Dirk Riehle's Industry and Research Publications

Cargo Cult Public Investments?

Richard Feynman, in an enjoyable-to-read article [1], explains what he calls the cargo cult:

In the South Seas there is a Cargo Cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land.

The cargo cult people confused correlation with causation. They thought that creating one condition (runways, controller) would lead to the desired effect (planes with lots of good stuff). It is a common fallacy to confuse correlation with causation, that is, the coinciding of two events (correlation) with a cause and effect relationship between them (causation).

In the case of the cargo culters, it is obvious to us. However, more modern examples are less obvious. One example on my mind is the sponsorship of clusters in Germany. A cluster is a (typically physically close) combination of companies, institutions, initiatives, and people focussed on one particular domain, usually something high-tech (software, clean tech, you name it). The idea is that throwing lots of funding at a budding cluster will create the conditions needed to make the next Silicon Valley happen.

I can’t see how this could possibly work. Looking at Silicon Valley, I see a long gestation period, and it was not started by throwing lots of money at existing large companies and institutions. So, the availability of funds for initiatives and institutes, etc. is a phenomenon that coincides (correlates) with a real high-tech cluster, but it isn’t necessarily the cause of it. For research on this, for example, see the work of Andrés Rodríguez-Pose.

If anything, it is the people and their networks that created Silicon Valley. They made companies, institutions, and initiatives their tools for reaching their goals. So, in my opinion, most public investment should be into people and should understand that it takes time for them to develop. Investing into people and the conditions for nurturing them, naturally, does not vibe well with politicians who would like to make a splash. But I don’t see how we could get around it.

[1] Richard Feynman (1974). Cargo Cult Science. In Engineering and Science vol. 37, no. 7, pp 10-13.

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Comments

  1. Johannes Link Avatar
    Johannes Link

    It was mentioned somewhere in this podcast: http://www.econtalk.org/archives/2012/06/moretti_on_jobs.html

    1. Bill Seitz Avatar

      This is typically triggered by someone having read some RichardFlorida (CreativeClass).

  2. Johannes Link Avatar
    Johannes Link

    A funny example I heard abour recently: Some cities in the US install farmer markets b/c Silicon Valley (and other high tech hubs) have a high number of farmer markets.

    1. Dirk Riehle Avatar

      That’s hysterical! (Any reference?)

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