Remember Tritium

The Queensland-based Australian Institute for Progress has condemned the Commonwealth and Queensland government’s commitment of $940 million dollars to quantum computing start-up PsiQuantum.

“Good luck to PsiQuantum if they can shake down a sovereign government for risk capital that private investors won’t put up, just as long as they shake down someone else’s government,” said Executive Director Graham Young.

Mr Young said that the dream of quantum computing is approximately 40 years old, but functional computers are barely 7 years old, and none of them is commercial so this is a high risk speculative area where most startups will fail.

“PsiQuantum produces quantum capable chips, but to date doesn’t appear to have produced a computer so it is behind competitors like Google and Microsoft already.

“Obviously its technology has promise because the US government has invested in it through the Defense Advanced Research Projects Agency (DARPA).

“It also has a partnership with the US Department of Energy.

“With this support why the Australian government has to jump in with both feet and a billion dollars is not immediately obvious, but maybe there are limits to the generosity of even Uncle Sam.”

Mr Young said that while the government talks as though it is investing in an industry it is really investing in a start-up company, which magnifies the risks in picking winners.

“It is one thing for a country to target the bio-medical industry, as Australia has successfully done, but an entirely different thing for it to put its money into a particular entrepreneurial enterprise.

“Last time the PM was in Queensland to spruik companies of the future it was to support Tritium, a Queensland start-up with substantial private support that went into administration last week because it could not compete on the international stage.

“Before it went into administration it had been forced to relocate its operations almost entirely to the US because conditions in Australia are not conducive to running internationally competitive technology industries.

“I would have though he might have learned a lesson from that.”

Mr Young said that there are many arguments against the investment.

“There is no guarantee that the government will get a return on investment. There is heavy competition in this area from companies that have actually built quantum computers such as Google and IBM.

“On their own Google and IBM can both overpower the Australian government when it comes to financial resources.

“Google has a market capitalisation of $2.05 Trillion USD, while the Australian government’s net worth is negative $465 Billion USD (which means in effect that every dollar put into PsiQuantum is borrowed).

“Australia can’t afford to lose a billion on a speculative investment.

“While there are some commercial co-investors like BlackRock, they have funds under management of $10 Trillion USD, about the value of Australia’s entire household wealth, and they will be spreading their risk over a number of companies.

“Instead, the Australian government has put our meagre savings all on one number.

“BlackRock’s strategy will also probably be to cashout after a successful stock exchange listing, a strategy not likely to be taken by the government.”

Mr Young said that there was also no guarantee that the hundreds (or thousands according to the Queensland premier) of jobs that are promised will eventuate or be for Australians.

Neither was there any guarantee that the computer would stay here, and even if it did that it wouldn’t re replicated overseas, or that overseas clients would not be accessing the computer remotely.

“I doubt whether DARPA is investing in an offshore facility for the Defence of the United States, so you can bet there will be a rival built on the US mainland.”

Mr Young said that the traditional arguments against governments picking winners remain:

• Governments are not good at assessing commercial risk;
• Businesses invest in lobbying for government assistance rather than commercial returns and successful lobbying distorts efficient economic outcomes favouring the well-connected over the good;
• The job of government is to produce an environment conducive to creating wealth, not to choose which commercial organisms are to survive or flourish; and
• Governments have a fiduciary duty to taxpayers to be careful with their funds and not to take excessive risks.

“Unfortunately the Albanese government appears to see itself as heroic managerialists leading the country to a nirvana that its investors and business people are too stupid to see.

“In reality their direct interference in the economy is raising costs and lowering efficiencies and making Australia the last place that sensible capital would want to invest.”