Quite some time ago I read a book that talked about the “anchor effect”. For those that never heard of the term, the anchor effect is when people make decisions by relying heavily on the first piece of information they receive about a topic or a particular prior experience that has similarities to the current situation. Over the years, being aware of this “anchor effect” has helped me see that many times the decisions people make are not entirely their own but are based on external influences such as what they hear, trends, or similar past events. While the anchor effect does make decision making easier, in some instances it can work against you—especially in times of uncertainty or if the information is not specifically applicable to your situation.
One great example of the anchor effect in action is in the recent run-up in the real estate market. Historically, people would look to put offers in below asking price in an effort to get a good deal on the property. However, with what has been going on recently in the market people seem very comfortable bidding 7-10% above asking price. The anchor effect plays out when people start doing their research by looking at online market guides, where they hear it’s normal to pay more than asking price and that those properties aren’t overvalued. Then—automatically, without thinking through it—people believe they must bid over the asking price, even though under normal circumstances they would just wait until circumstances are more favorable.
Another example is the recent trend of “meme stocks”. A Meme stock is a stock that gains popularity with a group of people, not because the company is performing well, but because of people’s online influence, which attracts many investors to that specific stock and drives its price up. The problem with this is that most of the time the companies behind these meme stocks are in horrible financial shape and are in industries that are in decline. Again, under normal circumstances people wouldn’t invest in these companies. However, since an influential group of people are raving about the stock, people put their hard-earned money into it. While sometimes people get lucky and walk away with a profit, most of the time investing in meme stocks leaves people with significant losses.
These are just two examples of how technology is giving us the ability to connect to spheres of influence at a level that was not possible just 20-30 years ago. While the people that provide input into your life used to mainly consist of people from family, church, work, or school, now can literally be any person from any part of the planet. With today’s technology, you might be watching a video about the real estate market in Florida, then reading investment advice from someone in England, and then later listening to podcasts from a person in Australia—all from one device in the convenience of your home.
While the ability to obtain so much information is great, it can also lead to great disaster because it becomes too easy to anchor your decisions to the wrong advice. The many online platforms that are available allow you to find a person who provides research or content about almost any topic, and with minimal effort. While much information can be easily accessed, content on the internet is usually generalized and not specific to your situation. The type of advice that takes you personally into consideration can only come from real-life relationships and trusted people who can provide wise counsel. So as technology continues to improve, we need to make an intentional effort to uphold the personal relationships that are absolutely necessary for strong community, as it becomes too easy to just shut out personal interaction.
Proverbs 11:14: Where there is no guidance the people fall, but in an abundance of counselors there is victory.