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Sunday 20 Aug 2017 | 20:04 | SYDNEY

The art of picking winners

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22 October 2010 14:20

 

The exchange over 'picking winners' reminded me of this book by Cohen and Delong. One of the points they make on this subject is rather good: picking winning industries may actually not be that hard, but picking winners is:

Americans like to say scornfully that industrial policy is about “governments picking winners”. Picking winner industries is not that hard – even for governments. Most countries trying to climb the ladder of quality and industrial sophistication through selective promotion compiled pretty much the same lists at the same time. Even at the leading edge of the technological frontier, the industries that governments are tempted to promote are largely the same ones picked by the analysts and brokers at investment firms such as Merrill Lynch, Nomura or Rothschild’s.  In the past, the picks would have been semiconductors, computers, mobile technology, or biotechnology. Right now, yet again, governments and analysts alike are all picking clean tech, nanotech, and biotech. Picking “winner industries” is not the hard part; winning is. It is difficult to create actual winners, companies that develop into successful competitors. It is easy to establish a national champion company in a winning industry and have it develop into an inefficient, cash-draining zombie...

Of course, it doesn't have to end in failure: Cohen and Delong list some of the successes: Brazil's Embraer; Japan's targeting of the electronics industry (a path later followed by Taiwan and South Korea); and France's targeting of nuclear energy, space rocket launchers, commercial aviation (later the European Airbus project), and supertrains. But there have been plenty of failures too – especially since (to use the old cliché) it often turns out that losers are even better at picking governments.

Photo by Flickr user Dr. Jaus, used under a Creative Commons license.

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