Anchor

Anchor BIAS

Hi friends,

I recently attended a behaviour finance course aptly tittled Irrational behaviour conducted by Prof Dan Ariely (http://danariely.com/) of duke university. The course is available free on coursera.com and I highly recommend it. It will open your eyes to various aversions and biases we suffer and how we see, what we want to see and that it has got nothing to do with ‘reality’.

One of the lecture series covered a topic pertaining to decisions we make. Prof Dan Ariley asks the audience if they think they are in control of decisions they are making or are they slaves to external environment, some stimuli which if triggered would make them a robot doing things as prescribed.

So he did this experiment exploiting the human beings need to compare and create an anchor.

If there are 02 different products A and B of equal quality, you can easily sell the one you wish to by introducing a third product slightly inferior than the one you wish to sell.

Read the last paragraph again to understand what I am saying. For e.x if you want to sell more of A, introduce a A(minus).

Now rationally speaking, presence of A(minus) only tells us that A is better than A(minus) It does not tell us anything about the quality of B and its comparision with A. However Human beings are NOT RATIONAL.

Our urge and craving for anchor is so strong that we cannot take decisions without it. And once we have got the anchor, we (over) use it to justify. Strangely enough once you have the hammer, everything becomes a nail. The logic only suggests that A is better than A(minus) but people will conclude A is the best choice amongst the 03 options.

Lets say, you are a manager of a travel agency and you have 2 products for Europe. 07 days Paris with breakfast for Rs 100,000 and Spain with breakfast for Rs. 100,000.

Now over the last quarter, you realized that while Paris with breakfast is selling like hot cakes, spain not so much. Can you turn the tables using anchor and framing bias? The answer is an emphatic YES. If you simply add a third product in the mix which is inferior to the one you wish to sell at the same price.

So if we include 07 days Spain without breakfast for Rs 100,000, people will get an anchor to compare spain with spain without breakfast. They will conclude Spain with breakfast is better than spain without breakfast and (Surprisingly better than paris with breakfast).

Tada, sale of Spain with breakfast package picks up.

Please watch this amazing TED talk given by Dan Ariely and I hope you learnt something new today.

[ted id=548]

 

 

On a more Spirual/philosophical note

This experiment opened my mind to this amazing insight. Lets take this analogy to its ultimate conclusion. Readers might not agree with my hypothesis because it is very controversial to say the least.

I say that the logical conclusion of this experiment is that nothing we do, is done by us. We as human beings are only capable of reacting to situations based on our conditioning and genetic make-up.

And if somebody gets access to that genetic /conditioning framework, he or she can pretty much control our entire existence. We will do, what he/she wants us to do.

Think about it. The sales manager of a travel firm got access to a small, miniscule power of Anchor bias and he was able to shove Spain with breakfast on to gullible public who by the way under the illusion of choice were thinking that they have made their decision with FREE WILL without cohersion.

Just imagine, the cosmic law/energy field/god or whatever you may must have access to a zillion biases and genetic/conditioning formatting running the whole system while we think that we are

taking our day to day desions ourselves with FREE WILL and without any cohersion.

Well I will leave it at that, you are free to form your own opinion.

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