Researchers have found out that - as a general rule - items that are scarce or have recently become scarce are much more desired than items that are considered abundant.
It means that if we have two jars of cookies - one full and one with only a few cookies left - the jar with the fewer cookies will be considered more DESIRED and ATTRACTIVE than the one where the cookies are abundant.
This is how the market is ruled as well. Commodities that are in high demand can be purchased at a high price only while an oversupply would drive prices down.
So far everything easy and predictable. If we take Fetal Bovine Serum as an example, price peaks and drops should be closely related to, and fully dependent on, shortages caused by natural cycles. Such natural cycles could be droughts or herd re-building.
Yet there are times when herds are big, nature is friendly and moderate prices should be the case. The industry consumption is relatively stable, no unexpected events can be reported.
But prices are still high and nobody knows why.
The answer is - we are humans and we just feel a passion to posses something that is considered scarce. The same is valid also for big organizations where humans work. No matter how sane and solid the system and its principles, humans are in charge of execution.
And humans strive for the limited amount of cookies.
In his book "Influence" Robert Cialdini tells the story of the American Broadcasting Company who paid in 1973 the amount of $ 3.3 million for a single television showing of a movie. ABC's vice president Barry Diller, who was known as a highly experienced businessman, struck the deal knowing that it may generate a loss of 1 million. Yet the reason why Diller made this decision was that in the competition between ABC and NBC for the broadcasting right, the participants had "lost their mind".
Back to the world of Fetal Bovine Serum. After a long period of product shortage created by natural conditions in the US, owing a large FBS inventory is considered extremely important. This goes to the extent that the improved supply and availability gets ignored. Companies who can afford spending big amounts of money on building inventory are in severe competition with each other. The "rush" goes to such extent that the danger of ending up sitting on a large, overpriced and unsellable stock gets ignored.
Smaller market players must follow the trend for a while as they try not to be cut off supply. Therefore FBS prices remain high even if the normal market conditions are favorable and there should be enough product to cover the user's needs. While everybody's in competition for the jar with the few cookies the jar where cookies are abundant is simply neglected. Nobody pays attention to two facts: 1. supply is back and 2. there are also good FBS replacement alternatives.
The cookie jar can get overturned too. Many years ago controllers at a large serum company found out that the FBS inventory at that time was largely overpriced. They forced the company to correct the inventory value and adapt it to the normal market level. This caused a loss of many millions. The person who had piled up the large inventory no matter the price left the market and never came back.
This is what we can learn out of this story about cookies. Before you rush for the jar with the scarce cookies look around. There might be another one out there, full to the top and just waiting for you.
