The winner of the 2015 Melbourne Cup was a complete outsider coming in at odds near 100 to 1. This should be a sobering reminder to the Federal Government of its own efforts at picking winners. Does it pay off for the punters (or perhaps taxpayers)? The favorites have won the race 34 times up to 2015. This looks a pretty good result at 22 percent. But let us look at the return on investment. The average odds on the winning favourites is 4.4 to 1 So on average if I invest $100, I lose $78 as the favourite only wins 22% of the time and I win $97 so at the end of the day I get a $19 return on $100. This is 19% on my investment but averaged over how many years? Now the timescale would perhaps be all right for a government taking the long 150 year view. However there are periods of up to 20 years where no favourites come in and that is no good for a two or even a three-term Canberra government, Worse still, the Cup is a handicap race!
So up in Canberra if they bet on the Cup how would they do it? On present form they would appoint a Chief Punter and a Council for Punting made up of owners, breeders and trainers. They would be commissioned to make an independent assessment of the form. They would after extensive discussion with interested parties then recommend supporting the favourite. But in true Canberra fashion that might be only an interim report with the final report issued a day after the race had been run.
This is the way science, technology and innovation is handled. Just look at the National Broadband, wind farms, Direct Action, the Clean Energy Finance Corporation and now the present favourite - innovation.
So we punters have a measure in returns from our betting on the Cup. But perhaps the correct conclusion for the Federal Government is not to bet at all although some will argue that it is only other peoples’ money well spent.
A far better approach would be for the Federal Government to consider itself as if it were the owner of the Flemington racecourse and try to keep the track in top class condition, not vary the entry rules from year to year and not change the course or the handicaps after the race has started.
By extension, the Federal Government might also help the equivalent of the breeders and trainers. After all, the closed stud book for thoroughbred horses has severely limited the improvement in winning times. There has been no improvement since 1920 in the Cup or the classic W S Cox Plate, a weight for age handicap.
Is the closed stud book working in Canberra? After all, scientists may invent but all sorts innovate. Bill Gates was a first class Harvard dropout. So don’t have the closed stud book of only supporting scientists as marketers, lawyers, accountants and engineers all contribute to innovation. A good start would be good schools and good universities where Vice-Chancellors are not chasing up every yellow brick road that appears to come from Canberra. Students may then enter their own race without interference or handicapping and some will be the equivalent of the Cup winners.
There have been a few 100 to 1 winners of the Melbourne Cup. In the Federal Government sphere, a patent for WiFi by CSIRO radio astronomers is just such a win bringing in $400 million in royalties. But the CSIRO didn’t know it was riding a winner until nearly the end of the race.
So learning from the Cup, the Federal Government should get involved in “track maintenance and pre-race training” and simply enjoy taxing the winners.
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Tom Quirk is a director of Sementis Limited a privately
owned biotechnology company. He has been Chairman of the Victorian Rail Track
Corporation, Deputy Chairman of Victorian Energy Networks and Peptech Limited
as well as a director of Biota Holdings Limited He worked in CRA Ltd setting up
new businesses and also for James D. Wolfensohn in a New York based venture
capital fund. He spent 15 years as an experimental research physicist,
university lecturer and Oxford don.