Anchor, Baby

The classroom was divided equally into two sections by an aisle running down the middle of the room.  Students have been free since the beginning of the semester to sit where they want, and they generally spread themselves out fairly equally, creating two fairly similar sample groups. 

To one side of the room, I gave each student a small slip of paper containing two questions:

1. Do you believe that Benito Juarez was more than 114 years old when he died?
2. Guesstimate the age of Benito Juarez when he died.

The other side of the room got a slip of paper with only one question:

1. Guesstimate the age of Benito Juarez when he died.

The class has been studying Mexican history, and while we had been discussing Juarez, we had not yet reached the period when he dies suddenly of a heart attack, nor does the textbook mention his age when he dies.  What was point of the quiz?

Actually, the point had very little to do with history—Mexican or otherwise.  The quiz was not even graded; instead, I asked a student on each side of the room to gather the slips on their side, then average the answers on the estimated age of Juarez when he died.

The results were rather shocking:  among the students with two questions to answer, both the average answer and the range of answers were significantly higher than those of students who only had to answer a single question.  Why?

Actually, I was repeating a famous experiment published by Daniel Kahneman in his brilliant book, Thinking Fast and Slow.  Kahneman, a pioneer in the field of behavioral economics and a winner of the Nobel Prize in economics, calls this the anchoring effect—the tendency to allow a piece of information to influence decision making.  In the example above, I suggested to my students the utterly preposterous notion that President Juarez might have lived to be over 114 years old.

Or, as Kahneman put it, “Any number that you are asked to consider as a possible solution to an estimation problem will induce an anchoring effect.”

In his book, Kahneman gives an example that I wasn’t quite able to duplicate in my classroom (and sooner or later, I really did have to talk about Mexico…).  A wheel of fortune was rigged so that it would only stop on either 10 or 65.  Then the experiment participants were asked the following questions:

1. Is the percentage of African nations among UN members larger or smaller than the number indicated?
2. What is your best guess for the percentage of African nations in the UN?

The average answer of those who saw 10 and 65 were 25% and 45%, respectively.

Want another example?  Visitors to the San Francisco Exploratorium were given two questions:

1. Is the height of the tallest redwood tree more or less than 1,200 feet?
2. What is your best guess about the height of the tallest redwood?

In this example, the average estimate was 844 feet.  But, when the height in the first question was lowered to 120 feet, the average estimate of the tallest redwood decreased to 282 feet, a drop of 562 feet, a difference of much more than 380 feet—the actual height of the tallest redwood! 

This kind of influence happens so frequently that it is amazing that it is only recently that we have a name for it.  Kahneman gave a perfect example of this in real estate.  Trained professionals—experts in evaluating real estate—consistently gave higher estimates of a property’s value after being told the seller was asking an outlandishly high price for the property. 

It may be almost impossible to have a business negotiation of any kind without the anchoring effect having some effect on the transaction.  It explains why opening bids are exaggerated, why television hucksters establish a phony value for the schlock they are selling before revealing the true price, and why states with ceilings on liability lawsuits never see a reduction in insurance rates—it just pushes the amounts awarded up to the maximum.  The amount of the ceiling becomes the anchor.

That the anchoring effect works is obvious, but what distresses me is that even information that we immediately recognize as false—still influences us!  Remember the experiment that I did with my students?  None of them—not even the education majors—believed for a second that President Juarez lived to be over 114 years old.  The idea was preposterous, but it still affected their answers.

In an election year, I do find this distressing.  More than I should, I watch television, I read things on the internet, and I read the occasional blog that is neither footnoted nor peer-reviewed.  (Of course, the one you are reading right now is okay, but all the other blogs are pure shit!  Trust me, I’m 487% reliable and somewhere in the right hand column is the very large number of readers this month who agree with me.)

I wonder how many of my opinions have been shifted by nonsense that I knew was false, but it still shifted my decision making.  On the other hand, all of this does help explain this bizarre election year—sort of.

Oh, and President Juarez died at the age of 66...Or 114.