Anchor of 700 grams

Between us, I’ve never ordered a 700-gram steak. I admit, I love high-quality meat, but 700 grams is just too much for me. Last weekend, I went out with my son, Yuval, for a lavish meal at one of the best steakhouses in our area (no sponsorships here). We sat down to hear what the master chef had to offer. After the waitress talked about the tomahawk and the ribeye and… you name it… Yuval zeroed in on his target—New York steak. That’s what we came for. Then, without batting an eye, she said the following: “If you want a New York steak, I have a 700-gram cut to offer you.” I realize that for half of my readers (if not more), this statement raises no eyebrows; you don’t order a cut that weighs less than 750 grams. But for those sensitive to irrational biases and numbers like me, it was clear that at that moment, our waitress “threw an anchor in the water.”

Amos Tversky and Daniel Kahneman, Nobel Prize winners in Economics in 2002, described anchoring as one of three heuristics used for estimating probabilities and predicting values [1]. Anchoring is a quite effective heuristic—one of the mechanisms at our disposal when we need to make a quick decision. According to Tversky and Kahneman, when people need to provide numerical estimates, they start from some initial value that serves as an anchor, but they do not sufficiently adjust their estimates based on the subject they are dealing with.

In other words, the likelihood that a typical customer would respond to our waitress with, "If it's not 250 grams or less, then we should find a vegetarian dish or another restaurant," is almost zero. For most of us, it’s either what’s available, or maybe we’ll dare to ask, "Is there a 600-gram option?"

In one experiment [2], participants assigned to two different groups spun a wheel of fortune to generate a number. In the first group, the researchers ensured that the number drawn was always 10, while in the second group, it was 65. Participants were then asked whether the percentage of African countries in the UN was higher than the drawn number and what they thought that percentage was. In the first group, the average estimate was 25%, while in the second group, it was 45%. How did this happen? Simply put, participants indiscriminately applied the anchoring heuristic and used the drawn number to estimate the answer to the question.

In another study by Northcraft and Neale (1987) [3], researchers examined the impact of anchoring on housing price estimates by appraisers or real estate agents (experts with experience) compared to students (laypeople without experience). Participants were given comprehensive information about the house, including the average sale price of similar homes in the area, and were even allowed to visit the property. The anchor provided to participants was the price that the homeowner was "asking" for. Despite the experts' claims that the asking price was irrelevant and their assertion that they evaluated the value independently, it was found that the asking price influenced their value estimates. Moreover, the anchor affected the experts to the same extent it influenced the students. In short, anchors have the potential to affect all of us—experts and laypeople alike.

It is important to remember that Tversky and Kahneman's goal was not to demonstrate that researchers could manipulate participants and leverage bias (possibly in an unethical manner), but rather to show that, evolutionarily, we have developed the use of anchors in our judgments.

Let’s complicate the picture a bit more—there are external anchors. The sailing company told us that on their last voyage, they had to deal with waves of 3 meters. If we have no experience with sailing, “3 meters” will serve as an anchor for which we have no judgment or discernment. Moreover, if we are asked under pressure what we would consider a “high and uncomfortable” wave height, we will likely respond with a number around 3. But there are also internal anchors—if we are experienced sailors and the sailor hasn’t yet dried off from the sweat, a response to a similar remark will activate an internal reference mechanism and a completely different line of thinking.

If you've identified that you're dealing with an anchor, cut the number in half or double it. Step outside the conventional framework to allow yourself effective discernment.

What is the connection between anchors and coaching?

How many times have you found yourself reacting to an anchor that isn’t yours? A manager tells you what the average bonus is at the company and asks how much bonus you expected to receive. Another manager asks, “In our company, we allocate about a month to define a new feature in the product. How long will it take you?” You respond, “A month or so,” but your gut feeling tells you that defining the feature you have in hand requires much more time. You’ve just taken over a new group, and you feel there’s a need for significant organizational change within the team. The CEO explains and asks, “In a time like this, it’s not customary to make big changes. What do you think is the right thing to do?” In coaching, the anchor has its own depth, depending on the coachee and the phenomenon at hand.

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[1] The other two are the availability heuristic (see previous post) and the representativeness heuristic.

[2] Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases: Biases in judgments reveal some heuristics of thinking under uncertainty. science, 185(4157), 1124-1131.

[3] Northcraft, G. B., & Neale, M. A. (1987). Experts, amateurs, and real estate: An anchoring-and-adjustment perspective on property pricing decisions. Organizational Behavior and Human Decision Processes, 39, 84-97.