Although the phrase "when in doubt, use quantum mechanics" has long been used as a joke, this article is not a discussion of a methodology for using quantum mechanics in investing. Instead, it mainly reflects on humanity's exploration of unknown fields, the reflection on past knowledge systems, and the painful struggles and interesting stories that arise in this process through reading and studying the history of quantum mechanics. This also brings a lot of help and reflection to our investment, which is essentially a kind of exploration of the unknown world in the future.
This article is written by Jolin, a member of BEDROCK.About Continuity
The quantum revolution first broke the continuity of space. Within the so-called "Planck scale," the continuity of space and time seems to be lost, and the assumption of "infinite continuous division" is not always true.
Further, the existence of the Planck scale breaks the continuity of time, and time is considered a "set" that contains all "moments," each corresponding to a "state." According to the Many-Worlds Interpretation theory, the universe has only one wave function, which evolves uniquely according to the Schrödinger equation. Because the Schrödinger equation itself is deterministic (an equation), given the state at a certain moment t, we can deduce the state of the system from both positive and negative directions at any time. Thus, the evolution of the universe is naturally deterministic, and everything has already been predetermined from the past to the future. Hartle and Hawking proposed the famous "no-boundary hypothesis": the universe does not have a clear boundary at its beginning, and time is not a ray that starts from a point. Instead, it is complex! Time is like the surface of our Earth, where there is no place that can be called a "starting point."
Investment Thinking: Human thinking tends to favor continuity and storytelling, as "continuity" and "storytelling" give a sense of stability, control, and narrative. However, the thinking of physics leads to philosophical deduction, telling us that the world is discontinuous, and there is no such thing as a linear narrative from the past to the future. Applied to the social level, people typically need the "continuity" of inertia to maintain their sense of existence. The gap between this "expectation" and the reality is often the enormous opportunity offered by the market.
About "Reality": Measurable VS Theoretical
One interesting thing about Heisenberg is that his breakthrough thinking came from the desire to "discard unverifiable deductions." Prior to this, the wave theory and particle theory of light had been debated for a long time, and both sides had made some theoretical progress and observational data to prove themselves. Heisenberg believed that "the subject of physics should only be things that can be observed and practiced, and physics can only start from these things, rather than on things that cannot be observed or purely inferred." This led to the "Heisenberg uncertainty principle" deduced from the matrix and further developed into matrix mechanics. In the early days, Heisenberg's principle was that he did not accept any unobservable or purely conjectural doubts, and he believed that this was "meaningless." (A theory: What is the difference between an invisible dragon and non-existent one?)
An interesting debate is that Einstein believed that theory could construct reality. He took another path, deducing relativity theory from theory and then conducting relevant experiments based on the guidance of theory. In fact, physicists have indeed "built up" many new discoveries through this approach, "bottom-up."
Investment thinking: A sensitivity: Look for the gap between "common sense"/"theory" and "phenomenon." Whether from top to bottom or from bottom to top, breakthroughs in scientific research often come from scientists' tireless pursuit of certain small gaps throughout their lives. This also applies to investment.
Occam's Razor: Entities should not be multiplied unnecessarily.
In this book, Occam's Razor is mainly applied to a principle in physics: when there are multiple descriptions of the same thing, choose the simpler one. This includes choosing the hypothesis with the fewest assumptions when multiple theories have equal explanatory power. For example, if we have two explanations for why there's no dragon in the garage - one is that there's an invisible, untouchable, unmeasurable dragon, and the other is that there's simply no dragon - then according to Occam's Razor, we should choose the latter explanation.
Investment Insight: "Simplifying complexity" requires more skill. Instead of pursuing a series of complex theories, assumptions, or stories that cannot be verified, it is better to return to common sense and do research in the most intuitive and essential way possible.
Idealistic VS materialistic
Starting from Heisenberg's uncertainty principle, physics has evolved from an absolute "objective" framework into a chaotic, interactive, and stochastic framework. The famous thought experiment, "Schrodinger's cat," further introduced the subjective role of observation in determining experimental results, introducing the role of the "subjective" in what was previously believed to be a purely objective physics paradigm. Further extrapolation suggested that "the observable universe is the entire universe," and "what cannot be seen is equivalent to nonexistence." Some deductions have even attempted to explain microscopic phenomena from the perspective of "consciousness," but these have been met with significant controversy. In sum, quantum theory has added many footnotes to idealistic philosophy. The wave function theory suggests that everything is probabilistically present before being triggered into "collapse," and the "observer effect" states that it is the participation of "consciousness" that triggers the collapse, where "my mind is the universe."
