The Hidden Trap Of ‘Anchoring Bias’ in Decision Making and The ‘Moneyball’ Movie

Making decisions is part of everyone’s life, be it you or me. It is toughest and riskiest part of our lives. Bad decisions can create irreversible damages.

COGNITIVE BIAS

For making decisions, the method widely used is to gather sufficient information, look at the cost, benefits, advantages, disadvantages — generate multiple solutions and then decide. But most of us may not be aware that our minds also play a critical part in the decision-making process — we use a lot of mental shortcuts(Heuristics) or unconscious routines to help in making decisions without our knowledge. These shortcuts are called Cognitive Biases.

These biases affect everything — It affects our life, interaction with others, our emotions, new ideas, new product development, customer service, acquisition, succession planning, hiring. These biases are hidden traps residing within us and we unknowingly, unconsciously fall into them. These traps would affect people around us too.

To make better decisions, we need to be aware of those traps and take steps to reduce the impact.

ANCHORING BIAS

Anchoring Bias is one of the cognitive biases that states it is human’s nature to rely too heavily on the first piece of information received (the “anchor”) when making decisions — Giving disproportionate weight to be initial data we receive.

In one experiment, college students were asked two questions: a)How happy are you? b)How often are you dating?. When the questions are asked in this order, the average variation in answers was minimal.

But when the question order was reversed, the dating question was asked first — it acted as an anchor and students started connecting the happiness to dating heuristic. The results were dramatic — People felt either happier or sad. “Oh. I haven’t had a date for a long time. I must be feeling miserable”

THE MOVIE “MONEYBALL”

In the Moneyball movie, Oakland Athletic’s General manager Billy Beane is upset by his team’s loss to New York Yankees in the elimination round of 2001 season. He sincerely wanted to win the championship.

Billy Beane needs to assemble a competitive team for 2002 season with a measly budget of $38million whereas New York Yankees have got $120 million to spend on recruiting players. Another sad news is that Oakland Athletics is losing three of his star players — Damon, Giambi and Isringhausen to rival teams.

Billy Beane meets his director Steve, informs him about the loss of star players and requests for some additional money.

Billy: “Steve, Well, you know we’re being gutted. We’re losing Giambi, Damon, Isringhausen. We’re in trouble”.

Steve: “Billy, You’ll find new guys.You found Jason, you found Damon”.

Billy informs Steve that he cannot compete against teams having $120million with a budget of only $38million. He does not want his team to just participate in the tournament but win the championship.

But Steve replies: “Billy, we’re a small-market team, and you’re a small-market GM. I’m asking you figure out how to find replacements for the guys we lost, with the money that we do have”.

See how the discussion has started anchoring around the topic of “Replacing the players”.

Cut to the next scene …

Oakland Athletic’s Scouting room — Billy Beane and 10 older men, all former players is sitting around a larger table, discussing the problems and trying to find solutions.

One of the former players, Grady, “Ok.Guys. We have got three big holes to fill….we will go around the room. I like the player Geronimo. How about him

We could see how even the selection panel is anchoring their discussions around filling the spots vacated by the players — How they are giving disproportionate weight to ‘replacing the three-star players’.

THAT”S NOT THE RIGHT PROBLEM

Anchoring Bias would blind us in such a way that we would fail to understand the real stumbling blocks. We would waste time in trying to solve the wrong problem.

Let’s move to the scene of the discussion between Billy Beane and the team of former players.

As the selection members continue to discuss new players, Billy Beane becomes restless and shows his disgust. One of the selection members asks Billy’s suggestion.

Billy: Guys, you’re just talking. Talking, “la-la-la-la-la” — like this is business as usual. It’s not.

Grady: We are trying to solve the problem.

Billy: You’re not looking at the problem.

Grady: We’re very aware of the problem.

Billy: Okay, good. What’s the problem?

Grady: Look, Billy, we all understand what the problem is. We have to —

Billy: Okay, good. What’s the problem?

Grady: We have to replace three key players in our lineup.

Billy: Nope. What’s the problem?

Another selector, Pittaro: We gotta replace these guys with what we have —

Billy: No. What’s the problem, Barry?

