What is bias from association?

Bias from association (associate bias) is your tendency to be easily influenced by associations.

For example, let’s say that you associate high prices with quality goods. This is because this association has proven to be true in the past. The goods that you bought at high prices previously did turn out to be high quality, which triggered a reward response.

In a world where we are overcome with stimulus and information, it’s a lot easier to use the mental shortcut that high prices = high quality than to examine each product we buy with a magnifying glass to attempt to prove its quality.

So, we rely on the “click, whirr” mental shortcut, as Robert B. Cialdini calls it, in his book, Influence: The Psychology of Persuasion, to make decisions in a complex world.

Examples of Association Bias

upscale Jewelry

What if you could actually increase sales of a product by raising its price? Bias from association makes this possible.

Cialdini opens his textbook with a story about an Indian Jewelry store in Arizona.

The owner of the store is having trouble selling a few pieces of turquoise jewelry. She believes that she has priced the quality pieces reasonably. It’s also high tourist season with regular foot traffic, so there is no reason why these pieces should not sell. But even after placing them in a more prominent position in the store, they just stubbornly sit there. Day after day, customer after customer.

Finally, right before the owner is about to leave for an out-of-town buying trip, she scribbles a note to her lead saleswoman to price everything in the display case at “x 1/2,” just to get rid of the turquoise pieces.

When she returns from her trip, the owner is not surprised to see that the jewelry has been sold. But she is surprised when she learns that the saleswoman had misread her scribbled note. The saleswoman read the “x 1/2” as “x 2.”

All the pieces of jewelry had sold… at double their original price.

How could this happen?

In the case of the turquoise jewelry, it’s possible that an upscale vacationer was drawn to the jewelry collection because of its high price. In their mind, high price is associated with high quality because of the success of this association in the past.

But high price could also be associated with something else: high status. So not only does a high priced good = high quality, it also signals to the world that the buyer is someone of high status (and wealth) as well.

Airline Seats

Naval Ravikant, in a post on price discrimination, explains that airlines can charge 5x -10x the price of economy seats for first class. Even when it only costs the airline about 2x - 3x the economy price to provide the extra service.

People are willing to pay these high prices because they associate the perks of first-class with the high status of being rich. They can signal they are rich with their first-class seats.

Advertising

Charlie Munger notes that advertisements regularly take advantage of our influence from association bias.

The old Carl’s Jr. ads are a great example. Why are scantily clad, beautiful women eating hamburgers? Because now when you think of beautiful women, you’ll associate them with Carl Jr. burgers, and vice versa.

Associating Past Success with the quality of the candidate

Munger also warns that some of the most important miscalculations occur when you associate someone with their past success without examining to see if it was luck.

Naval Ravikant agrees, writing on Twitter:

Making money through an early lucky trade is the worst way to win. The bad habits that it reinforces will lead to a lifetime of losses.

I’ve seen an example of this past success association bias first-hand with my beloved Edmonton Oilers hockey team. They have continually hired General Managers based solely on past success. And they are arguably the worst managed team in sports.

As Munger warns us, the upper management makes hires without “[looking] for dangerous aspects of the new undertaking that were not present when past success occurred.”

Loving Bias & Association Bias

Our tendency to love/like and hate/dislike others also plays a role in influence by mere association tendency.

How many of us are willing to forgive the shortcomings of our loved ones, simply because we love them?

As Munger says, we should: “See it like it is and love anyway.”

In business, Munger notes that this plays out with business owners underestimating the “competency and morals of competitors they dislike,” usually on a subconscious level.

How can you combat Bias From Association ?

It’s a good start just to acknowledge that it exists. Then you can see how it plays out in your own life.

If you’re hiring someone for a job, make sure you take a good, hard look at their past success to see how luck and chance played a role.

Examine how the circumstances in the industry have changed since the candidate had their success, and how they plan to navigate a world in flux.

When it comes to classification stereotypes, like old = mentally dull, or young = inexperienced, Munger suggests you realize that you are making general associations that may not hold up in each specific case.

Munger is as sharp as he has ever been at the age of 96, even while his body starts to fail to some degree.

There is no way to fully eliminate your influence by association bias. But if you know it exists, and how it can potentially influence your thinking, you are making good progress.

Keep at it.

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Cialdini PhD, Robert B.. Influence: The Psychology of Persuasion (Collins Business Essentials). HarperCollins e-books. Kindle Edition.

Munger, C. T., & Kaufman, P. D. (2008). Poor Charlie's Almanack: The wit and wisdom of Charles T. Munger. Virginia Beach, Va: Donning Co. Pub.

Naval Ravikant on price discrimination: https://nav.al/price-discrimination