(intro music)
My name is Laurie Santos.
I teach psychology at Yale University, and today
I want to talk to you about anchoring.
This lecture is part of a series on cognitive biases.
Let's do a math problem. really quickly, and you've
gotta do it in your head
Ready?
First, multiply the following numbers: eight times seven times six
times five times four times three times two times one.
OK, that's it.
What's your guess?
A thousand?
Two thousand?
When the psychologists Danny Kahneman and Amos Tversky tried this with
human subjects, subjects on average
guessed about two thousand two hundred and fifty.
Seems like an OK guess.
But now, let's suppose I gave you a different math problem.
What if I gave you this one?
Ready?
One times two times three times four
times five times six times seven times eight.
What's your answer?
If you're like Kahneman and Tversky's
subjects, your answer might be a bit different here.
For this question, their subjects guessed a lot lower.
On average they said the answer was about five hundred and twelve.
The first amazing thing about these similar
mathematical estimates is that people get the answers really, really wrong.
In fact, the real answer?
Well, for both, its forty thousand three hundred and twenty.
People are off by an order of magnitude.
But the second, even more amazing thing is that people give
different answers to the two problems, even though they're just different ways
of asking exactly the same question.
Why do we give completely different answers,
when the same math problem is presented differently?
The answer lies in how we make estimates.
When you have lots of time to do a math
problem, like eight times seven times six times five times four times three times
two times one, you can multiply all of
the numbers together and get an exact product.
But when you have to do the problem
quickly, you don't really have time to finish.
So you start with the first numbers.
You multiply eight times seven, and get fifty-six.
And then you've gotta multiply that by six,
and, well, you're guessing the final number's gotta be pretty big, bigger than
fifty-six, like maybe two thousand or so.
But when you do the second problem, you start
with one times two, and, well, that's only two, and two times three's only six.
Your answer's gonna be pretty small,
maybe only like five hundred or so.
This process of guessing based on the first
number you see is what's known as "anchoring."
The first number we think of
when we do our estimate is the anchor.
And once we have an anchor in our head,
well, we sort of adjust as needed from there.
The problem is that our minds are biased not to adjust as much as we need to.
The anchors are cognitively really strong.
In the first, problem you probably started with fifty-six, and
then adjusted to an even bigger number from there.
And in the second problem, you started with six, and then adjusted from there.
The problem is that starting at different points leads to different final guesses.
Like real anchors, our estimated anchors kinda get us stuck in one spot.
We often fail to drag the anchor far enough to get to a correct answer.
Kahneman and Tversky discovered that this
sort of anchoring bias happens all the time,
even for anchors that are totally arbitrary.
For example, they asked people to spin a wheel with
numbers from one to a hundred, and then asked them to estimate
what percentage of countries in the United Nations are African.
People who spun a ten on the wheel estimated that
the number was about twenty-five percent.
But people who spun a sixty-five estimated that
the number was forty-five percent.
In another experiment, Dan Ariely and his colleagues had people
write down the last two digits of their social security number.
They were then asked whether they would
pay that amount in dollars for a nice bottle of wine.
Ariely and colleagues found that people in the highest quintile of social security
numbers would pay three to four times as much for the exact same good.
Just setting up a larger anchor can make a
person who would pay eight dollars for the bottle
of wine be willing to spend twenty-seven dollars instead.
Sadly for us, sales people use anchors against us all the time.
How many times have you noticed a salesperson or an advertisement
anchoring you to a particular price, or
even to how much of a particular product you should buy?
Whether it's buying a car, or a sweater,
or even renting a hotel room, our intuitions about what prices
are reasonable to pay often come from some arbitrary anchor.
So, the next time you're given an anchor, take a minute to think.
Remember what happens when you
drop your anger too high, and then
consider thinking of a very different number.
It might affect your final estimate more than you expect.