Truth 28. The anchoring principle
In one investigation, people were asked to guess how many African countries are in the United Nations.11 Most people don’t know the answer to this question without doing a Google search, so they guess. In this particular study, people were standing in front of a wheel of fortune. Half of the time, the researcher spun the wheel of fortune, and it landed on a high number (such as 100); the other half of the time, the number was much lower (such as 10). How did the random wheel-of-fortune number affect people’s judgments about the number of African countries in the United Nations? Even though it is illogical for a random number to have anything to do with making this guess, it strongly affected people’s judgments. The people who saw the high number adjusted their guess downward, but not downward enough. (The average guess was 50.) The people who saw the low number adjusted their guess upward, but not upward enough. (The average guess was 15.) The actual number of African countries in the United Nations is 53.12
What is interesting about the wheel-of-fortune study is that everybody knows that wheels of fortune are based on chance. Thus, in some sense, people should have completely discounted the number that was displayed on the wheel of fortune. This brings up another important point about the anchoring effect: Even when the initial anchor is obviously arbitrary or downright silly, it still exerts a powerful impact on people’s judgments.
People tend to make judgments based upon an initial starting point and then adjust upward or downward, but they fail to make sufficiently large adjustments.
The anchoring effect refers to the fact that people tend to make judgments based upon an initial starting point and then adjust upward or downward, but they fail to make sufficiently large adjustments.
Another example: People were asked to guess how many physicians were listed in the Manhattan phone book. Certainly, no one knows that information off the top of her head. Some people were first asked whether the number was greater than or less than 100. Other people were first asked whether the number was greater than or less than 1,000,000. Obviously, there are more than 100 doctors in Manhattan, but certainly there aren’t as many as a million. However, these two different anchors caused people to make very different guestimates about the number of physicians in Manhattan.
In negotiation, your opening offer acts as an anchor—and so does the counterparty’s opening offer. This means that a counterparty’s outrageous opening offer may psychologically anchor your own perceptions about what you can attain in the negotiation. I have seen several negotiators get “pulled out to sea” when the other party drops an aggressive opening anchor. The solution? Determine your opening proposal before hearing the counterparty’s opening.
Anchors have more staying power when they are supplemented with facts, data, and logic.
Anchors can be numbers, but they can also be your supporting arguments and data. Anchors have more staying power when they are supplemented with facts, data, and logic. Thus, it is much more powerful to justify your opening offer with relevant information and facts than to simply state the offer.