Definition Anchoring Bias. Description.
 Anchoring Bias is the human tendency to rely too heavily
on information, especially the first piece of information that is available (treated as an "anchor), when making subsequent judgments and decisions. It is also called Focalism.
During decision making. individuals anchor and overly rely
on specific information or a specific value and then adjust to that value
to account for other elements of the circumstance. Usually once the anchor
is set, there is a bias toward that value.
Anchoring was pioneered by by Amos Tversky and Daniel Kahneman.
Anchoring in Psychology
In psychology, anchoring and adjustment is seen as a psychological heuristic that influences how people intuitively assess probabilities. According to this heuristic, people start with an implicitly suggested reference point (the "anchor") and make adjustments to it to reach their estimate. A person begins with a first approximation (anchor) and then makes incremental adjustments based on additional information. These adjustments are usually insufficient, giving the initial anchor a great deal of influence over future assessments.
This form of Cognitive Bias is particularly relevant for strategists,
management consultants and decision makers in general.
Compare with: Agenda Setting Theory | Confirmation Bias | Status Quo Bias
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How to Avoid Anchoring in Strategic Decision Making?
" Recently, Taleb and Nobel prize-winning psychologist Daniel Kahneman together explored their differing approaches to unlocking the mysteries of decision making processes (in the New York Library). Taleb learned from Kahneman the idea of anchoring bias: when you ask someone the last four figures of his social security number and then how many dentists exist in Manhattan, there will be a correlation according to Kahneman.
People use available 'knowledge', information and forecasts (KIF) without any doubt. And the more complex the KIF presented, the riskier decisions people make! People are too 'gullible' (Editor: ~naive, unsuspecting) using KIF. Besides this naivety, sometimes it can also be very profitable for them to use complex KIF (think of bonuses and rewards).
So people, according to psychology, will overly use (early) presented KIF in their decisions. And that can be disastrous: such decisions, based on anchoring and forecasting, can have severe side effects (Taleb calls them 'iatrogenics', a medical term), which decision makers do not see or expect, or do not want to see. And these side effects are particularly severe and dangerous in Taleb's fourth quadrant ("wild randomness", see the summary of Black Swan Theory).
The question I have is: How do you prevent anchoring bias (AB) from occurring when making strategic decisions in your organization and - if you can't - how do you counter these severe side effects?" |
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