Quaero and industrial policy

Building on the success of Airbus, France and Germany hope to spend government funds to build a search competitor to Google. Challenging Google, however, will be a lot more difficult than challenging tradition-bound Boeing.

Governments don't tend to spend a nation's investment capital as well as private citizens. It's not because government functionaries are stupid. Rather, besides being removed from the day to day operations in a given market segment, governments also tend to have different motivations guiding investment decisions. Corporations which inspire national pride, such as airlines and carmakers, tend to receive disproportionate favor whether or not those industries are important sources of growth. Jobs often take precedence whether or not those jobs can be justified. That is the case with China, where a large sum of the nation's available investment capital is used by wasteful and inefficient state corporations, some of which have over a million and a half employees.

Sometimes governments invest in defending "culture," something which rarely attracts venture capitalists but tends to have populist appeal and helps politicians get re-elected. In defense of a recent investment project undertaken by the French government (described later), Mr. Chirac stated (quoted from March 11th edition of The Economist):

Culture is not merchandise and cannot be left to blind market forces.

We must staunchly defend the world's cultural diversity against the looming threat of uniformity.

Our power is at stake.

That being said, it's not impossible for government investment to lead to successful results. A newcomer to the game of poker may win a big stakes bet on his first hand. He's just less likely to do so.

Airbus is a famous example of government investment that has been spectacularly successful. Boeing at one time completely dominated the market for airliners. This is a multi-billion dollar industry, and given the number of airline companies in Europe (a legacy of past industrial policy), lots of money flowed across the Atlantic to fill Boeing-controlled bank accounts. As a joint venture backed by Germany, France, Britain and Spain, Airbus was founded to compete with the American juggernaut...and has been quite successful in that endeavor. Airbus now has over half of the market for sale of new airliners.

One of Airbus' unique advantages was its "lego-block" style approach to airline construction. Sections of a new plane were assembled in various countries, then shipped to central assembly facilities in Toulouse, France or Hamburg, Germany, where they were attached to make a final product. This new componentized approach to airline construction saved on costs and boosted reliability.

Like Airbus, Quaero, a search engine the development of which is funded by the governments of France and Germany, has some unique innovations. Current search engines are oriented around text searching. Quaero will move beyond this to include searches using pictures and sounds as terms.

Software that recognizes shapes and colors will use the "search image" to find pictures that have similar characteristics. This same technology will enable "spiders," the software that indexes individual pages on the internet, to link unlabeled images and sounds to those that are labeled, thus providing more information to arbitrary images on the internet and making them available in text searches.

This is all interesting stuff, and though Google plans such functionality "as soon as possible," Quaero will certainly have a leg-up in such technology. Of course, I imagine such search capability will be used to find less Albert Einstein than Jessica Alba. Likewise, given the complexity of a "matching algorithm" for pictures and sounds, it remains to be seen if searchers will find a lot of Mother Theresas and Dame Ednas in their Alba searches.

More to the point, Quaero will have a harder time solving search result issues than Google, not for lack of money (governments rarely are short of it), but because they lack the ability to attract the best and brightest algorithm scientists in the world. Who is more likely to attract a promising IT expert, fast-growing, Silicon Valley darling Google, or the French and German governments?

Though Chirac likes to speak of the Quaero project as being "in the image of the magnificent success of Airbus," he would do well not to overestimate the lessons of that success. In truth, Airbus' success may be the result of a confluence of chance events, a business version of a poker newbie winning big on his first hand. It's a lot easier to compete with conservative Boeing, a company as unionized and as resistant to change as the most ossified Detroit automotive dinosaur. Google is a far more nimble competitor, one founded on the skills of its engineers and less on right to work protections secured by unions.

Consider the Airbus' unique innovation - the lego block approach to airline construction. That had more to do with "realpolitik" than engineering insight, as the participating countries needed to secure Airbus-related jobs to justify expenditures to tax-paying citizens. This led - accidentally - to a componentized approach to airline construction.

Granted, accidental or not, Airbus' innovation is still innovation. However, it's worth noting that for every European industrial policy success story, there are at least a hundred instances of governments spending huge sums to dump truckfulls of cash down proverbial wells.

I'm looking forward to seeing what comes of the Quaero project. Google, however, is no Boeing, and if I were a gambling man, Quaero has more chance of sharing the fate of France's Bull Computer than Airbus.


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