I was taking a bath when I read about the Anchoring Effect. (I’m basically Archimedes.) It hit me so hard I actually stopped reading, put my book on the floor, and stared into my Rosemary-Mint scented bubbles for a long time. Holy crap. I’ve been doing this wrong since I started fundraising. My failure to understand this aspect of how the brain works may have kept me from closing bigger gifts; from having better, more visionary conversations with prospective donors; from really getting to know what my donors and prospects could do, and even perhaps wanted to do, if I hadn’t been such a blunt instrument.
That dang Anchoring Effect.
The Anchoring Effect is our brain’s tendency to zero in on one piece of information and make all decisions around that one piece of information. Some piece of info “anchors” our understanding of the situation, and becomes the starting point or baseline for all our decisions.
Daniel Kahneman and Amos Taversky demonstrated the potency of anchors in their Wheel of Fortune experiment.* They had their subjects spin the wheel, which was rigged to land only on either 10 or 65, and write down the number. The subjects were then asked two questions: whether or not the percentage of African nations in the UN members was larger or smaller than that number, and their best guess as to the percentage of African nations in the UN.
You know where it is going. The average guess of those whose wheel landed on 10 was 25% and the average guess of those whose wheel landed on 65 was 45%. The wheel and where it lands has absolutely no relation to the percentage of African nations in the UN, so it absolutely should not influence our estimates of that number. And yet, it did for those subjects.
Essentially, the first number we come across as suggested is the one we decide is the anchor. We decide what is too high or too low, not based on an objective assessment of the value of the thing (if we can even call it “objective” BUT LET’S NOT GO DOWN THAT MARXIST ROAD YET), but based on whatever initial number we heard. A number which could be absolute, total bollocks.
When I first came across the Anchoring Effect, I had had several conversations with donors mentioning the minimum amount for endowing a scholarship at my previous institution. I didn’t realize that what I was doing was giving people a figure that would be really, really, REALLY hard for them to transcend mentally in a significant way. And you know what? All those donors endowed a scholarship at that minimum level. I didn’t have a single one endow at a higher level. Now, perhaps that was the most they could give. And those were wonderful gifts! The minimum had been set because that was a number that would make a significant impact on a student’s life. But those donors and I never talked about what they could do, or what they wanted to do. What kind of impact they wanted to make and how that impact could be translated into a gift, a gift not anchored to the rather arbitrary number, but a gift tailored specifically to their capacity and passion. I started too early with the number.
As with all cognitive biases, there is actually a useful angle to the Anchoring Effect. It can work to our benefit. Sometimes talking about a gift amount upfront can help donors be aspirational with their giving. It can inspire them to look into their wealth and see what is actually possible — gifts they may not have thought they could do, but when considered reveal themselves to be within reach and a truly exciting opportunity to do something bigger than they ever imagined.
Of course, the Anchoring Effect doesn’t just apply to the gift amount. For many donors, the Anchoring Effect can mean someone only thinks about gifts in terms of cash and makes all their philanthropy decisions around the cash they have available. The check they can write today. But the reality is, there are so many ways to make a gift, and most people’s wealth isn’t in cash. It’s in stocks, IRAs, property, etc. Part of what we do as fundraisers is to broaden people’s thinking about what it means to give and how gifts can be made. Being aware of the persistent work of the Anchoring Effect can help us make sure we are not getting artificially stuck on any one aspect to a person’s gift — we can be sure to present and explore multiple options for giving, help them think about philanthropy in different ways, and ultimately help donors connect to philanthropy in the way most personal, meaningful, and impactful to them.
As you’ll read me write many times in this series, the answer to the questions of “What should I do now, knowing about this cognitive bias?” is entirely dependent on the person you’re talking to and the kind of ask you’re making. Are you looking for a lead gift for a campaign, a gift you have set at $5 million? Then you’ll need to lead with that number and let the Anchoring Effect work in your favor with the right donors. Are you looking to help a donor make the best gift they can and are trying to figure out what that may be? Start with having them share with you the impact they want to make and then work together towards figuring out the amount you will ask them for, working hard to make sure conversations don’t get stuck artificially on a number that happened to come up in any early conversations.
* Daniel Kahneman, Thinking Fast and Slow, 2011. pg. 19