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Go With the Flow?

Sigma Investment Counselors

June 15, 2015

Over the last several weeks, there have been several articles discussing Google’s autonomous cars’ penchant for being involved in an above average number of accidents.  According to Google, none of these accidents have been the fault of the autonomous car.  If Google’s claims are correct, we have an interesting paradox, Google’s cars have more accidents than other drivers, and it’s the other drivers fault.

Perhaps the problem rests with the clash between the relentless precision inherent in autonomous cars and the somewhat flexible view of traffic laws on the part of the motoring public.  Google’s cars are programed to optimize safety;  be slow in responding to a green light, quick to react to a yellow light and diligent in observing speed limits.  This is not how the rest of us drive.  In other words, autonomous cars tend to hinder the normal flow of traffic, as human drivers are far more likely to respond to actual conditions and to go with the flow rather than completely obey all traffic regulations.

There may be a lesson here for investors.  Like driving conditions, markets fluctuate and require a flexible approach.  Just as it may not make sense to attempt to preprogram an automobile, without regard to changing road conditions or the responses of other drivers, portfolio management is not a “one and done” proposition.  Things change.  Motorists and investors (and their advisors) should be prepared to respond.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

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