You may think that the three topics in the title make a strange combination, but I am excited to be writing on these topics as they are some of my favourite subjects (if only I could incorporate immunology…). In this article I am going to explore what happens when we consider looking at acquiring a new HPLC/UHPLC instrument and how behavioural economics plays a role in our decisions. Our initial thought is to stick with the status quo, but is that the rational decision or just the mind playing tricks? Let’s start by looking deeper in to behavioural economics and how this will affect our thinking when considering purchasing a new HPLC instrument and what (if anything) we should do differently. Finally, we should be on the lookout for Black Swans…
For many decades it was thought and believed that we think and act in a rational way. However experiments in behavioural economics are showing us that we the way we actually think is, well, irrational. We don’t actually spend much time or brain power thinking through our decisions; we take mental shortcuts and act more on impulse and instinct, driven by automatic emotions. This makes it more difficult to challenge the status quo and try something different, even if it offers benefits. That is, until you put your more rational head to work and identify and reverse these mind tricks.
Behavioural economics has become a huge field of study with a range of fascinating experiments to illustrate its main ideas. I will cover the main areas briefly here, but for those with a deeper interest I would recommend the work of Daniel Kahneman and his book Thinking, Fast and Slow as a good starting point. Some of the main theories of behavioural economics are listed below and the implications of these when you consider purchasing a new HPLC instrument:
- Base Value Neglect – we always look for the best deal or percentage discount rather than looking at the underlying value. 33% off and 50% extra free are actually the same deal and offer the same underlying value, but most people are attracted to the 50% extra for free. When we look to buy a new HPLC instrument we get blinded by the discount offered by company A, but what is the actual underlying value.
- Anchoring – Initially prices are arbitrary, but quickly that price becomes established in our mind and becomes an anchor. Going forward that will shape what we are willing to pay for that item and related products. Don’t let this cloud your judgement when considering a new instrument, look at the actual benefits and value it will actually offer rather than how it compares in price to your existing model.
- Loss Aversion and the Endowment Effect – Here we are basically putting more value on something we already own than on the same item we don’t have. For example if I have an £50 ticket for the cricket at Lord’s, due to the endowment effect I am unlikely to sell it to you unless you offer me significantly more than £50. Loss aversion is similar; we only like to gamble a little to win a lot rather than risking losing a large amount even if the odds are the same. When looking to purchase a new HPLC system, be careful of putting more value on your current instrument and inflating its value over similar products.
- Heuristics – Inheritantly our brains are lazy, so we are easily influenced by past experiences and examples that come readily to mind and make a decision based on a stereotype. We are influenced by our past HPLC instrument experiences and exaggerate how good things currently are to even consider changing. We are more susceptible to believing what we have been consistently told previously about our current instrument.
- Hyperbolic Discounting – We are interested in obtaining a short-term reward rather than a long-term gain – pensions are a great example here, we prefer to have the money now rather than invest for the future. In the case of a new HPLC instrument the danger is to become more focused on the short-term costs of changing supplier rather than the long-term benefit a new instrument could bring.
- Inertia –Ultimately we prefer to do nothing rather than take action as maintaining the status quo requires the least effort. It becomes easier to stick with your current HPLC instrument than try any else.
Like what you are learning?
A New HPLC
As you can see from above, when you think about purchasing a new HPLC instrument, your first thought will inevitably be to stick with the status quo, but that is not necessarily the right choice and is due to some of the mind tricks that underpin behavioural economics. In this blog by Seth Godin, he looks at the warning signs of defending the status quo, many of which are part of behavioural economics. What we thought were perfectly rational thoughts we may have been having when thinking about purchasing a new HPLC instrument are actually rather irrational and are shortcuts the brain takes to expend less effort.
What about Black Swans?
There is a relationship between Black Swans and behavioural economics. The Black Swan is a concept that was introduced and coined by Nassim Nicholas Taleb. Its basic principle is that we get fooled in to a false sense of security by past events and believe we can forecast the future by looking at the past (heuristics). However every now and again something completely different occurs which cannot be predicted and usually has a large consequence – the Black Swan. The best example of this is if you look at a turkey. For hundreds of days, the same thing happens every day and the turkey would guess the next x number of days will follow the same pattern. Then Thanksgiving (or Christmas) looms and all of a sudden the next day is very different and not foreseen – the Black Swan! How does this relate to buying an HPLC instrument though? It may not, but what I am saying is that by relying on what worked in the past and using those experiences to predict the future, you could potentially open the door to a Black Swan event. One potential example here is considering the manufacturer of a drug, which unexpectedly finds an unwelcome reaction to its drug in the patient (the Black Swan). It turns out to be a trace impurity has arisen, but the current HPLC instrument did not have the performance capabilities to detect it so it ended up in the product. The Black Swan could have been avoided if the HPLC instrument had detected the impurity. The better option is to spread the risk more, try something different to become more ‘antifragile’ and minimise the effects of a Black Swan.
Challenge the Status Quo
In summary, what I would like to suggest is that the next time you think about purchasing a new HPLC instrument, don’t just go for the status quo and let your lazy, irrational mind make the decision. If you carefully evaluate the options and make your brain work harder and more rationally, you can overcome these mind tricks and make a more informed decision that offers long-term benefits. You can’t always stop a Black Swan, but by challenging the status quo and taking many smaller risks and increasing your options you can certainly minimise their impact.
Which HPLC system would the completely rational brain choose? A Thermo Scientific™ Vanquish™ UHPLC system of course!