My decisions are biased?

This week there is big news, that is, we moved to a new office. The bathroom on the fifth floor where the original office was located is under maintenance, and I discovered that almost everyone went to the bathroom on the fourth floor and just a few took the elevator to the bathrooms on the sixth floor. It's not difficult to realise that there is no fundamental difference in going to the bathrooms on the sixth floor and going to those on the fourth floor. So why does everyone choose to go the floor below? Today, let's use the financial way of thinking to analysis this small event.

A tendency like this can be explained by the 'Anchoring' effect in finance. The so-called anchoring effect describes how people rely on the initial piece of information offered to make subsequent judgements and will be fixated on that behaviour, so when facing changes, reactions may be insufficient. Back to the bathroom scenario, there is no theoretical difference between going to the sixth floor and the fourth floor but because people are used to walking up and down flights of stairs, many subconsciously feel that going downstairs is less strenuous and time consuming. Therefore, when the urgent need to go to the toilet occurs, people's behaviour is “anchored” in initial experience, that is, experience of walking up and down stairs. Most people subconsciously go to the fourth floor, making the sixth floor a better choice because there are fewer people and no queues.

In an investment environment, an inclination to 'anchor' influences people to inaccurately react to new information and maintaining this original behaviour; the 'old way' of doing things maay result in investment failure or failure to achieve the desired goals, and even financial crisis, although the 2008 financial crisis has nothing to do with this. When the real estate industry experiences negative news, people are still "anchored" to biased behaviours during bull market state. When the bubble bursts, a huge financial shock occurs, causing a financial crisis.   Anchoring allows people to obtain information, but cannot translate these new information into corresponding behavioural changes let alone the times we can't even get accurate information.