Week 250- The Invasion of Normandy begins! – WW2 – June 10, 1944
13 Jun 2023 Leave a comment
in defence economics, Wall Street Tags: World War II
If you are so smart, why aren’t you rich? MITI version
14 Mar 2014 4 Comments
in entrepreneurship, human capital, Public Choice, Wall Street Tags: Deirdre McCloskey, efficient markets, MITI, picking winners, Wall Street, Wolf of Wall Street
If you are so smart, why aren’t you rich? This is the American question – asked of MIT’s Paul Cootner by a money market manager in the 1960s.
Why do investment advisors sell and often give away their sage advice? If their insights were any good, they could trade on the share market before others caught on and make a killing!
Deirdre McCloskey wrote a book about the limits of economic expertise. For a summary, see http://www.deirdremccloskey.com/docs/pdf/Article_168.pdf.
I will give a personal example based on the skills of bureaucracies in picking winners. The test of my hypothesis is based on the transferability of human capital across jobs.
My graduate school professors in Japan included many retired bureaucrats from the Ministry of Finance and MITI. These agencies were heralded by Joe Stiglitz and others for picking winners and guiding Japanese companies to choose the right technologies and what to export.
The skills that my graduate school professors learned at picking winners over their careers with the Ministry of Finance and MITI in the high-growth years in the 1970s would now be available to them in their retirements to trade on their own account.
My graduate school professors should quickly become very rich after retiring because of the skills they learned in picking winners while at the Ministry of Finance and MITI, which should cross over into their private share portfolios. The rich lists world-wide should be full of retired industry and finance ministry bureaucrats.
Instead, my graduate school professors took the train and bus to work and their families lived off their salaries in standard sized Japanese government apartments. All looked forward to their annual bonus of 5.15 months salary.
If governments are any good at picking winners, people should be willing to pay big time to get jobs at ministries of finance and ministries of international trade and industry to get access to their unique and highly secret skills they learn therein on how to pick winners. I am still waiting for that tell-all book by an insider on these skills. Why is there no Picking Winners for Dummies on Amazon kindle as yet?
P.S. McCloskey argued that the advising industry lives off 19th century case law on directors’ and trustees’ duties. If you take advice – from an accountant, a lawyer or an economist – and the business or investment still fails, it can’t be your fault. You took advice.
P.P.S. Cootner’s reply was “If you’re so rich, why aren’t you smart?” The answer to this was Wall Street investment brokers didn’t have to be smart to get rich; they can make money off fees and brokerage commissions even when their investment advice stank. Didn’t you watch The Wolf of Wall Street?
Utopia, you are standing in it! 
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