Anchoring Bias Chestnut Trap
I want to start today with a story that sounds like a joke. Oh, I love these. Yeah, but it’s actually it’s a piece of 2000 year old psychological war for all. It’s a parable from ancient China. Specifically from the text, the zwangzi. Right, right. It’s the famous story of the monkeys and the chestnuts. And honestly, it’s one of those stories that makes you laugh at the monkeys right up until you realize, well, until you realize you’re the monkey. That’s usually how these things go, right? So the setup is pretty simple. You have a keeper, a guy who is in charge of a troop of monkeys. And he’s rationing out their food, acorns or chestnuts, depending on the translation you’re looking at. And he makes them an offer. He gathers them around and says, okay, here’s the deal. You get three measures in the morning and four in the evening. And the reaction is just immediate. It’s whatever the monkey equivalents of a full scale riot is. They are screeching. They’re furious. They feel completely ripped off. The vibe is basically that three is a massive insult. So the keeper pauses. He reads the room. Right. He reads the room and says, okay, calm down. Let’s try this instead. I will give you four in the morning and three in the evening. Cure joy. Delighted. Yeah. They think they’ve just won the negotiation the century. Everyone goes back to grooming each other. Happy as can be. And that right there is the trap. Because obviously if you do the math, the net result is identical. It’s seven chestnuts. Exactly. The inventory hasn’t changed at all. The clerk intake hasn’t changed. But the emotional reality that rage versus the delight, it flipped 180 degrees just by, you know, swapping the order of the numbers. Which creates a really fascinating question. If the reality didn’t change, what actually did. Exactly. And that’s what we’re digging into today. Because this isn’t just a funny anecdote about primates. It’s the origin of a Chinese idiom, zao-san mu-ci, which literally translates to three in the morning, four in the evening. Right. Which has become a way to describe inconsistent behavior or trickery. But deep down, it’s really the perfect introduction to what psychologists call anchoring bias. Anchoring bias. I feel like most people have probably heard the term. But I don’t think we realize just how deep the hooks go in our daily life. Oh, absolutely not. Our mission for this deep dive is to show you how this mechanism, this reliance on the first piece of information we hear shaped ancient diplomatic treaties, to find the past rates of imperial exams, and you know, currently decides how much you pay for your genes. Or what you ask for in a seller negotiation. It’s essentially the operating system of human judgment. We are going to explore why our brains are so desperate for that first piece of information, not anchor, and how difficult it actually is to drag our minds away from it once it’s set in place. So let’s get into the machinery here. The psychology of the first. Why did the monkeys react that way? I mean, I know we said monkeys, but we established that humans do this too. If you give me 50 bucks now and 50 later versus 20 now and 80 later. Actually, wait, that’s not quite the same thing. It’s not. No, because in the monkey scenario, the total is exactly the same both times. It’s purely about the starting point. The formal definition of anchoring bias is our tendency to rely far too heavily on the very first piece of information offered when making decisions. Ah, okay. So that first number is the anchor. Correct. For the monkeys in the first scenario, the anchor was three. That set their baseline. Three felt low. It felt like scarcity. So even though four was coming later, they were already living in the emotional reality of not enough. They were framed by the three. And in the second scenario, the anchor was four. Right. Which felt like abundance. It felt like a feast. So the three that came later didn’t really matter as much because the emotional tone for the whole day was already set to winning. Okay, but this implies our brains are incredibly lazy. Are we really just looking for the first available shortcut so we don’t have to think? Well, lazy is a bit harsh. But yes, efficiency is the goal here. The human brain is a very energy expensive organ. It burns about 20% of your body’s calories. Yeah. So it doesn’t want to calculate the total daily value of chestnuts or dollars. Every single time it faces a choice, it wants a reference point. This is what psychologists call cognitive laziness or cognitive ease. So the first number just provides the baseline so the brain can stop processing. It provides a tether. Think of it like a boat dropping an actual anchor in the water. You can drift a little bit left or right. That’s the negotiation or the adjustment phase. You are fundamentally stuck in the radius of where that anchor initially dropped. Okay, that makes sense for the laziness part. But I was reading