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The Anchoring Bias

‘The Tonight Show’, hosted by Johnny Carson, ran on American television for 30 years. While most of the episodes were downright hilarious, some were controversial and a few taught life’s hidden truths!

Once Carson was interviewing a girl scout who had set the record for selling the most cookies. He asked her the secret of her success. She said she would ask people if they would donate $30,000 to girl scouts. Obviously, people said no. The girl said she would then ask them, ‘Would you at least buy a box of cookies!’ People generally obliged and bought!

Psychologists call it the Anchoring Effect. It is a cognitive bias that makes us rely more on the first piece of information that we get. When we are fed subsequent information, we interpret the newer information from the reference point of our anchor i.e., the first piece of information, instead of looking at it objectively.

Put simply, once an anchor is formed, it creates a bias that fashions how our brain perceives subsequent information. The brain uses the anchor as its starting point and contrasts the new information with it. We don’t realize this is happening within our mind!

Behavioural scientists Jerry Burger set up a cupcake stand. He priced them at 75 cents. 44% of the people bought it.

Burger then changed the price of cupcakes were presented. He said the cupcakes that used to cost $1 was now priced at 75 cents. 73% of the people bought it!

This is how Anchoring Bias anchors our mind. You can use it to your advantage if you know how to use it smartly.

Imagine you are a salesman in an apparel shop. People who generally come in to buy a suit also might need a shirt and tie. The suit costs Rs. 15,000. The shirt Rs. 3,000. And the tie Rs. 750.

Which one would you show first?

If you understand the Anchoring Bias, the answer is simple. You should present the most expensive item i.e., the suit first. A customer who buys a Rs.15,000 suit will perceive the shirt as less expensive and the tie to be even less and might well end up buying all three.

Try showing the other way around and you may well lose the customer!

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We are strangers to ourselves!

If you haven’t started saving for your retirement, have you ever wondered why you have not?

It’s coz, deep inside, you would rather spend money on yourself rather than having it to give it to a stranger even if that stranger happens to be an older you!

Hal Hershfield, a social psychologist at New York University did an experiment. He made the participants strap on a virtual reality headset. Half of them saw a digital representation of themselves for a minute and then had a chat with a researcher.

The other half also saw an avatar of themselves – but their faces were altered to make it look like how they would be at age seventy. This group gazed at the seventy-year-old version of themselves for about a minute and then had a chat with a researcher.

Later, the participants were told they had received an unexpected $1,000 and were told they could spend on themselves or save it.

Participants who saw images of their current selves put an average of $80 into the retirement account. But those who saw images of their future selves allocated more than twice that amount, $172!

In another, but similar, experiment, some participants saw a morphed image of an old man and some saw a morphed image of them that looked like they were seventy.

Again, participants who saw the image of themselves at age seventy saved more than those who had simply seen a picture of some seventy-year-old.

Hershfield says, ‘Thinking about the future self, elicits neural activation patterns that are similar to neural activation patterns elicited by thinking about a stranger. Do you understand what he is saying?

Envisioning yourself far into the future is not easy and you think of that future self as an entirely different person. Reason why, you would rather spend the money today rather than having it saved for a stranger. Even if that stranger is the older you!

Now you know why ads of mutual funds and investment options are not working as much as they should. And here is what they should do…

They need to make you think of yourself today being the same as the one who would be in the long-term. In other words, they need to morph your picture and make you look like a seventy-year-old and mail it to you. With their brand message.

You will see it and will feel sorry for yourself. Or, at least, for that older you. And will start saving!

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If someone doesn’t like you, ask them a favour!

You have that one colleague or acquaintance who doesn’t like you. He or she disagrees with you about everything. He or she despises you every time. At times you wish you could kill that person. Right?

Relax. There is another way. A simpler way. No, not killing him or her but to kill his or her dislike for you.

Ask him or her to do you a favour!

WTF, you think. Yeah, I heard your mind voice!

It was actually Benjamin Franklin who said it. It was later proved right by behavioural scientists and psychologists.

America’s first major inventor, scientists and philosopher always used this simple technique to win over his political opponents. If he found an adversary he wished to win over, he just asked them a favour.

Once, there was this adversary who hated Benjamin Franklin. Benjamin wanted to win him over. He wrote a letter to him asking him if he could lend him a certain rare book that his adversary had in his possession.

Surprisingly, the adversary complied. He sent the book to Benjamin who promptly returned the book after reading it with a huge thank you note.

Next time when Benjamin and his adversary bumped into each other, the adversary came to Benjamin himself and started talking with great civility. This had never happened before. So much so, they two became good friends!

What happened here?

Psychologists say if you do someone a favour, your mind thinks you must like them. The mind thinks you wouldn’t have agreed to do a favour for someone you dislike. So, your mind tells itself it likes that person. Poof. The dislike vanishes!

If you feel embarrassed asking for a favour from the person who dislikes you, at least ask them for something they can give without incurring any cost – their opinion. Ask them for their opinion about something saying you value it very much. Same result would ensue. The person’s dislike for you will disappear!

It works. So much so, it’s even called The Benjamin Franklin Effect!

P.S: By the way, I know you don’t like me. Yet, I value your opinion a lot. Can you share your opinion about how I can improve my writing please!

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