Copenhagen

Technology produces its own share of wrong turns and dead ends…not to mention ironies and contradictions.

Gene mapping and other very new technologies have no immediate or even visible profit potential. But the very uncertainty of their prospects helps to expand the potential.

Yet, at the beginning of this century, the very newest technology also had potential — an explosive potential in fact, as least as great as that of the human genome project or the Internet.

In 1895, the electron was discovered. And exactly 100 years ago, Max Planck found that the rules of classical physics were inadequate to explain what the study of the atom revealed. He described the “smallest common coin in the currency” of physics as a “quantum.”

Five years later, Einstein saw that light followed the principles of quantum physics…and Niels Bohr, in 1913, realized that quantum theory also applied to matter itself.

Then in the mid-`20s, a uniquely talented group of physicists came together in Copenhagen, under the guidance of Bohr, to develop the Copenhagen Interpretation of quantum mechanics.

Today I am interrupting my story of the Battle of Britain. Elizabeth came to London yesterday. My partners and I would have been content to go out to dinner, discuss business and drink. But Elizabeth’s arrival changed the direction of our evening. Instead of enjoying ourselves, we would have to be improved by some cultural experience. So, with dreary hearts we passed the bars, spilling over with happy drinkers, and a movie theater with “Gladiator” emblazoned on the marquis in letters two-stories high, and arrived at the Duchess Theatre in Covent Garden.

Entering the theatre, we saw a small, empty stage. “Danish modern,” said my partner, a comment on both the barrenness of the stage set and our expectations for the evening’s entertainment. But the play, Michael Frayn’s “Copenhagen,” was anything but barren. Instead, it was a rich and elegant look at one of the most remarkable episodes in the history of science, ideas and war.

I will not review the play for you. I merely wish to tell you some of what it was about. The specific dramatic event chosen by Frayn was the meeting in Copenhagen between Bohr and Werner Heisenberg in 1941, about a year after the Battle of Britain was over. Europe was at war. Denmark was an occupied country. Heisenberg was in charge of the German atomic energy program.

In 1900 the secrets of the atom had at least as much potential as the secrets of the genome today. Though many advances emerged from atomic research, it produced just two very dramatic products. The first was dropped on Hiroshima in August 1945. The second was dropped on the investment world about 30 years ago — nuclear power. Both bombed. The first was destructive to human life. The second was destructive to money. As mentioned here a few days ago, nuclear power plants now change hands for less than half of 1% of the original cost of construction.

But of course, the future could not be foretold in 1928, anymore than it can be today. Besides, Heisenberg had just made a fascinating discovery: that one could not know the present, either. Heisenberg showed that the more accurately you knew the position of a particle, the less accurately you could tell its velocity. That insight became known as the Heisenberg Uncertainty Principle.

Uncertainty (I do not shrink from stating the obvious when it is called for), prevails in the rest of life, too. The observer and the observed are inseparable.

Investors, for example, may think they are objectively viewing the stock market and making decisions based upon what they see. They do not realize that what they see is of their own making: they look at the market and see the reflection of their own emotions and aspirations. Their greed, or fear, or indifference produces the market action they see.

But poor Werner Heisenberg. For 30 years following the close of WWII he was criticized for attempting to build an atom bomb for Germany.

Before WWII, German physicists led the world in atomic theory. And many, if not most, of those scientists were Jews. Hitler was asked to stop persecuting the Jews — because they were so important to German science. “They are all communists,” he replied. “That is why I have to persecute them.” The Jewish scientists left — Einstein, Frisch, Peierls and many more. They took up jobs in universities and laboratories in England, Canada and the United States. And as the war began, the big question among them all was — could atomic energy be used to build a bomb?

The key was the “diffusion equation.” Frisch and Peierls, now working for the Allies, miscalculated it — greatly underestimating the difficulty of building a bomb. The Manhattan project was begun based on this error.

German scientists did the calculation, too — but they also got it wrong. However, their miscalculation convinced them not to bother trying to build a bomb. Heisenberg, perhaps the world’s most brilliant mathematician, was no Nazi. He may have realized the calculation was wrong. In Michael Frayn’s play we are also told that he purposely turned the German atomic program towards generating power rather than making a bomb.

As it turned out, of course, the bomb worked. It was not as easy as it first appeared to be. But with the resources of America behind the project, and almost a whole lost tribe of Jewish scientists in Los Alamos, N.M. working around the clock, the problems were overcome. Bohr himself contributed to the effort.

With elegant, nearly divine, irony, Jewish physicists built the bomb that — had the war lasted a bit longer — would have been dropped on Hitler. Instead, it was used to incinerate Japanese women and children.

After the war, Oppenheimer, Einstein and Bohr were heroes. They had created the most powerful weapon of mass destruction ever. And Heisenberg, who had never killed anyone, found many of his former colleagues unwilling to shake his hand. Yet, whose hands were clean?

