From today's study session,
some important points to consider when running a business came up, so I'm jotting them down.
- When making decisions, awareness of the anchoring effect and acknowledgment of one's own judgment are extremely important (feat. sample size).
Our choices and judgments are, in many cases,
shaped not only by our effort or ability,
but also by random elements (the unconscious, accidental personal experience, luck, timing, the people around us, innate talent, and so on).
And yet,
when we decide something, we tend not to give enough weight to those random factors.
1. Anchor
One of these psychological factors in humans is the anchoring effect.
The Anchoring effect refers to the way that, just as a ship stays where its anchor is dropped,
the first piece of information we are given acts as a mental anchor that continues to influence later judgments.
- from Thinking, Fast and Slow, Danny's explanation of anchors
When you ask about Gandhi's lifespan, the range of answers shifts depending on whether the first anchor is 'Was he over 33?' or 'Was he over 112?'
And in real-estate transactions, the actual final price is influenced by the first asking price.
In retail in particular, when a {chicken} shop posts a specific time for when it will be ready, or when a notice goes up that says you can buy up to 12 cans of {Campbell's Soup} per person, average sales rose from 3.5 cans to 7 cans.
From cases like these, you can see that in negotiation, the side that moves first has the advantage.
< Kahneman's negotiation tips >
1. Be the first to propose: in a market, the first anchor in negotiation has a powerful effect.
2. Don't be absurd: just because the other side's offer is absurd, don't make an equally absurd counter-offer that makes the gap impossible to close.
3. Make it clear that this is hard for both of you: rather than escalating, pretend you're walking away from the negotiation, or make it clear that this offer is hard not only on you but on them as well.
2. The Law of Small Numbers
And -
since small samples have high variability and are likely to produce extreme results, statistical analysis emphasizes the importance of using larger samples.
The Law of Small Numbers
refers to the tendency for extreme results to appear more often in small samples. By contrast, in larger samples the results appear more balanced and accurate.
Considering this together, the summary is as follows.
Summary
1. The preparation process before dropping an anchor
: If you drop your anchor rashly, or if the other side has already dropped their anchor first,
before you get pulled along (rushing to solve the problem)
to first reduce your own ambiguity (the small hint),
consider the Law of Small Numbers (small samples lead to extreme results)
and build up 'your own sample.'
2. Now, I drop my anchor first.
: While staying aware of randomness and availability bias,
when the time and place are ready,
throw the first punch with your own anchor.
Applications
1. Consider this in the process of collecting and analyzing raw data.
2. Apply it to pricing policies.
3. Apply it to POP, copy (UX writing).
4. Time-of-day video, music, and scent.
