Friday, May 21, 2010

Why a government of technocratic elites cannot succeed

The Antiplanner has a very interesting post asking whether the government can pick winners:
The problem is that government is not about efficiency, it is about power. If government tries to pick winners, it will tend to pick things favored by powerful interest groups, not the best technology. Once it has made its picks, the winning interest groups will work to maintain the policies favoring them even if the pick turns out to be a loser.
The post is packed full of smart and concludes that the government cannot in fact, reliably pick winners in the tech game.

I agree, and have a proof point. Most companies can't pick technology winners, either, and they are strongly motivated by the quest profit, not power. The genius of Cisco's John Chambers was to decide that they weren't going to try to pick winners; rather, they'd let the market choose winners and buy the startups that won those battles. Consider the dynamic laid out by the Antiplanner:

It may be possible, if you search hard enough, to find an example of a government successfully picking and promoting a winner. Atkinson specifically mentions “Internet, the web browser, the search engine, computer graphics, semiconductors, and a host of others.” One problem with these examples is that government did not pick any of these technologies with the aim of promoting the industries. Instead, it help develop these technologies because they were useful to government (mainly defense) agencies.

More important, for every successful example, you can find numerous failures. Think about corn ethanol, one example of government picking a technology for the specific purpose of promoting a new industry. It wasn’t long before people realized that corn ethanol is a very inefficient way of trying to save energy, but once government picked it, it can’t stop supporting it.

The market has all sorts of examples of winners and losers like this, too. Chambers decided that you didn't have to prognosticate, you just had to identify the emerging winners. Essentially, Cisco lets the market weed out a lot of the failure technologies, and snaps up the winning ones.

Actually, Chamber's real brilliance was figuring out how to make corporate acquisitions work; historically most have been failures. Cisco is one of the few companies to do successful acquisitions repeatably.

And so the response to progressives itching to use the Organs of the State to pick new winning technologies is not "can we make the selection process motivated by some sort of Aristotilian sense of Good, rather than raw political power"? Rather, the question is "do you really think that anyone the government can reasonably expect to hire can out-preform John Chambers?"

Because good luck with that one.

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