Investment perspective: "what cannot be seen is equivalent to nonexistence" has significant guiding implications in the fields of sociology and investment. One must hold a respectful and open-minded attitude towards external productivity that is beyond human control, but one cannot be timid in moving forward, nor should investment decisions be based on a series of hypotheticals and anxieties. Additionally, accepting the inherent contradictions in things and not pursuing an absolute "aesthetic neatness" (not using a hammer to find nails, not attempting to use a single theory to verify all market rhythms) can help open up thinking and approach truth in certain situations.
Micro VS Macro
Quantum mechanics has long been plagued by the problem of being too "abstract" and only deducible, without being perceivable. Perfect measurement of the quantum level in reality has been shown to be unfeasible (Heisenberg's uncertainty principle). However, the macroscopic world we inhabit does exhibit elegant regularity (the world of Newtonian theory).
There have been many attempts to explain this, such as ensemble theory, GRW, and string theory's proposal of an 11-dimensional space, and so on.
Investment perspective: One regularity is that something that is unexplainable, vague, and chaotic in the microcosm, will exhibit relative regularity and determinism at the macroscopic scale. The macroscopic scale is more graspable.
Verifiability: Bell's Inequality
Bell's inequality (which under the assumptions of locality and realism, establishes a strict limitation on the possible correlations of results when two separated particles are simultaneously measured) ultimately settled the debate between classical physics, represented by Einstein, and quantum mechanics. This inequality has two characteristics: 1) the required experiments to prove it are feasible in the physical world, and 2) it provides a very clear standard based on underlying assumptions that are sufficiently fundamental to demarcate classical and quantum physics. The experimental verification of Bell's inequality ultimately confirmed the correctness of quantum theory.
Investment perspective: constructing a toolkit that is implementable, practical, and verifiable is more important than theoretical deductions.
Innovation and conservatism: Planck, Einstein, and Feynman.
Planck's black-body formula played a critical role in the birth of quantum theory. When scientists tried to explain the problem of black-body radiation using classical physics, they found that they could not explain it. They derived two black-body radiation formulas corresponding to radiation as either particles or waves, but neither formula worked perfectly; one worked for short wavelengths but failed for long wavelengths, and the other worked for long wavelengths but failed for short wavelengths. Planck combined the two formulas by manipulating the math and came up with a formula that worked perfectly with the experimental data. From this, he concluded that energy could not be continuous but must be divided into individual "quantum" units, with energy represented as E=hv.
Interestingly, Planck was not confident in his formula because it was derived purely from mathematics and lacked physical meaning. Moreover, it might potentially overturn the traditional physics of Maxwell. Perhaps due to his insecurity and caution, Planck did not firmly follow the path of revolutionizing physics until Bohr's model achieved unprecedented success, which allowed Planck to acknowledge the meaning of quantum.
Einstein, who proposed the famous theory of relativity, had a fierce debate with the Copenhagen school in quantum theory. Two issues stand out: 1) the discovery of "randomness" and the observer's intervention as the most important revolutionary discovery in quantum theory. Einstein firmly believed in the beauty of science and that "God does not play dice," making it difficult for him to accept that the ultimate outcome of physical deductions would be a world of randomness and chaos (i.e., "inexplicable" and "unpredictable" features); and 2) the later string theory and ongoing "theory of everything" may again overturn the status of relativity in physics.
Bohr, a firm fighter for the Copenhagen school, had an interesting story with Heisenberg (when Heisenberg firmly defended the "particle" view, Bohr gradually acknowledged the meaning of "wave," and their ruthless debate ultimately gave birth to the discovery of "wave-particle duality"). Feynman, known for his rebellious and quirky character, once expressed his observation that many old physicists resist new ideas (such as Einstein's resistance to quantum theory), but when they become old themselves, they unconsciously do the same (such as resisting string theory).
Investment consideration: Even in the rigorous field of physics, traces of human thinking can be observed, such as path dependence, philosophical dependence, and authority dependence.
Scientists are interesting.
Many great physicists had colorful childhood education: Planck was talented in music, Bohr loved football, Einstein was skilled in playing the violin, and Heisenberg was a renowned pianist. Schrödinger had excellent knowledge of classical literature... There was also the gambling-loving Hawking, nerdy Heisenberg, Einstein who skipped classes during university, Newton and Watt who created a cult of personality around themselves, and so on.
Investment insight: Genuine passion and dedication are the starting point for outstanding achievements.
Comments