“In science,” Heisenberg wrote, “you just have to be able to drill in very hard wood and go on thinking beyond the point where thinking begins to hurt.”

This is true in the rest of life, too.

Bill Bonner

London, England May 19, 2000

P.S. I am on my way back to France tonight…and then to Baltimore on Monday. I’ll write.

*** The thrill is gone. The Dow rose 7 points yesterday. The Nasdaq fell 106 points.

*** Investors seemed to be abandoning the big cap tech stocks — against which I warned you weeks ago – in favor of utilities and financials.

*** Cisco was hot a few weeks ago. Investors were happy to buy it at $81. Now you can pick up a share for $56. Microsoft, too, has been discounted — from $119 a few months ago to $66 yesterday. And AOL traded hands at $95 earlier this year. It is now at $55.

*** The market hasn’t crashed. But it has changed. Fear hasn’t moved in and taken over. But it has visited once or twice. Investors are more cautious than they were in March. That caution could, of course, disappear in a summer rally. We’ll have to wait and see.

*** The “WSJ” reports that there are 380 IPOs waiting for an opportunity to go public. But times have changed. IPOs are no longer guaranteed to go up. Investors have gotten much more selective.

*** Another “WSJ” report says that lenders are giving away PCs to encourage borrowers. Could it be that even consumers are getting just a teensy bit worried too? Now they have to be bribed to go further into debt. These free PCs must be among the most expensive pieces of junk a family can acquire. In the “WSJ” example, a sub-prime borrower will make payments on a $40,000 mortgage until 2015 — at which time, she will have paid $79,560 and still owe a lump sum of $34,971.

*** Oil rose about a dollar — to $30.33. Gold did nothing. And the dollar rose to a six-year high against the British pound, a 15-year high against the New Zealand currency…and an all-time high against the South African rand.

*** Nearly all of Africa seems to be drifting into the heart of darkness. “The Economist” calls it “The Hopeless Continent” on the cover of this week’s issue. A photo in today’s “Times” of London shows an infant whose hand was cut off by rebels in Sierra Leone. And investment guru Jim Rogers, who is famously traveling in Africa with his companion, sent an email yesterday saying he was “scared to death.” Guns, murder, AIDS…hey, it’s just like home. You can follow Jim’s journey into the heart of Africa on his website.

*** Have you seen RJ Reynolds lately? It’s trading at 1 times earnings and yielding 12.5%. It has $1.756 billion (unaudited) in cash. And the lowest price per share — $24 — in the Dow 30.

*** Reuters reports that companies are going into default faster than they did a decade ago when the junk bond market collapsed. David Wyss, chief economist at Standard & Poor’s: “If this is happening at the peak of an economic boom, what happens in the next recession?”

*** I’ve run across a chart that shows in dramatic fashion how similar the rise in the Dow from 1920-29 is to the current bubble. Please take a look. Click “History May Not Repeat Itself But It Sure Rhymes” unde Headlines.

*** In Fiji political power is changing hands in the old- fashioned way…that is, by force rather than fraud. A group of armed men stormed the parliament building on Friday. Yesterday, a Mr. George Speight announced that “the executive control of our country currently resides in my hands.”

*** A new love bug is circulating. It is said to be more dangerous than its predecessor — changing the attached file name as it goes and doing more damage once a computer is infected.

*** In what was described by a Labour politician as “the biggest breakthrough in British race relations in a quarter century,” a new directive from the European Union will shift the burden of proof when employers are charged with racism. Firms will have to prove that they are not racist.

*** Our office here in London is on the edge of London’s fashionable Soho area — also the home of Boo.com — which went belly up yesterday. But there is no need to look up as you wander Soho’s streets. The crew that wrecked one of Europe’s most promising Internet startups is not jumping out of the windows. In fact, the job market for people with Internet skills is so hot that even losing $130 million or so for your former company is no bar to employment. “I’m going to take the next two days off and start an new job on Monday,” said one employee quoted in the “Daily Telegraph.”

*** Also of interest in London, Damien Hirst, described, perhaps tongue in cheek, as an “artist,” took his son’s educational toy, designed to illustrate the human anatomy, and copied it as a 20 foot bronze sculpture. Art critics (if that is the right word for a person who heaps sycophantic adulation on works of pure imbecilic, retrograde ordinariness) described it as “a masterpiece” and “the first key work of British art for the 21st century.” Aesthetically-challenged collector Charles Saatchi failed to see the humor in the piece and bought it for $1.5 million. But the creator of the toy, which the “Guardian” says “bears a remarkable resemblance to the sculpture,” sued. The parties settled…

*** Today is Ho Chi Minh’s birthday. Ho learned his politics in Paris, where he worked as a waiter.

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