Imagine how you might answer the following questions:
- Is the height of the tallest redwood more than 180 feet?
- What is your best guess about the height of the tallest redwood?
Participants who were asked these questions in a study by psychologist Richard West answered, on average, 118 feet. West ran this experiment several times and checked the results by changing the number in the first question. For example, in one trial he asked, “Is the height of the tallest redwood more than 1,000 feet?” When participants were then asked to make their best guess about the height of the tallest redwood, the average response was 826 feet.*
Do Your Colleagues Suffer from the Anchoring Bias?
According to an NPR report, the tallest redwood in the world is, in fact, 379 feet 4 inches.
Okay, but who cares?
You should care and care deeply. The dynamic at play here is the anchoring and adjustment bias. Simply put, this bias refers to the fact that judgments can easily be influenced by an uninformative number, in these examples 180 and 1,000 respectively.
As explained in the essay “The Big Idea: Before You Make That Big Decision,” “The trap of anchors is that people always believe they can disregard them, but in fact they cannot.”**
Still skeptical? Consider the following scenario.
You’re the Chief Technology Officer (CTO) at a start-up. The first software release was a success, and a second software product is in the works. The basic user, business, and technical requirements are in place. Now it’s time to develop a timeline.
The investors ask you and the Marketing VP how long it will take to build the product and take it to market. Following best practices based on your deep experience in tech, software development, and the start-up environment, you and the Marketing VP determine that the project will take 12 months from kick-off to production.
Now, imagine the same situation with one twist. The investors frame the question this way, “How long do you think it will take, about six months?” Six months is now an anchor or reference point, and it will affect your answer. You might come back with eight months or even nine, but you are unlikely to say 12, nearly double what the investors are thinking.
The problem? You’ve now boxed yourself and your team into a corner. If a 9-month timeline is unrealistic, deliverables will be late, and quality will suffer, placing your credibility at risk.
The solution is to acknowledge that the investors’ remarks about six months have influenced your estimate and then find a way to consciously re-anchor. In this example, the timeline for the previously successful product could serve as a valid point of reference. Even better would be to supplement this relevant information with case studies from outside your company. Such case studies can often be found in trade magazines and MBA textbooks.
Taking what Nobel Laureate Daniel Kahneman calls the “outside view” is powerful, but it does take time. One approach is to collect industry case studies on a regular basis. When estimating the time required to build a new product, you are more likely to have relevant data in hand that will allow you to take the outside view and increase the chances of a realistic timeline and successful outcome.
*West’s study was cited in “Why Smart People are Stupid” by Jonah Lehrer in a blog post for The New Yorker, June 12, 2012. http://www.newyorker.com/online/blogs/frontal-cortex/2012/06/daniel-kahneman-bias-studies.html
**”The Big Idea: Before You Make That Big Decision” by Daniel Kahneman, Dan Lovallo, and Olivier Sibony http://hbr.org/2011/06/the-big-idea-before-you-make-that-big-decision.