anchoring

Anchoring

Overview

When people estimate an unknown quantity they start from a reference point — an anchor — and adjust. The adjustment is almost always insufficient, so the final answer stays closer to the anchor than it should. This pattern holds even when the anchor is explicitly random and subjects are told to ignore it (Tversky & Kahneman 1974). It survives expertise, explicit warnings, and financial incentives for accuracy.

Strategically: almost every consequential negotiation, valuation, or forecast begins with an anchor. The first number said or written — asking price, salary band, prior-round valuation, revenue projection — anchors everything that follows.

Composes with: pricing-strategy · expected-value-and-kelly · probabilistic-thinking · signaling-games

When to Use

Apply when:

• About to negotiate a price, salary, valuation, contract term, or settlement
• Estimating an uncertain quantity after a number has already been mentioned
• A counterparty has opened and your reasoning is gravitating toward their number
• Resetting expectations after an anchor has already been set
• Sizing an AI startup valuation, raise, or AI-capex/adoption estimate where a headline round or a benchmark like Nvidia's market cap has already been floated as "the market"

When NOT to use:

• The number is genuinely informative (verifiable comparable, audited cost basis) — data, not an anchor
• Decision is trivial; you are past the negotiating phase; or anchor was set by you intentionally

Coaching Novices (Adaptive Front Door)

• Engine mode: user has a concrete case → run The Process directly.
• Coach mode: user is unfamiliar or has no concrete case → guide step by step.

In Coach mode, respond one step at a time. Each [WAIT] is a hard stop — output only that step's question, then stop.

1. One-line what-it-is: when you estimate or negotiate a number, the first number you hear pulls your answer toward it — even when you know it's random or wrong.
2. Check fit against When to Use / When NOT to use. If the number is genuine data, say so.
3. Elicit their real situation — a number that's been mentioned, an upcoming negotiation, a figure that's been floated. > [WAIT — do not advance until user responds]
4. Walk through The Process one step at a time with their input. > [WAIT — do not advance until user responds]
5. Close by naming the one concrete move that fits their situation (open with X / counter with Y / reset to Z). > [WAIT — do not advance until user responds]