I promise I will answer this question in this post, but first I would like you to do something. On a scratch sheet of paper, write down the last two digits of your cell phone number. Now, write down your estimate of what percentage of countries in the UN are in Africa______.
Without realizing it, your first answer probably affected your second, through a phenomenon called anchoring. Psychologists Daniel Kahneman and Amos Tversky first discovered anchoring in 1974 in experiments using a roulette wheel. Participants were asked the same question, but first were asked to roll a roulette wheel, which was secretly rigged to land on either 10 or 65. Participants who landed on 10 on average estimated the number of countries at 25%, and those who landed on 65 estimated an average of 45%. (The answer is 23%)
Anchoring also affects our choices. In an experiment described by Dan Ariely in his book, Predictably Irrational, an audience is first asked to write the last 2 digits of their social security number, and, second, to submit mock bids on items such as wine and chocolate. The half of the audience with higher two-digit numbers would submit bids that were between 60 percent and 120 percent more. The simple act of thinking of the first number strongly influences the second, even though there is no logical connection between them.
The anchoring effect means that the first information we receive has a disproportionate influence on our thinking.
One of the most surprising things about anchoring is how powerful it is even when we’re on guard against it. Even when we know the initial number is totally arbitrary, or way beyond anything reasonable, it still has an effect. If we’re given a high number to begin with, we adjust our own estimate downward, but we don’t adjust it enough.
Even well-informed professionals such as real estate agents are not immune to the effect themselves. In one experiment, four different groups of agents were given 10-page packages describing a specific property. The only difference was in the listed price. When asked to appraise the property, the median value correlated to the listed price, even though each denied that it had any effect on their decision.
Surely professional economic forecasters with serious quantitative training are protected from anchoring? Wrong again–the Federal Reserve studied professional economic forecasters and found that they exhibit anchoring bias toward previous forecasts. In another study, bank loan examiners who know the previous rating given to a loan end up closer to that rating on average than those who begin with no prior knowledge.
What does anchoring mean for persuasive communication?
In personal communication, first impressions set the initial anchor. Interestingly, bad first impressions tend to be longer lasting than good first impressions. The reason is that when we have a good first impression, we are more likely to spend more time with that person, and thus have more opportunities to gather information that can correct our initial impression. When we have a bad first impression, we will spend less time with that person and thus have fewer opportunities for correction.
First impressions are of course also important in presentations. Just as starting high and coming down leads to higher estimates of the product in the number exercise, a strong beginning in a presentation anchors the audience’s perception of you as a confident speaker with a relevant message.
In addition, the order in which you present information sets anchors that influence how choices are perceived. Suppose you are proposing a solution to a problem, which will require a $500k investment. In your presentation, it’s helpful to show that you looked at several options, but be sure to list the most expensive option first. $500k will seem less if you first tell them you considered an option that would cost $700k.
This tactic is commonly used in sales, especially by retailers. Williams-Sonoma once offered a breadmaker at $279, which sold OK. They introduced a bigger model at $429, and few sold…but sales of the $279 model nearly doubled. List price is another form of anchor that makes the sale price look good by comparison. At the supermarket, they post a sign offering 20 yogurts for $10. There’s no unit savings from just buying one, but they’re counting on you buying more as a result of the high anchor.
It works with larger purchase decisions as well. A friend of mine once told me that when he moved to Las Vegas, he specified to the real estate agent the price range of homes he wanted to look at, but complained that she took him to several houses way above the price range first. I told him that she was just setting the anchor.
Successful negotiators use anchoring all the time. People who ask for more initially tend to get more. They stake out extreme positions initially, and even though they may have to retreat a significant distance from the opening position they will usually end up higher. Don’t be afraid to ask for more.
If you’re on the receiving end of anchoring, what can you do about it?
The easy answer is that being aware of its influence should make you less susceptible to it, but unfortunately studies have shown that anchoring exerts its mysterious influence even when you know about it. The problem is that when we adjust from the initial anchor, we don’t adjust enough. It’s like an invisible bungee cord that limits how far we adjust.
There are really only two approaches that work. The first is to arm yourself with as much information as possible so that you have a realistic idea of what something is worth, before you come to the meeting or sales call. The second is “consider the opposite”. Before you make a decision, list the reasons that your estimate could be wrong.
So, have you figured out yet why Hooter’s sells Dom Perignon? The $110 price (at the time I saw it; honestly, dear– it was just for research) is the anchor which makes every other menu item seem cheap by comparison.
If you want to know more about anchoring, or are interested in the psychology of pricing, I highly recommend Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone.
For more about how anchoring is used in negotiations, I recommend Negotiating Rationally by Max H. Bazerman and Margaret A. Neale.
Jerry Seinfeld joked that the number one fear in America is public speaking, and death comes in second. So, at a funeral, you’re better off being in the casket than delivering the eulogy! I can definitely relate—a significant portion of my time spent coaching even senior-level executives deals with the issue of nerves.
The fear of speaking in front of groups is such an established fact of life for most people that it would seem nothing new can be said about how to combat it. Any book or course on presentations carries a comprehensive list of cures: prepare, breathe deeply, give yourself a pep talk, picture the audience naked, etc.
With so much advice out there, can there possibly be something new to say about the subject? I believe there is. Modern brain science points the way to a new approach by giving us a deeper understanding of what actually happens in our brains when we are under stress. This approach involves talking to yourself, but the message is actually the opposite of what we are normally told to say to ourselves. I’ll get to that in a minute, but first we need to understand a little about how our brains are structured and wired.
“We are what we repeatedly do. Excellence, therefore, is not an act, but a habit.”
Aristotle
The bookstores and the internet are chock-full of easy ways to change your life. 7 steps to eternal happiness; how to be rich quickly; lose 30 pounds by next week. Unfortunately, this illusion seems to have infected the brains of many of the students in my sales and speaking classes. They think that a couple days of training will unlock the secrets of excellence. Once they punch the appropriate training ticket they now know how to do it.
Here’s a dirty little secret about my training, or anyone else’s training: You will not be an excellent speaker or salesperson just because you took my course. (Please don’t spread that around—it’s bad for business.)
Don’t get me wrong— training in both fundamental and advanced skills can quickly take you from average to pretty good. And sometimes pretty good is good enough, depending on your competition. But to reach excellence, which I define very loosely as having a rare level of skill that makes your presentations eagerly anticipated and long-remembered, takes much more than a training session.
They say an expert is someone who learns more and more about less and less until finally he knows everything about nothing. I’m not sure if that’s true, but many of the senior executives I speak with come away from encounters with experts feeling they’ve been told a lot but still understand nothing.
One of the most common issues that I am asked to address in my coaching sessions is how to communicate complex and difficult information to a lay audience. My coaching clients, who include engineers, scientists, and lawyers, sometimes understand on their own that they take too long to express their ideas, and are frustrated by it. More often, they’ve been counseled by others that they must be more concise and clear. As one senior person in a high-tech company told me when he hired me to coach his staff: “I ask people what time it is, and they tell me how to build a watch.”
The real issue is not in making your listeners understand—it’s how to help them get it efficiently.
