Anchoring Bias: How to Avoid Getting Ripped off on Salary

Imagine that you’re interviewing at your dream company for your dream job. You’ve gone through all the interview stages and jump on a call with HR to discuss the job offer. Hooray! Everything is exciting and you’re ready to sign on! … until the person on the phone starts talking

HR Person: “We can offer you a base salary of $XX, XXX”

You: “…..”

The offer is much lower than what you were expecting. How could they be so disrespectful in their offer after going through such a lengthy interview process?!

The Anchoring Strategy

The HR person is using the anchoring strategy to their advantage, which uses a cognitive bias called anchoring. Anchoring is the tendency to rely too much on one single piece of information when making decisions. This single piece anchors your decision to be closer to it.

Take for example prices at the mall. Let’s say you walk into the Nike store and see shoes priced at $150. Although they look really nice, it seems like a hefty price to pay, so you pass over it for now. A few minutes later, you walk into Adidas and see a very similar looking shoe, but its original price is on sale from $250 down to $150. Now you’re really thinking….

For most people, quality aside they’d pick up the pair of shoes from Adidas. But that does not necessarily mean the Adidas shoe is better. Sure it’s original price is higher, but that doesn’t necessarily mean it has a higher quality than the Nike shoe. Adidas could have easily just priced the shoe at a higher original price and then put it on sale. That way, they’re attracting more customers because people see it as a better deal.

That’s the anchoring bias in full effect.

How to Beat Anchoring Bias

To beat the anchoring bias and negotiate a better salary, the best technique is to completely ignore the anchored offer. Then, push the conversation to be more on your terms.

For example, let’s say the offer if $50,000 per year but you really expected $70,000. Ignore that $50K number entirely and use your own high anchor to pull up the salary.

For example, you can say something like: “With my skill set and the positive reviews of the interviews, I was thinking closer to $80K.” By using that high anchor, you’re flipping the script. Now the conversation is back on your side. Eventually, HR will come up, perhaps not to $80K but somewhere much closer to your original $70K target.

That’s all there is to it. HR makes their low ball offers in order to anchor the conversation down. But realistically, that number doesn’t mean anything. It’s just some figure HR is using. But just like our example of the shoe prices, it’s not fully indicative of the actual value. You never have to stick to that first offer.

You can always change the price too, just like Adidas did with the sale price on the shoes. You do that by proposing your own high anchor to pull the conversation up into the higher numbers that you really want.

Final Thoughts

Anchoring is a cognitive bias where we have a tendency to lean towards certain numbers based on a single piece of information. It is very commonly used in salary negotiations where the company will lowball you an offer to try to pull the conversation to a lower number. To beat the anchoring bias, simply follow this 2-step strategy:

  1. Ignore the anchor completely
  2. Apply your own anchor to pull the conversation back onto your side

This article is part of a mini-series on cognitive biases. Stay tuned for more! Check out the others so far here:

Substitution Bias: How to Make Sure You Don’t Miss the Details
Availability Bias: Don’t Let Your Surroundings Affect Your Decisions
Confirmation Bias: How to Be More Open to New Ideas
Framing Bias: How to Make Better Decisions
Loss Aversion: How to Take Calculated Risks
Hindsight Bias: How to Be Smart About Reviewing Your Past Decisions

Subscribe to Mighty Knowledge

Join 600+ other learners.

Get curated links and key lessons from the most powerful content:
⭐️ Quotes
📜 Articles
📚 Books
🎥 Videos
🎁 And more

Delivered every two weeks on Thursday.