Anchoring

You lower your anxiety about uncertain by producing a number, then you “anchor” on it, like an object to hold on to in the middle of a vacuum.

Ask someone to provide you with the last four digits of his social security number. Then ask him to estimate the number of dentists in Manhattan. You will find that by making him aware of the four-digit number, you elicit an estimate that is correlated with it.

We use reference points in our heads, say sales projections, and start building beliefs around them because less mental effort is needed to compare an idea to a reference point than to evaluate it in the absolute. We cannot work without a point of reference.

So the introduction of a reference point in the forecaster’s mind will work wonders. This is no different from a starting point in a bargaining episode: you open with high number (“I want a million for this house” the bidder will answer “only eight-fifty” – the discussion will be determined by that initial level.

Nissim Taleb, The Black Swain