about this concept in the source is called adjustment in sufficiency. That sounds a bit more technical. What is that about? That’s actually the scary part. It explains why we can’t just correct the bias even when we know it’s happening to us. Wait, really? Yeah. Even if we logically know the anchor is arbitrary like the keeper just swapping the morning and evening numbers, we fail to adjust our expectations away from it sufficiently. But why? If I know the anchor is totally bogus, why can’t I just cut the rope? Because moving away from an anchor requires active mental effort. It’s like walking uphill. We adjust until we reach a range that feels plausible and then we just stop. We don’t go all the way to the truly rational answer. We just go until we stop feeling uncomfortable. So we take the path of least resistance. Always. And you also have to factor in the primacy effect. Right. The first thing. The first thing you hear naturally gets the most attention. It enters your working memory when your brain is fresh before you’re distracted or tired. So four in the morning literally occupies more mental real estate than three in the evening. It’s kind of like me being someone for the first time. The first impression is the anchor. If they’re super rude in the first five seconds, they can be perfectly nice for the next hour. But I’m still seeing their thinking, yeah, but you were really rude initially. You’re anchored to the rudeness. You adjust a little bit. You tell yourself, okay, maybe they’re just having a bad day, but you rarely adjust all the way to, oh, this is a fundamentally nice person. That’s actually terrifying when you apply it to bigger things than chestnuts or bad moods. And that’s exactly where the history gets fascinating because this wasn’t just a parable. This was applied diplomatic strategy. When you look at the tribute system in ancient China, it was basically anchoring 101 on a geopolitical scale. We threw that because I usually just think of the tribute system as, you know, foreign states bringing fancy gifts to the emperor. It was that, but the terms of the exchange were everything. Imagine an envoy from a foreign state entering the imperial court, the architecture, the silence, the atmosphere. It’s all designed to be intimidating. And then the first demand the emperor’s officials make sets the anchor for the entire relationship. So they drop a massive unreasonable demand right at the start. Yes. And then you have to think about something like you must provide this massive amount of silver and horses and you must accept these subordinate titles. That initial demand frame the entire negotiation. If the foreign power engaged with that number at all, even if it was just to argue it down, they had already lost. Because they’ve accepted the frame. Exactly. There are now vassals haggling over the price of their vassalage. They aren’t discussing whether to be vassals in the first place. The massive demand was the distraction. The submission itself was the seven chestnuts. Now, and if they wanted to win or lose not be vassals, they would have to reject the anchor entirely. Turn around, walk out, refuse to even hear the number, but obviously that risks war. So most accepted the anchor and just tried to adjust it down a little bit from there, which is exactly what the emperor wanted. There was another historical example in the sources that really blew my mind, the imperial exams. Oh, the civil service exams, yes. Because we tend to think of standardized tests as well standardized, consistent, but they were anchored too. This is such a great example of arbitrary anchors becoming permanent reality. So imagine a new emperor comes to power. The very first year of exams under his reign sets a pass rate. Let’s say it happens to be a really tough year and only 5% of candidates pass. Okay, so that 5% becomes the anchor. Right. For the next 20 or 30 years, it completely defines what normal difficulty is for that era. It creates the cultural expectation. Even if the candidates 10 years later are absolutely brilliant, the system is anchored to that initial 5% standard. So they artificially keep it low? Yes. Or conversely, if the first year was unusually loose and 20% passed, that era suddenly becomes known as a golden age for scholars. Just because of the completely random conditions of that first year. Just because of the first year, it’s the first year effect. It sets the baseline against which all future years in that reign are judged. It reminds me of market haggling. I spent some time in these traditional markets in Beijing years ago and I was terrible at it. Just terrible. And reading these sources, I realize now I was getting anchored every single time. It happens to the best of us. In those traditional markets, there are usually no price tags. The seller looks at you. They look at your shoes, your watch, how you carry yourself, and they just throw out a number. One thousand RMB for this Jade carving. And I panic and say, no