Traps In Decision Making — Avoid At Any Cost!

Part 1: The Anchoring Trap

Photo by John Schnobrich on Unsplash

We make decisions every day, be it in professional life or personal life. It takes one decision to make or break a situation.

Decision-making is full of traps, and we repeatedly make the same mistakes. What if I told you that by understanding these traps, you could not only guard yourself against these traps but use them effectively to get your work done!

There are, in total, eight traps of decision making, and they are

1. The Anchoring Trap.
2. The Sunk-Cost Trap.
3. The Status-Quo Trap
4. The Confirming-Evidence Trap.
5. The Framing Trap.
6. The Overconfidence Trap.
7. The Prudence Trap.
8. The Recallability Trap.

In this blog, I will cover the Anchoring Trap!

In everyday life, this trap is very evidently used in e-commerce sales. Recall if you ever bought a slightly expensive product after a steep discount, and you felt good about getting it on “Value.” Imagine this exorbitant price struck out, and a better price is written with a 75% off symbol flashing. The first thing you see in big font and red color is 75%.

When considering a decision, the mind gives disproportionate weight to the first information it receives.

Anchoring is often used by marketers, salespeople, lawyers, and negotiators. What makes this trap extra harmful is that you are satisfied and content when you walk out of the deal you are trapped in.

What can you do about it?

Anchors influence everyone, including policymakers, engineers, lawyers, consultants, and analysts, and it is impossible to avoid it.

People who are aware of the dangers of anchors can reduce their impact by using the following techniques:

• Do not stick with the first thought that came to your mind and carefully evaluate all options from different angles.
• Carefully evaluate your idea before “anchoring” your ideas with others’ opinions. Consult other people to see things from a different frame of reference after carefully thinking over your idea.
• If you are taking advice or counseling from someone, make sure you don’t anchor them into your preoccupation by oversharing, tell as little as possible, and avoid oversharing.
• Negotiations are one place where you have to be extra careful, pre-decide your stand, and upper and lower limit independently before entering a negotiation. You can also anchor the other person very low or very high if you get the chance to start the negotiations. Anchoring is a very powerful tool — use it well!

Tip for Data Analysts:

As a data driven decision maker, descriptive analytics is a vital tool to bust the anchoring trap.

• Avoid being anchored by outliers.
• Descriptive statistics is your best friend.
• Look at the median too.
• If possible, plot your data.
• Standardize and normalize the data as your models can be anchored too!

I will continue this series in my later blogs and describe the other traps also and add the links here.

I hope this adds value to your learning journey. I have started to share my learning journey in Data Science. Please follow me, and let’s dive in data! Prakshaal Jain

Credits: The work presented in this blog is published in this HBR Article