Making sound decisions is a critical skill in both professional and personal life. However, our thinking can often be influenced by anchoring bias – the tendency to rely too heavily on the first piece of information presented. In decision making, anchoring on initial values can lead to poor judgments. Understanding this cognitive shortcut and how to overcome it leads to better choices.

What is Anchoring Bias?

Anchoring bias occurs when we attach, or anchor, our thoughts to the first number or value we hear about something. This number provides a mental reference point that shapes our perception, influencing any subsequent judgments. Even arbitrary or irrational anchors can sway our opinions.

For example, when estimating the value of a home, you may anchor to the listing price and adjust your assessment based on features. But research shows even implausible listing prices distort estimates, with higher anchors leading to higher valuations. The initial anchor value holds undue power over the thought process.

How Anchoring Bias Impacts Decisions

Anchoring bias creeps in subtly during decision making:

• When weighing options, you may favor the choice presented first simply because it came first.
• During negotiations, you might anchor to the other party’s initial offer rather than objectively determining an appropriate counter.
• When forecasting, past events and figures often anchor predictions of the future.

Even irrelevant anchors influence judgment. In studies, arbitrary numbers like participants’ social security digits impacted estimates unrelated to those anchors.

The effect remains significant even when anchors are implausible or participants are incentivized to avoid bias. This reveals just how unconscious and instinctive anchoring can be.

Strategies to Overcome Anchoring Bias

While anchoring is an innate tendency, consciously accounting for it will lead to sharper thinking. Consider these strategies to avoid anchor-induced poor judgment:

• When making decisions, list pros and cons before reviewing any initial values or proposals. This clears your mind of anchors.
• Actively adjust away from the anchor. Imagine how your assessment would differ if the anchor was lower or higher.
• Seek objective data points. Research prices for similar items or past precedents rather than relying on convenient anchors.
• Consider extremes. Ask how you would evaluate options if an anchor was absurdly high or low.
• Challenge assumptions. Question why the anchor was presented and if it reasonably relates to the decision.

Being watchful for anchoring moments and mentally adjusting from the anchor takes practice. But it prevents distorted judgments.

Put it to Work

Anchoring bias influences decisions small and large. Here are examples of overcoming it:

• When negotiating a salary, research typical pay for the role so you can counter objectively rather than anchoring to their offer.
• If buying a used car, research prices for similar mileage and models first. This establishes a realistic baseline unaffected by what the dealer starts with.
• When planning a project timeline, review actual timelines from past projects. This gives realistic targets not anchored in guesswork.

In each case, establishing objective benchmarks independently allows you to see beyond arbitrary anchors.

The Takeaway

Anchoring bias is a pervasive cognitive shortcut that can undermine sound reasoning. By identifying anchoring moments and proactively adjusting from the anchor, we can overcome this instinct and improve decisions. With vigilance, we can catch ourselves gravitating toward convenient anchors and expand our thinking to incorporate broader, more objective perspectives.