I have learned something important over 40 years of working in the Technology world. Sometimes tunnel vision kicks in when deciding which technology to use. I found a fascinating article in the Boston Globe by Leon Neyfakh that talks about how the Nuclear Reactor world is now technologically locked-in with a technology that was not the best one for Japan:
Japan’s reactors are “light water” reactors, whose safety depends on an uninterrupted power supply to circulate water quickly around the hot core. A light water system is not the only way to design a nuclear reactor. But because of the way the commercial nuclear power industry developed in its early years, it’s virtually the only type of reactor used in nuclear power plants today. Even though there might be better technologies out there, light water is the one that utility companies know how to build, and that governments have historically been willing to fund.
Economists call this problem “technological lock-in”The term refers to the process by which one new technology can prevail over another for no good reason other than circumstance and inertia. The best-known example of technological lock-in comes from the 1970s, when VHS and Betamax, two different kinds of videotape, competed in the market until VHS gained a slight lead and then leveraged it to total domination. Whether the VHS format was actually superior to Betamax didn’t matter. After the lock-in, consumers no longer had a choice.
Leon Neyfakh
Financially Locked In?
In the financial industry, this is how we end up financially locked in to a specific savings product.
For example, I found myself in this situation with my RESPs in TD Mutual Funds.
I ended up financially locked in because I didn't look at other savings vehicles that would have done better. I should have moved to a real trading account and purchased better ETFs. The TD E-series Mutual Funds were good, but many ETFs are better. Continuing to use a TD Mutual Fund account was also a large mistake.
Feeling financially locked in is an uncomfortable feeling. Still, if you can change, you don't need to jump. The opposite of locked-in would be a financial joy rider. This person changes because something seems cool, much like technology junkies who need new phones every year. Still, you should at least figure out whether you are in the right place financially. All decisions in life should be revisited every once in a while to determine whether your decision is still valid. The argument I don't have time to do that, means you have decided your initial decision was valid. You will stick with it (but don't get to complain about it later).
The industry itself is also rather stuck. Its reliance on COBOL continues, and it can't seem to escape it.
Any decision rarely locks you into a single path financially. Even with LIRA (Locked-in Retirement Accounts), you can change the type of account the LIRA is. So take advantage of this freedom. Make sure your decision still works. After all, you don't want to end up with a BetaMax financial solution now, do you?
My father always tells me that nothing is ever set in stone. I tell all my clients this.
It’s easy to back yourself up into a corner. Especially an expensive one.