The Frontal Cortex

Anchoring

In the last few months, the globalized world has endured two very different crises. First, there was the ash cloud over Europe, which paralyzed air travel for millions of passengers. Then, there is the leaking oil well in the Gulf of Mexico, which continues to spew somewhere between 5000 and 60,000 barrels of crude into the ocean every day.

While these disasters have nothing in common, our response has been plagued by the same fundamental problem. In both instances, officials settled on an early version of events – the ash cloud posed a severe danger to plane engines, and the oil well wasn’t a very bad leak – and then failed to update that version in light of new evidence. As a result, valuable time was squandered.

This is a form of anchoring, a mental bias first outlined (of course) by Kahneman and Tversky. One of my favorite demonstrations of anchoring was done by a group of MIT economists led by Dan Ariely, as they conducted an auction with their business graduate students. (The study was later repeated with executives at the MIT Executive Education Program with similar results.) The items for sale included everything from a fancy bottle of French wine to a cordless keyboard to a box of chocolate truffles. The auction, however, came with a twist: Before the students could bid, they were asked to write down the last two digits of their social security number. Then, they were supposed to say whether or not they would be willing to pay that numerical amount for each of the products. For instance, if the last two digits of their social security number were 55, then they’d have to decide whether or not the bottle of wine or the cordless keyboard were worth $55. Finally, the students were instructed to write down the maximum amount they were willing to pay for the various items.

If people were perfectly rational, then writing down their social security numbers should have no effect on their bids. In other words, a student with a low valued social security number (like 10) should be willing to pay roughly the same price as someone with a high valued number (like 90). But that’s not what happened. Look, for instance, at the bidding for the cordless keyboard. Students with the highest social security numbers (80-99) made an average bid of $56. In contrast, the average bid made by students with the lowest numbers (1-20) was a paltry $16. A similar trend held for every single item. On average, students with higher numbers were willing to spend 300 percent more than those with low numbers.

What does this have to do with the ash cloud and the oil spill? While anchoring is typically interpreted as a consumer mistake – we anchor to the wrong price – I think the bias can also be applied to our beliefs. Consider the ash cloud: After the cloud began drifting south, into the crowded airspace of Western Europe, officials did the prudent thing and canceled all flights. They wanted to avoid a repeat of the near crash of a Boeing 747 in 1989, when the KLM aircraft flew, at night, above the ash cloud of an Alaskan volcano. This led to a complete engine failure and an emergency landing.

Given the limited amount of information, anchoring to this previous event (and trying to avoid a worst case scenario) was the only reasonable reaction. The problems began, however, when these initial beliefs about the risk of the ash cloud proved resistant to subsequent updates. Over the next few days, numerous test flights were sent up into the atmosphere. Much of the data collected by these flights suggested that the ash might not be such a severe danger, at least at the periphery. For instance, measurements of the atmospheric ash concentration found that the density of particles was roughly comparable to the sand dust clouds from the Sahara that sometimes sweep over central Europe. (Surprisingly, the highest concentration of particles was found at the atmospheric boundary layer, which is below 3 km. However, these particles are mostly air pollution from cars and factories.) Furthermore, subsequent tests also revealed that the silica content of the Icelandic ash was significantly below that of other dangerous ash clouds, such as that produced by the Alaska volcano in 1989. (For a bunch of reasons, clouds of lower silica content are less likely to melt in engines at cruising speed.) All of this evidence helps explain why numerous test flights carried out by Lufthansa, Air Berlin and British Air during the crisis revealed no damage to the aircraft and aircraft engines. Nevertheless, the cancelations continued for another four days.

My point is absolutely not that the ash cloud wasn’t dangerous, or that the aviation agencies were wrong to cancel thousands of flights, at least initially. (Nobody knows the answer to those questions, although I’d rather be an inconvenienced traveler than a victim of catastrophic engine failure.) Instead, I think we simply need to be more aware that our initial beliefs about a crisis – those opinions that are most shrouded in ignorance and uncertainty – will exert an irrational influence on our subsequent actions, even after we have more (and more reliable) information. The end result is a kind of epistemic stubbornness, in which we’re irrationally anchored to an outmoded assumption.

The same thing happened with the BP oil spill. Initial reports suggested that the leak was relatively minor, less than a thousand barrels a day. As a result, BP and the government were slow to launch into crisis mode. Days were squandered; little was done. In fact, it took BP seventeen days before the company attempted the first fix of the underwater leak. Because BP and the government were anchored to a false belief – the spill wasn’t supposed to be that bad – they spent weeks thinking the wrong thing in a crisis.

The only way to avoid anchoring is to know about it. We need to be more aware that anchoring is a fundamental flaw of human decision making, and that our first reaction to an event will continue to shape our ensuing thoughts, even after that reaction is no longer relevant or valid. Our old beliefs might be wrong, but they’re influence lingers on, an intellectual anchor holding us back.

