Quick Insight
Anchoring is estimating a number based on some other number, no matter how irrelevant that other number is to a rational estimation. It’s very powerful, and we underestimate its influence on us. A good general strategy is deliberately “thinking the opposite” of where an anchor drags you.
Anchoring is estimating a number based on some other number, no matter how irrelevant that other number is to a rational estimation. Here’s a study that showed how power anchoring is – and how we underestimate its power.
Real estate agents were shown a house and then told the list price of the house. They were then asked for their estimate of the expected sales price of the house.
You probably guessed what happened. The higher the listing price they were given, the higher the sales price they estimated.
81% said the list price had no influence on their decision. Almost all of them said it didn’t influence them, but overall it did influence them.
The same process was done with amateurs, and the effect of the list prices on their sales estimate was larger. This is not surprising.
Now for our last surprise. 63% of the amateurs said the list price had no effect. In other words, almost 40% admitted the list price impacted their estimate vs 20% of experts. The amateurs were more self-aware of the impact of the anchor.
First, focus your attention and search your memory for arguments against the anchor. Some things to focus your attention on include the minimum offer the other party will accept or on the costs to the other party of failing to reach an agreement.
A good general strategy is deliberately “thinking the opposite” of where the anchor drags you.
- Rob Stephens
Founder of CFO Perspective and the Finance and Strategy Toolkit (FAST)
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