Just Copy It
One of the greatest inventions in the history of humans, which we have heard a lot about lately. Chips AKA semiconductors was a technology developed in 1960 and was booming and showing its relevance to scientists around the world about its application and usefulness in pretty much any electronic device developed.
Every country wanted a piece of it because through its use, a computer that took the whole room and looked like this;
Could be scaled down in size and made to look like this;
America was leading the race in the research and development of Chips, and Russia knew they couldn’t afford to stray afar from this race of semiconductors. So what does Russia do?
They follow the most basic human mechanism of learning. COPYING!
Boris Malin, a prominent Soviet Union scientist specializing in semiconductor devices, found himself embroiled in a tricky situation. Despite viewing himself as a scientist rather than a spy, Alexander Shokin, the bureaucrat overseeing Soviet microelectronics, deemed the SN-51 chip an essential acquisition for the Soviet Union. Shokin summoned Malin and a team of engineers to his office, where he scrutinized the chip under a microscope.
His directive was clear: “Replicate it precisely, without any deviations. You have three months.”
The computing power of chips was changing every two weeks, and the Russian scientific community was visibly upset by the route Russia had chosen to develop the semiconductor technology.
In the realm of theoretical physics, the Soviet Union boasted some of the world’s finest minds. They had numerous scientists who had contributed enormously in the space of semiconductors and other scientific technology.
1) The launch of Sputnik in 1957, 2) Yuri Gagarin’s pioneering spaceflight in 1961, and 3) the successful fabrication of Osokin’s integrated circuit in 1962, all provided compelling evidence of the Soviet Union’s technological prowess. Even the CIA recognized the rapid progress of the Soviet microelectronics industry.
However, Shokin wanted the scientific community to replicate the chips they had smuggled from the United States instead of truly allowing them to understand and explore the principles of semiconductor technology.
Shokin’s “copy it” strategy was fundamentally flawed when it came to designing chips, but one couldn’t blame him completely. Copying technology had worked before because both the US and USSR had built hundreds of nuclear plants throughout World War II just by copying technology.
The difference here was Nuclear heads weren’t evolving every week as semiconductors did. The change took place at such a pace that without the understanding of how the integrated circuits worked no one could catch up with the change.
Understanding though is a tricky thing! We all want to truly understand certain aspects of our lives, jobs, relationships, etc. But it doesn’t work that way. We always operate with less information than we would like and that’s scary because if we were to go wrong we wouldn’t have anyone to blame but ourselves.
So what do we do? We copy!
We copy, because it is easier to assume that others know it all, and when they do eventually go wrong, it is easier to blame others than ourselves.
When it comes to investing, we follow the same mechanism. We copy! We copy portfolios from our friends, relatives, fund managers, and pretty much anyone willing to show thier investments to us.
But when it comes to investing, we fail to understand that Stock Markets are a complex adaptive system. Vishal, the author of Safalnivehsak writes. Stock Markets are “built on many investors’ individual views and transactions (and their behavioral biases). This weighing machine is continually adapting to new information under conditions of uncertainty and complexity”
Physicist Per Bak founder and most influential contributor to the study of complex systems explains complex adaptive systems using a “sand pile to illustrate self-organized criticality”. He asks to “Start to sprinkle sand on a flat surface and the grains settle pretty much where they fall; the process can be modeled with classical physics. After a modest pile is created, the action picks up, with small sand slides. Once the pile is of sufficient size, the system becomes “out of balance,” and little disturbances can cause full-fledged avalanches. We cannot understand these large changes by studying the individual grains. Rather, the system itself gains properties that we must consider separate from the individual pieces.”
In simpler terms, stock markets change faster than any other technology, and copying someone else isn’t the best way to learn in such systems.
In a complex system, it is better to truly understand the requirements of one’s own needs. And then chalk the path forward. The copying strategy adopted by the USSR set them back years behind to US in transistor technology and they never caught up. Similarly, there are tons of investors out there who copied the portfolios of other investors but were never able to match their level of success since they failed to understand their true purpose of investment.
Until next time…
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