way, 500. Thinking I’m being this tough negotiator. But you’ve already lost. The real value of that Jade might be 50. But by saying 500, you feel like you just cut the price in half. You feel exactly like the monkey’s getting four in the morning. You feel the dopamine hit of the wind. While the seller is trying not to smile. Meanwhile, the seller is thrilled because he anchored you so high that even your aggressively low offer is a massive, massive profit for him. So the skill isn’t in coming up with a clever counter offer. It’s in completely ignoring the first number. The truly skillful bargainer hears one thousand and reacts with visible shock. They might laugh or pretend to walk away or offer ten. They know they have to destroy the anchor before the actual negotiation can even begin. They have to reset the morning count. This connects back beautifully to the underlying philosophy of the Chestnut story. It’s from the Swangzi, which is a foundational Taoist text. And Taoism is big on this idea of relativity. This idea that things are only big or small because we compare them to something else. Swangzi is really the master of perspective. He uses the monkey story specifically to illustrate that human judgment is relative, not absolute. The monkeys don’t judge the seven Chestnuts. They judge the transition from three to four. They judge the Delta, the chain. Right. The source text literally says, the reality was unchanged. Only the emotions were manipulated. Swangzi is critiquing how easily our peace of mind is totally disturbed by framing. The sage, the wise person in Taoist thought, sees the seven Chestnuts. They see the underlying total. They don’t get high on the four or depressed by the three. They just see the reality. Yeah. There’s that line from Laosie mentioned in the sources too, about being and non-being. Ah, yes. Being and non-being produce each other. Difficult and easy complete each other. It sounds a bit abstract at first. It does. But if you apply it to the monkeys, it makes perfect sense. Four is only considered high, because three exists as a comparison. You literally cannot have a concept of expensive without a concept of cheap. The anchor creates the contrast that allows the judgment to exist in the first place. So the anchor literally creates the perception of value. Without the keeper saying three first four is just a number. It means nothing. Precisely. The anchor is the void against which the value is measured. That is deep. But we have to come up for air for a second, because I need to know how this is messing with my actual life today. I’m not haggling for Jade very often, and I’m not bringing tribute to an emperor, but I am buying stuff constantly. What you’re looking at this dynamic every single time you see a sale price. The straight-through price on a tag. It is easily the most common application of anchoring bias in the modern world. You see a sweater, the tag says 80. My brain just releases dopamine. I feel like a genius for finding it. Because you aren’t actually evaluating the sweater to see if it’s worth 70 saving. The original 150 was the three in the morning, the bad option that makes the 80, no red line, I might actually think it’s too expensive. You very well might, you’d have no reference point. That original price is an artificial anchor designed specifically to disable your critical thinking about the item’s actual value. We’re all really just monkeys in a department store. Pretty much. What about salaries? This is a high-stakes one that affects everyone. Conventional wisdom always says, never speak first in a negotiation. You always want the other side to show their cards, is that true? Actually, the research on anchoring suggests the exact opposite in many cases. The person who speaks first sets the anchor. Really? I always thought speaking first should weakness or desperation. If you speak first and offer a low number, yes, absolutely. But if you walk in and say, I’m looking for a salary in the 120,000 range and the employer was privately thinking 90,000, you’ve just dragged the entire conversation towards your anchor. So now 100,000 looks like a reasonable compromise to them. Exactly. You’ve reframed their expectations. Whereas if you sit back, let them speak first. And they say, we’re budgeting about 80,000. Now you have to fight uphill just to get them to 90. You are fighting their anchor. Because of that adjustment in sufficiency we talked about. Right. The gravity is pulling toward their number. So the modern advice is set the anchor yourself and set it high. Within the realm of reality, yes. You want to be the one defining the morning portion of the deal. What about situations where it’s not about money at all? I was reading this section in our sources on medical diagnoses. And that actually worried me a bit. Are doctors really susceptible to this too? Highly susceptible. In medicine it’s called diagnostic anchoring. A patient comes into the emergency room with three or four