Asleep at the Wheel? The Importance of Understanding Passive Fatigue

Let’s start off with a quiz:

What does it mean if you have passive fatigue?

1. You are tired of using only index funds in your retirement plan
2. You are reading your child’s homework and they haven’t learned about active voice in grammar
3. You have a reduced state of alertness due to the monotony of your task

While you may have experienced all three, I want to talk about option C.

I came across the phrase “passive fatigue” while reading an article in The Economist about some of the challenges of automation. It refers to a human user’s inability to intervene in a timely manner when an automated task starts to go awry—and is a term that asset managers may begin to hear more often with the rise of the machine and the proliferation of artificial intelligence (AI). 

Passive fatigue is a fairly new term, but it is a concept that has been around for years. The phrase “asleep at the wheel” is similar in nature and evokes an image of driving down a long, straight stretch of highway without any other cars around. You could be well rested, but the monotony of the scenery coupled with boredom that comes from the unchanging drive lull you into a sleepy state of half-consciousness. When a deer darts across the road, disaster ensues. In the modern age of technology, think of a self-driving car that misinterprets debris in the road and starts to veer into another lane. With passive fatigue, you have become so used to something else executing your tasks that you’re not prepared to react when needed.

As the financial industry expands its use of robots and AI to perform the tasks that humans own now, we will certainly have to guard against passive fatigue. This technology is still in its infancy and it could be months or years before the effects of coexisting with robots are realized. But what about today? Are there other circumstances where the asset managers need to guard against passive fatigue?

Consider outsourcing. While outsourcing service providers may not be robots or utilizing AI yet, the dangers of passive fatigue by the asset manager still exist. Tasks actively executed in the past are now being performed for you. Do you have a comprehensive oversight model in place to provide the proper checks and balances? There are many benefits to outsourcing parts of your operations, but outsourcing doesn’t relieve you of your obligations to your clients. You, not your service provider, are ultimately responsible for the safekeeping of client assets. 

As technology continues to advance and emerge, keep in mind the effect that passive fatigue can have on your business. Asset managers need to leverage technological advances and service providers to enhance their business, but they must also ensure they remain alert and able to respond nimbly when needed.