Buying a Bike: A lesson in loss aversion

Before pedaling across the country I needed to figure out a major problem.  Was I old and slow or was my bike old and slow?  If it was me, then biking across the country in a bit over a month was going to be a huge and painful problem.  If it was the bike, then getting a new one would take care of the issue.

I was worried because over the past year I have been getting passed by lots of bicyclists.  When I was a teenager I was fast on a bike.  Recently I have been very slow.  I was passed by a woman in her 20s who was pedaling in flip-flops.  I was passed going up a hill by a hipster on a fixed gear bike wearing a giant chain and lock.  I was passed by a man on a flashy bike so quickly that he was gone before I could react.  The list goes on.

These experiences happened while riding a Trek 7.3 FX, which is called a hybrid bike.  Hybrid bikes are the children of a marriage between a mountain bike and a road bike.  Hybrids are relatively heavy so they can stand up to cycling off the road.  However, they are easy on a middle-aged back and bottom since you are sitting up straight and not hunched over like on a road bike.

This was not about ego.  I am in my mid-50s.  I have no problem being passed.  I am just happy to still be on a bike and in decent shape.  The problem with being passed means that I was going very slowly and slowly is a big problem when pedaling 8 hours a day.  When my wife and I pedaled around during nice days in the winter, we did about 11.5 miles per hour.  To do a 100 mile day at that rate means about nine hours in the saddle.  Bumping the speed up by 15% to 13 miles per hour basically means 1 hour less per day sitting on a bike.

I was unsure what to do.  Buying a new bike and finding out it did not really improve my speed would be an expensive mistake.  Not buying a new bike and finding out I was riding a clunker would also be a painful mistake.

I went to my local bike store (Landry’s of Boston) and talked to Mark V.   Mark was amazing!  He said instead of buying a bike, rent one for the weekend.  It would cost a bit less than $200 and if I bought any bike, not just the style I rented,  he would deduct the rental cost from the new bike’s price tag.

This was amazing for two reasons.  First, it would provide me with a simple way to test out if my slow speed was the bike’s fault or my own body’s, without spending a lot of money on a new bike.  Second, this rental was a wonderful example of how behavioral economics can be applied to better run a business.

One key idea from behavioral economics is “Loss Aversion.”  Loss aversion means that losing money is much more painful psychologically than gaining.  Whether Mark understood it or not, getting me to pay about $200 locked me into buying a bike at his bike shop because few renters (including me) wanted to endure the pain of losing the money by buying a bike at a competitor’s shop.

I rented a Specialized Roubaix Elite for the weekend.  It was a bit small, but it answered my question within 45 minutes.   I was pedaling up a small hill, in almost the exact same place where I was blown away by the man on the fancy bike.  I heard an “on your left” call three-quarters of the way up the hill.  A women on another fancy bike zoomed past.  Now was the moment.  On the old bike I had no chance.  What would the new bike do?  To make a long story short, I caught her after a 1/2 mile chase, passed her and didn’t feel like passing out.  At that moment I realized my old bike definitely needed to be replaced before setting out this summer.

A few days later Mark V. sold me a Trek Domane SL5.  The bike was slightly cheaper than the Specialized Roubaix Elite but had almost the same specifications.  However, money wasn’t the the main reason I picked the Trek over the Specialized.  Instead, it was size.  The Trek was slightly bigger and fit my body better.

Does a new bike make a difference?  After two weeks on the new bike I did my training loop at an average speed of 15 mph.  That is a far cry from the 11.5 mph of a few months ago.  Some of the speed came from more exercise, but much was the result of shaving almost 10 pounds of weight off my bike and having better components.

Mark V.
Mark V.

Economist Advocating for Using Cash