The priming trap: Why the first number you see costs you money

That first number in a negotiation will cost you money, even when you know it’s wrong.

Psychologist Daniel Kahneman demonstrated this with a roulette wheel experiment. Participants watched it land on either 10 or 65, then estimated the percentage of African countries in the UN. Those who saw 10 guessed 25% on average. Those who saw 65 guessed 45%. Same question, random anchor, wildly different answers.

Here’s why this matters for investors: Research by Adam Galinsky and Thomas Mussweiler shows that first offers account for roughly half to more than four-fifths of the variance in negotiation outcomes. The seller’s asking price, last quarter’s valuation, or even an offhand comment about “similar deals in the €20-30M range” becomes your reference point. Your brain treats that initial figure as relevant information even when you consciously know it’s inflated or arbitrary.

The effect is automatic and powerful. Even expert negotiators and real estate professionals are significantly affected by anchors, adjusting insufficiently from whatever number they hear first.

Three ways to counter priming:

1. Anchor yourself first: Build your valuation model before seeing the seller’s number. Your DCF becomes your reference point, not theirs.

2. Reset the range: Before negotiations, deliberately consider absurd valuations (€1, €1 billion). This weakens the psychological grip of the seller’s anchor.

3. Give yourself time: Anchoring effects weaken after a couple of days of other cognitive activity. Don’t make offers immediately after seeing their number.

Great investors don’t fight anchors. They set their own.