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(intro music)

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My name is Laurie Santos.

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I teach psychology at Yale
University, and today

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I want to talk to you about anchoring.

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This lecture is part of a
series on cognitive biases.

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Let's do a math problem.
really quickly, and you've

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gotta do it in your head

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Ready?

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First, multiply the following numbers:
eight times seven times six

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times five times four times three times
two times one.

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OK, that's it.

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What's your guess?

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A thousand?

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Two thousand?

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When the psychologists Danny Kahneman
and Amos Tversky tried this with

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human subjects, subjects on average

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guessed about two thousand
two hundred and fifty.

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Seems like an OK guess.

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But now, let's suppose I gave you
a different math problem.

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What if I gave you this one?

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Ready?

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One times two times three times four

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times five times six times
seven times eight.

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What's your answer?

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If you're like Kahneman and Tversky's

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subjects, your answer might
be a bit different here.

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For this question, their subjects
guessed a lot lower.

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On average they said the answer
was about five hundred and twelve.

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The first amazing thing
about these similar

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mathematical estimates is that people get
the answers really, really wrong.

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In fact, the real answer?

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Well, for both, its forty thousand
three hundred and twenty.

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People are off by an order of magnitude.

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But the second, even more amazing 
thing is that people give

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different answers to the two problems,
even though they're just different ways

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of asking exactly the same question.

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Why do we give completely different answers,

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when the same math problem
is presented differently?

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The answer lies in how we make estimates.

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When you have lots of time to do a math

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problem, like eight times seven times six
times five times four times three times

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two times one, you can multiply all of

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the numbers together and get an exact product.

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But when you have to do the problem

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quickly, you don't really have time to finish.

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So you start with the first numbers.

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You multiply eight times
seven, and get fifty-six.

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And then you've gotta
multiply that by six,

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and, well, you're guessing the final
number's gotta be pretty big, bigger than

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fifty-six, like maybe two thousand or so.

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But when you do the second problem, you start

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with one times two, and, well, that's only
two, and two times three's only six.

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Your answer's gonna be pretty small,

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maybe only like five hundred or so.

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This process of guessing based on the first

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number you see is what's
known as "anchoring."

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The first number we think of

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when we do our estimate is the anchor.

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And once we have an anchor in our head,

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well, we sort of adjust
as needed from there.

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The problem is that our minds are biased
not to adjust as much as we need to.

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The anchors are cognitively really strong.

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In the first, problem you probably
started with fifty-six, and

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then adjusted to an even
bigger number from there.

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And in the second problem, you started
with six, and then adjusted from there.

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The problem is that starting at different
points leads to different final guesses.

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Like real anchors, our estimated anchors
kinda get us stuck in one spot.

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We often fail to drag the anchor far
enough to get to a correct answer.

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Kahneman and Tversky discovered that this

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sort of anchoring bias happens all the time,

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even for anchors that are totally arbitrary.

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For example, they asked
people to spin a wheel with

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numbers from one to a hundred,
and then asked them to estimate

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what percentage of countries in
the United Nations are African.

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People who spun a ten on
the wheel estimated that

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the number was about twenty-five percent.

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But people who spun a
sixty-five estimated that

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the number was forty-five percent.

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In another experiment, Dan Ariely
and his colleagues had people

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write down the last two digits
of their social security number.

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They were then asked whether they would

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pay that amount in dollars
for a nice bottle of wine.

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Ariely and colleagues found that people
in the highest quintile of social security

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numbers would pay three to four times
as much for the exact same good.

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Just setting up a larger anchor can make a

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person who would pay eight
dollars for the bottle

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of wine be willing to spend
twenty-seven dollars instead.

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Sadly for us, sales people use
anchors against us all the time.

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How many times have you noticed
a salesperson or an advertisement

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anchoring you to a particular price, or

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even to how much of a particular
product you should buy?

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Whether it's buying a car, or a sweater,

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or even renting a hotel room, our
intuitions about what prices

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are reasonable to pay often come
from some arbitrary anchor.

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So, the next time you're given an
anchor, take a minute to think.

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Remember what happens when you

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drop your anger too high, and then

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consider thinking of a
very different number.

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It might affect your final estimate
more than you expect.