Mental anchoring

Are we prisoners of past references?

Mental anchoring is an attachment to past events, situations, numbers,
ideas, explanations, even impressions,
Number anchoring is a phenomenon in itself

The mind neglects other realities as well as new information
and do not try to anticipate the future.
This tends to block thinking and to lead to biased decisions

That focus on an ancient reference might be due to simplified
cognition or linked to a past emotion.

Investors for example tend to have a "loss aversion".
It makes them keep assets which prices are below what they paid
when investing in them.

brain References in which our mind can get stuck.

What is mental anchoring?

Stubbornness, myopia or stuck in the past?

Anchoring is one of the frequent mental biases / behavioral biases found
among human beings - yes, you and me - with potentially damaging
effects.
Mental
anchor anchoring happens when a narrow ancient reference
stays firmly stuck within the mind (as if some neurons keep being wired
together)

This reductive mental process, also called focalism, this milestone
around the neck affects how we perceive, think, recall, analyze and
decision make decisions.

What are those past criteria
that takes hold of our mind and freezes it?

  • On the basis of past previous references such as:

    • Strongly ingrained past situations, events, 

    • data, numbers, values
Number anchoring is a phenomenon in itself.

For example, if a number, even exaggerated, fanciful or
unrelated
to the topic is
stated just before an analysis,
a negotiation, a valuation, an investment, a spending, it

unconsciously influences strongly the reasoning.


See also below the role or an ancient price reference;
often the initial buying price
on economic / financial
estimates and decisions.

    • Also past impressions, ideas, paradigms, explanations,

    • Even some sentiments felt at that time.
    • While blind ignoring other aspects of the situation,
    either neglecting new events or skipping a deeper analysis
    of the available information) that makes the situation differ
    from the past (or from how we evaluated it in the past)
  • What are the causes?

    Anchored eyes,
    anchored brain,
    anchored heart
    or anchored feet?

    The causes of this narrow mental attitude might be either:
    • Cognitive
    (focusing on a previous reasoning, a first perception,
    a simplistic initial analysis)
    • Or emotional
    (remembering some pleasant or painful situation).

    A subjective anchoring on past references, sometimes on first
    impressions, without taking into account current realities
    and trying to anticipate evolutions
    , is, as said above, a rather
    frequent
    behavioral bias.

    It can be categorized more precisely as an oversimplified
    heuristic,
    and even, when it persists for a long time, an
    robot automaticity.

    Consequences on behaviors

    Mental anchoring tends to bring stubborn behaviors
    and is the father and mother of:
    • "Cognitive dissonance"
    (denial / averserepeal rejection of new facts that contradict past beliefs
    and thus create displeasure) or past decisions (commitment
    effect)
    • The "status quo bias"
    (behavior mental conservatism, resistance to change,
    or just slow / frozen mind / behavior (
    snail underreaction).
    Here is the illusion that in an uncertain world that evolves all
    the time (dynamical system), we could endlessly live on vested
    interests and knowlege and practices we never check if they
    became obsolete.


    =>
    The anchoring bias, when it persists (because the mental adjustment 
            to the actual
    situation is delayed or never takes place), tends to lead to
            decisions and behaviors that are underperforming or even
            disastrous
    .

    An example in sous economics and finance

    In economics and finance, the "prospect theory" gives the example of the
    "loss aversion".

    In a version of this specific form of anchoring, the investor mind often stays
    focused / stuck on an arbitray past price price reference. It can be :

    * his/her buying price (this is the most usual price anchor),
    * or sometimes a round price,
    * or a past peak price,
    * or some rigid / stubborn selling objective price decided in the past...

    He / she does not accept to sell an asset he / she owns as long as its
    current price is under that reference price
    , even if its future
    price prospect have been dwindling.

    =>
    Therefore he/she takes the risk of losing more money by keeping an
           
    asset that did not deliver its promises.

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    M.a.j. / updated : 01 Sept.  2015
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