Comments

  1. #1 gregorylent
    May 27, 2010

    higher states of consciousness help … this whole topic was identified by yogis long long ago …

    of course science types discount anything outside their box

  2. #2 Elizabeth
    May 27, 2010

    “BP will pay for this,” “BP will be responsible for the clean-up,” “BP will be writing checks to you,” were common phrases in government official comments about the oil spill … suggesting that as long as the catastrophe was NOT a FEMA type event (earthquake, tornado, flood, etc), the government did not have to respond. I think that was a form of anchoring.

  3. #3 Jennifer Gleeson Blue
    May 27, 2010

    I’m especially intrigued by how this goes on and on as it relates to long-held beliefs and ways of operating in the world (not just as it relates to events). Glad to have some language to put to the phenomenon.

  4. #4 martha
    May 27, 2010

    Research has consistently shown this to be the case. People filter information through their belief systems. If information is consistent with beliefs then the information is accepted and considered reliable with little scrutiny. If it is inconsistent, then the information will be subject to high scrutiny. This is shown in the anti-vaccination positions of certain people, who will say studies showing the safety of vaccines are subject to bias or are otherwise not trustworthy, but they will ignore the bias’s and dishonesty of Wakefield’s discredited research and say that the data was good.

  5. #5 martha
    May 27, 2010

    Gregory Lent, what evidence is there that higher states of consciousness help? There isn’t even evidence that certain mental states are “higher” than others. I take it you claim mediation can help with anchoring. Please show me the data because I question your claim.

  6. #6 Vinayak
    May 28, 2010

    hi, great post BUT i’m not sure that the mechanism identified in ariely’s experiment is at work here. The choice of bid from a range of numbers is truly random whereas the decision to which the aviation policymakers were ‘anchored’ wasn’t entirely random (as you concede). i’m not sure whether slightly different impulses were at work. for instance, isn’t it possible that figures in authority are almost by definition risk-averse? There would be no incentive for the person whose call it was to suggest that it’s safe to fly if even the slightest possibility of an air crash would result. Another example of this is the security status determined by homeland security ‘experts’ in America: often the country is on an ‘orange’ setting (indicating high security) despite the fact that little or no evidence exists to justify that state of alert. The reason is likely to be sheer risk-aversion: you don’t want to be the guy who relaxed the nation’s security just before a bomb went off. The BP case may also involve a significant amount of deliberate obfuscation by BP. Shouldn’t you account for these other factors before deciding on the ‘anchoring’ hypothesis which to my mind is rather weak at this point..

  7. #7 Cathy Sander
    May 28, 2010

    All of this research has got me into a depressed mood. Given the difficulty of committing ourselves to skepticism and being receptive to new information with as little bias as possible, how could we deal with this information? I just don’t see how, except by trial and error.

  8. #8 Ingenjören
    May 28, 2010

    gregorylent: You said, “higher states of consciousness help … this whole topic was identified by yogis long long ago …

    of course science types discount anything outside their box”

    You’ve got it backwards. Science has learned and evolved every year, the Yogis are still stuck in the same non working approaches they have been trying for centuries.

  9. #9 Ian Kemmish
    May 28, 2010

    Belief might have had something to do with the administration of the flight ban. Then again, it might have been the fact that in recent years the regulations about such events had been updated in accordance with “the precautionary principle”. Or the fact that the time it took for manufacturers to issue new guidance was approximately equal to the duration of the ban. Or the fact that 50% of the passengers involved were American and therefore in possession of some of the most aggressive corporate injury lawyers on the planet, further emphasising the bias towards caution.

    Perhaps one could coin the term “meta-anchoring” for the belief that the evolution of a situation like this is solely due to anchoring?

  10. #10 byeatheism
    May 28, 2010

    the blood and bodies of the atheist movement…

    they tried to BULLDOZE the entire METAPHYSICAL DIMENSION…

    they LOST THE WAR…

    you have FORFEIT YOUR SOUL, shermer… you have become an object in the material world, as you WISHED…

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    farm1.static.flickr.com/7/11792994_ffaaee87fa.jpg

    we’re gonna smash that TV…

    They had become ENEMIES OF THE PEOPLE AND OF GOD…
    you pushed too much and *CROSSED THE LINE*

    degenerates (PZ) or children (HEMANT) – ATHEISTS!

    youtube.com/watch?v=bRRg2tWGDSY

    do you have anything to say, you STUPID LITTLE F*CKER?

    how about I tell you, Mr. Shermer, EVERYTHING YOU THINK ABOUT THE WORLD is

    *WRONG*

    THE BOOBQUAKE – 911!

    dissidentphilosophy.lifediscussion.net/philosophy-f1/the-boobquake-911-t1310.htm

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    RUN, ATHEISTS, RUN!!!

