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Looking for a shorter route home, a cyclist in the U.K. tapped his address into his smartphone. The GPS-enabled phone generated a route, and the cyclist headed down the road. However, the road turned out to be the M25, a very busy British highway. With drivers speeding along at 70 mph, it seems like an obvious mistake. However, according to Sgt. Phil Dix of the Surrey Police, "[The cyclist] was blissfully unaware he'd committed any offense."

This isn’t the first time people have trusted technology past the point of common sense, and I doubt it’ll be the last. That said, it’s disconcerting to see people assuming technology or even the opinion of a third party trumps what’s actually happening around us. However, I think there’s a way to add some balance: Create a kill switch.

For instance, you might remember the story I shared last December about Knight Capital Group. A trading program glitch cost the firm $440 million in less than an hour. Based on this incident and similar market meltdowns, the Nasdaq OMX Group has built a kill switch for investing firms. According to Reuters:

“Firms can use the tool to set limits on the sizes of positions they can afford to take on. The tool will send email warnings as the limits are neared, and if they are breached, the kill switch will be triggered, trading will be prevented, and the firm's open orders in the system will be canceled.

If a member firm wants to reauthorize trading after a kill switch has been triggered, it will have to contact Nasdaq and explain why the breach occurred and why it is safe for the exchange to reauthorize order entry.”

So when could a kill switch help us?

  • Everybody is doing it. If we find ourselves using a version of this logic (e.g., my friend does it this way) to justify our actions, hit the kill switch. A classic example is reacting to big moves in the market. Maybe we see our co-workers dumping all their stocks, and we think, “Hey, us, too!” But hitting the kill switch gives us a moment to think through our decision. Of course, we may find plenty of other reasons to do the same thing, but the primary one shouldn’t be because everyone else is doing it. That’s a quick path to frustration and disappointment because it isn’t really about us, but about other people.
  • It’s always been this way. Sticking with something that works does make sense, but defaulting to the status quo “just because” creates a missed opportunity to do something better. I see this a lot with investors who’ve inherited stocks or bonds. It could be emotional attachment or it could be fear of change, but we need to hit the kill switch when our comfort with what we know becomes our excuse to ignore other options. We need to walk through our logic for not changing and make sure we’re clear about the reasons for sticking with the status quo.

Status Quo

There’s nothing that says you can’t still go ahead with a decision after hitting the kill switch. However, it will give you a much-needed pause to interrupt a cycle that may be more about a reaction or habit instead of careful thought.

What kill switches have you added to your routine? I’d love to know how you’ve avoided your version of riding a bike on the M25.

Carl

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