symptoms. The doctor latches on to the very first one they notice. Let’s say severe chest pain. That immediately anchors their thinking to a heart issue. Even if the other three symptoms point to something completely different, like severe heartburn or panic attack. They might subconsciously downplay or entirely ignore the other symptoms because they just don’t fit the initial anchor. And they aren’t doing it on purpose or out of negligence. It’s that adjustment in sufficiency again. It takes a massive amount of cognitive effort to abandon the first theory you form and start over from scratch. So a bad first impression in a hospital setting can literally be dangerous. It can be fatal. That’s exactly why second opinions are so incredibly valuable. A second doctor comes into the room without that initial anchor and might see the total chestnuts. The whole clinical picture completely differently. Man. And what about legal cases? I assume lawsuits are just giant anchoring battles between lawyers. No, absolutely. It’s the entire game. When a personal injury lawyer stands up and asks a jury for 50 million. But they are anchoring the jury’s baseline. We want the jury to start thinking in terms of millions rather than thousands. Right. If the lawyer asked for 50,000. By asking for 5 million. The anchor shifted the entire window of what seems possible. It’s just manipulation plain and simple. Well, it’s human psychology. We can call it manipulation when it’s used against us, but it’s really just how the hardware of the brain works. Okay. So how do we upgrade the hardware? Or at least how do we install a firewall? Because if I want to stop being the monkey in the story, what do I actually do? You have to become an active thinker, not a passive one. The sources we looked at suggest three very specific steps to break an anchor. All right. Walk us through them. Step one. Step one is recognition. You have to train yourself to actually hear the click of the anchor dropping. When you see a price tag or hear a salary offer or read a dramatic headline, stop and ask yourself, is this effect or is this a frame? Just noticing that it’s happening is half the battle. It completely breaks the trance. You take a breath and say, ah, okay, that’s the three in the morning offer. I see what you’re doing. Got it. Step two. Step two is generate alternatives. This is the part that requires cognitive work. You have to force your lazy brain to consider the exact opposite. If a car dealer starts the negotiation at 15,000? You’re purposefully stretching the rubber band in the other direction. Exactly. You’re widening the playing field. You are consciously refusing to let their arbitrary number be the only source of gravity in the room. Okay. Recognize the anchor. Generate alternatives. And step three. Step three goes right back to the Dallas approach from the Zwangxi. Focus on totals. Count the actual chestnuts. Count the chestnuts. Forget the sequence of the offers. Forget the perceived discount. Forget the easy monthly payments. Look at the total cost out of pocket. Look at the total compensation package for the year. Look at the absolute net result. It sounds so simple when you lay it out like that. But we really do love the feeling of getting a deal. Focusing on the boring total kind of kills the buzz. It absolutely does. It’s boring. It’s clinical. But it’s the only way to see reality clearly. The Dallas Sage isn’t swaying with joy or anger. Because the Sage is looking directly at the pile of seven chestnuts not at the keeper’s hands waving them around. It really is a practice. You have to be willing to be a buzz kill to your own brain’s dopamine system. That’s the price of clarity. This has been a massive wake-up call for me. I’m sitting here rethinking literally every major purchase I’ve made in the last five years. Just remember there is always a keeper trying to switch the numbers on you. Well, before we wrap up this deep dive, I want to leave everyone listening with a thought that came up while we were prepping the material for today. We’ve talked a lot about avoiding bad deals, about not getting ripped off at the market or the car lot. But there’s a flip side to this bias. Yeah, this is the uncomfortable part. If reality is unchanged and only our emotions are manipulated by the anchor, I want you to look at the winds in your life. The times you walked away feeling great, the times you felt like you really came out on top of a negotiation or a purchase. Ask yourself, was it actually a real win? Or was it just four in the morning? Did you just happen to get the good number first? How many of your personal victories were actually just successful framing by someone else who got exactly what they wanted from you? Are you truly happy with the seven chestnuts you took home or are you just happy with the presentation? That is going to keep me up tonight. Thanks for taking this deep dive with us today. Keep counting your chest and that’s everyone. See you next time.