Another selector, Barry: We need 38 home runs, 120 RBIs and 47 doubles to replace.

Billy Imitates Buzzer Sound showing disagreement.

Billy: The problem we’re trying to solve is that there are rich teams and there are poor teams, then there are 50 feet of crap, and then there’s us. It’s an unfair game.

Billy Continues: We are like organ donor for the rich. Boston has taken out our kidneys, Yankees have taken out our heart and you guys are sitting around here talking about the same old nonsense. We have to win the championship.

We could see ‘how the loss of those stars’ influenced the subsequent thoughts and judgements of Billy’s team.

The scouting team continues to select a person based on the parameters of the player whom he is going to replace. Once an anchor is set, judgements are made with reference to that anchor and all the available information is interpreted around the anchor. The bias sets in and clouds our judgement.

HOW TO AVOID THE TRAP OF ANCHORING BIAS

01) In the initial scenes, we could see Billy spending time alone, thinking about the problem on his own before he even meets his director or other selection panel members with a solution. Think about the problem on your own before consulting others to avoid becoming anchored by their ideas.

02) In the meeting with scouting team, Billy says, “What if we look at the problem from a different perspective — The whole time we thought that it was the chicken that made the chicken soup good. But we could alter the taste of the chicken soup by altering other ingredients like Onion. And Onions are cheaper than buying additional chicken. We need to think different”.

Billy offers a solution “We have to think differently. Rather than looking at the three players as individuals, can we look at the combination of skills and average the value — I agree it is different from the way we looked at players over the sport’s history”.

Billy continues “Can we try Bill James’s Sabermetrics methods?”. Bill James, scientifically analyzes and studies baseball, often through the use of statistical data, in an attempt to determine why teams win and lose. Billy wanted to use Bill’s method for selecting players, an unconventional approach in the history of Baseball Sports.

But the scouting team refuses Billy’s suggestion “Billy, we are not playing Fantasy baseball. Bill James was a night security guard at a pork and beans factory. He is not in baseball, he is in pork and beans”. The team’s thoughts are biased, not open-minded enough to separate the message from messenger so that they could explore alternate solutions.

To avoid anchoring bias, Billy shows us that we should always view the problem from different perspectives — need to try alternate starting points — explore options to try unconventional approaches. The important suggestion is not to stick with your first line of thought.

03) During his visit to Cleveland Indians, Billy meets Peter Brand, a fresh young Yale economics graduate working as an assistant for Mark Shapiro. Billy feels that Peter knows something about player value. He goes and talks to Peter in private. Over the course of the discussion, Billy realises that Peter has radical ideas about how to assess players’ value and he too follows Bill Jame’s method.

Peter “The Red Sox team see Johnny Damon and they see a star who’s worth $7.5 million a year. When I see Johnny Damon, what I see is…an imperfect understanding of where runs come from. The guy’s got a great glove. He’s a decent leadoff hitter. He can steal bases.But is he worth the $7.5 million a year that the Boston Red Sox are paying him? No. No.”

Billy was the first person who spent the time to listen to Peter’s radical ideas. He was open-minded, willing to listen despite knowing that Peter is a fresh graduate. Others dismissed Peter’s ideas as impracticable. Don’t judge the person who is giving opinions, judge the information.

When Billy sought an opinion from Peter or his scouting team, he was careful not to anchor their thought processes with his own — He first listened to their thoughts, ideas, before sharing his opinion. Our thoughts would influence others.

Be open-minded, seek opinions, information, alternate ideas, listen to others before sharing your views — widen your knowledge, the frame of reference and push mind in different directions.

CONCLUSION

Socrates once said that the unexamined life is not worth living. We need to re-examine every problem from different perspectives and explore whether are there any anchors existing unconsciously. Once you reconsider everything, you may make new decisions and open yourselves to new opportunities.

REFERENCES: The Hidden Traps in Decision Making — HBR article by John S. Hammond, Ralph L.Keeney, Howard Raiffa, Thinking Fast and Slow by Daniel Kahneman, Influence by Robert B.Cialdini, Predictably Irrational by Dan Ariely, Moneyball screenplay by Steven Zaillian and Aaron Sarkin.