(2022-07-06) Chin Don't Read History For Lessons

Cedric Chin: Don't Read History for Lessons. Here’s a real world story that you might be familiar with. The question I’d like you to ask while reading it is: what lessons might you take away from it?

In 1958, Morris Chang left his job at Sylvania Semiconductor and joined Texas Instruments as an engineering manager. It was his second job out of college

At the time, the pricing model for ICs was simple. Since semiconductor manufacturing had high capex, manufacturers would charge their customers high prices to recoup their large upfront costs

Chang had noticed that this fixing process could be sped up if the production line was operating at max capacity, allowing his staff to learn and iterate as fast as possible

Chang hired a then little-known outfit called the Boston Consulting Group (BCG) to crunch the numbers for him, in order to justify an alternative pricing model. This eventually came to be known as ‘learning curve pricing’

TI then went as far as to reduce their prices every quarter, even if their customers didn’t demand it. Chang would later state that his strategy was to “sow despair in the minds of my opponents”.

Learning curve pricing worked because of the nature of semiconductors as a product. Unlike, say, products like personal computers or cars, IC process nodes that were no longer leading edge still found uses in lower-end, cheaper items like microwaves or television sets.

TI began applying learning curve pricing to a whole host of product lines

They applied it, for instance, to the 1972 launch of their personal calculator. Here, the competitors in the calculator market were more determined — leading to a price war and an eventual $16 million loss

Undeterred, TI launched their new electronic digital watch for a mere $19.95 a year later.

TI’s low prices evaporated the already low profit margins in the digital watch division, and stronger competitors learned to follow suit. A race to the bottom had started

It may seem a little odd that Chang was transferred from the semiconductor business — one of TI’s most important business units — to consumer products, an underperforming division. The most plausible reason for the transfer was that Chang was passed over for the CEO job.

Chang was moved to a staff job in 1981 — the ‘head of quality and people effectiveness’. He still had a Senior Vice President title, but was effectively put out to pasture.

Two years later, in 1983, Chang quit. He was a legend in the semiconductor industry, and had accomplished much for TI, but his career had simply hit a dead end. He was 52 years old.

Three years later he would take over the Taiwanese research organisation that he would eventually turn into TSMC

The Perils of Learning Lessons from History

Ben Gilbert and David Rosenthal

had the following to say about Morris Chang: David: The other meaning of ‘it's never too late

The problem with this take, of course, is that it’s not entirely true.

History is context dependent.

For instance, read the following list of plausible lessons from Morris Chang’s story, and gauge how credible they are:

I don’t think any of these lessons are particularly good

I play a game in my head. The game is simple. For every lesson that you see, append “… except when it doesn’t” to the end.

In fact, the only lesson that I think might pass the “… except when it doesn’t” test is the third one — that competitive advantage comes from creation

The first broad argument for reading history is that you’d be able to place current events in their proper historical context.

The person who has read history would know not to overreact to certain events

Singapore historian Wang Gungwu — one of the foremost authorities on the Chinese diaspora. Professor Wang argued that history was usually amongst the first things to be weaponised in the event of a war. He gave a number of historical examples, before making the case that a good understanding of history was necessary to resist the narrative machinations of its belligerents.

a second argument.

If you get to this truth, the argument goes, you will be able to ‘avoid the mistakes of your forebears.’

weak form is what you get when you hear someone say “history doesn’t repeat itself, but it rhymes

The underlying assumption behind both the strong and the weak forms of this argument is that you can learn lessons from history. And to make things clear, I think this is true. I just don’t think the lessons are anything like what we think lessons should look like.

I’m sympathetic to the two criticisms most typically levelled against learning from history

Everything in life is path dependent

The second argument against reading history is even more harsh. The argument is that accountings of history are not accurate, and can never be accurate, thanks to the narrative fallacy

The real trick of reading history, it seems to me, is to find a way to read for things that are idempotent across time. You ideally want ideas or takeaways that generalise properly.

I think we should read history for concept instantiations, not lessons.

this is an idea that falls out of Cognitive Flexibility Theory,

consider the following set of ‘lessons’:

What makes these ‘lessons’ different from the ones I talked about earlier?

For starters, notice that each of the ‘lessons’ are structured as “this is a real world example of some concept or idea”, instead of a more general “you should do X” or “when Y happens, you should watch out for Z”.

the form teaches you to see, without forcing you into narrow, actionable recommendations

There’s an even worse tendency that I’ve noticed, where people read a little history and then attempt to turn it into a coherent framework in their heads. The failure mode is that the framework then acts as a blinker — it slows down their learning, and blinds them to other cases that might not fit into the neat structure

The goal of reading from history, then, is to expand the set of prototypes (pattern) in your head.

never you mind that retellings of each case may be inherently flawed

when you read case studies with intentionality, you’re not waiting for something to hit you over the head