking) jumps in the action and generates a story that links the retrieved evidence. Using our publish date example, if the last time the team was given a date that they pushed back against only to be harangued, the associative engine will construct a story about the outcome if they push back in this scenario.  

An example of the impact of anchors and the associative engine, Kahneman relates an example of the impact on unit sales from a store’s sales of Campbell’s soup.  An A/B scenario was used to show that a 10% off with a limit of 10 cans sold more than just offering 10% with no limit. Airlines often use the limit approach to motivate sales. Sale training often calls this technique the impending event close (buy now or we will run out or buy now or the price will go up).

Scenarios, where relevant memories can be easily retrieved will tend to follow the System 1 pattern (even if they fall prey to the Law of Small Numbers). The chapter ends with a cautionary note from Kahneman, “you should assume that any number that is on the table has an anchoring effect on you, and if the stakes are high you should mobilize yourself (your system 2) to combat the effect.”

Remember, if you do not have a favorite, dog-eared copy of Thinking, Fast and Slow, please buy a copy.  Using the links in this blog entry helps support the blog and its alter-ego, The Software Process and Measurement Cast. Buy a copy on Amazon,  It’s time to get reading!  

The installments:

Week 1: Logistics and Introductionhttp://bit.ly/2UL4D6h

Week 2: The Characters Of The Storyhttp://bit.ly/2PwItyX

Week 3: Attention and Efforthttp://bit.ly/2H45x5A

Week 4: The Lazy Controllerhttp://bit.ly/2LE3MQQ

Week 5: The Associative Machinehttp://bit.ly/2JQgp8I

Week 6: Cognitive Easehttp://bit.ly/2VTuqVu

Week 7: Norms, Surprises, and Causeshttp://bit.ly/2Molok2

Week 8: A Machine for Jumping to Conclusionshttp://bit.ly/2XOjOcx 

Week 9: How Judgement Happens and Answering An Easier Questionhttp://bit.ly/2XBPaX3 

Week 10:  Law of Small Numbershttp://bit.ly/2JcjxtI