Musings from the CU Suite

The Danger of Anchoring

Written by Anthony Demangone, Powered by NAFCU

I'm in the middle of a great book: The Undoing Project: A Friendship That Changed Our Minds.  It is a wicked good read.

book


It discusses two Israeli psychologists who dove into how people make decisions. The book is unnerving - it describes how we unwittingly fool ourselves into making bad choices. 

The researchers touched upon anchoring. What is it? Your decisions can be adversely affected by placing too much emphasis or importance on the first piece of data you receive. That data "anchors" your mind in one area, leading it to dismiss or diminish subsequent information.

Don't believe it? The researchers did an experiment that you can repeat. 

They divided a group of high school students into two groups. Each group was given a math problem and only five seconds to answer it. Due to the short amount of time, the students had to estimate the answer. 

Group one's problem: 8 X 7 X 6 X 5 X 4 X 3 X 2 X 1 = ?

Group two's problem: 1 X 2 X 3 X 4 X 5 X 6 X 7 X 8 = ?

In theory, you'd think the answers would be similar.  Nope. 

Group one's average answer: 2,250

Group two's average answer: 512

The actual answer is 40,320.

The reason for the difference? Group one was anchored with an 8, and group two was anchored with a 1. 

It got me thinking. Where in my work am I confronted with a series of numbers, ideas or arguments? When brainstorming, do I give too much weight to my first hunch?

Just some food for thought. 

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Speaking of food for thought, NAFCU has a credit union volunteer certification program.  In short, I run volunteers through ten separate areas that they should understand. Fiduciary duties. The role of boards and what good corporate governance looks like NCUA expectations, financial ratios. You get the idea. There's a short test, and if the volunteer passes - they are certified as a NAFCU Certified Volunteer Expert.  Probably something that NCUA would like to see!

Here are the next two chances to do an in-person certification. 

I hope to see you there!

About the Author

Anthony Demangone, Executive Vice President and COO, NAFCU

Anthony DemangoneAnthony Demangone, NCCO is Executive Vice President and Chief Operating Officer at NAFCU, where he oversees day-to-day operations and manages the association's education, marketing, membership, human resources, building facilities, finance and information technology functions.

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