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Availability Heuristic and Spot Market Rates…
Availability Heuristic is when people make judgments about the likelihood of an event based on how easily an example, instance, or case comes to mind. In our world of Spot Market freight, we see it in the way of people neglecting industry facts and data of rates in favor of personal impressions or recollections. How many times have we read people neglecting all market data in favor of a personal experience someone shared with them on rates? Businessmen and women choosing to neglect billions of dollars of collected freight data that is unbiased. Instead, they choose to base their own business strategy 100% on another’s personal opinion on the likelihood of a rate being attained in a constantly evolving market. We let others bias recollection too often determine our strategy, our approach, and our mood. We should be building a strategy removed from ours and others emotions and balance it with our experience, our peer’s experience and the data of thousands of other carriers who operate within the same market we are currently in. Our emotions and another’s emotional recollection can cause us to make some bad judgments at times.
Here is a personal example of Availability Heuristic causing bad judgment outside of Spot Market rates. I am always nervous swimming in the ocean and its because I have heard of people being bit by sharks and the thought of that is one that easily sticks in my memory. So, every time I am at the beach, I think about sharks and it impacts my decisions and my mood. I also freely label others decision as a bad judgment call on their part when they decide to “swim with the sharks!” I neglect stats and data in favor of what comes to my mind the quickest, and falsely believe the probability of a shark attack as being very high. The facts and data say that I am twice as likely to be killed or injured by a coconut at the beach than I am a shark in the ocean. Even knowing this fact, I am always 10x more comfortable sitting under a coconut tree rather than swimming in the ocean with the potential of being bit by a shark. Neglecting facts and relying solely on my bias recollection…I gladly put myself in twice as much personal danger. Luckily, I am not at the beach often and my livelihood does not depend on this decision-making process, or else I would be in deep trouble!
If you operate 100% in the Spot Market and your livelihood depends on your decision making within it… We probably should not develop our routing and pricing strategies using only our peers and personal assessment of probability, completely neglecting all market data and facts available to us in this day and age… I feel we are all susceptible to Availability Heuristic and we may believe we are playing it safe, staying out of the water and sitting under the tree, but we are really putting ourselves in greater risk. I believe the safest bet to create solid pricing and routing strategies, is to balance unbiased facts/data, peer recommendations, and personal experiences/ memories.
P.S. I still am not more comfortable swimming in the ocean…You just won’t find me under any coconut trees now either!
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