  11. #11 Alan
    May 28, 2010

    The anchoring explanation is an intriguing possibility, but it also raises some questions, since the examples involve social psychology rather than just individual psychology in a classroom or experimental setting. If the Europeans anchored on prior experience involving a previous volcanic eruption in 1989, for instance, why didn’t those in charge of the BP spill anchor on the Valdez oil spill of 1989 (the prior experience years are simply coincidental)? Could reactions to these crises situations also be described by the “How do I feel about it” heuristic, otherwise known as the affect heuristic? For instance, volcanic eruptions are visible, dramatic, salient–and air travel is something that frightens many under the best of conditions. On the other hand, something happening underwater is out of sight, a force of nature, which humanity is supposed to be in control of through clever technology. An oil spills effects are not immediately emotionally salient–of course, that changes as the full scope of damage becomes more clear. The question or comment boils down to this. Isn’t what happened in the context of social psychology a primarily matter of the affect heuristic rather than anchoring and adjustment? If the phenomenon is visible, large, up in the air, it evokes an immediate feeling of concern–an immediate reaction. If something is going on undersea, there is little basis to feel a sense of immediate concern. And this all would be impacted by the optimism bias. If a huge, tehcnologically sophisticated entity communicates that its out of sight issue is contained, in the absence of any contradictory data, all of which is devoid of emotional salience, one would tend to rely on that information. On the other hand, airborne volcanic ash is visible for all to see, viscerally provactive even.

  12. #12 Jonathan
    May 30, 2010

    Anchoring doesn’t exist. It’s just another example of the Monty Hall Problem. By choosing whether or not they’d pay a certain amount for an item, the participants are telling you something about their personal preferences. The math behind it is simple; it just isn’t intuitive.

  13. #13 gines
    May 31, 2010

    I think thats anchoring as well:

    One Chinese person walks into a bar in America late one night and he saw Steven Spielberg. As he was a great fan of his movies, he rushes over to him, and asks for his autograph.

    Instead, Spielberg gives him a slap and says “You Chinese people bombed our Pearl Harbor, get out of here.”

    The astonished Chinese man replied “It was not the Chinese who bombed your Pearl Harbor, it was the Japanese”.

    “Chinese, Japanese, Taiwanese, you’re all the same,” replied Spielberg.

    In return, the Chinese gives Spielberg a slap and says “You sank the Titanic, my forefathers were on that ship.”

    Shocked, Spielberg replies “It was the iceberg that sank the ship, not me.”

    The Chinese replies, “Iceberg, Spielberg, Carlsberg, you’re all the same.”

  14. #14 bridal gowns
    June 1, 2010

    You’ve got it backwards. Science has learned and evolved every year, the Yogis are still stuck in the same non working approaches they have been trying for centuries.

  15. #15 jjo
    June 1, 2010

    this posting makes me think of emerson’s self-reliance…”a foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.”

  16. #16 fix it pro
    June 1, 2010

    In return, the Chinese gives Spielberg a slap and says “You sank the Titanic, my forefathers were on that ship.”

  17. #17 Carl Abbott
    June 1, 2010

    Anchoring (a.k.a. ‘clinging’) is an age old human problem. As Buddha put it, “the illusion of self originates and manifests itself in a cleaving to things”. Anchoring is so closely connected to our sense of self (we are what we hang on to) that even knowing it occurs won’t change behavior much. After all, emotion rules.

  18. #18 contragenic
    June 1, 2010

    Just because a person isn’t educated enough to understand Physics, doesn’t mean there is a god. Xianity is a great example of anchoring.

  19. #19 Claudia Putnam
    June 2, 2010

    I think it would be interesting to explore how to correct an anchored belief. It’s not enough to say you have to be aware of it…that’s fine for prevention, but how to do you deal with it once it’s happened? Even if awareness helps with, say an executive team or a President, how do you deal with it with the masses? What are some ideas you have for changing thinking? I hate to bring this up, but for example, Windows Vista actually didn’t suck after Service Pack 1, but there was no telling anyone this. It didn’t even matter if someone had Vista running great on their machine. They were convinced it was a disaster. MSFT had to launch a whole new product in order to change the perception. The same person who wasn’t happy with Vista can now be running Win7 with the same zero problems and more or less the same interface and be thrilled.

  20. #20 Lig tv izle
    September 2, 2010

    Gregory Lent, what evidence is there that higher states of consciousness help? There isn’t even evidence that certain mental states are “higher” than others. I take it you claim mediation can help with anchoring. Please show me the data because I question your claim.

  21. #21 Jennifer
    March 14, 2011

    There shouldn’t be a battle between Science and God. They simply co-exist.

  22. #22 Houston Lawyer
    March 18, 2011

    All of this research has got me into a depressed mood. Given the difficulty of committing ourselves to skepticism and being receptive to new information with as little bias as possible, how could we deal with this information? I just don’t see how, except by trial and error.

  23. #23 june smith
    April 12, 2011

    You’ve got it backwards. Science has learned and evolved every year, the Yogis are still stuck in the same non working approaches they have been trying for centuries.

  24. #24 Medion RIM Akkus
    May 16, 2011

    ve got it backwards. Science has learned and evolved every year, the Yogis are still stuck in the same non

  25. #25 bayliy
    September 7, 2011

    Indonesia seeks compensation for August oil spill that campaigners say destroyed fishermen’s livelihoods.But BP’s disastrous oil spill in the Gulf of Mexico has cast another dark shadow over the region,Oil industry will have to change how it operates in deep water following Gulf of Mexico spill, BP acknowledges.