Lessons from Gandhi

One of my favorite books is Thinking, Fast and Slow by Daniel Kahneman. In it, he explores a fascinating psychological phenomenon called anchoring—a cognitive bias that subtly skews our perceptions and decisions.

The book discusses an example of the anchoring bias that resonated with me. It examined a study where two groups were asked how old they thought Gandhi was when he died. Their answers varied dramatically depending on how the question was framed.

I found this so intriguing that, as a new manager in the industry a decade ago, I ran a little experiment with my own team.

I split them into two groups and asked each the same fundamental question—just phrased differently.

Group 1: "How old do you think Gandhi was when he died?"

Group 2: First, I primed them with: "True or false—Gandhi was 117 years old when he died?" Then I followed up with: "Now, how old do you think he was when he died?"

The results? Group 1’s average guess was about 75. Group 2? The average jumped to the low 90s.

That’s the power of anchoring! Just mentioning a high number—even an obviously false one—nudged people’s guesses upward.

Now, why does this matter?

Because anchoring isn’t just an academic concept—it’s an essential tool in negotiation, especially in our industry. Whether you’re structuring settlement offers, discussing payment plans, or setting expectations with consumers, the first number thrown into the conversation holds immense influence.

What is Anchoring?

Anchoring is a cognitive bias in which an individual relies too heavily on the first piece of information they receive when making decisions. This initial reference point influences subsequent judgments and negotiations, often leading people to adjust their expectations based on the anchor rather than objective reasoning.

Why Anchoring Matters in Collections

Anchoring isn’t just a fun psychological trick—it’s a tremendously influential strategy. Whether you’re structuring settlement offers, discussing payment plans, or setting expectations with consumers, the first number introduced can dictate the entire conversation.

Consider two settlement scenarios:

• Scenario 1: You ask a consumer, “How much can you pay today?” They might say $50.

• Scenario 2: You start with, “Would you be able to settle this for $500 today?” Even if they say no, they might counter at $250 instead of $50.

In both cases, you’re asking about payment, but by setting a higher initial number in Scenario 2, you’ve anchored the conversation around a different expectation. 

In the first conversation, the consumer has actually anchored the negotiation at $50. Notice how hard it is to overcome consumers using anchoring to their benefit?!

Using Anchoring to Your Advantage

1. Make the first move. Don’t let the consumer set the starting point—put the number out there first.

2. Be strategic. Set an initial offer that’s reasonable but gives you room to negotiate.

3. Use it beyond payments. Anchoring applies to timelines, payment structures, even tone of voice. 

Great negotiators understand that the first number mentioned holds immense influence. Use it wisely, and you’ll find yourself closing better deals, more often.