In our last blog post “Freight Markets Boom and Bust – Why?,” we looked at reasons behind freight booms and busts. And while volatile freight markets experience ups and downs, it’s human nature to prefer stability.
At the end of the day, we’re all trying to carve out our own little bubbles of stability in a volatile world without giving up too much in exchange for that peace of mind. We’d all prefer stable prices, or at worst, “low, slow and stable” inflation.
Historically this preference is framed in psychological terms — for instance, the idea that we dislike deviating from expectations. But there’s a growing body of research at the intersection of economics and physiology/biochemistry that suggests there are deeper biological origins for this preference. In more practical terms, freight market volatility makes planning difficult by making forecasting budgets more difficult. There is wasted time and wasted energy associated with volatility.
Solutions for Managing Volatile Freight Markets
Flexibility is Critical When Dealing with Uncertainty
Information Transparency: Don’t Confuse More Data with Better Transparency
But we should not conflate data volume with data transparency. In an industry where there are increasingly copious amounts of data, a healthy dose of skepticism is also necessary regarding the independence of the data. Does each incremental byte of data provide unique information about the state of supply and demand, or does it unknowingly herd market participants toward the same cliff? This dual nature of information transparency is well documented by economists.)