Anchoring or the Anchoring Bias is the human tendency to evaluate or “anchor” numbers based on their presentation.
Observers and participants are usually swayed by the availability or recency of a number. The human tendency towards anchoring bias is often exploited to make subsequent facts or numbers appear in a certain light.
Beware the Anchoring Bias – Question the Numbers
The easiest way to evaluate the anchoring bias is to watch or observe its effect through an example. Anchoring works best without historical perspective, so we’ll look at a place where numbers often come sans context: finance and economics news.
Anchoring Bias in a Job Report
Let’s say that there is a new jobs release from the BLS, reporting that 138,000 jobs were added. An enterprising financial writer picks it up and writes a post with the headline “138,000 Jobs Were Added in Stunning Month!”.
Writers often use this technique to drive home stunning(!!!) facts that shield the inherent fluctuation in the data.
It could be malicious or unintentional but it’s certainly inevitable; people consume so much information they don’t have the time to properly frame an entire problem. Without knowing some key pieces of context (past months, average months, how quickly the workforce is growing) you’ll tend to agree with the author.
Beware Your Anchoring Bias: Question any Numbers
Anchoring is so persistent because of how much information there is to process. It is simply impossible to have the time to know all the details of every story.
Not everybody knows the history of the federal funds rate, the number of jobs added per month, the detailed history of the economy.
When we read we rely on others to process and contextualize that information for us. A malicious or bad writer, instead, will spin the numbers – making them murky, muddy, volatile, noisy… and difficult to parse.
Sometimes information is boring… and boring often doesn’t make it to a headline.
This bias reveals itself in many aspects of reporting. On this site we like to point out economic and finance reporting bias. But that’s just our expertise and interest – Michael Crichton’s famous Gell-Mann amnesia theorem hints at the iceberg of misinformation in the news.
Most every slightly contentious article has layers of manipulations and assumptions in interpreting and reporting the data
It’s often difficult to understand or trust anything besides a primary source… and those have their own biases! Financial reporting often includes some form of “continues winning streak” or “lowest point since” because financial data is so volatile. There are so many datasets out there there will certainly be thousands of spurious correlations.
What is the Solution to Anchoring Bias?
The only “solution” to the anchoring bias is knowing every report only reveals one small aspect of the truth. Your confidence in a conclusion should increase only as the number of primary sources and witnesses buttressing it increase.
Take the infamous employment example above… if the government suddenly reports a spike to 30% unemployment, you’ll have to weigh it against other data and your own experience.
Of course, the other important solution is a healthy dose of humility and an open mind. You may have been lead to believe a certain thing which was purposefully vague or misleading.
If evidence later comes out overturning it? Raise anchor, friends!
Alas, we don’t have the time to re-evaluate all of our conclusions. It’s more important to know that you can be easily mislead – and anchoring is one of the common ways it happens.